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

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Speaker 1: This week on Masters in Business, I have an old

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Speaker 1: friend as a guest. His name is David Kotak. He

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Speaker 1: has been on the street for over forty years. He's

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Speaker 1: the co founder and chief an investment officer of Cumberland Advisers.

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Speaker 1: I know David for a decade plus, and David pretty

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Speaker 1: much knows everybody on the street. He's one of these

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Speaker 1: guys who have been around, not only been around for

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Speaker 1: a long time, but is super plugged in UM. You'll

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Speaker 1: hear him discuss some of the Federal Reserve chairman that

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Speaker 1: he's met. He's pretty much met every FED chair since

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Speaker 1: the nineteen seventies. He's really an interesting guy, very knowledgeable,

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Speaker 1: especially about active bond management and muni bonds. He's an

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Speaker 1: interesting runs an interesting portfolio passive h E T F

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Speaker 1: index equity these but active bonds and and there's a

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Speaker 1: very specific reason for that that we we talked about UM.

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Speaker 1: David hosts something which has become known as the Shadow

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Speaker 1: Federal Reserve Meetings. He's also the chairperson of the Global

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Speaker 1: Interdependence UM Committee and basically puts together a series of

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Speaker 1: conferences UM around the world where heads of state and

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Speaker 1: head heads of various central banks come and debate economic

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Speaker 1: issues and policies and monetary policy. It's really a fascinating group.

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Speaker 1: I'm fortunate enough to participate in the the what's become

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Speaker 1: what's become known as Camp co Talk, but it really

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Speaker 1: began as the Shadow Federal Reserve Committee, which similarly debates

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Speaker 1: issues of the Federal Reserve and interest rate policy, as

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Speaker 1: well as monetary and fiscal policy, investing issues, investing posture

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Speaker 1: is regulation, all sorts of things like that. It's a

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Speaker 1: fascinating collection of of people, UM, A number of whom

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Speaker 1: have appeared on the show over the past year. But

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Speaker 1: about fifty or sixty people from all walks of life

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Speaker 1: from all over the world come by and and meet

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Speaker 1: in Maine, from as far as away as Abu Dhabi

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Speaker 1: and and as close as um New York City, and

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Speaker 1: essentially five or six dozen of us get together in

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Speaker 1: cabins and and have these fascinating uh discussions. A little

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Speaker 1: bit of fishing and a little bit of drinking takes

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Speaker 1: place as well. But I find David just to be

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Speaker 1: one of these old school guys. He does things the

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Speaker 1: right way. He came up through um a very rough

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Speaker 1: period in markets and in the nineteen seventies, and I

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Speaker 1: think his approach is very circumspect and and very reasonable,

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Speaker 1: and there are a lot of things to be learned

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Speaker 1: from him. So, without any further ado, here is my

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Speaker 1: conversation David Kotok. This is Masters in Business with Barry

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Speaker 1: Ridholts on Bloomberg Radio. My special guest today is an

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Speaker 1: old friend, someone I've known for a long time. His

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Speaker 1: name is David Kotok, and he is the co founder

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Speaker 1: and chief investment officer of Cumberland Advisors, a firm now

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Speaker 1: located in Florida that manages a couple of billion dollars um.

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Speaker 1: Quick background on David. Uh. Bachelor's from University of Pennsylvania,

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Speaker 1: n eventually gets both an m S and an m

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Speaker 1: A master's in philosophy from University of Pennsylvania. Is that correct?

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Speaker 1: That is correct? Author of four books, including the best

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Speaker 1: selling From bar to Bull with ETFs, soon to be

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Speaker 1: the author of the upcoming Adventures and Uni Lands. Uh. David,

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Speaker 1: Welcome to Bloomberg, Barry. It's so nice to be with you.

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Speaker 1: We've chases for a while and here we are and

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Speaker 1: we don't have fishing rods in our hands. Know we're

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Speaker 1: normally normally when I'm with you, I I usually have

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Speaker 1: a speckled trout on the line showing off a wide

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Speaker 1: mouth bass um. We consider. I don't like to brag,

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Speaker 1: you know how humble I am, but I consistently am

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Speaker 1: the top performing angler in camp co talk, which we

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Speaker 1: will will talk about in a little later. Let's let's

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Speaker 1: start out talking a bit about your background. So you

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Speaker 1: have a somewhat unusual background. In addition to all that

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Speaker 1: academic training, you are an army captain in from sixty

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Speaker 1: six to sixty nine. Is that? Is that correct? Well,

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Speaker 1: that's right. I I finished undergraduate school at Wharton in

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Speaker 1: sixty five and at that period in our history Vietnam War,

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Speaker 1: full full throw, full throat, and um. I spent three

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Speaker 1: years in the Army in sixty six to sixty nine,

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Speaker 1: and then got out and came back to New Jersey

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Speaker 1: and invent I became registered as a solo investment advisor

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Speaker 1: under the Forties Act. Before we fast forward, I find

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Speaker 1: the fact that you were a captain in the army fascinating.

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Speaker 1: What was that training like and and is any of

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Speaker 1: that applicable to your day job. Well, the the army

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Speaker 1: is a great experience under most circumstances. Most people would

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Speaker 1: not repeat it, right, but they would also say, and

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Speaker 1: many of my friends would say, I'm glad I did it,

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Speaker 1: and number two, I'm glad I'm here. So that's the

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Speaker 1: Dorothy Parker quote. I hate writing, but love having written.

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Speaker 1: So well, there you go. That's right. And the thing

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Speaker 1: about that that the army experience, a military experience that

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Speaker 1: helps me is it creates a hierarchical structure in your thinking,

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Speaker 1: a reporting system, a system in which you follow directives,

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Speaker 1: and so when you think in terms of that structure,

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Speaker 1: it helps you in a business environment. And it actually

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Speaker 1: helps me when I look at businesses and I look

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Speaker 1: at governance, and I look at situations around the world

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Speaker 1: in terms of investment, advice and decisions. Because I can

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Speaker 1: measure them in the context of their structure, you understand

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Speaker 1: how the decision making process is implemented in a similar

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Speaker 1: military style at places like central banks and other sort

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Speaker 1: of governmental entities. Sure, because the experience is not only

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Speaker 1: the textbook experience in the study of organizations and businesses,

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Speaker 1: but in the army, you have somebody above you and

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Speaker 1: somebody below. You have to transmit a directive and you

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Speaker 1: have to see the see it through and accomplish something.

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Speaker 1: So it's very helpful to me. So let's talk a

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Speaker 1: little bit about government. You were on the transition teams

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Speaker 1: for both New Jersey Governor Tom Keane and New Jersey

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Speaker 1: Governor Christy Women. Did you see that same sort of

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Speaker 1: hierarchical structure and ability to follow directives at the state level.

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Speaker 1: We saw it and we also saw the absence of it.

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Speaker 1: And therefore the structure of a new government is to

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Speaker 1: try to create order. In the transition you have chaos.

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Speaker 1: Creating a order out of chaos is always a difficult

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Speaker 1: thing to do, and that's what the world's about. So

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Speaker 1: my prior experience helped me in both transition teams. You know,

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Speaker 1: you set up a new government, you have a lot

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Speaker 1: of new personalities. There's a very rapid change in personalities,

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Speaker 1: and the leader at the top, the new governor, is

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Speaker 1: like an electronic machine with people banging at them and

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Speaker 1: pinging at them every second, trying to put together and

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Speaker 1: in New Jersey's case, the governor of New Jersey very powerful.

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Speaker 1: So there are a couple of thousand appointed positions in

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Speaker 1: the government and so it was a lot to do,

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Speaker 1: was great experience transition teams. So let's fast forward to

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Speaker 1: what you do for a living today. You run a

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Speaker 1: m that's primarily known as an active bond shop. How

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Speaker 1: does that differ from just more passive bond ownership. Well,

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Speaker 1: we we we have a forty year plus history in

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Speaker 1: active management of bonds. We do our own credit work.

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Speaker 1: We look at what rating agencies do, but we do

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Speaker 1: our own credit work as well. And we also have

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Speaker 1: a pretty good E t F segment, although that that

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Speaker 1: has a lot of growing prominence. But we're known for

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Speaker 1: long time as a bond shop. So let me ask

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Speaker 1: you a question about active bonds. That the rub on

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Speaker 1: active equities is, Hey, you're probably in the longhould, better

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Speaker 1: off just being passive, low cost and just leave it go.

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Speaker 1: But the studies say the same isn't true for bonds.

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Speaker 1: You're better off being somewhat active, or at least that's

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Speaker 1: the the academic math. Explain why that works and how

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Speaker 1: well we think, So Barry that the yield curve, the

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Speaker 1: distribution of interest rates over maturities, shifts all the time,

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Speaker 1: so it by itself is active for variety of reasons

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Speaker 1: having nothing to do with the bond uh buyers daily activity.

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Speaker 1: Those are functions of government and central banks and economic activity.

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Speaker 1: But because they're there, you can take advantage of them

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Speaker 1: in an active bond approach rather than just buy a bond,

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Speaker 1: hold it, collect the interest, and get the principle when

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Speaker 1: the bond matures. So the yield curve shift is one

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Speaker 1: of the issues. The directions of each of those policy pieces,

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Speaker 1: Central banks, governance deficits are also big pieces. I'm Barry

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Speaker 1: rich Helps. You're listening to Masters in Business on Bloomberg Radio.

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Speaker 1: My special guest today is David Kotok. He is the

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Speaker 1: c i O of Cumberland Advisers with about two point

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Speaker 1: three billion in assets under management, and I want to

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Speaker 1: start this segment with a quote of yours that I

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Speaker 1: find intriguing. Said quote. We believe the value of stocks

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Speaker 1: and bonds is enduringly linked to interest rates and the

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Speaker 1: cost of money. Interest rates eventually dominate that valuation process

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Speaker 1: and are the market's way of restoring equilibrium. So there's

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Speaker 1: a lot in that. Let's let's discuss it. What Why

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Speaker 1: do you believe that interest rates are so crucial to

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Speaker 1: stocks and bonds. The valuation of every financial asset is

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Speaker 1: a discounting mechanism, some sort of attempt to estimate what

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Speaker 1: it's going to be worth tomorrow, and at what rate

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Speaker 1: do you discount tomorrow to today? And that is the

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Speaker 1: fundamental interest rate. Now you can argue is that the

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Speaker 1: nominal interest rate? Is it the real interest rate? You

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Speaker 1: have to adjust for risk. But the bottom the bottom

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Speaker 1: line is an interest rate. It's the cost of money.

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Speaker 1: It's the host of of risk free what you would

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Speaker 1: get if you were just putting money in treasuries well,

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Speaker 1: or something that is essentially risk free. And the fact

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Speaker 1: is every single financial decision has to be compared with

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Speaker 1: the risk free rate and the maturity that coincides with

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Speaker 1: the financial decision you're making. So if you're buying stocks,

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Speaker 1: for example, you have a very long term asset pool.

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Speaker 1: If you take all the stocks and lump them together

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Speaker 1: and call them stock market, and you bought one share

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Speaker 1: of stock market, it's a very long lived pool. The

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Speaker 1: same thing might be true with a very long term bond.

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Speaker 1: So you say to yourself, Okay, do I expect the

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Speaker 1: long term bond maturity or the outcome of the long

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Speaker 1: term share of stock market to produce a result, What

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Speaker 1: is the result I expect and how do I discount

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Speaker 1: that result to today? To decide whether or not to

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Speaker 1: do it? That discounting mechanyms mechanism is an interest rate.

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Speaker 1: So you add to the part initial part of the

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Speaker 1: quote that eventually interest rates are part of the valuation process.

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Speaker 1: That are the market's way of restoring equilibrium. Explain what

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Speaker 1: that means well, markets move up and down. They represent

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Speaker 1: the consensus pricing view of all the agents in the

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Speaker 1: market at any given minute. Agents meaning all the buyers

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Speaker 1: and sells, all the buyers and sellers. Anybody who's a

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Speaker 1: player has a way to buy or sell at a

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Speaker 1: price every second, and they all have information. How does

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Speaker 1: this whole mass clear? In the end, it clears because

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Speaker 1: it reverts to some basic discounted price. And the basic

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Speaker 1: discounted pricing mechanism is the interest rate. Now, the market

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Speaker 1: interest rate maybe belower above what would be natural rate.

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Speaker 1: We don't know. So therefore the market interesting may be

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Speaker 1: influenced by other forces, and they have to be examined.

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Speaker 1: A good example right now is you have this crazy

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Speaker 1: idea in Europe of a negative interest rate Switzerland getting switz.

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Speaker 1: That's right. I that we're accustomed to saying to a bank,

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Speaker 1: here's my money, pay me interest, and give it to

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Speaker 1: me when we agree, either tomorrow or a year from now.

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Speaker 1: Now we have a new concept. Here's my money, store

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Speaker 1: it for me electronically. I will pay you a fee,

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Speaker 1: and at the end of the term, you're gonna give

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Speaker 1: me back less than I gave you. That is counterintuitive

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Speaker 1: to any saver or lender. We don't think that way.

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Speaker 1: We never have. And so this is a negative interest

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Speaker 1: Now you say to yourself, is that going to go

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Speaker 1: on forever? The answers no, it's not a sustainable system.

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Speaker 1: So can you use the negative interest rate in the

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Speaker 1: marketplace today to discount the value of something? I don't think. So,

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Speaker 1: therefore you have to guess, estimate, guest estimate at what

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Speaker 1: the interest rate ought to be if it reflected as

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Speaker 1: much as you know, and you would get something other

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Speaker 1: than a negative rate. Because you know, a negative interest

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Speaker 1: rate is not a sustainable model, even though it is

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Speaker 1: being applied in one of the largest economic blocks in

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Speaker 1: the world. So let me throw a quote at you

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Speaker 1: from a guest of hours a few weeks ago. I

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Speaker 1: s I s ed Hyman and we were talking about

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Speaker 1: Japan practically at zero, Switzerland is negative, Germany is close

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Speaker 1: to one percent, the US is over two percent, all

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Speaker 1: of them on their tenure bonds. And when I asked ed,

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Speaker 1: what is the difference between these countries? Is it a

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Speaker 1: function of risk? Is it a function function of something else?

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Speaker 1: And he said interest rates on government bonds reflect expected

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Speaker 1: growth rates. Do you agree with that? Well? I used

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Speaker 1: to say that would have been very accurate, but I

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Speaker 1: think today to say that by itself is insufficient because

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Speaker 1: you're leaving out central bank action absolutely and the we

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Speaker 1: we now have extraordinary central bank action unlike anything we

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Speaker 1: have in the history of man in modern financial time.

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Speaker 1: So let me flash back with you, because you started

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Speaker 1: in the nineteen seventies and that was an era. I

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Speaker 1: was a wee lad, but I very vigorously remember don't

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Speaker 1: get gas with my guests container for the lawnmower, and

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Speaker 1: not having the right um license plate number to to

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Speaker 1: carry it home. I had to beg the guy for

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Speaker 1: guess to mow the lawn. Uh. Inflation was off the charts.

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Speaker 1: You launched your business in that era. What was it

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Speaker 1: like during the nineteen seventies, and both inflation was high

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Speaker 1: and the interest rates the seventies. The seventies were remarkable.

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Speaker 1: You started out in a rocky period at the end

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Speaker 1: of the sixties, you got into the seventies. Then you

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Speaker 1: had the war in the Middle East. The price of

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Speaker 1: oil went from three bucks to twelve I remember it, well,

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Speaker 1: not a gallon, not a gallon. I was in this

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Speaker 1: business managing portfolios when that happened. And the rate of

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Speaker 1: inflation in the seventies went to double digits. It was remarkable.

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Speaker 1: Interest rates had been at levels and at the time

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Speaker 1: of the First Shock they hit the highest interest rates

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Speaker 1: since the Civil War in the United States. Can you

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Speaker 1: imagine a hundred year period and now you have a

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Speaker 1: new all time high interest rate. The prime rate hit twelve,

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Speaker 1: never thinking that six or seven years later it would

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Speaker 1: be higher. Higher. Still in the last minute, we have

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Speaker 1: what ended up happening with rates there and how did

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Speaker 1: that set off the next cycle in bonds. Well, we

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Speaker 1: had a big inflation. Rates went up, they were double digits.

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Speaker 1: Inflation went to double digits. It was the end of

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Speaker 1: the Carter regime. Incomes Paul Vulker, who deserves a medal

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Speaker 1: as a national hero for the United States. He said

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Speaker 1: in nineteen seventy nine, I will stop this inflation no

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Speaker 1: matter what I have to do, and he did it.

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Speaker 1: Bonds peaked and the Long Bond Rally started in one

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Speaker 1: I'm Barry rid Hoults. You're listening to Masters in Business

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Speaker 1: on Bloomberg Radio. My special guest today is David Kotak.

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Speaker 1: He is the chief investment officer of Cumberland Advisers, managing

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Speaker 1: two point three billion dollars and a fly fisherman extraordinary.

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Speaker 1: We'll we'll talk more about that in a in a

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Speaker 1: later segment. Let's get right into the Federal Reserve. You

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Speaker 1: have known personally and met with every re FED chairman

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Speaker 1: going back to nineteen seventy. Tell us how that came about. Well,

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Speaker 1: I met Arthur Burns twice. I had two meetings with

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Speaker 1: Arthur Burns in his office, and so he was the

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Speaker 1: FED chief from of nineteen seventy to nineteen seventy eight. Um. Yeah,

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Speaker 1: I never met Miller that that preceded him. I never

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Speaker 1: met Martin and I never met Miller, who was there

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Speaker 1: for a very short period of time in the Carter administration.

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Speaker 1: He was replaced quickly by Vulcar, which was a good thing.

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Speaker 1: I met Arthur Burns. Arthur Burns really was was a

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Speaker 1: smart economist, very skilled, knew his history, and he in

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Speaker 1: he takes on the chairing of the Federal Reserve when

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Speaker 1: the first energy shock happened in the Seven Days where

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Speaker 1: seventy four we just talked about it. So you think

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Speaker 1: of yourself there you are as a FED chairman. Your

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Speaker 1: economy goes into a recession. The price of oil has

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Speaker 1: gone up four fold, People are in gas lines, people

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Speaker 1: aren't flying, there are no airplanes, no automobiles. That the

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Speaker 1: US economy has been clobbered on the head by this

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Speaker 1: rising energy. We were very energy dependent since the end

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Speaker 1: of World War two, and we had a massive adjustment.

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Speaker 1: Interest rates are up, inflation is rate. How do you

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Speaker 1: balance all of this with monetary policy? That is what

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Speaker 1: Burns faced. Now. Critics would say Burns tried to do everything,

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Speaker 1: balance the middle, and therefore accomplish some of each and

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Speaker 1: not enough of any. And that's easy to do in retrospect.

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Speaker 1: It's always easy to judge the game on a Monday,

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Speaker 1: as you know hindsight, you bet. So here's Burns facing

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Speaker 1: raising interest rates because he wants to fight inflation, very

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Speaker 1: counterintuitive when you have a very weak economy, and he's

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Speaker 1: got auto manufacturers not making autos, people not flying on planes,

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Speaker 1: and people not order planes, airlines not ordering planes because

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Speaker 1: the energy prices spiking up. So you have this cross current.

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Speaker 1: That was Burns period at the FED, and he did

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Speaker 1: some of each, but not enough to keep the inflation

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Speaker 1: from rising. So in the mid seventies the economy started

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Speaker 1: to recover, but the inflation rate was then accelerating, and

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Speaker 1: it accelerated to above ten percent at the peak, and

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Speaker 1: the tenure was yielding. If if memory serves well, it

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Speaker 1: went into well into double digits at the end. And

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Speaker 1: every time you ratcheted up interest rates, they were a

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Speaker 1: new high level and people said, oh my gosh, I

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Speaker 1: want to buy bonds, these bonds. I've never seen yields

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Speaker 1: like this in our shop. We said, wait a minute,

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Speaker 1: there's a force driving up these bonds, and it is

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Speaker 1: too soon to buy bonds. When you have an acceleration

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Speaker 1: of inflation, you must be able to see the end

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Speaker 1: of the tunnel because you have no idea where that is.

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Speaker 1: So rates are going higher, bonds are going cheaper, yes,

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Speaker 1: And when did we well we stood aside on the

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Speaker 1: bond market, and we entered the bond market in ninety

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Speaker 1: nine when Volker came in and became chairman. I believe

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Speaker 1: Paul Volcker meant what he said. That was my personal view.

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Speaker 1: And I remember the first bond I bought after years,

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Speaker 1: It was a Pacific Telephone and Telegraph pac TELL was

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Speaker 1: then a sub of a T and T. It was

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Speaker 1: twelve point one five percent thirty year telephone bond rated

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Speaker 1: triple A. That was the first bond that we had

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Speaker 1: bought for clients in years. And you know, twelve on

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Speaker 1: triple A from the telephone company. People would kill Oh, yeah,

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Speaker 1: for sure. Little did I know that at the end

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Speaker 1: of the Slam, when the bond market was in a

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Speaker 1: free fall, that bond would trade below eighty cents on

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Speaker 1: a dollar. It, by the way, bounce back was subsequently

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Speaker 1: called and everybody that we bought it four had a

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Speaker 1: twelve income flow and got their money back on the call.

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Speaker 1: So Vulcer comes in and he had warned everybody, I

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Speaker 1: will do whatever it takes, and he proceeds to ratchet

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Speaker 1: up rates to unprecedented level, pauses the recession by design.

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Speaker 1: What was that You're like to to manage money through.

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Speaker 1: I lost all my hair, my beard turned gray. Look

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Speaker 1: so you look just like you do today, exactly that's

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Speaker 1: I aged. I aged everything in eighteen months. But that

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Speaker 1: was thirty five years ago. You're telling me this, I

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Speaker 1: haven't changed. This is how you looked when you were

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Speaker 1: thirty five. That's exactly right. I haven't changed since since

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Speaker 1: the Volker Slam. Volker was was dead on. He said,

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Speaker 1: we will lose the country if we have double digit inflation,

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Speaker 1: and we must reverse it, no matter where it takes.

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Speaker 1: So he took the short term pain and within a

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Speaker 1: year it turned. Within a year, interest rates started the fall,

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Speaker 1: and they fell for the next thirty years. Inflation went

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Speaker 1: back to single digits and continued to decline. Real growth

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Speaker 1: and accelerated, and we've had a glorious story for the

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Speaker 1: last thirty years. I'm Barrier Hults. You're listening to Masters

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Speaker 1: in Business on Bloomberg Radio. My guest today is David Kotok.

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Speaker 1: He is the co founder and chief investment officer of

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Speaker 1: Cumberland Advisors, as well as being a fisher and buddy

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Speaker 1: for for many, many years. Let's let's start out the

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Speaker 1: segment by talking about camp ko Talk as it's uh

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Speaker 1: now become known. It kind of started out as the

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Speaker 1: Shadow Federal Reserve um committee. Tell us about those uh

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Speaker 1: those events, Well, the Shadow Federal Reserve Kansas City Fed

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Speaker 1: Shadows thing was a nickname that John Hills and Wrath

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Speaker 1: gave us when he came up one time. And so

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Speaker 1: that's how Wall Street Journal reporter now kinda known as

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Speaker 1: the Fed with took over Greg ip Slot as the

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Speaker 1: FEDS liaison to the Wall Street Journal exactly. So anyway,

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Speaker 1: Hills and Wrath was there for a day and a

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Speaker 1: half and he coined that nickname. The Camp Coo Talk

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Speaker 1: nickname came from Becky Quick and uh, Becky Quick put

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Speaker 1: it up on a screen during an interview. So, um,

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Speaker 1: that's how it stuck. She she originated the name. The

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Speaker 1: name is stuck and it's grown, I guess now to

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Speaker 1: become fairly commonly known. So tell us a little bit

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Speaker 1: about Camp Coo Talk. What was the genesis of this?

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Speaker 1: How did it come about? I've been fortunate enough to

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Speaker 1: be going to Camp Coo Talk for almost a decade.

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Speaker 1: It feels like it just started. Well, you keep it up,

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Speaker 1: you'll get tenure. That's what I'm hoping for Look, we

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Speaker 1: were a couple of guys saying, we need to get away,

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Speaker 1: go out in the woods somewhere and just think about

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Speaker 1: the world finance, economics, markets without all the minute by

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Speaker 1: minute interrupted by daily pressure. And I had been going

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Speaker 1: to Grand Lake Stream Main It's this is my twenty

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Speaker 1: five year so I said, I know a place we

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Speaker 1: can come fishing. We can stay in a kid It

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Speaker 1: was a different camp. It wasn't Lean's Lodge at the time.

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Speaker 1: I said, so let's go up there for a weekend.

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Speaker 1: And that's how it started, and it grew. How many

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Speaker 1: people were in this was a handful. This was half

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Speaker 1: a half a dozen people or fewer. On nine eleven,

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Speaker 1: when a group of us were at the Name meeting

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Speaker 1: and got out of the second Tower and in that

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Speaker 1: group where people like Harvey Rosenbloom, Dallas Fed, Stu Hoffman,

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Speaker 1: a lot of folks, you know, and we were having

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Speaker 1: this discussion. I had invited wait, wait, wait, back up.

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Speaker 1: So you're at a meeting in the second World Trade

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Speaker 1: Center building. To what floor was this? Well, we had

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Speaker 1: come down and we were on the ground floor. Very fortunate,

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Speaker 1: so we were out in six minutes, eight minutes we

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Speaker 1: were very, very lucky to get out. But during that time,

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Speaker 1: up until then, I'd said, Harvey, come on, we'll go

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Speaker 1: away somewhere we'll be able to talk. I don't want

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Speaker 1: to go fishing. I don't want to go in the

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Speaker 1: woods often, I don't want to go fishing. I don't

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Speaker 1: want to go in the woods, all of them. Brush

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Speaker 1: with death changes your perspective, sure did, and that changed

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Speaker 1: it and the group the following year was the largest ever,

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Speaker 1: which might have been twelve, and it has grown ever since.

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Speaker 1: And you know, give us you've been there, give us

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Speaker 1: some names of people who attend, because it's really a

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Speaker 1: collection of a list names. Well, it's a collection of

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Speaker 1: people who like economics, financial markets, geopolitics, government, who have

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Speaker 1: diverse views. Who are Democrats, republic begins, liberals, conservative. We've

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Speaker 1: had last year we had Gary Schilling with his views,

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Speaker 1: Paul McCulley with his views, Jack Rivkin with his views, uh,

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Speaker 1: Natalie Cohen from Wales who's got expertise and municipal credit.

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Speaker 1: We have men and women from around the world. Martin

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Speaker 1: Barnes comes from Vancouver, Paul O'Brien came from Abu Dhabi.

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Speaker 1: So you have a mix of people from all over

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Speaker 1: the world, and what do we do. We have no

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Speaker 1: power point, none, none, whatsoever. I can attest to that.

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Speaker 1: The speeches are limited to five or six minutes, and

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Speaker 1: even that exactly. And we have dialogue and we talked

430
00:27:46,080 --> 00:27:49,560
Speaker 1: to each other, and we have visitors who are professionals.

431
00:27:49,600 --> 00:27:53,080
Speaker 1: In the governor the page last year. The governor's coming

432
00:27:53,119 --> 00:27:57,280
Speaker 1: back this Friday. He this is his fourth year. On Thursday,

433
00:27:57,320 --> 00:27:59,920
Speaker 1: we've got a congressman who's on the House Financial Serve

434
00:28:00,080 --> 00:28:05,480
Speaker 1: US Committee and he was a State Treasures Bruce poll Quinn,

435
00:28:05,560 --> 00:28:10,639
Speaker 1: you may remember he was there. And we'll have a

436
00:28:10,760 --> 00:28:15,840
Speaker 1: debate on some issue probably on Saturday night. And we'll

437
00:28:15,880 --> 00:28:20,600
Speaker 1: have gatherings. Now, the gatherings are discussions. You've been in

438
00:28:20,640 --> 00:28:22,800
Speaker 1: the thick of them. You solve the world's problems in

439
00:28:22,840 --> 00:28:25,920
Speaker 1: the more repeatedly. At the end of the weekend, they're

440
00:28:25,960 --> 00:28:28,960
Speaker 1: still there. Someone's gotta do. They just don't enact my policies.

441
00:28:28,960 --> 00:28:31,439
Speaker 1: Otherwise all these things, if they would only listen to you.

442
00:28:32,520 --> 00:28:36,320
Speaker 1: So so it's a great discussion in an environment which

443
00:28:36,400 --> 00:28:40,480
Speaker 1: is informal. It's in pristine water, in a watershed, in

444
00:28:40,680 --> 00:28:44,720
Speaker 1: forest with wild it's like no other land I've ever

445
00:28:44,800 --> 00:28:50,280
Speaker 1: been on him, and it's it's absolutely this is no

446
00:28:50,560 --> 00:28:52,840
Speaker 1: other than a couple of cabins here and there. There's

447
00:28:52,880 --> 00:28:55,840
Speaker 1: no difference than what this was like a hundred thousand

448
00:28:55,920 --> 00:28:59,520
Speaker 1: or a million years ago. It's other than the withdrawing

449
00:28:59,560 --> 00:29:06,360
Speaker 1: glaciers are what actually created these lakes. But it's absolutely pristine, wild,

450
00:29:07,240 --> 00:29:11,000
Speaker 1: amazing land, nothing like I've ever seen anywhere in the

451
00:29:11,120 --> 00:29:15,719
Speaker 1: United States. And it's protected. There's a huge, complex, huge

452
00:29:15,880 --> 00:29:19,000
Speaker 1: acreage which is in a land trust, so that will

453
00:29:19,080 --> 00:29:24,040
Speaker 1: never develop. And it adjoins the past McQuade Indian Reservation land,

454
00:29:24,360 --> 00:29:29,960
Speaker 1: which is in a separate configuration, and therefore it's impossible

455
00:29:30,040 --> 00:29:33,800
Speaker 1: to see the kind of resort erosion that that the

456
00:29:33,880 --> 00:29:37,000
Speaker 1: inroads of resorts that would take away this setting. So

457
00:29:37,080 --> 00:29:40,600
Speaker 1: that's good for the economic development of Maine if that happened,

458
00:29:40,600 --> 00:29:42,880
Speaker 1: but it would be bad for all this pristine land.

459
00:29:43,280 --> 00:29:45,440
Speaker 1: I think so. And so I mean, if you look

460
00:29:45,480 --> 00:29:48,760
Speaker 1: at what we do, we hire every guide within fifty miles.

461
00:29:48,840 --> 00:29:51,360
Speaker 1: We bring in a group were we may be the

462
00:29:51,360 --> 00:29:55,600
Speaker 1: biggest economic activity all summer. Yeah. We people joke, they

463
00:29:55,600 --> 00:29:58,520
Speaker 1: say you're ten percent of the GDP of the whole county.

464
00:29:58,720 --> 00:30:00,560
Speaker 1: I don't know what it is, but it would be

465
00:30:00,880 --> 00:30:02,280
Speaker 1: you know. And I think by the way we do

466
00:30:02,360 --> 00:30:05,400
Speaker 1: good things, we spend we pay people, they have jobs,

467
00:30:05,800 --> 00:30:08,440
Speaker 1: so we make donations to the land Trust. People are fair.

468
00:30:08,720 --> 00:30:12,960
Speaker 1: There's an active philanthropic arm to this as well. And

469
00:30:12,960 --> 00:30:14,880
Speaker 1: and so so let's talk a little bit about the

470
00:30:14,920 --> 00:30:18,840
Speaker 1: debates and the discussions. I could tell from personal experience

471
00:30:19,280 --> 00:30:22,240
Speaker 1: everything is off the record. It's all Chatham House rules

472
00:30:22,280 --> 00:30:25,680
Speaker 1: where you can describe what was said, but you can't

473
00:30:25,720 --> 00:30:29,080
Speaker 1: identify Paul McCully said what. You're not allowed to do that.

474
00:30:29,160 --> 00:30:32,240
Speaker 1: It's all on the on the download. But some of

475
00:30:32,240 --> 00:30:38,080
Speaker 1: the conversations are really quite fascinating, especially when you realize, hey,

476
00:30:38,120 --> 00:30:41,959
Speaker 1: you have the number four guy at PIMCO debating someone

477
00:30:42,040 --> 00:30:45,440
Speaker 1: from the Philadelphia Fed and this guy. It's really very

478
00:30:45,560 --> 00:30:49,520
Speaker 1: high level debates and conversations. Well, I think the conversations

479
00:30:49,520 --> 00:30:52,680
Speaker 1: are great, and the people who come have a basic

480
00:30:53,080 --> 00:30:57,360
Speaker 1: platform of information so you can cut right to the

481
00:30:57,440 --> 00:31:03,280
Speaker 1: issue and dissected immediately. And we do this. I mean,

482
00:31:03,320 --> 00:31:05,600
Speaker 1: there's a media that cover it. So as you know,

483
00:31:07,120 --> 00:31:10,720
Speaker 1: if you have somebody's permission, you can quote them, you

484
00:31:10,760 --> 00:31:13,920
Speaker 1: can interview them. But if you don't then you can

485
00:31:14,000 --> 00:31:17,240
Speaker 1: take the takeaway from the group, but you can't quote

486
00:31:17,240 --> 00:31:20,440
Speaker 1: somebody unless you get their permission first, and that that

487
00:31:20,480 --> 00:31:24,480
Speaker 1: creates a sort of level of comfort where people say

488
00:31:24,520 --> 00:31:27,440
Speaker 1: things that they wouldn't say if they were on camera

489
00:31:27,600 --> 00:31:30,200
Speaker 1: or on the record. There's a very much let your

490
00:31:30,200 --> 00:31:33,000
Speaker 1: hair down and say what you really think environment, which

491
00:31:33,040 --> 00:31:35,480
Speaker 1: is relatively rare these days. I think so. And I

492
00:31:35,520 --> 00:31:37,920
Speaker 1: think the second part is that if you walk by

493
00:31:37,960 --> 00:31:40,920
Speaker 1: a conversation and you hear something you really shouldn't have heard,

494
00:31:41,640 --> 00:31:44,120
Speaker 1: you ignore it. Now you may remember it. This is

495
00:31:44,160 --> 00:31:47,400
Speaker 1: like telling the jury to disregard the Testament, but you

496
00:31:47,480 --> 00:31:50,240
Speaker 1: don't go quote it in the newspaper. Because you walk

497
00:31:50,360 --> 00:31:54,760
Speaker 1: by a conversation and there's Barry Ridholt's talking to somebody

498
00:31:54,800 --> 00:31:58,040
Speaker 1: in a private conversation. You heard something that Ridholt said.

499
00:31:58,520 --> 00:32:02,479
Speaker 1: That's nobody else's business us. So by agreement, we we

500
00:32:02,560 --> 00:32:05,680
Speaker 1: apply a modified version of the Chatham House rule and

501
00:32:05,720 --> 00:32:10,000
Speaker 1: the Jackson Hole rule. And therefore whatever it's public from

502
00:32:10,120 --> 00:32:14,680
Speaker 1: the weekend is by agreement with the permission of the

503
00:32:14,720 --> 00:32:17,000
Speaker 1: person who said it, and it's really just the tip

504
00:32:17,040 --> 00:32:19,000
Speaker 1: of the iceberg. So so let's talk a little bit

505
00:32:19,040 --> 00:32:24,360
Speaker 1: about the global Interdependence Center. You're now chairman emeritus, but

506
00:32:24,520 --> 00:32:27,840
Speaker 1: you ran their programs for a long time. And this

507
00:32:27,960 --> 00:32:33,200
Speaker 1: is really an even higher level version of of a

508
00:32:33,320 --> 00:32:36,320
Speaker 1: much more sophisticated First of all, aren't you housed in

509
00:32:36,360 --> 00:32:39,560
Speaker 1: the in the Philadelphia offices are in the Philadelphia Federal

510
00:32:39,600 --> 00:32:46,280
Speaker 1: Reserve Building. Actually I'm program chairs program chair, no longer

511
00:32:46,320 --> 00:32:49,680
Speaker 1: the program chair, and Dunkelberg is the chairman Americus. Bill

512
00:32:49,800 --> 00:32:55,880
Speaker 1: Dunkelberg economist a nationalization independent business and George Chichecos, who

513
00:32:55,960 --> 00:32:58,200
Speaker 1: is the former dean of the Business School at Drexel,

514
00:32:58,600 --> 00:33:00,720
Speaker 1: is also a chairman of America. This I was the

515
00:33:00,720 --> 00:33:04,400
Speaker 1: program chair, and I chaired the Central Banking series. John

516
00:33:04,440 --> 00:33:08,440
Speaker 1: Sylvia at Wells Fargo's now chairing Central Banking, Michael Drury

517
00:33:08,520 --> 00:33:12,920
Speaker 1: and mcvain Trading in Memphis is now chairman, and don

518
00:33:13,000 --> 00:33:16,000
Speaker 1: Ris Miller and Strategus is now the program chair. And

519
00:33:16,040 --> 00:33:17,960
Speaker 1: I'm just the old goat getting in the way and

520
00:33:18,040 --> 00:33:21,120
Speaker 1: stern the pot So so tell us about because this

521
00:33:21,200 --> 00:33:24,200
Speaker 1: is all around the world. Tell us about what these

522
00:33:24,240 --> 00:33:27,920
Speaker 1: meetings are and who attends these and what policy and

523
00:33:28,240 --> 00:33:31,800
Speaker 1: information comes out of these kind The Global Interdependent Center

524
00:33:31,920 --> 00:33:36,400
Speaker 1: idea was to convene dialogue in a neutral way and

525
00:33:36,480 --> 00:33:41,200
Speaker 1: allow different points of view to be discussed, and hopefully

526
00:33:41,920 --> 00:33:44,920
Speaker 1: you get people of goodwill together in such a discussion

527
00:33:44,960 --> 00:33:49,400
Speaker 1: and some good outcome occurs. That was behind the thinking

528
00:33:49,520 --> 00:33:54,640
Speaker 1: of it, convene dialogue with a neutral platform that enabled us,

529
00:33:54,680 --> 00:33:57,840
Speaker 1: by the way, to invite people who otherwise wouldn't go

530
00:33:58,000 --> 00:34:01,320
Speaker 1: to other platforms, because here was a place that said,

531
00:34:01,360 --> 00:34:06,760
Speaker 1: just by coming and having a discussion, you created the

532
00:34:06,840 --> 00:34:10,319
Speaker 1: way in which things may get better. And that was

533
00:34:10,440 --> 00:34:13,680
Speaker 1: mostly in economic trade, monetary affairs, but it was also

534
00:34:13,719 --> 00:34:16,200
Speaker 1: in health and in water. And that's and here I

535
00:34:16,280 --> 00:34:19,880
Speaker 1: was the program chair. We've been speaking with David Kotok.

536
00:34:20,160 --> 00:34:23,719
Speaker 1: He is the co founder and chief investment officer of

537
00:34:23,880 --> 00:34:27,480
Speaker 1: Cumberland Advisors. If you want to read more of David's work,

538
00:34:27,600 --> 00:34:30,960
Speaker 1: you can go to cumber dot com. And I haven't

539
00:34:31,000 --> 00:34:33,959
Speaker 1: noticed you tweeting very much. I don't think there's a

540
00:34:34,000 --> 00:34:37,480
Speaker 1: Twitter handle fairs at Cumberland, a d V at Cumberland,

541
00:34:37,520 --> 00:34:39,960
Speaker 1: a DV on Twitter. Uh. If you want to check

542
00:34:40,000 --> 00:34:42,600
Speaker 1: out the rest of our conversation, be sure and go

543
00:34:42,719 --> 00:34:45,879
Speaker 1: to either Apple iTunes or Bloomberg dot com and you'll

544
00:34:45,920 --> 00:34:49,200
Speaker 1: hear uh. David and I continuing talking about fishing and

545
00:34:49,239 --> 00:34:51,920
Speaker 1: other such stuff. Be sure and check out my daily

546
00:34:52,000 --> 00:34:55,440
Speaker 1: column on Bloomberg View dot com or follow me on

547
00:34:55,440 --> 00:34:59,040
Speaker 1: Twitter at Rid Halts. I'm Barry Ridhults. You've been listening

548
00:34:59,040 --> 00:35:02,880
Speaker 1: to Masters and Busines this on Bloomberg Radio. Welcome to

549
00:35:02,960 --> 00:35:05,719
Speaker 1: the podcast portion of our show. I'm here with an

550
00:35:05,719 --> 00:35:08,759
Speaker 1: old friend, David ko Talk. David, how long have we

551
00:35:09,040 --> 00:35:14,640
Speaker 1: known each other? A hundred and fifty years? I'm not

552
00:35:14,840 --> 00:35:16,319
Speaker 1: you have a couple of years on me, but it

553
00:35:16,360 --> 00:35:18,920
Speaker 1: certainly feels like it's. It's that you and I had

554
00:35:18,920 --> 00:35:21,240
Speaker 1: done a number of television hits and a couple of things,

555
00:35:21,280 --> 00:35:24,400
Speaker 1: different things. I want to say, early two thousands, so

556
00:35:24,440 --> 00:35:27,399
Speaker 1: it's got to be well over a decade. And when

557
00:35:27,440 --> 00:35:30,160
Speaker 1: I first went to Camp Ko Talk, when I first

558
00:35:30,239 --> 00:35:34,200
Speaker 1: got invited, I tell four or five stories about that

559
00:35:34,360 --> 00:35:38,160
Speaker 1: first weekend. I'll never forget. This is a true story,

560
00:35:39,040 --> 00:35:41,680
Speaker 1: So this will I have a ton of questions for you,

561
00:35:41,719 --> 00:35:43,640
Speaker 1: but I have to share this one story. So I

562
00:35:43,680 --> 00:35:46,960
Speaker 1: get invited to Camp ko Talk and I'm like, do

563
00:35:47,040 --> 00:35:48,880
Speaker 1: I really want to slip all the way up to me?

564
00:35:48,960 --> 00:35:51,960
Speaker 1: You gotta fly an hour and then you drive three hours.

565
00:35:52,040 --> 00:35:54,000
Speaker 1: Really in the middle of nowhere. I had never been

566
00:35:54,000 --> 00:35:58,120
Speaker 1: there before. And um, someone I asked, goes, you got

567
00:35:58,160 --> 00:36:01,160
Speaker 1: an invitation to that? How did you get invited? No, David,

568
00:36:01,280 --> 00:36:04,759
Speaker 1: he said, you gotta do, you gotta go. Okay, so

569
00:36:04,800 --> 00:36:08,120
Speaker 1: I go. So we we get up there. You finally

570
00:36:08,160 --> 00:36:11,400
Speaker 1: get there, and the property in the lake and everything.

571
00:36:11,440 --> 00:36:14,759
Speaker 1: It's insane. I'll never forget the first time we take

572
00:36:14,800 --> 00:36:17,080
Speaker 1: a fish. We you know, it's catch and release. We

573
00:36:17,120 --> 00:36:19,920
Speaker 1: throw it back and this eagle swoops down the fishes

574
00:36:20,000 --> 00:36:23,680
Speaker 1: in the water for eight seconds, fifty feet from the

575
00:36:23,880 --> 00:36:27,439
Speaker 1: from the canoe, this eagle swoops down, grabs the fish,

576
00:36:27,480 --> 00:36:30,920
Speaker 1: flies away. It was the most dumbfounding thing I had

577
00:36:31,000 --> 00:36:33,960
Speaker 1: ever seen. I'm like, this is really the wilderness, isn't it.

578
00:36:34,160 --> 00:36:37,319
Speaker 1: And then Saturday night we're playing poker, and I'll never

579
00:36:37,400 --> 00:36:41,720
Speaker 1: forget Scott Frew and I are at the table and

580
00:36:42,200 --> 00:36:45,960
Speaker 1: I don't remember who the fourth person was, but Scott

581
00:36:46,000 --> 00:36:48,120
Speaker 1: Frew and I are, We're each we're all drinking. By

582
00:36:48,120 --> 00:36:50,800
Speaker 1: the way, everyone should know, the cost of admission is

583
00:36:50,800 --> 00:36:54,080
Speaker 1: everybody has to bring a half a case of of

584
00:36:54,160 --> 00:36:56,759
Speaker 1: good wine or in John Moulden's case, a case of

585
00:36:56,800 --> 00:37:00,200
Speaker 1: crabby wine. But basically it's half a ca is a

586
00:37:00,280 --> 00:37:04,359
Speaker 1: wine and is a ton of drinking, but responsibly. And

587
00:37:04,440 --> 00:37:08,160
Speaker 1: Paul McCulley of PIMCO gets up and says to me,

588
00:37:08,520 --> 00:37:12,240
Speaker 1: can I Can I refill your sure? Absolutely? And then

589
00:37:12,400 --> 00:37:15,359
Speaker 1: somebody else gets up to Scott gets up and says

590
00:37:15,360 --> 00:37:18,799
Speaker 1: to Scott Frew, who runs Rockingham Capital, which is edge fund,

591
00:37:18,920 --> 00:37:21,560
Speaker 1: can I refill your glass? Sure? And I They two

592
00:37:21,600 --> 00:37:23,720
Speaker 1: of them walk away, and I just turned to Scott

593
00:37:23,760 --> 00:37:28,319
Speaker 1: and say, my waiter manages five hundred billion dollars more

594
00:37:28,320 --> 00:37:31,120
Speaker 1: than your waiter. And because his waiter was only a

595
00:37:31,120 --> 00:37:34,160
Speaker 1: five hundred billion dollar farm as opposed to a trillion

596
00:37:34,160 --> 00:37:36,799
Speaker 1: dollar farm, it was like one of the most bizarre

597
00:37:37,600 --> 00:37:40,400
Speaker 1: things I've ever seen in my life. And it's we

598
00:37:40,520 --> 00:37:43,120
Speaker 1: just everybody at the table left, not because it was

599
00:37:43,160 --> 00:37:46,080
Speaker 1: so funny, but because it was so it's such an

600
00:37:46,160 --> 00:37:50,880
Speaker 1: unusual grouping and so fascinating. Well, it's a wonderful grouping. Absolutely.

601
00:37:50,880 --> 00:37:54,879
Speaker 1: You came in the beginning and I talked to myself, way,

602
00:37:54,920 --> 00:37:57,880
Speaker 1: here's a New York City boy. He's coming up to me,

603
00:37:58,640 --> 00:38:02,000
Speaker 1: and his experience with fishing is to go buy locks

604
00:38:02,000 --> 00:38:05,239
Speaker 1: and z bars, and now he's going to have a

605
00:38:05,280 --> 00:38:08,240
Speaker 1: fishing rod in his hand. This will be interesting to see.

606
00:38:08,719 --> 00:38:11,640
Speaker 1: And of course you had a famous episode at Camp

607
00:38:11,680 --> 00:38:14,320
Speaker 1: Coked Well, which one the one where you nearly burned

608
00:38:14,320 --> 00:38:17,680
Speaker 1: down the entire well hold the first year before we

609
00:38:17,719 --> 00:38:21,400
Speaker 1: nearly burned the cabin down the first year. So I

610
00:38:21,480 --> 00:38:23,560
Speaker 1: was a ringer. You didn't know. I spent my summer's

611
00:38:23,640 --> 00:38:28,280
Speaker 1: upstate New York fishing my childhood into my twenties and thirties.

612
00:38:28,680 --> 00:38:31,959
Speaker 1: So it was the first day of our first year,

613
00:38:32,480 --> 00:38:36,400
Speaker 1: and everybody was complaining they weren't catching any fish. And

614
00:38:36,719 --> 00:38:38,719
Speaker 1: everyone should know. We meet in this island in the

615
00:38:38,760 --> 00:38:41,560
Speaker 1: center of the lake. The guides clean all the fish.

616
00:38:41,600 --> 00:38:45,960
Speaker 1: We have a giant fish fry, and and everybody eats fantastically.

617
00:38:46,200 --> 00:38:49,359
Speaker 1: We gained too much weight, so Scott and I pull

618
00:38:49,480 --> 00:38:53,880
Speaker 1: up um in the canoe and one of the guides said, hey,

619
00:38:53,880 --> 00:38:56,440
Speaker 1: I hope you guys caught something, because we got no fish.

620
00:38:56,760 --> 00:38:59,919
Speaker 1: We each had thirty plus on a on a straight

621
00:39:00,120 --> 00:39:02,200
Speaker 1: I'm holding my hand up because it was a as

622
00:39:02,239 --> 00:39:05,160
Speaker 1: tall as i I'm standing home, just under six feet.

623
00:39:05,440 --> 00:39:08,040
Speaker 1: We had that much fish. And after that, nobody, oh,

624
00:39:08,120 --> 00:39:11,760
Speaker 1: here's a New York boy not able to fish. We

625
00:39:11,760 --> 00:39:14,560
Speaker 1: we we held our own that you did. We also

626
00:39:14,600 --> 00:39:17,439
Speaker 1: had John Brown, who I still think is the best

627
00:39:17,440 --> 00:39:20,920
Speaker 1: guide there. So he's the one who deserves. Everybody falls

628
00:39:20,960 --> 00:39:24,480
Speaker 1: in love with their guide on the first nearly everything.

629
00:39:24,560 --> 00:39:27,880
Speaker 1: Is that true? Yes, everybody's guide the first time becomes

630
00:39:28,000 --> 00:39:30,919
Speaker 1: their favorite guide. And by the way, that's probably true

631
00:39:30,920 --> 00:39:33,479
Speaker 1: of all kinds of things like this. But I've seen

632
00:39:33,480 --> 00:39:36,920
Speaker 1: it over and over again and and that's okay. So

633
00:39:36,920 --> 00:39:40,320
Speaker 1: so the other episode you you mentioned about nearly burning

634
00:39:40,320 --> 00:39:44,040
Speaker 1: the cabin down was I'm in a Cabinet's me and

635
00:39:44,080 --> 00:39:48,560
Speaker 1: Scott Frew, Chris Whalen. Chris Whalen was Josh Rosener. So

636
00:39:48,600 --> 00:39:52,160
Speaker 1: these are guys fairly well known on Wall Street. Barry

637
00:39:52,239 --> 00:39:57,000
Speaker 1: from nas Deck, the Nobel from nas Deck. And we're

638
00:39:57,080 --> 00:39:59,279
Speaker 1: using the same towels over and over again. And here's

639
00:39:59,280 --> 00:40:02,320
Speaker 1: where the New York City boy gets into trouble. So

640
00:40:02,760 --> 00:40:05,400
Speaker 1: you're an apartment in New York City, the radiators or

641
00:40:05,640 --> 00:40:09,440
Speaker 1: ten thousand degrees. You come out of the before you're engaged,

642
00:40:09,480 --> 00:40:12,879
Speaker 1: while you're still a disgusting single guy. You come out

643
00:40:12,880 --> 00:40:14,600
Speaker 1: of the shower with a wet towel. You throw it

644
00:40:14,600 --> 00:40:16,680
Speaker 1: over the radiator. By the time you get home, Hey,

645
00:40:16,680 --> 00:40:20,760
Speaker 1: I got a clean, dry, warm towel. It's fantastic. Um

646
00:40:20,800 --> 00:40:24,320
Speaker 1: My wife basically cringes every time she hears that story.

647
00:40:24,360 --> 00:40:27,319
Speaker 1: But meanwhile, it turns out if you do that up

648
00:40:27,360 --> 00:40:31,600
Speaker 1: at camp Ko talk, unless it's really a hundred apply

649
00:40:32,080 --> 00:40:35,480
Speaker 1: cotton towels, you run into a little trouble. And apparently

650
00:40:35,640 --> 00:40:40,480
Speaker 1: these were not cotton fly towels. They it started to smoke.

651
00:40:40,960 --> 00:40:44,719
Speaker 1: The room filled up with a thick, noxious I was

652
00:40:44,800 --> 00:40:48,560
Speaker 1: already in the main lodge working on whatever I was

653
00:40:48,600 --> 00:40:50,480
Speaker 1: working on that day, on the because that was the

654
00:40:50,480 --> 00:40:55,160
Speaker 1: best place for WiFi. Apparently Barry Nobel wakes up, can't

655
00:40:55,160 --> 00:40:58,520
Speaker 1: see anything through the smoke, crawls on his hands and knees,

656
00:40:58,600 --> 00:41:03,800
Speaker 1: finds the smoldering towel, drags it outside and rescued everybody

657
00:41:03,840 --> 00:41:06,480
Speaker 1: from a fate worse than death. The funny part of

658
00:41:06,480 --> 00:41:09,480
Speaker 1: it was that towel smoldered for three days. I don't

659
00:41:09,480 --> 00:41:11,279
Speaker 1: know what it was made of, but it did not

660
00:41:11,360 --> 00:41:13,840
Speaker 1: go out for three days. It just sat outside smolder.

661
00:41:14,880 --> 00:41:19,120
Speaker 1: The story got embellished because of course, pretty soon we

662
00:41:19,160 --> 00:41:23,759
Speaker 1: are we get the report about you your towel right

663
00:41:24,120 --> 00:41:29,080
Speaker 1: and and almost burning down the cabin, which was probably exaggeration,

664
00:41:29,200 --> 00:41:33,000
Speaker 1: but from almost burning down the cabin became the rid

665
00:41:33,040 --> 00:41:37,480
Speaker 1: Holts forest fire right curse, and it just every year

666
00:41:37,560 --> 00:41:42,640
Speaker 1: gets better. I think it's like a fish. Josh Rosener

667
00:41:42,800 --> 00:41:44,960
Speaker 1: once said something to me and he goes, rid Hols,

668
00:41:45,000 --> 00:41:46,759
Speaker 1: are there gonna be any more accidents this year? And

669
00:41:46,760 --> 00:41:49,760
Speaker 1: I go, Josh, you still think that was an accident?

670
00:41:50,480 --> 00:41:52,920
Speaker 1: He eventually figured out not to mess with me or

671
00:41:52,920 --> 00:41:56,400
Speaker 1: else I would that was. That was good natured teasing.

672
00:41:56,800 --> 00:41:59,560
Speaker 1: There was. It was pretty hilarious and and it was

673
00:41:59,600 --> 00:42:01,839
Speaker 1: one of those things that when you tell I tell

674
00:42:01,880 --> 00:42:03,360
Speaker 1: the story. I get home and tell it to my

675
00:42:03,400 --> 00:42:05,440
Speaker 1: wife and she's like, what else did you do? What

676
00:42:05,760 --> 00:42:08,200
Speaker 1: am I not hearing about? If I'm only hearing about

677
00:42:08,239 --> 00:42:11,680
Speaker 1: the fire? What was the real big problem? So I

678
00:42:11,960 --> 00:42:13,840
Speaker 1: actually this is my favorite trip of the year. I

679
00:42:13,840 --> 00:42:16,359
Speaker 1: look forward to it every year. It's it's so relaxing,

680
00:42:16,760 --> 00:42:19,040
Speaker 1: and it's such a great crowd of people. And I

681
00:42:19,120 --> 00:42:23,759
Speaker 1: always learn Um, the chief economist at Freddie mack I

682
00:42:23,800 --> 00:42:29,640
Speaker 1: had such a fast dun dun, duncan's such? Are you sure?

683
00:42:30,120 --> 00:42:34,600
Speaker 1: I want to say Freddie mack Um? But he's he's

684
00:42:34,640 --> 00:42:38,840
Speaker 1: a fascinating, fascinating guy understands not just housing but the

685
00:42:38,880 --> 00:42:43,160
Speaker 1: economy better than just about anybody I know. And there's

686
00:42:43,200 --> 00:42:47,239
Speaker 1: a two dozen people that when when I introduced them

687
00:42:47,280 --> 00:42:52,600
Speaker 1: to a newbie, almost always is and he understands this

688
00:42:52,640 --> 00:42:55,239
Speaker 1: space better than anybody I know. It's it's really an

689
00:42:55,280 --> 00:42:59,839
Speaker 1: amazing uh collection of folks. You deserve kudos for nice

690
00:43:00,080 --> 00:43:05,640
Speaker 1: up and and we also have media personalities. Kathleen Hayes

691
00:43:05,719 --> 00:43:08,759
Speaker 1: has been up sure from Bloomberg, Mike McKee, he's coming

692
00:43:08,840 --> 00:43:10,680
Speaker 1: up this year, as Mike is coming up this year.

693
00:43:10,920 --> 00:43:15,560
Speaker 1: So you you have folks who either our journalists and

694
00:43:16,520 --> 00:43:18,680
Speaker 1: study the world have to report on the world, they

695
00:43:18,719 --> 00:43:21,320
Speaker 1: have to be thinking about it, or you have folks

696
00:43:21,360 --> 00:43:25,479
Speaker 1: who have to analyze it because their financial market types

697
00:43:25,640 --> 00:43:29,520
Speaker 1: or their money managers, or we have academics or economists.

698
00:43:29,880 --> 00:43:32,879
Speaker 1: We mix them all up. From Dartmouth Tuck. Last year

699
00:43:32,960 --> 00:43:36,840
Speaker 1: we had he was that's right, who was on the

700
00:43:36,960 --> 00:43:41,360
Speaker 1: uk UH, their central bank, the Bank Bank of England.

701
00:43:41,440 --> 00:43:44,760
Speaker 1: And another year we had Mike Dooley. Mike Dooley, when

702
00:43:44,800 --> 00:43:47,800
Speaker 1: he was I m F World Bank in his career

703
00:43:47,920 --> 00:43:51,640
Speaker 1: was the guy who designed the Brady bond that solved

704
00:43:51,680 --> 00:43:55,319
Speaker 1: the South American financial crisis. In fact, the original name

705
00:43:55,360 --> 00:43:58,880
Speaker 1: for that Bond was a Dully Bond and Nick Brady

706
00:43:59,000 --> 00:44:02,320
Speaker 1: co opted the name because he was the Treasury secretary.

707
00:44:02,360 --> 00:44:05,320
Speaker 1: Well that's that's, you know, one of the great great

708
00:44:05,440 --> 00:44:08,879
Speaker 1: advantage of power. So so let's talk a little bit

709
00:44:08,960 --> 00:44:13,839
Speaker 1: about about you and some of your um early mentors

710
00:44:13,880 --> 00:44:16,840
Speaker 1: and and things like that. Who who were your early mentor?

711
00:44:16,920 --> 00:44:19,600
Speaker 1: Now you you asked me that in the notes ahead

712
00:44:19,600 --> 00:44:21,200
Speaker 1: of time, you said, I'm going to ask you about

713
00:44:21,239 --> 00:44:22,960
Speaker 1: you and I will give you a name. But it

714
00:44:23,000 --> 00:44:26,160
Speaker 1: may not be familiar. Doesn't matter. Okay, we have Google.

715
00:44:26,239 --> 00:44:28,600
Speaker 1: We can track people down. I don't know if we'll

716
00:44:28,800 --> 00:44:31,920
Speaker 1: be interesting. I never googled him, but in thinking about it,

717
00:44:31,960 --> 00:44:34,239
Speaker 1: there was an economist in New York. His name was

718
00:44:34,280 --> 00:44:41,240
Speaker 1: Gabriel Karakesh rhymes with Marrakech. He was Hungarian. He his

719
00:44:41,239 --> 00:44:46,319
Speaker 1: history was back to the good body era, way back

720
00:44:46,360 --> 00:44:49,720
Speaker 1: in which is what good body is? How long? Oh gosh,

721
00:44:49,960 --> 00:44:54,680
Speaker 1: I mean this is a long time ago, decades, many decades.

722
00:44:56,160 --> 00:45:01,040
Speaker 1: And he was a mentor to me when I was

723
00:45:01,120 --> 00:45:04,239
Speaker 1: starting out in this business. In fact, the first serious

724
00:45:04,600 --> 00:45:08,080
Speaker 1: work that I published was with a journal that's no

725
00:45:08,120 --> 00:45:11,600
Speaker 1: longer in existence, and we co authored it together, and

726
00:45:11,880 --> 00:45:15,439
Speaker 1: it was a piece about long cycles. You're refreshing. All

727
00:45:15,480 --> 00:45:18,920
Speaker 1: this memory is flooding back now. And we talked about

728
00:45:19,040 --> 00:45:24,360
Speaker 1: the condratif cycle in the kitchen cycle. Lord, this is

729
00:45:24,440 --> 00:45:27,680
Speaker 1: fifty years ago. It still comes up every time there's

730
00:45:27,680 --> 00:45:30,160
Speaker 1: a market crash. Always it pops up. All right, now

731
00:45:30,160 --> 00:45:36,400
Speaker 1: we're we're mired in health. Ye. Gabby was the first

732
00:45:36,840 --> 00:45:43,200
Speaker 1: serious economist who mentored me in the early stages of

733
00:45:43,239 --> 00:45:46,000
Speaker 1: this business. And he had a wonderful He spoke with

734
00:45:46,040 --> 00:45:49,320
Speaker 1: a deep Hungarian accent, and he had a wonderful line

735
00:45:49,360 --> 00:45:52,200
Speaker 1: I learned from him, and it was something like this,

736
00:45:52,280 --> 00:45:55,000
Speaker 1: I'm going to massacre the accident, but he said, you're

737
00:45:55,040 --> 00:45:58,200
Speaker 1: going to have a PhD and still be an s

738
00:45:58,239 --> 00:46:02,200
Speaker 1: ob and that was That was a line I learned

739
00:46:02,239 --> 00:46:04,279
Speaker 1: from him. But I also learned a lot of very

740
00:46:04,320 --> 00:46:08,000
Speaker 1: good economic thinking from him. So let's talk a little

741
00:46:08,000 --> 00:46:12,359
Speaker 1: bit about investors. What investors out there do you appreciate

742
00:46:12,520 --> 00:46:18,120
Speaker 1: like and who influenced your approach to invest in? Ah? Wow,

743
00:46:19,920 --> 00:46:23,879
Speaker 1: this is an accumulation of decades, so there's not such

744
00:46:23,920 --> 00:46:27,520
Speaker 1: an easy question. I don't like to talk about others

745
00:46:28,280 --> 00:46:30,920
Speaker 1: because I don't want to say anything negative. And therefore

746
00:46:30,960 --> 00:46:33,719
Speaker 1: if I only say positive things, well, don't tell us

747
00:46:33,719 --> 00:46:36,680
Speaker 1: who's terrible, tell us who you've learned from. But but

748
00:46:36,760 --> 00:46:38,920
Speaker 1: what I've learned is this. What I've learned is this.

749
00:46:39,000 --> 00:46:41,560
Speaker 1: We talked about the enduring nature of interest rates and

750
00:46:41,560 --> 00:46:45,360
Speaker 1: how important I've been a student of central banking monetary

751
00:46:45,400 --> 00:46:49,040
Speaker 1: economics all of my adult life. I chaired the Central

752
00:46:49,040 --> 00:46:52,480
Speaker 1: Banking series of the Globally Interdependent Center, and it's been

753
00:46:52,520 --> 00:46:57,759
Speaker 1: something that's been of interest to me in in more

754
00:46:57,880 --> 00:47:01,840
Speaker 1: than it's been a passionate in passion in terms of study.

755
00:47:02,880 --> 00:47:06,400
Speaker 1: So you look at central banking and monetary economics and

756
00:47:06,440 --> 00:47:11,080
Speaker 1: you say, well, how do you put together policies in systems?

757
00:47:11,400 --> 00:47:16,480
Speaker 1: How do central banks ever get true independence? And is

758
00:47:16,480 --> 00:47:19,520
Speaker 1: there such a thing? And what are the political forces

759
00:47:19,560 --> 00:47:23,359
Speaker 1: that are always trying to influence monetary policy? And there

760
00:47:23,360 --> 00:47:27,640
Speaker 1: are many, and so I've studied that in great depth.

761
00:47:27,800 --> 00:47:32,960
Speaker 1: I think it is the most serious input into asset pricing,

762
00:47:33,440 --> 00:47:36,960
Speaker 1: and therefore, if it's a serious input into asset pricing,

763
00:47:37,400 --> 00:47:40,760
Speaker 1: it's a serious input into the management of stocks and bonds.

764
00:47:41,320 --> 00:47:45,120
Speaker 1: And that's been an enduring theme for me. So of

765
00:47:45,800 --> 00:47:47,560
Speaker 1: we're we're by the way, I'm playing with the phone

766
00:47:47,600 --> 00:47:50,480
Speaker 1: because I'm gonna set up a little periscope so people

767
00:47:50,520 --> 00:47:54,799
Speaker 1: can watch for a few minutes exactly what we're what

768
00:47:54,840 --> 00:48:00,560
Speaker 1: we're doing. Let's see if I can make this happen. Um,

769
00:48:00,600 --> 00:48:03,600
Speaker 1: what are you thinking now? Nothing? Um, So let's talk

770
00:48:03,640 --> 00:48:07,919
Speaker 1: a little bit about the specific investors that you think

771
00:48:08,640 --> 00:48:11,120
Speaker 1: you learned so much from. Who were the guys that

772
00:48:11,200 --> 00:48:14,520
Speaker 1: you basically said, I really admire what this person does,

773
00:48:14,600 --> 00:48:18,520
Speaker 1: even if it's different from from what what you do

774
00:48:18,880 --> 00:48:23,640
Speaker 1: or um, currently unavailable. All right, so much if you

775
00:48:23,719 --> 00:48:29,360
Speaker 1: look at it a theme, Okay, interesting themes in investing.

776
00:48:30,520 --> 00:48:33,520
Speaker 1: The first theme that I think is it has had

777
00:48:33,560 --> 00:48:40,520
Speaker 1: a massive influence is Bogel and Vanguard. Tremendous, tremendous. He

778
00:48:40,600 --> 00:48:44,800
Speaker 1: set a platform in place and essentially took a passive

779
00:48:44,840 --> 00:48:47,680
Speaker 1: approach and said I'm gonna do it. I'm gonna do

780
00:48:47,760 --> 00:48:53,680
Speaker 1: it by waiting the market capitalization waiting was the theme,

781
00:48:53,880 --> 00:48:57,560
Speaker 1: and the SMP five index became the anchor. And now

782
00:48:57,680 --> 00:49:00,640
Speaker 1: you think about the fact that that translated into the

783
00:49:00,719 --> 00:49:06,759
Speaker 1: first exchange traded fund in spider right, and it goes

784
00:49:06,800 --> 00:49:10,440
Speaker 1: back twenty years with the SPI index in a mutual

785
00:49:10,480 --> 00:49:14,799
Speaker 1: fund as a method of investment. Absolutely, so you say, okay,

786
00:49:14,840 --> 00:49:20,520
Speaker 1: if there was one single idea that has now dominated

787
00:49:20,680 --> 00:49:25,440
Speaker 1: stock market investing. It's the notion of a cap weighted

788
00:49:25,600 --> 00:49:29,880
Speaker 1: large cap group of companies. There is a filtering mechanism,

789
00:49:30,000 --> 00:49:33,560
Speaker 1: it's Standard and Poors. They decide who's in and out

790
00:49:33,560 --> 00:49:37,920
Speaker 1: of the index and a basket by weight, and that

791
00:49:38,080 --> 00:49:42,320
Speaker 1: has had a profound influence. SMP five index cap weighted

792
00:49:42,760 --> 00:49:46,120
Speaker 1: is the benchmark of the American stock market and has

793
00:49:46,200 --> 00:49:48,359
Speaker 1: been four years now. Whether you like it or not.

794
00:49:48,520 --> 00:49:51,400
Speaker 1: You wanted the Dow Jones, you want the Nasdack, you

795
00:49:51,760 --> 00:49:56,760
Speaker 1: whatever you want. Every single money manager in the US

796
00:49:56,800 --> 00:50:00,799
Speaker 1: stock market space either has to use it as a

797
00:50:00,840 --> 00:50:06,799
Speaker 1: benchmark and refer to it or explain why not. Well,

798
00:50:06,840 --> 00:50:08,920
Speaker 1: if they're not big cap, they can use the rustle.

799
00:50:10,280 --> 00:50:13,360
Speaker 1: If they're international they can. But there's always an explanation.

800
00:50:13,400 --> 00:50:16,160
Speaker 1: There's always an explanation. And if you ask, if you

801
00:50:16,239 --> 00:50:18,279
Speaker 1: line up a hundred people and say what is the

802
00:50:18,360 --> 00:50:22,560
Speaker 1: premier benchmark for the American stock market, it's the SMP

803
00:50:22,680 --> 00:50:28,640
Speaker 1: five index. So that notion and therefore the notion of

804
00:50:28,800 --> 00:50:33,920
Speaker 1: passive baskets, accumulations, not trying to do a single stock

805
00:50:34,440 --> 00:50:40,040
Speaker 1: choice started. Really it it galloped ahead with Bogle, right,

806
00:50:40,120 --> 00:50:43,279
Speaker 1: that's forty years ago and today two thirds of what

807
00:50:43,640 --> 00:50:47,399
Speaker 1: Vanguard does is passive indexes and they're running over three

808
00:50:47,440 --> 00:50:51,000
Speaker 1: trillion dollars. Something worked to that may be one of

809
00:50:51,040 --> 00:50:55,960
Speaker 1: the single greatest investment success stories of all time because

810
00:50:56,000 --> 00:50:58,920
Speaker 1: for for I want to say, the first twenty years,

811
00:50:59,320 --> 00:51:02,680
Speaker 1: there was an a whole lot of acceptance to that concept.

812
00:51:03,080 --> 00:51:05,640
Speaker 1: It was it was there was a small group of

813
00:51:05,680 --> 00:51:09,120
Speaker 1: people who understood and appreciated it, but a lot of

814
00:51:09,160 --> 00:51:11,879
Speaker 1: folks just didn't get it. Well, there's an element to it,

815
00:51:12,040 --> 00:51:17,040
Speaker 1: and that is very low running costs. So it's a

816
00:51:17,080 --> 00:51:22,399
Speaker 1: low cost passive structure and will cost low turnover, low taxes. Absolutely,

817
00:51:22,640 --> 00:51:26,280
Speaker 1: And what do we find. We find that two thirds

818
00:51:26,320 --> 00:51:29,600
Speaker 1: of the managers, three quarters of the managers over time

819
00:51:29,880 --> 00:51:33,319
Speaker 1: failed to match that index. And they do it. And

820
00:51:33,360 --> 00:51:36,200
Speaker 1: if you take the total cost structure that it takes

821
00:51:36,239 --> 00:51:39,960
Speaker 1: to manage and attracted from the index, you get where

822
00:51:40,000 --> 00:51:42,839
Speaker 1: the managers are, which is what you would expect if

823
00:51:42,880 --> 00:51:47,160
Speaker 1: you measure the whole crowd. So I think if there's

824
00:51:47,239 --> 00:51:53,800
Speaker 1: one single investment concept creator person that puts something in place,

825
00:51:53,960 --> 00:51:56,640
Speaker 1: it would be vocal. Now you say where are we today?

826
00:51:56,920 --> 00:52:00,239
Speaker 1: We're a shop that ownly that does no single stock picking.

827
00:52:00,320 --> 00:52:02,200
Speaker 1: We manage a few hundred million in the E t

828
00:52:02,400 --> 00:52:05,759
Speaker 1: F space, and we provide models of ets for other

829
00:52:05,840 --> 00:52:09,440
Speaker 1: managers and so the the amounts involved are larger, but

830
00:52:09,520 --> 00:52:12,759
Speaker 1: we directly handle i would say, under a half a

831
00:52:12,800 --> 00:52:15,840
Speaker 1: billion in in E t F s in a number

832
00:52:15,840 --> 00:52:21,080
Speaker 1: of different styles. But we have taken that same fundamental principle,

833
00:52:22,000 --> 00:52:26,160
Speaker 1: low cost, low turnover or turnover when you have to,

834
00:52:26,400 --> 00:52:30,400
Speaker 1: don't turn over when you don't, and craft portfolio using

835
00:52:30,440 --> 00:52:33,040
Speaker 1: E t F s. I think that is a well

836
00:52:33,239 --> 00:52:39,160
Speaker 1: established principle now that didn't exist fifteen or twenty years ago. Fascinating,

837
00:52:39,200 --> 00:52:43,120
Speaker 1: I would I would say that it existed twenty years ago,

838
00:52:43,239 --> 00:52:45,839
Speaker 1: but it really didn't have the following. It wasn't as

839
00:52:46,400 --> 00:52:48,800
Speaker 1: embraced as it's become. Well, it was in the mutual

840
00:52:48,840 --> 00:52:51,360
Speaker 1: fun complex. So at two o'clock in the afternoon you

841
00:52:51,480 --> 00:52:53,359
Speaker 1: had to decide if you wanted to sell. At four

842
00:52:53,400 --> 00:52:56,160
Speaker 1: o'clock in the afternoon, you'd find out what the price was.

843
00:52:56,640 --> 00:53:00,200
Speaker 1: E t F changed all totally completely changed, changed all

844
00:53:00,239 --> 00:53:02,600
Speaker 1: of that. Um So that that leads me to my

845
00:53:02,680 --> 00:53:06,280
Speaker 1: next question, what has changed since you've joined the industry?

846
00:53:06,560 --> 00:53:09,200
Speaker 1: Well aside from that, but the E t F changes

847
00:53:09,280 --> 00:53:13,040
Speaker 1: monumental still underway and it's growing. That's number one. In

848
00:53:13,080 --> 00:53:16,640
Speaker 1: the municipal bond space. We used to have a notion

849
00:53:16,680 --> 00:53:19,759
Speaker 1: that if it's insured, it's triple A. You don't even

850
00:53:19,800 --> 00:53:22,279
Speaker 1: know have to know who the issuer is, you don't

851
00:53:22,320 --> 00:53:25,040
Speaker 1: have to know what the call provision is. You don't

852
00:53:25,320 --> 00:53:28,120
Speaker 1: give me the coupon and tell me it's insured and

853
00:53:28,160 --> 00:53:30,160
Speaker 1: it's triple A. And that's all I need to know.

854
00:53:30,760 --> 00:53:34,520
Speaker 1: That change with the financial christ clearly triple A doesn't

855
00:53:34,520 --> 00:53:38,120
Speaker 1: have the same weight. And we have a survivor in

856
00:53:38,160 --> 00:53:41,480
Speaker 1: the insurance space that didn't get beaten up by going

857
00:53:41,520 --> 00:53:45,160
Speaker 1: out of the read and butter business assured guarantee and

858
00:53:45,200 --> 00:53:48,640
Speaker 1: a second one MBIA. But as a practical matter, remember

859
00:53:48,640 --> 00:53:52,239
Speaker 1: we used to have a dozen that credit enhanced and

860
00:53:52,280 --> 00:53:57,319
Speaker 1: had triple A run right, So what did how did they?

861
00:53:57,440 --> 00:53:59,319
Speaker 1: What did they do? By the way, there's a new

862
00:53:59,320 --> 00:54:02,440
Speaker 1: one that's now a mutual and in theory is owned

863
00:54:02,480 --> 00:54:06,200
Speaker 1: by bond on the writers, So everybody's the incentives are

864
00:54:06,200 --> 00:54:08,759
Speaker 1: now better lines. Right, So you sit think of a

865
00:54:08,800 --> 00:54:13,040
Speaker 1: major change. Here's a major change. You've got this three

866
00:54:13,080 --> 00:54:16,400
Speaker 1: and a half trillion dollar space financing state and local

867
00:54:16,520 --> 00:54:22,200
Speaker 1: governments throughout the United States, ninety thousand different entities, forty

868
00:54:22,320 --> 00:54:27,600
Speaker 1: thousand different bond issuers, and all of a sudden, the

869
00:54:27,719 --> 00:54:30,520
Speaker 1: method of finance has turned upside down with a shock.

870
00:54:31,680 --> 00:54:33,920
Speaker 1: People don't trust the bond insurance, they don't trust the

871
00:54:34,040 --> 00:54:38,279
Speaker 1: rating agencies. Congress comes along passes this massive piece of legislation.

872
00:54:38,520 --> 00:54:41,720
Speaker 1: We still don't know what it's gonna end. Frank dot Frank,

873
00:54:42,320 --> 00:54:46,480
Speaker 1: and people on their own have to evaluate the sewer company,

874
00:54:46,520 --> 00:54:50,759
Speaker 1: the turnpike, the airport, the school board. They don't know

875
00:54:50,800 --> 00:54:53,879
Speaker 1: how to do it. They've never done it. And so

876
00:54:54,160 --> 00:54:56,480
Speaker 1: for us, this has been a great thing for Cumberland

877
00:54:56,480 --> 00:54:58,560
Speaker 1: because we had our own credit back and we're in

878
00:54:58,600 --> 00:55:02,920
Speaker 1: a new business. We get hired now by institutions to

879
00:55:03,080 --> 00:55:06,799
Speaker 1: be the backup credit surveillance in addition to the rating

880
00:55:06,880 --> 00:55:11,200
Speaker 1: agency ratings, and those are institutions that have to manage.

881
00:55:11,239 --> 00:55:14,440
Speaker 1: They have constraints, but under Dodd Frank, they have to

882
00:55:14,480 --> 00:55:18,600
Speaker 1: have a second opinion. We're qualified second opinion on municipal credit.

883
00:55:18,680 --> 00:55:20,960
Speaker 1: How how big of a business line is that for?

884
00:55:21,080 --> 00:55:24,680
Speaker 1: Because I know you guys mostly as asset managers and

885
00:55:24,719 --> 00:55:28,600
Speaker 1: active bond managers, I think you memory serves you became

886
00:55:28,600 --> 00:55:32,759
Speaker 1: an r I A and a registered investor andvisor the

887
00:55:32,920 --> 00:55:37,520
Speaker 1: new Cumberland and I registered in nineteen seventies. David Kotar

888
00:55:38,080 --> 00:55:40,080
Speaker 1: as an r right, So why did you go from

889
00:55:40,200 --> 00:55:44,600
Speaker 1: Kotak to Cumberland? Had had a partner in nineteen seventy three,

890
00:55:44,640 --> 00:55:47,719
Speaker 1: he's no longer with us, Chef Goldberg, and he and

891
00:55:47,760 --> 00:55:50,120
Speaker 1: I founded a firm. We came up with a name.

892
00:55:50,160 --> 00:55:54,919
Speaker 1: We lived in Cumberland County. No great searches on this name,

893
00:55:55,200 --> 00:55:57,960
Speaker 1: and we named it Cumberland Advisors, And that's how we

894
00:55:58,000 --> 00:56:01,680
Speaker 1: got the name. Nineteen seventy three. So you guys, since

895
00:56:01,719 --> 00:56:07,000
Speaker 1: we're talking about Cumberland County, you guys essentially decamped a

896
00:56:07,040 --> 00:56:11,080
Speaker 1: few years ago from Florida, from New Jersey to Florida.

897
00:56:11,520 --> 00:56:15,160
Speaker 1: What motivated that move? You know, the old, the old

898
00:56:15,160 --> 00:56:18,400
Speaker 1: Seinfeld joke is, well, he's Jewish, he lives in the northeast.

899
00:56:18,760 --> 00:56:20,640
Speaker 1: It's the law, he has to go to Florida. But

900
00:56:20,760 --> 00:56:23,399
Speaker 1: you were really there were not only that we went

901
00:56:23,440 --> 00:56:26,960
Speaker 1: to the west coast. So it's a whole different to

902
00:56:27,040 --> 00:56:30,239
Speaker 1: visit New York go too, this West coast. It's a

903
00:56:30,320 --> 00:56:34,120
Speaker 1: little different. So so what was the motivation between not

904
00:56:34,200 --> 00:56:36,600
Speaker 1: an easy thing to up and move an entire company.

905
00:56:36,760 --> 00:56:40,520
Speaker 1: I give you the story in a in a abbreviated form.

906
00:56:40,600 --> 00:56:43,680
Speaker 1: We had looked at Florida for some time. We found

907
00:56:43,760 --> 00:56:48,720
Speaker 1: ourselves on airplanes every week to some city from Philadelphia.

908
00:56:49,080 --> 00:56:54,640
Speaker 1: We made a series of a series of inquiries and decisions.

909
00:56:54,760 --> 00:56:57,880
Speaker 1: East Coast versus West Coast? Which city on the East coast?

910
00:56:57,920 --> 00:57:00,560
Speaker 1: Palm Beach for lauder day out? Where do you go?

911
00:57:00,680 --> 00:57:02,480
Speaker 1: Where are the airports? How do you get up and

912
00:57:02,520 --> 00:57:05,200
Speaker 1: down between the airports and the West coast. We had

913
00:57:05,200 --> 00:57:07,560
Speaker 1: a person working for us on the East coast, so

914
00:57:07,600 --> 00:57:10,040
Speaker 1: we already had a presence. We said, why don't we

915
00:57:10,080 --> 00:57:12,160
Speaker 1: go to the West coast and be in both places.

916
00:57:12,719 --> 00:57:15,880
Speaker 1: One thing led to another. We ended up in Sarah.

917
00:57:16,000 --> 00:57:19,880
Speaker 1: But that's that's the destination. What happened with the departure

918
00:57:20,480 --> 00:57:23,120
Speaker 1: because you had been in New Jersey for decades. I

919
00:57:23,160 --> 00:57:25,920
Speaker 1: still am. We still have a satellite office in New Jersey.

920
00:57:25,960 --> 00:57:27,680
Speaker 1: We have two people in New Jersey. We have a

921
00:57:27,760 --> 00:57:31,600
Speaker 1: legacy of you had several dozen people and the headquarters

922
00:57:31,600 --> 00:57:34,040
Speaker 1: were in New Jersey's We now have thirty four people

923
00:57:34,600 --> 00:57:37,280
Speaker 1: and two of them are in New Jersey. And we

924
00:57:37,360 --> 00:57:40,080
Speaker 1: maintained an office and address in New Jersey, and we

925
00:57:40,120 --> 00:57:42,080
Speaker 1: have a client based in New Jersey because we were

926
00:57:42,120 --> 00:57:45,640
Speaker 1: there for almost half a century. But our operations are

927
00:57:45,680 --> 00:57:49,320
Speaker 1: mostly in Sarasota, Florida. Um, there's a lot of good

928
00:57:49,360 --> 00:57:51,800
Speaker 1: reasons to be there. People say, oh, you moved because

929
00:57:51,840 --> 00:57:54,439
Speaker 1: of the Texas I said, well, yes, taxes were one,

930
00:57:55,160 --> 00:57:59,080
Speaker 1: lifestyle is another. All of my people took us four

931
00:57:59,160 --> 00:58:02,120
Speaker 1: years buried move the human capital of the firm, and

932
00:58:02,240 --> 00:58:06,840
Speaker 1: we did. We we help people relocate. That took cost

933
00:58:07,480 --> 00:58:10,960
Speaker 1: uh not one of them wants to move back and

934
00:58:11,080 --> 00:58:16,160
Speaker 1: they are satisfied with the move we hired in Florida.

935
00:58:16,760 --> 00:58:19,960
Speaker 1: Combination of things where at an all time head count high,

936
00:58:19,960 --> 00:58:23,720
Speaker 1: where an all time assets high, where it's been a

937
00:58:23,720 --> 00:58:27,040
Speaker 1: marvelous experience for five years. Did you expect it to

938
00:58:27,080 --> 00:58:29,560
Speaker 1: go as smoothly as it did, because that's a hugely

939
00:58:29,680 --> 00:58:36,240
Speaker 1: disruptive thing to organization, especially it was around Was it

940
00:58:36,680 --> 00:58:39,800
Speaker 1: after the financial crisis or during? Oh this is all

941
00:58:39,840 --> 00:58:42,240
Speaker 1: in the last five years, So was it after so

942
00:58:42,440 --> 00:58:45,840
Speaker 1: post crisis? It seems I'm going to make an observation.

943
00:58:45,920 --> 00:58:50,840
Speaker 1: It seems that whenever there is a massive events, it

944
00:58:50,880 --> 00:58:53,240
Speaker 1: could be the financial crisis, It could be nine eleven.

945
00:58:53,720 --> 00:58:57,680
Speaker 1: It galvanizes your thinking and you subsequently take action. Is

946
00:58:57,720 --> 00:59:00,880
Speaker 1: that a fair observation. I think it's a fair observation

947
00:59:00,920 --> 00:59:04,560
Speaker 1: on human nature. For sure. We tend to like stasis.

948
00:59:04,720 --> 00:59:07,440
Speaker 1: We have inertia. What does it take to move us?

949
00:59:08,160 --> 00:59:10,720
Speaker 1: We have to have a shock. Shock comes along. We

950
00:59:10,800 --> 00:59:14,720
Speaker 1: move any kind of shock, and whether it's a shock

951
00:59:14,760 --> 00:59:17,960
Speaker 1: of smoke in your cabin and leads a lodge, or

952
00:59:18,000 --> 00:59:20,320
Speaker 1: it's a financial crisis. In two thousand and eight, in

953
00:59:20,440 --> 00:59:23,760
Speaker 1: Lehmann fails, we have a shock, you change. It takes

954
00:59:23,760 --> 00:59:30,560
Speaker 1: a shock. Our view was motivated post shock, but it

955
00:59:30,640 --> 00:59:36,440
Speaker 1: was motivated because we did some serious examination on our clients,

956
00:59:36,440 --> 00:59:39,480
Speaker 1: our base, our growth, and what did we find. We

957
00:59:39,600 --> 00:59:42,960
Speaker 1: found wealth and older people are in Florida and people

958
00:59:43,000 --> 00:59:46,680
Speaker 1: from New Jersey who were our clients were now in Florida.

959
00:59:47,160 --> 00:59:49,600
Speaker 1: And so we were back and forth and back and forth,

960
00:59:49,640 --> 00:59:51,440
Speaker 1: and we said we need to be in two places,

961
00:59:51,760 --> 00:59:54,520
Speaker 1: and so we were in both places. Now, once we're

962
00:59:54,520 --> 00:59:58,400
Speaker 1: in both places, where do you put the next element

963
00:59:58,800 --> 01:00:01,320
Speaker 1: in the old place or the new place? Well, the

964
01:00:01,400 --> 01:00:04,400
Speaker 1: people involved said, we'd like to put that element in Florida.

965
01:00:04,720 --> 01:00:07,280
Speaker 1: And the people who wanted to service and support it

966
01:00:07,600 --> 01:00:09,840
Speaker 1: work in it said, let's let I want to go

967
01:00:10,240 --> 01:00:12,120
Speaker 1: and one at a time. Now, we had to move

968
01:00:12,280 --> 01:00:16,520
Speaker 1: people when housing was difficult to sell, when you had

969
01:00:16,560 --> 01:00:20,320
Speaker 1: economic difficulties in New Jersey, when you had a seventeen

970
01:00:20,400 --> 01:00:23,480
Speaker 1: year old daughter who was going to the prom and

971
01:00:23,560 --> 01:00:26,919
Speaker 1: she her boyfriend. If she moved there would be a

972
01:00:26,960 --> 01:00:31,360
Speaker 1: crisis in the household. And I said, okay, wait till

973
01:00:31,400 --> 01:00:34,800
Speaker 1: after the prom, wait till after graduation. Will be in

974
01:00:34,840 --> 01:00:40,240
Speaker 1: two places. We want you, We want our human capital intact.

975
01:00:40,600 --> 01:00:42,400
Speaker 1: And so we did that. By the way, she went

976
01:00:42,480 --> 01:00:44,480
Speaker 1: to the problem with somebody else. She broke up with

977
01:00:44,520 --> 01:00:48,600
Speaker 1: the boyfriend. So but the point is that's what we did.

978
01:00:48,640 --> 01:00:52,840
Speaker 1: We moved human capital by making it easy for them

979
01:00:52,920 --> 01:00:56,800
Speaker 1: to solve their problems. That's a pretty good description of

980
01:00:57,200 --> 01:01:00,560
Speaker 1: just about everything I know. We we have to get

981
01:01:00,600 --> 01:01:02,640
Speaker 1: you out of here in about fifteen minutes to go

982
01:01:02,720 --> 01:01:05,560
Speaker 1: do some television. So let me plot through my last

983
01:01:05,600 --> 01:01:09,640
Speaker 1: handful of questions. Um. One of the things I've been

984
01:01:09,680 --> 01:01:13,720
Speaker 1: finding about this podcast about speaking with people who I

985
01:01:13,800 --> 01:01:16,600
Speaker 1: know and respect and have followed for years. They've all

986
01:01:16,680 --> 01:01:20,800
Speaker 1: read a fascinating number of books, many of which I

987
01:01:20,880 --> 01:01:23,440
Speaker 1: am not familiar with. I'm always surprised when someone says.

988
01:01:24,000 --> 01:01:28,640
Speaker 1: A guest last week suggested the Marine Corps uh War Fighting,

989
01:01:28,760 --> 01:01:33,200
Speaker 1: which is a book on planning and management, which you

990
01:01:33,200 --> 01:01:35,760
Speaker 1: would think has nothing to do with investing, but turns

991
01:01:35,800 --> 01:01:38,520
Speaker 1: out to be a fascinating book. Tell me about some

992
01:01:38,600 --> 01:01:42,720
Speaker 1: of your favorite books, whether it's finance related or not. Well,

993
01:01:42,720 --> 01:01:48,280
Speaker 1: there's a book by Kennedy, a Yale professor, and it's

994
01:01:48,720 --> 01:01:51,640
Speaker 1: been around for a while, and it's The Decline and

995
01:01:51,800 --> 01:01:57,000
Speaker 1: Fall of Great Powers. He has a sequel, but the

996
01:01:57,120 --> 01:02:02,520
Speaker 1: Decline and Fall of Great Powers studies that very subject.

997
01:02:03,280 --> 01:02:07,120
Speaker 1: I found that something to think about, whether it's Rome

998
01:02:07,760 --> 01:02:12,200
Speaker 1: or Washington, and so it set me thinking in a

999
01:02:12,360 --> 01:02:20,120
Speaker 1: more strategic framework and helped crystallize that few There are

1000
01:02:20,160 --> 01:02:23,840
Speaker 1: all kinds of books of history. I've read many of them,

1001
01:02:24,360 --> 01:02:27,920
Speaker 1: and I find that the reflection on history and how

1002
01:02:28,040 --> 01:02:33,600
Speaker 1: things happen and why are very important. And I'm I

1003
01:02:33,680 --> 01:02:36,800
Speaker 1: favor some classical things, such as give us some names.

1004
01:02:38,760 --> 01:02:42,080
Speaker 1: You're educating the next generation of investors and traders. Well,

1005
01:02:42,120 --> 01:02:45,120
Speaker 1: i'll tell you. I'll tell you something that's struck me.

1006
01:02:45,200 --> 01:02:50,320
Speaker 1: I came down from Maine to be here with you

1007
01:02:50,400 --> 01:02:52,919
Speaker 1: and to have some things in New York and then

1008
01:02:52,960 --> 01:02:55,960
Speaker 1: the first gathering at Lean's Lodge is coming up the

1009
01:02:55,960 --> 01:02:59,680
Speaker 1: weekend after Father's Day, and we were about forty people.

1010
01:02:59,800 --> 01:03:03,960
Speaker 1: And in the course of the discussions up there with

1011
01:03:04,400 --> 01:03:06,760
Speaker 1: Randy Spencer, as you know, one of our guides and

1012
01:03:06,800 --> 01:03:11,560
Speaker 1: others and and musical entertainment and musical entertainment, we started

1013
01:03:11,600 --> 01:03:17,560
Speaker 1: to talk about the region and how the region and

1014
01:03:17,680 --> 01:03:22,240
Speaker 1: the former Acadians who lived there because that was Acadia,

1015
01:03:22,360 --> 01:03:25,840
Speaker 1: and the history of this region which go back before

1016
01:03:25,880 --> 01:03:28,960
Speaker 1: the Revolutionary War and deal with the war between the

1017
01:03:29,000 --> 01:03:32,640
Speaker 1: British and the French, which we called the French Indian War,

1018
01:03:32,920 --> 01:03:35,120
Speaker 1: but it was really war between the British and the French.

1019
01:03:35,400 --> 01:03:37,880
Speaker 1: And when you get into that history, you find that

1020
01:03:37,920 --> 01:03:42,400
Speaker 1: the tribes of Indians were used by either side, sometimes

1021
01:03:42,400 --> 01:03:45,880
Speaker 1: they switch sides, and you learn some of the history

1022
01:03:45,880 --> 01:03:48,440
Speaker 1: of a region which is now not taught in schools.

1023
01:03:48,480 --> 01:03:51,640
Speaker 1: It's a history of the United States which has escaped.

1024
01:03:52,440 --> 01:03:55,440
Speaker 1: There are many books on the French Indian War, the

1025
01:03:55,560 --> 01:04:00,200
Speaker 1: early part of America, the pre revolutionary period of America, UH,

1026
01:04:00,880 --> 01:04:07,600
Speaker 1: and they are missing in the literary realm. Now there's

1027
01:04:07,640 --> 01:04:13,760
Speaker 1: another series of books written by Beverly Swirling Swirling has

1028
01:04:13,880 --> 01:04:17,080
Speaker 1: best seller ranking. She's got a number of books, and

1029
01:04:17,200 --> 01:04:20,640
Speaker 1: she's written about New York and she starts with the

1030
01:04:20,760 --> 01:04:25,920
Speaker 1: period before the Revolutionary War s W E R L

1031
01:04:26,040 --> 01:04:29,840
Speaker 1: I n G. And the first book of hers. I've

1032
01:04:29,840 --> 01:04:33,680
Speaker 1: read them all. I think they're six, if I recall correctly,

1033
01:04:33,720 --> 01:04:36,680
Speaker 1: five or six. I've read them all. And the first

1034
01:04:36,720 --> 01:04:41,400
Speaker 1: one is City of Dreams. And she's a very skilled writer.

1035
01:04:41,600 --> 01:04:47,240
Speaker 1: And well, it's historical fiction, so she has taken New

1036
01:04:47,360 --> 01:04:50,320
Speaker 1: York at the time it was settled by the Dutch

1037
01:04:50,400 --> 01:04:55,200
Speaker 1: Ins Stevenson. Stevenson was the first leader, and she wrote

1038
01:04:55,200 --> 01:04:58,160
Speaker 1: the story about the very tip of this island as

1039
01:04:58,160 --> 01:05:00,720
Speaker 1: she was able to glean from a study of history.

1040
01:05:01,000 --> 01:05:04,440
Speaker 1: And then she weaves a tale. And her sequence of

1041
01:05:04,520 --> 01:05:09,520
Speaker 1: books give a view of New York through this lens

1042
01:05:09,520 --> 01:05:14,720
Speaker 1: of historical fiction. But it's very lively writing. It grasps

1043
01:05:14,880 --> 01:05:18,280
Speaker 1: grabs you, and when it does, it clasps you to

1044
01:05:18,400 --> 01:05:21,160
Speaker 1: the book and you don't put it down. I found

1045
01:05:21,160 --> 01:05:23,960
Speaker 1: that way. City of Dreams is the place to start.

1046
01:05:24,040 --> 01:05:27,200
Speaker 1: And if you do like it, there's three or four more,

1047
01:05:27,640 --> 01:05:31,320
Speaker 1: and any other books, any investing relating books that um

1048
01:05:31,560 --> 01:05:33,920
Speaker 1: stand out in your mind. Well, I read Ben Graham

1049
01:05:33,960 --> 01:05:38,520
Speaker 1: many years ago. The classics, the classics, the classic. Now

1050
01:05:39,240 --> 01:05:43,280
Speaker 1: there is a new book, Adventures in Muni Land, the

1051
01:05:43,440 --> 01:05:47,000
Speaker 1: story of the municipal bond crisis from two thousand seven

1052
01:05:47,040 --> 01:05:50,240
Speaker 1: to two thousand and fourteen, and it's in galley Proof

1053
01:05:50,360 --> 01:05:54,439
Speaker 1: right now. My co authors, my colleagues are Michael Comas

1054
01:05:54,560 --> 01:05:57,040
Speaker 1: and John Musso and I had a little bit to do.

1055
01:05:57,480 --> 01:05:59,720
Speaker 1: And it's a great book. And it is going to

1056
01:05:59,840 --> 01:06:04,000
Speaker 1: be out in July, and it will be available in August,

1057
01:06:04,120 --> 01:06:07,080
Speaker 1: and Bloomberg Radio is going to help us launch the

1058
01:06:07,160 --> 01:06:12,960
Speaker 1: book on August from our offices in Sarasota, Florida. That's fantastic,

1059
01:06:13,040 --> 01:06:17,040
Speaker 1: you know, I remember there being a m everybody knows

1060
01:06:17,080 --> 01:06:20,760
Speaker 1: Meredith Whitney came out with her famous sixty minutes prediction

1061
01:06:20,840 --> 01:06:24,520
Speaker 1: about a hundred billion in failures and unimmuni bond market.

1062
01:06:24,520 --> 01:06:28,720
Speaker 1: When crazy you came out. I want to say, I

1063
01:06:28,720 --> 01:06:31,200
Speaker 1: don't remem if it was that week or the next day,

1064
01:06:31,240 --> 01:06:33,919
Speaker 1: but you were on TV the next day saying this

1065
01:06:34,000 --> 01:06:38,160
Speaker 1: is reckless, this is irresponsible. There is just no inditie

1066
01:06:38,240 --> 01:06:40,600
Speaker 1: that this is going to happen. How did that, how

1067
01:06:40,600 --> 01:06:43,400
Speaker 1: did that come about? And what was the pushback that

1068
01:06:43,480 --> 01:06:47,040
Speaker 1: you got Well, I can't speak for Meredith. She made

1069
01:06:47,040 --> 01:06:52,200
Speaker 1: her forecast and she's had to live with it. Um no,

1070
01:06:52,280 --> 01:06:57,080
Speaker 1: I mean, how did your response come about to Well,

1071
01:06:57,120 --> 01:06:59,560
Speaker 1: we we looked at this and we said, it's absurd

1072
01:06:59,600 --> 01:07:03,320
Speaker 1: to things that a hundred billion of defaults in the

1073
01:07:03,400 --> 01:07:07,160
Speaker 1: municipal bonds space can happen in one year on the

1074
01:07:07,200 --> 01:07:09,920
Speaker 1: forecast by the end of the year, and by the way,

1075
01:07:09,920 --> 01:07:13,760
Speaker 1: it hasn't happened in ten years. There are some defaults

1076
01:07:13,840 --> 01:07:16,640
Speaker 1: every year and there always will be. But as a

1077
01:07:16,680 --> 01:07:20,800
Speaker 1: practical matter, the municipal bond space is very good grade

1078
01:07:20,840 --> 01:07:25,080
Speaker 1: credits is very transparent. By the way, you think about

1079
01:07:25,160 --> 01:07:27,880
Speaker 1: your school board budget, you can go to the hearing,

1080
01:07:28,200 --> 01:07:30,880
Speaker 1: you can read it. You're there, you know the people

1081
01:07:30,880 --> 01:07:36,200
Speaker 1: who are voting yes or no. Transparency is embedded in

1082
01:07:36,280 --> 01:07:39,400
Speaker 1: state and local government. We may not like the people

1083
01:07:39,720 --> 01:07:45,000
Speaker 1: making the government decisions, but the financial information is mostly

1084
01:07:45,080 --> 01:07:48,360
Speaker 1: clear most of the time, and we have a pretty

1085
01:07:48,480 --> 01:07:54,480
Speaker 1: sound distribution of government throughout the fifty states. Now we

1086
01:07:54,600 --> 01:08:00,760
Speaker 1: have also poster children for trouble Puerto Rico, Detroit, Stockton, California.

1087
01:08:00,960 --> 01:08:04,080
Speaker 1: It does happen, but as a practical matter, most of

1088
01:08:04,120 --> 01:08:07,920
Speaker 1: the time. The muting space is very dependable, and it's

1089
01:08:08,040 --> 01:08:10,880
Speaker 1: under the radar screen of a lot of investors. Shouldn't

1090
01:08:10,880 --> 01:08:14,280
Speaker 1: be in my view. Right now today, the thirty year

1091
01:08:14,960 --> 01:08:18,040
Speaker 1: Treasury bond of the United States fully taxable to an

1092
01:08:18,040 --> 01:08:22,080
Speaker 1: American citizen is a little over three and a very

1093
01:08:22,160 --> 01:08:26,400
Speaker 1: high grade tax free bond to an American citizen is

1094
01:08:26,400 --> 01:08:30,280
Speaker 1: a little over four percent. That's upside down and backwards.

1095
01:08:30,280 --> 01:08:33,360
Speaker 1: Four percent is the equivalent of almost six percent or seven.

1096
01:08:33,720 --> 01:08:36,360
Speaker 1: It's seven depends on where your tax including you're in

1097
01:08:36,400 --> 01:08:40,240
Speaker 1: a high tech state California, Massachusetts, Yes, New York. That's

1098
01:08:40,439 --> 01:08:42,639
Speaker 1: like getting a seven percent. So you're looking at where

1099
01:08:42,680 --> 01:08:44,799
Speaker 1: would you go today and have a double or triple

1100
01:08:44,880 --> 01:08:49,040
Speaker 1: A level of credit? Very solid history, never failed to

1101
01:08:49,120 --> 01:08:53,200
Speaker 1: pay and pay you seven percent a year return on

1102
01:08:53,280 --> 01:08:58,760
Speaker 1: your investment, year after year after year. You can't find it,

1103
01:08:59,120 --> 01:09:01,439
Speaker 1: and you can get it. It's available right now. You

1104
01:09:01,439 --> 01:09:03,679
Speaker 1: can say to yourself, yeah, but you know what about

1105
01:09:03,760 --> 01:09:07,000
Speaker 1: other kinds of institutions. I'll give you an example. Triple

1106
01:09:07,040 --> 01:09:11,960
Speaker 1: a credit three hundred year institution. Total funds in the

1107
01:09:12,160 --> 01:09:17,679
Speaker 1: endowment fund exceed the total debt of the institution. Tax

1108
01:09:17,760 --> 01:09:22,000
Speaker 1: free bond. It's issued by an education bond structure by

1109
01:09:22,080 --> 01:09:27,160
Speaker 1: Yale University. Believe me, they will pay you. And what

1110
01:09:27,280 --> 01:09:30,360
Speaker 1: is that yielding? About four today? Tax free? There you go?

1111
01:09:30,479 --> 01:09:32,799
Speaker 1: All right, So I only have you for another six minutes.

1112
01:09:33,040 --> 01:09:36,360
Speaker 1: So let me go through my last few questions. Um,

1113
01:09:36,400 --> 01:09:40,479
Speaker 1: what are some of the enduring investing myths that you know,

1114
01:09:40,640 --> 01:09:43,800
Speaker 1: get your goat that that you see in this Like

1115
01:09:44,040 --> 01:09:47,080
Speaker 1: what sort of stuff? Maybe that muni bond thing is one,

1116
01:09:47,200 --> 01:09:51,960
Speaker 1: but what what are the classic myths that you are

1117
01:09:51,960 --> 01:09:58,679
Speaker 1: offended by? Well, I don't like when I see legal

1118
01:09:59,400 --> 01:10:06,759
Speaker 1: meaning the law protects it being used as ethical meaning

1119
01:10:07,200 --> 01:10:10,360
Speaker 1: there's a judgment, and if it's legal, it's okay to do,

1120
01:10:10,880 --> 01:10:14,480
Speaker 1: even if it's going to impose financial pain on somebody.

1121
01:10:14,680 --> 01:10:18,679
Speaker 1: Because I'm really structuring something that is legal, give us

1122
01:10:18,880 --> 01:10:21,919
Speaker 1: taking advantage of them. We saw it in a financial crisis.

1123
01:10:22,160 --> 01:10:24,679
Speaker 1: We saw it in derivatives and some of the mortgage

1124
01:10:24,680 --> 01:10:29,479
Speaker 1: backed securities. We saw it used in the restatements of values.

1125
01:10:29,600 --> 01:10:33,479
Speaker 1: We saw things where banks had an off balance sheet

1126
01:10:34,320 --> 01:10:41,960
Speaker 1: liability that was criminal. It's amazing that there have not

1127
01:10:42,080 --> 01:10:46,479
Speaker 1: been prosecuted. If it were criminal in our system, there

1128
01:10:46,479 --> 01:10:49,840
Speaker 1: would be a criminal prosecution. And I don't think I've

1129
01:10:49,880 --> 01:10:52,320
Speaker 1: seen one. We have a new game. Well, don't draw

1130
01:10:52,360 --> 01:10:55,040
Speaker 1: the conclusion that it wasn't criminal just because some projects

1131
01:10:55,960 --> 01:10:59,240
Speaker 1: was talked into, Hey, if you prosecute this, you're gonna

1132
01:10:59,320 --> 01:11:03,720
Speaker 1: crash they that's the nonsense that the prosecutors failed to

1133
01:11:03,720 --> 01:11:11,880
Speaker 1: do their jobs. Well, there was no penalty imposed at

1134
01:11:12,040 --> 01:11:18,519
Speaker 1: some symmetrical balance equivalent to the damage done by people

1135
01:11:18,560 --> 01:11:22,120
Speaker 1: who hurt millions and millions of people. There wasn't even

1136
01:11:22,120 --> 01:11:26,919
Speaker 1: a clawback of past. And this latest game, this latest

1137
01:11:26,960 --> 01:11:30,280
Speaker 1: game of will impose and negotiate and force a big

1138
01:11:30,320 --> 01:11:35,240
Speaker 1: fine on a bank and show how strongly we're regulating

1139
01:11:35,280 --> 01:11:39,280
Speaker 1: and cleaning the system is a farce. Well, you basically

1140
01:11:39,320 --> 01:11:42,080
Speaker 1: make the shareholders pay for the bad actions of some

1141
01:11:42,760 --> 01:11:45,559
Speaker 1: and those people don't really suffer the path. So it's

1142
01:11:45,560 --> 01:11:50,400
Speaker 1: an embarrassment that there's an ethical breach. Offends me. I'm

1143
01:11:50,439 --> 01:11:54,080
Speaker 1: a boy scout. That's the way I grew up. I learned.

1144
01:11:54,320 --> 01:11:57,600
Speaker 1: I learned business methods in a grocery store. And in

1145
01:11:57,640 --> 01:11:59,920
Speaker 1: a grocery store, if you want your customer to come back,

1146
01:12:00,439 --> 01:12:02,720
Speaker 1: you don't put the soiled fruit in the bottom of

1147
01:12:02,760 --> 01:12:05,320
Speaker 1: the peck. And when they take the top tomato off,

1148
01:12:05,439 --> 01:12:11,400
Speaker 1: underneath is so last two questions, Um, what advice would

1149
01:12:11,439 --> 01:12:14,320
Speaker 1: you give to a recent college graduate or a millennial

1150
01:12:14,680 --> 01:12:18,920
Speaker 1: who is just starting out his career today? Read history

1151
01:12:19,160 --> 01:12:25,360
Speaker 1: and study hard and be patient and keep smiling. That

1152
01:12:25,520 --> 01:12:28,599
Speaker 1: that's pretty good advice. And my last question that I

1153
01:12:28,720 --> 01:12:31,559
Speaker 1: ask all of our guests what do you know about

1154
01:12:31,640 --> 01:12:35,240
Speaker 1: investing today that you wish you knew when you began

1155
01:12:35,320 --> 01:12:38,479
Speaker 1: in nineteen seventies. The older I get, Barry, and the

1156
01:12:38,520 --> 01:12:41,120
Speaker 1: more I do this, the more I realize how little

1157
01:12:41,200 --> 01:12:45,400
Speaker 1: I know, and that makes it so exciting. I love

1158
01:12:45,479 --> 01:12:47,800
Speaker 1: what I do. I love it. I get up in

1159
01:12:47,800 --> 01:12:49,920
Speaker 1: the morning. I said, you are in the midst of

1160
01:12:50,000 --> 01:12:53,800
Speaker 1: extraordinary financial times. You spent the last fifty years of

1161
01:12:53,880 --> 01:12:59,360
Speaker 1: your life as an adult, mostly as an adult, preparing

1162
01:12:59,520 --> 01:13:04,200
Speaker 1: yourself off to be in the asset management business. In

1163
01:13:04,240 --> 01:13:09,160
Speaker 1: these remarkable times, you are now writing the textbooks and

1164
01:13:09,400 --> 01:13:13,519
Speaker 1: will be and they will be used thirty years from now.

1165
01:13:14,120 --> 01:13:17,880
Speaker 1: It's a very, very exciting time to be in financing economics.

1166
01:13:17,920 --> 01:13:20,519
Speaker 1: I love every minute of it. David, thank you so

1167
01:13:20,600 --> 01:13:22,400
Speaker 1: much for being so generous with your time. I know

1168
01:13:22,439 --> 01:13:24,559
Speaker 1: we've got to scoot you out of here. In forty

1169
01:13:24,560 --> 01:13:28,759
Speaker 1: five seconds. You've been listening to my interview with David Kotak.

1170
01:13:29,280 --> 01:13:33,639
Speaker 1: He is the founder and chief investment officer of Cumberland

1171
01:13:33,680 --> 01:13:38,000
Speaker 1: Advisers and author of the forthcoming book ad Ventures in

1172
01:13:38,120 --> 01:13:40,840
Speaker 1: muni Land. I will see you up in Maine. In

1173
01:13:43,040 --> 01:13:46,280
Speaker 1: you do have you've been listening to Masters in Business

1174
01:13:46,320 --> 01:13:49,160
Speaker 1: on Bloomberg Radio. I'm Barry Rihults. Be sure and check

1175
01:13:49,200 --> 01:13:51,479
Speaker 1: out all of our other interviews. Look an inch up

1176
01:13:51,560 --> 01:13:54,880
Speaker 1: or down on iTunes. You'll see all these and be

1177
01:13:54,920 --> 01:13:57,960
Speaker 1: sure and check us out next week. I'm Barry Ridhults.

1178
01:13:58,479 --> 01:13:59,960
Speaker 1: Thanks for coming by.