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Speaker 1: Welcome with trillions. I'm Joel Weber and I'm Eric Belserness.

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Speaker 1: Do you know who Barry Ritt Holds is. Yeah, a

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Speaker 1: little bit kind of a big deal here. He's been

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Speaker 1: around for a while. He's a money manager, a Bloomberg

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Speaker 1: opinion columnists, and he's also a fellow podcast host. His

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Speaker 1: podcast Masters in Business is literally a crash course in

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Speaker 1: business with some of the biggest names in everything from

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Speaker 1: finance to banking to managing money. Yeah. Absolutely, he's one

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Speaker 1: of the most interesting people. He runs an advisors shop

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Speaker 1: that is cutting edge and in a couple of ways,

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Speaker 1: Rid Holts Wealth Management. You know, I'm on Twitter and

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Speaker 1: a lot of those guys are very popular. Their blog

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Speaker 1: posts are really great. And Barry is very honest and

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Speaker 1: a lot of real brutally honest and he's not afraid

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Speaker 1: to answer any question, even if it's about advisor fees

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Speaker 1: and whatnot. And I've seen him operate on Twitter and

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Speaker 1: he'll take on anybody. He'll answer anything. He's just very

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Speaker 1: vocal and obviously he's used to interviewing people, so I

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Speaker 1: thought it'd be interesting to interview him. And I know

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Speaker 1: he's a big E T F user. That's the that's

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Speaker 1: the cool part because he managed I mean, he manages

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Speaker 1: a lot of money, is he and his team, and

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Speaker 1: he has some really important views about e t s. Yeah,

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Speaker 1: when someone goes out and says E t F serve

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Speaker 1: the devil, he tends to be on the other side

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Speaker 1: of that. And I've noticed that because he's using them.

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Speaker 1: I mean, he has real people's money in e t

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Speaker 1: F so he better believe they're they work and they're good.

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Speaker 1: So we asked him about e t f s passive.

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Speaker 1: He'ses some active while he's not persuaded by thematic e

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Speaker 1: t f s, even if he likes the industry. I

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Speaker 1: thought that was interesting. And also just this this low

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Speaker 1: cost migration that advisors are loving in the asset management

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Speaker 1: side but hasn't quite hit the advisors side, and that's

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Speaker 1: a third rail issue. But he'll he he took it

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Speaker 1: on and he was not afraid to talk about He

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Speaker 1: wasn't afraid to talk about anything we hit on. I

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Speaker 1: think God, uh, portfolio management, trump, p F trump trade everything,

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Speaker 1: And you know when you talk about being honest about

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Speaker 1: those things, he really is that way in his columns

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Speaker 1: and on Twitter, and so are the people he works

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Speaker 1: with so we asked them, you know, as an advisor

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Speaker 1: with clients, has that helped and has it ever hurt?

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Speaker 1: I thought it was interesting. So what we're gonna call

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Speaker 1: this episode because we actually have so much material, it's

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Speaker 1: like a double album. It's a double podcast, so the

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Speaker 1: white album I have one even better. Use Your Disillusion

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Speaker 1: one and two. And I say that because Barry talks

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Speaker 1: about disillusion being the reason a lot of money has

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Speaker 1: shifted over to passive in the past ten years. Sidebar

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Speaker 1: guns and Roses. Use your Illusion one or two? Which

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Speaker 1: is your preferred I can't remember, probably the one with

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Speaker 1: Don't Cry. That's probably my favorite song from that whole thing.

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Speaker 1: But um, there's a I don't know half of it

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Speaker 1: is good. The other half of its number two This

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Speaker 1: weekend trillions, Use Your Disillusion one and two with Barry

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Speaker 1: Barry Evan ridd Alts go how did you become who

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Speaker 1: you are? Um? So I'll share a deep, dark secret

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Speaker 1: with you guys. And nobody believes me when I say this,

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Speaker 1: but it's really true. A lot of what I do

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Speaker 1: is just because I'm entertaining myself. So Daniel Boston is

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Speaker 1: the Librarian of Congress for former Librarian of Congress, and

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Speaker 1: he famously once said, I write to figure out what

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Speaker 1: I think, and besides that hour all the bars are closed, unquote,

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Speaker 1: And that's really true. You don't understand your own thought process.

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Speaker 1: You don't know what you really think until you go

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Speaker 1: through the entire process of putting it on paper, figuring out.

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Speaker 1: Here's my intro, here my supporting points, here's my conclusion.

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Speaker 1: We have a very muddled internal dialogue. Most people are

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Speaker 1: not crystal clear about their viewpoints and their positions. It's

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Speaker 1: why people are so easily influenced. They don't really know

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Speaker 1: what they believe. There's a handful of things that they're

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Speaker 1: probably pretty deeply as constant, their personal spirituality, their religion,

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Speaker 1: some of their ethics. However, a lot of what they

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Speaker 1: think they believe it is very squishing and so often

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Speaker 1: ill defined. So writing really helps you figure that out.

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Speaker 1: And what started with the blog was frustration with the

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Speaker 1: nineties and two thousands media, which I thought the financial media.

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Speaker 1: I thought the financial media was pretty mediocre and in

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Speaker 1: a lot of ways punctuated with excellence, but a lot

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Speaker 1: of really terrible stuff. So at most major newspapers, um,

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Speaker 1: someone would get hired for the economics beat because it

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Speaker 1: was terrible, and they would send them to all right,

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Speaker 1: you're gonna go to the Treasury and you're gonna get

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Speaker 1: this report. This comes out at eight o'clock. And then

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Speaker 1: you know on Friday, you're gonna the first Friday of

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Speaker 1: the month, you're gonna go do non farm payroll at

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Speaker 1: the labor to point. And they used to actually go

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Speaker 1: to these places and they would write these terrible things

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Speaker 1: about what happened. Most people who are language oriented don't

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Speaker 1: frequently have the math skills to keep up with that um,

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Speaker 1: and they don't understand things like causation, and they don't

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Speaker 1: understand so so you ended up with these things that

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Speaker 1: most of the time don't matter UM, but occasionally are

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Speaker 1: important and we're frequently wrong. And so the entire blog

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Speaker 1: The Big Picture began as a pushback to that. Just

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Speaker 1: by I would read something and it would frustrate me

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Speaker 1: because I knew it was either wrong or to the

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Speaker 1: average investor misleading, And the same thing was true with

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Speaker 1: the podcast. I used to pull my hair into my head.

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Speaker 1: There would be some fantastic person on if Choose your Poison,

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Speaker 1: Bloomberg TV or CNBC or Fox Business or Fox News

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Speaker 1: before they had Fox Business or CNN, bisy this and

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Speaker 1: they would do this terrible interview, what's your favorite stock?

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Speaker 1: Where's the dal gonna be in a year? Hey? When

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Speaker 1: is the Fed gonna cut rates? Or rates? And I'm like, wait,

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Speaker 1: this guy is brilliant. He wrote the seminal white paper

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Speaker 1: on fill in the blank? Who is he? How did

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Speaker 1: he get that way? So the podcast, if the blog,

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Speaker 1: was pushed back to financial media. The podcast, which just

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Speaker 1: celebrated its fourth anniversary. Is that the is that like

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Speaker 1: the Wood anniversary? I don't know. It's two hundred plus interviews,

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Speaker 1: many of each last twelve eighteen hours. Things like that,

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Speaker 1: and it's it's the podcast was pushed back to the

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Speaker 1: electronic media's refusal to have and I shouldn't say refusal,

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Speaker 1: the rarity of a very good interview with people who

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Speaker 1: are intelligent and accomplished and have a unique perspective and

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Speaker 1: have something to say. Who cares what their favorite stock is?

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Speaker 1: They walk out of the building, it's already stale. Asked

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Speaker 1: them something that's evergreen and important. How did you get

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Speaker 1: into the managing money? So I started as a trader

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Speaker 1: a few decades ago, and that was a ton of fun. Um.

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Speaker 1: You make a lot of money, some months you lose

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Speaker 1: a lot of money. But it was really, really interesting,

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Speaker 1: and eventually I came to the conclusion that it was

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Speaker 1: fair as far as I was concerned. The compensation ended

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Speaker 1: up being fairly random um. But most fascinating to me

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Speaker 1: was the guys on the desk around me, And it

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Speaker 1: was back then it was all guys, and this person

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Speaker 1: is making money this month and this person isn't, and

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Speaker 1: then you flip it, and that sent me down a

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Speaker 1: rabbit hole of why performance exists and how people some

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Speaker 1: people dwell and some people don't, and the entire behavioral

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Speaker 1: finance UM rabbit hole opened up to me in the

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Speaker 1: mid nineties. But I went from there to research. It

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Speaker 1: was became an assistant to a technology strategist at a

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Speaker 1: firm that no longer exists. It was ended up being

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Speaker 1: brought by Oppenheimer, and then eventually became a market strategist.

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Speaker 1: And so the first twenty years of my career I said,

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Speaker 1: turned down money, listen, I can't compromise the objectivity I

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Speaker 1: have and in doing my research or so, I foolishly,

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Speaker 1: But eventually it became clear to me that when I

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Speaker 1: would refer people to other Oh this guy you want

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Speaker 1: Muni bonds, Go talk to him all you want to.

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Speaker 1: It dawned on me one day when I referred to

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Speaker 1: somebody to a Muni bond specialist. The person came back

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Speaker 1: to me and said, so tell me about this private

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Speaker 1: placement there they're talking about. And I suddenly had a

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Speaker 1: tremendous insight. Oh my god, I have massive reputational liability

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Speaker 1: and probably legal liability if I send someone, not getting

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Speaker 1: paid for it, never asking for a dime, but thinking

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Speaker 1: I'm doing the right thing by sending people to And

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Speaker 1: at that point it was like, all right, that's it.

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Speaker 1: I'm I'm done making those sort of idiotic risk decisions

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Speaker 1: folding people to other people. Congratulations, you're the first client

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Speaker 1: of the Ridoltz Group. And and that's how that began.

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Speaker 1: And that was just about a decade. You still had

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Speaker 1: that first client, Yes, still do. And how many clients

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Speaker 1: do you have to I want to say we work

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Speaker 1: with about five hundred families a little under and we're

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Speaker 1: up to about nine hundred million dollars. We're just shy

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Speaker 1: of a billion, and we're just shy of five years,

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Speaker 1: which will September is our um champagne party anniversary. Can

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Speaker 1: I tell you something. We discussed that internally in the

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Speaker 1: office and decided it was a bad look. And instead,

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Speaker 1: I know this sounds like hokey and self serving, we

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Speaker 1: decided that the whole New York office is going to

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Speaker 1: go volunteer somewhere on that anniversary. I know that it

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Speaker 1: sounds it sounds artificial, but it really isn't. Because this

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Speaker 1: industry is somewhat notorious for a lot of um back

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Speaker 1: padding and we're all guilty of it, and I'm I'm

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Speaker 1: we would like to avoid that sort of that sort

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Speaker 1: of luck. All right, So, Barry, we invited you on

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Speaker 1: this podcast which is about e t F s because

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Speaker 1: I've seen you right about e t F s. You

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Speaker 1: you speak at many of the E t F conferences,

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Speaker 1: You've talked about investing in them. Just talk about, you know,

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Speaker 1: as an advisor, what E t F have done for

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Speaker 1: your business and how you use them. Sure, so, there

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Speaker 1: are a couple of really obvious, simple advantages of e

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Speaker 1: t F s. Perhaps first and foremost is the tax

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Speaker 1: structure is vastly superior to most other things. And and

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Speaker 1: that's number one. Number two with e t F s

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Speaker 1: if you're dealing, we set up an online this is

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Speaker 1: already a couple of years old. We set up an

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Speaker 1: online I hate the term robo advisor, but an automated

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Speaker 1: UM solution that is low touch, low cost, and it

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Speaker 1: it trades essentially commissioned free at t D using all

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Speaker 1: of these ETFs from various names like Vanguard and black

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Speaker 1: Rock and State Treat and and what have you. And

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Speaker 1: that that circle of of commission free stuff is always changing,

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Speaker 1: but we don't change the portfolio reflected regardless. You can

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Speaker 1: set up a well diversified portfolio, not with two million dollars,

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Speaker 1: not with two hundred thousand dollars, but with you know,

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Speaker 1: twenty dollars. That wasn't possible pre e t fs. It

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Speaker 1: didn't make sense to buy five thousand dollars worth of

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Speaker 1: mutual fund given the costs and the price breaks and

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Speaker 1: what have you. But you can do that with with

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Speaker 1: e t fs. When it comes time to rebalance or

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Speaker 1: what have you, you can you can make those sort

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Speaker 1: of changes very easily. And what's your e t F

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Speaker 1: index fund active mutual fund balance in in a typical

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Speaker 1: portfolio or in that nine million dollars in firm assets.

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Speaker 1: How's that allocated? Roughly percentage? So I don't want to

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Speaker 1: misspeak because you're you're us three things, So let me

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Speaker 1: give you a broad overview and then we'll drill drill down. UM.

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Speaker 1: So we typically believe in a broad, globally diversified, low

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Speaker 1: cost asset allocation model, and we use dimensional funds, Van

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Speaker 1: guard uh So, Wisdom Tree funds, UM basically all the

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Speaker 1: all the names you would know, and you don't need

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Speaker 1: a million funds to be really diversified. UM are we

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Speaker 1: between ten and fifteen gives you pretty much the entire

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Speaker 1: world ten and fifteen holdings UM. Some of the portfolios

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Speaker 1: we have UM or all A E t f s.

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Speaker 1: We have a tactical portfolio we use which isn't the

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Speaker 1: typical tactical portfolio. It exists. It's rules driven, it's pretty

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Speaker 1: basic quantitative strategy. But the idea is, if your holdings

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Speaker 1: is in a portfolio that gets out of the way

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Speaker 1: for the fat part of a thirty or forty market collapse,

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Speaker 1: then you could leave your real money alone and not

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Speaker 1: try and market time. Not that this market times, but

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Speaker 1: it's basically a trend following system. And the idea is

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Speaker 1: if the market really has a wild hiccup. Well, your

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Speaker 1: average seventy percent stock bond portfolio with a slug in

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Speaker 1: the tactical, it ends up looking like fifty fifty. And

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Speaker 1: so if you can't withdraw withstand a draw down in

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Speaker 1: your portfolio, which is what a fifty fifty portfolio should

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Speaker 1: do in a crash, um, then you shouldn't be in equities.

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Speaker 1: What are you telling clients now that this is the

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Speaker 1: fat part of the economic cycle that we're hitting on

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Speaker 1: all cylinders, that when you come out of an economic

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Speaker 1: um crisis, out of a financial credit crisis, that you

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Speaker 1: tend to have a long, slow recovery. By the way,

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Speaker 1: this isn't us saying this. I've been writing this in

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Speaker 1: on Bloomberg and elsewhere for you know, pretty much the

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Speaker 1: whole run. Um. You look at the research from Ryan

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Speaker 1: Hart and rogue Off, it's pretty clear um week GDP week,

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Speaker 1: consumer UH spending, soft job creation, soft wage gains, weak

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Speaker 1: home price appreciation is what typically describes the post credit

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Speaker 1: crisis recoveries. This has been playing out with some variables

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Speaker 1: pretty close to that script, which implies that this cycle

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Speaker 1: will go much longer than most people believe. Um. I've

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Speaker 1: I've been reading people call for a recession I don't know,

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Speaker 1: just about twice a year for the past ten years. UM,

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Speaker 1: It's hard to see anything on the immediate horizon that

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Speaker 1: is a threat. The feed is tightening, but they're tightening

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Speaker 1: from very low levels with very low, small amounts of inflation. Now,

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Speaker 1: all these can change. Maybe the tariffs put through push

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Speaker 1: through a lot of a lot of inflation, maybe some

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Speaker 1: other uh saber rattling causes a problem. So typically an

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Speaker 1: external shock to a strong economic recovery or a strong

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Speaker 1: economic cycle doesn't really affect it. But when you have

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Speaker 1: an economy that's starting to falter, doesn't take much of

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Speaker 1: a shove to send it sprawling. So far, the economy

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Speaker 1: has been very robust and has with withstood a series

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Speaker 1: of I'm not going to be politically correct, I'm just

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Speaker 1: gonna say a series of ill thought out, um economic

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Speaker 1: actions by this administration that in a weaker economy, would

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Speaker 1: have caused a recession. They're just fortunate that they inherited

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Speaker 1: a very strong economy. Otherwise we would be looking at

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Speaker 1: something far less. I would be far less sanguine about

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Speaker 1: what was going on in d C. If I wasn't

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Speaker 1: confident enough that the economy me was robust. There's a

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Speaker 1: lot of people you talk about this sort of economic

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Speaker 1: bullmarket that we've been seeing for quite a while. There's

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Speaker 1: a lot of chatter out there, and you've heard it,

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Speaker 1: You've actually written about it that oh, it's this Russian

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Speaker 1: too passive, that's just blindly lifting all these stocks. And

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Speaker 1: look out, when the passive bubble pops, everybody is going

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Speaker 1: to be uh running back to active. What's your take

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Speaker 1: on all this is somebody who uses passive? Does any

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Speaker 1: of that breakthrough to you? Right? Well, we use passive

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Speaker 1: and active. Um. I think the bulk of most people's

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Speaker 1: portfolio should be mostly passive, and I think if they

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Speaker 1: want to throw an overlay of value or small cap

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Speaker 1: or whatever, that's perfectly fine. The passive indexing versus active

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Speaker 1: management debate has been frighteningly ignorant, shockingly self serving. Some

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Speaker 1: of the stupidest crap I've ever read about finances come

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Speaker 1: out of it. Indexing is Marxism? Do you remember that nonsense?

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Speaker 1: Of course, it's a bubble that's gonna crash everything. How

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Speaker 1: is indexing about? So let's let's put this into context. First,

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Speaker 1: indexing began forty years ago. And despite the obviousite obvious

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Speaker 1: advantages of low cost, low taxes, low turnover, no specific

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Speaker 1: benchmark other than the benchmark the SPH, the pursuit of

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Speaker 1: alpha typically leaves to not even achieving beta. So the

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Speaker 1: intellectual underpinnings of this have been around for literally decades.

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Speaker 1: It was only in the past ten years that this

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Speaker 1: blew up. And so when you look at the context

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Speaker 1: of this, why why did this blow up? And and

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Speaker 1: I'll give you five reasons, And I think this helps

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Speaker 1: explain why it's not a bubble, it's not Marxism, it's

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Speaker 1: not the end of capitalism. It's first of all, you

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Speaker 1: go back to the late nineties yearly two thousands, scandal

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Speaker 1: after scandal after scandal, the I p O spinning scandal,

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Speaker 1: the analyst scandals, the accounting scandals, that one after another

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Speaker 1: aftern that's before we get to Bernie made Off in

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Speaker 1: all the Ponzi schemes and everything else, and then the

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Speaker 1: dot com collapse. I think at a certain point, the

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Speaker 1: mom and pop investor says, you know, I've played this

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Speaker 1: game and it doesn't seem to work for me. Right.

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Speaker 1: That's before high frequency trading made um individuals feel like

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Speaker 1: the market was skewed against them. Um. But as we

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Speaker 1: say in our office, the solution to high frequency trading

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Speaker 1: is low frequency trading. If you're not an active trader,

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Speaker 1: that doesn't affect you. So that's number one. Number two,

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Speaker 1: you had a series of giant market crashes, the dot

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Speaker 1: com collapse, then the housing collapse, then then the Great

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Speaker 1: Financial Crisis, then the commodities crop collapse. It seems wherever

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Speaker 1: investors went hunting for alpha, they got their heads handed

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Speaker 1: to them. And at a certain point, the mainstream investor says,

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Speaker 1: you know what, screw you guys. I'm taking my ball

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Speaker 1: and going home. And so for them who have to

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Speaker 1: be invested if they want to retire, it made sense

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Speaker 1: to say, I'm not gonna pay commissions. I'm gonna pay

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Speaker 1: an eight dollar fee to buy an index at t

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Speaker 1: D or Schwab or wherever, or go robo or go

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Speaker 1: robo um or you know, I've been promised this out performance,

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Speaker 1: but when you actually do the math, the performance isn't there. Uh.

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Speaker 1: The brokers end up capturing the lion share of of

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Speaker 1: whatever upside there is. If you Jim Chanos said on

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Speaker 1: on Masters in Business, you know when he started his

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Speaker 1: hedge fund thirty years ago, there were three hundred guys

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Speaker 1: creating alpha, all guys back then. Now there's eleven thousand

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Speaker 1: funds and it's the same three hundred people creating alpha.

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Speaker 1: So unless you're fortunate enough to be in one of

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Speaker 1: those funds, you're paying a lot for underperformance. And I

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Speaker 1: think again the public is kind of figured out they're

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Speaker 1: not in those funds, they don't access to it. And

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Speaker 1: then the fourth, and I think the most most important

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Speaker 1: thing is behavioral finance has become so ubiquitous and so

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Speaker 1: well understood that the average person says, you know, I'm

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Speaker 1: full of um my own biases, and I'm emotional, and

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Speaker 1: I don't necessarily have the discipline to do this the

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Speaker 1: right way. So they've begun to recognize rather than try

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Speaker 1: and play that game, I'm just gonna buy an index

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Speaker 1: and seeing forty years, Well, this is all what's fueled

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Speaker 1: why we have a podcast called Trillions about et f s. Right,

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Speaker 1: Why do people even need advisors? Why not just do

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Speaker 1: the robot thing that you have for So there's three

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Speaker 1: part answers to that. First, some people don't even need

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Speaker 1: robo advisors. They can do it themselves. I spoke it

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Speaker 1: years ago and an a a ii um events And

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Speaker 1: this wife comes up to me with her husband and

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Speaker 1: tow and says, tell my husband, he's an idiot. So

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Speaker 1: I turned to the guy and say, sir, you're an idiot.

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Speaker 1: Now that I've called your husband idiot, why do you

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Speaker 1: think he's an idiot? And she says, he keeps buying

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Speaker 1: all these stocks that are collapsing. I go, stocks like

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Speaker 1: Lehman an a I g or No, he bought Disney

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Speaker 1: when it fell, and he bought JP Morgan. Ma'am if

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Speaker 1: he has the I go, are you panicking and selling?

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Speaker 1: He's now? I buy one at here, I do one

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Speaker 1: entry when it falls x percent, I do a second

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Speaker 1: entry here. I only buy quality companies without a lot

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Speaker 1: of debt, and a lot of them. Ma'am, he's not

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Speaker 1: an idiot, I go, I write, he's doing fine. You

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Speaker 1: could now. You need to be disciplined, you need to

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Speaker 1: be thoughtful, you need to spend a lot of time.

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Speaker 1: The person had been retired since his mid fifties. He

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Speaker 1: loves this, and he's he was. He goes, I beat

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Speaker 1: in the market four out of the past seven years,

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Speaker 1: or something like that. And when you missed, he goes

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Speaker 1: I was right there. Okay, so I said the wife, ma'am,

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Speaker 1: I don't want to He's doing a good job. So

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Speaker 1: that's one person, But that's not the average investor. The

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Speaker 1: average investor doesn't have the time, doesn't have the discipline,

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Speaker 1: doesn't have the emotional balance to not get sucked in

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Speaker 1: to the vortex when everything gets hairy and things are

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Speaker 1: flying over your head and everything on the news is

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Speaker 1: the world is ending. Some group of people. Uh, the

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Speaker 1: robo advisors are perfectly valid for listen, I want a

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Speaker 1: simple portfolio. I don't care what you have to say.

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Speaker 1: I don't want to speak to you. Uh. Once a quarter,

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Speaker 1: send me an update, and once a year tell me

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Speaker 1: if I'm on target form my plan. I mean, doesn't

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Speaker 1: that actually breed good behavior though one would think, But again,

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Speaker 1: that's not the average investor. The average investor. Whenever you

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Speaker 1: do a survey asking people what their risk tolerance is,

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Speaker 1: what you get is not their risk tolerance. What you

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Speaker 1: get is how the market behaved over the prior ninety days.

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Speaker 1: If the markets falling, they're really conservative and they don't

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Speaker 1: want to take a lot of risk. When the market

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Speaker 1: screaming higher, listen, I'm aggressive and I can withstand, So

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Speaker 1: it doesn't tell you anything. So you really have to

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Speaker 1: be aware of what people say isn't very often what

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Speaker 1: they do. And then there's another group of people who

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Speaker 1: are running businesses or owning companies, or very busy in

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Speaker 1: a professional career, and they know they don't have the

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Speaker 1: time or energy or discipline or focus. And besides, they

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Speaker 1: would rather spend their time and energy on their own

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Speaker 1: business than dealing with their own four oh one K,

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Speaker 1: their employees for one k, setting stuff up for the kids.

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Speaker 1: Some people have generational wealth and issues. Some people want

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Speaker 1: to give money to philanthropy. Some people want to make

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Speaker 1: sure that when they sell a business that they don't

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Speaker 1: max out their taxes. That there's a ton of things

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Speaker 1: that require some expertise. And that's the typical advisor client

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Speaker 1: that gets what they pay for. You know, if someone says, listen,

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Speaker 1: just buy me an S and P five hundred, why

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Speaker 1: would those people pay, you know, an advisor for that

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Speaker 1: They don't need that. The issue becomes the complexity which

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Speaker 1: is out there, the the discipline to manage your own

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Speaker 1: behavior and what you need in terms of various services

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Speaker 1: real quick sidebar. There's a you know, a pot e

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Speaker 1: t F, there's a cybersecurity ETF, robotics. These them ets

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Speaker 1: have risen a little bit. A lot of people blow

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Speaker 1: them off, but a lot of the stocks they hold

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Speaker 1: are young. There won't be in the big index is

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Speaker 1: for a while then most people own Is there a

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Speaker 1: case for them? Do you ever get tempted by some

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Speaker 1: of these more speculative areas, Yes, there's a case for them. No,

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Speaker 1: I'm never tempted by them. But like you know how

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Speaker 1: Google had the big earnings recently. Um, and then everybody

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Speaker 1: on Twitter does this thing where they quote people who

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Speaker 1: said Google is not going anywhere. I feel like those

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Speaker 1: are the same people who pooh poo like a pot

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Speaker 1: et F because they're like, oh, it's a joke. Um,

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Speaker 1: I don't think it's a joke. But it's just speculation. Correct.

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Speaker 1: But if Google was sort of uh waved off back

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Speaker 1: then or looked at is maybe high flying or speculative.

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Speaker 1: Shouldn't things that are speculative today be taken more seriously

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Speaker 1: to get your claws into that young industry or young

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Speaker 1: stock as opposed to waiting until it's an adult and

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Speaker 1: finally makes it in the SMP five hundred, Alex, I'll

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Speaker 1: take survivorship bias for one please. So you're telling me

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Speaker 1: about Google today, but you're not mentioning pets dot Com

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Speaker 1: or Cosmo or any of the other thousands of pieces

428
00:25:37,359 --> 00:25:40,120
Speaker 1: of crap that came and go. Remember Google was like

429
00:25:40,160 --> 00:25:44,320
Speaker 1: the twenty six search engine. I was a beta tester

430
00:25:44,400 --> 00:25:47,840
Speaker 1: er for Google back in the you know, eighteenth century,

431
00:25:47,880 --> 00:25:51,080
Speaker 1: and I remember playing with it for a day in

432
00:25:51,160 --> 00:25:53,760
Speaker 1: sending an email to the person who invited me, this

433
00:25:53,800 --> 00:25:56,240
Speaker 1: is interesting, how can I invest in your company? Was

434
00:25:56,240 --> 00:25:59,080
Speaker 1: that like a Yahoo dot Com email? I don't even

435
00:25:59,280 --> 00:26:04,840
Speaker 1: know it was a OK? It was dialing right that

436
00:26:05,160 --> 00:26:10,359
Speaker 1: crazy era. So let's separate the pot et fs from

437
00:26:10,440 --> 00:26:15,400
Speaker 1: And a buddy of mine runs a cannabinoid wellness and

438
00:26:15,520 --> 00:26:19,960
Speaker 1: health hedge funds described buddy, uh, this is somebody. Todd

439
00:26:19,960 --> 00:26:23,960
Speaker 1: Harrison is somebody I'm friendly with. Never indulged in in

440
00:26:24,119 --> 00:26:28,359
Speaker 1: any leafing material with him. Um, but he's a person

441
00:26:28,480 --> 00:26:31,880
Speaker 1: whose office was right near the World Trade Center during

442
00:26:31,960 --> 00:26:36,640
Speaker 1: nine eleven, had horrific survivorship guilt. They put him on

443
00:26:36,920 --> 00:26:41,000
Speaker 1: the usual opioids and depressants. He hated what it did

444
00:26:41,040 --> 00:26:42,960
Speaker 1: to him. He said, I'm not who I used to be.

445
00:26:43,520 --> 00:26:48,560
Speaker 1: Eventually found his way to some legal medical Like there

446
00:26:48,560 --> 00:26:51,600
Speaker 1: have been medical marijuana legal in New York for really

447
00:26:51,640 --> 00:26:55,840
Speaker 1: really specific diseases. It's not like quote unquote medical marijuana

448
00:26:56,160 --> 00:26:59,119
Speaker 1: when it was in California, where m hey, dude, I'm

449
00:26:59,119 --> 00:27:01,240
Speaker 1: having a hard time sleep open. Oh here's some weed

450
00:27:01,680 --> 00:27:06,359
Speaker 1: that that is not what New York was. And look

451
00:27:06,400 --> 00:27:10,120
Speaker 1: at look at what's taking place state by state. Does

452
00:27:10,160 --> 00:27:15,160
Speaker 1: anybody doubt that fifty years from now medical regular marijuana

453
00:27:15,520 --> 00:27:18,960
Speaker 1: is sold over the counter like beer. How about twenty

454
00:27:19,000 --> 00:27:21,080
Speaker 1: years from now, how about ten years from now? At

455
00:27:21,119 --> 00:27:25,199
Speaker 1: a certain point, it's clear we can't incarceraate millions of

456
00:27:25,240 --> 00:27:30,040
Speaker 1: people for weed and pay millions of dollars billions of

457
00:27:30,080 --> 00:27:33,280
Speaker 1: dollars to drug companies for things that may or may

458
00:27:33,320 --> 00:27:36,200
Speaker 1: not work. Oh and thanks for the opioid. Sessions would

459
00:27:36,200 --> 00:27:39,400
Speaker 1: like to speak with you now, you know Sessions. So

460
00:27:39,720 --> 00:27:44,280
Speaker 1: this whole crew is a temporary setback to the relentless

461
00:27:44,400 --> 00:27:49,679
Speaker 1: march forward of progress, not just politically, technologically, sociologically. So

462
00:27:49,720 --> 00:27:52,320
Speaker 1: you sound like you understand the pot industry, the growth

463
00:27:52,359 --> 00:27:54,600
Speaker 1: and all this. This is a great example high right now,

464
00:27:55,640 --> 00:27:58,959
Speaker 1: no high on life. I can say it. But it's

465
00:27:59,000 --> 00:28:00,879
Speaker 1: a good example because we do talk about the ETFs

466
00:28:00,880 --> 00:28:04,080
Speaker 1: in the show a lot. But as an investor out there,

467
00:28:04,480 --> 00:28:07,000
Speaker 1: w E d s on. But say you're listening out there,

468
00:28:07,080 --> 00:28:09,240
Speaker 1: m J is the ticker. It's a diversified basket of

469
00:28:09,280 --> 00:28:12,399
Speaker 1: pot Starry Jane. It could have been better, but I

470
00:28:12,400 --> 00:28:15,560
Speaker 1: think we need how does nobody up something? Well, I

471
00:28:15,600 --> 00:28:17,800
Speaker 1: think the issuers didn't want to go too far and

472
00:28:17,840 --> 00:28:20,280
Speaker 1: like really irk the sec by like doing a touchdown

473
00:28:20,320 --> 00:28:23,879
Speaker 1: dance with the ticker. But the ticker ticker makes a

474
00:28:23,880 --> 00:28:26,919
Speaker 1: big difference. But here's a case where you know the

475
00:28:26,960 --> 00:28:29,520
Speaker 1: industry you bought you kind of sound like you're, um,

476
00:28:29,720 --> 00:28:32,160
Speaker 1: I'm intrigued by it. But but but as an investor,

477
00:28:32,600 --> 00:28:35,560
Speaker 1: what stops you from trying to get an early foothold

478
00:28:35,600 --> 00:28:39,720
Speaker 1: in using say diversified basket like MJ. That's a great question. Well,

479
00:28:39,760 --> 00:28:42,080
Speaker 1: first of all, I have you know the the old

480
00:28:42,160 --> 00:28:44,840
Speaker 1: joke is the second mouse gets the cheese. The settlers,

481
00:28:45,160 --> 00:28:47,000
Speaker 1: the early settlers are the ones with the arrows in

482
00:28:47,040 --> 00:28:50,880
Speaker 1: their back. Um, I don't I don't know, I don't

483
00:28:50,960 --> 00:28:55,120
Speaker 1: know if m Ben Franklin type stuff right there. So

484
00:28:55,200 --> 00:28:59,120
Speaker 1: the question we we mentioned, we mentioned Google right, So

485
00:28:59,560 --> 00:29:01,800
Speaker 1: is this the first group of stocks? Is this the

486
00:29:01,840 --> 00:29:06,800
Speaker 1: second group? Like? How many? How many dog pile and

487
00:29:07,440 --> 00:29:10,720
Speaker 1: go and what were some of the other out of Vista?

488
00:29:10,840 --> 00:29:13,880
Speaker 1: How many of these other mediocre search engines do we

489
00:29:13,920 --> 00:29:17,400
Speaker 1: have to go through before Google comes along, executes better,

490
00:29:17,400 --> 00:29:19,440
Speaker 1: has a broader vision, can do all that chance they

491
00:29:19,440 --> 00:29:23,000
Speaker 1: need to do. So maybe m J is a home run,

492
00:29:23,440 --> 00:29:25,800
Speaker 1: or maybe it's a speculat piece of graphic goes nowhere.

493
00:29:26,120 --> 00:29:29,200
Speaker 1: I have no way to tell that. So you have

494
00:29:30,120 --> 00:29:34,960
Speaker 1: an aud advantage to some extent because of being media savvy.

495
00:29:36,040 --> 00:29:39,480
Speaker 1: Your whole team is just you. Guys are especially candid

496
00:29:39,560 --> 00:29:41,640
Speaker 1: and entertaining. I mean I think you're at the tip

497
00:29:41,680 --> 00:29:44,000
Speaker 1: of the spear in that regards. Then at the back

498
00:29:44,120 --> 00:29:49,720
Speaker 1: end there's these asset managers and advisors will call them traditional. Um,

499
00:29:49,800 --> 00:29:51,960
Speaker 1: you never hear from them. If you do, you get

500
00:29:52,000 --> 00:29:54,920
Speaker 1: like a research report that's been vetted by fifteen lawyers.

501
00:29:54,960 --> 00:29:57,880
Speaker 1: It feels late and milk toast. Yeah, you know what

502
00:29:57,920 --> 00:30:02,400
Speaker 1: I mean? Um, is this Twitter and this sort of Um,

503
00:30:03,440 --> 00:30:06,880
Speaker 1: what's the word I'm looking for? Social media? Or is

504
00:30:06,920 --> 00:30:09,600
Speaker 1: this the future? Or do you think it will sort

505
00:30:09,640 --> 00:30:13,680
Speaker 1: of live over here in a more compartmentalized and the

506
00:30:13,720 --> 00:30:17,120
Speaker 1: tradition will will will stay because they do have a

507
00:30:17,120 --> 00:30:20,720
Speaker 1: ton of assets, or is it all gonna slowly switch over?

508
00:30:21,120 --> 00:30:25,040
Speaker 1: Where you fear the Fidelity portfolio manager um, you know,

509
00:30:25,160 --> 00:30:29,719
Speaker 1: debating you over Jeff Sessions on Twitter. So the answer

510
00:30:29,760 --> 00:30:34,520
Speaker 1: to that is yes and no. I don't see Fidelity, Vanguard,

511
00:30:34,560 --> 00:30:38,960
Speaker 1: black Rock, Goldman, Sachs, Morgan, Stanley Schwab. I don't see

512
00:30:39,000 --> 00:30:43,720
Speaker 1: them as occupying the space we do. Now they'll they

513
00:30:43,760 --> 00:30:47,280
Speaker 1: all have started blobs of some sort. Many of them

514
00:30:47,320 --> 00:30:50,720
Speaker 1: have podcasts. Go down the list of some of the

515
00:30:50,800 --> 00:30:53,520
Speaker 1: stuff that we do, some of the media we do.

516
00:30:54,120 --> 00:30:58,040
Speaker 1: But you know, keep in mind, you have to be

517
00:30:58,560 --> 00:31:01,840
Speaker 1: you have to recognize the history of this. The blog

518
00:31:01,960 --> 00:31:06,320
Speaker 1: started because in the eighties you had to have gone

519
00:31:06,320 --> 00:31:08,440
Speaker 1: to a rights the right school, you had to work

520
00:31:08,480 --> 00:31:11,200
Speaker 1: for the right firm. Otherwise you're not getting on TV,

521
00:31:11,320 --> 00:31:15,720
Speaker 1: you're not getting on radio. Um. And so it was

522
00:31:15,880 --> 00:31:19,840
Speaker 1: it was there were gatekeepers and walls and the rest

523
00:31:19,880 --> 00:31:24,000
Speaker 1: of us were sort of voiceless. That began to change

524
00:31:24,440 --> 00:31:27,520
Speaker 1: with the Street. Dot Com was sort of a and

525
00:31:27,640 --> 00:31:32,560
Speaker 1: the Yahoo message boards. There was a broad democratization of

526
00:31:33,920 --> 00:31:38,400
Speaker 1: media and discussion and debate about investing. The problem is

527
00:31:39,440 --> 00:31:42,160
Speaker 1: Yahoo message boards were filled with fake news that was

528
00:31:42,200 --> 00:31:45,160
Speaker 1: really fake news. Long as we're saying things that were wrong,

529
00:31:45,320 --> 00:31:48,200
Speaker 1: for shorts were saying things that were wrong, and everybody

530
00:31:48,720 --> 00:31:52,560
Speaker 1: the search for the truth um was fought and and

531
00:31:52,600 --> 00:31:55,560
Speaker 1: the old expression is a lie gets halfway a one

532
00:31:55,600 --> 00:31:57,400
Speaker 1: in the world, while the truth is still putting on

533
00:31:57,440 --> 00:32:04,160
Speaker 1: its shoes. So what avengely that evolved into was And

534
00:32:04,240 --> 00:32:08,120
Speaker 1: I described the signal to loss ratio in a number

535
00:32:08,160 --> 00:32:10,200
Speaker 1: of columns over the years. I've written about this a lot.

536
00:32:10,640 --> 00:32:15,160
Speaker 1: But at a certain point, people no longer read mast heads.

537
00:32:15,880 --> 00:32:20,960
Speaker 1: They read specific um writers. So at the Wall Street Journal,

538
00:32:21,480 --> 00:32:24,120
Speaker 1: it's Spencer Jacob. It used to be jesse Eisener, he's

539
00:32:24,160 --> 00:32:28,200
Speaker 1: now a pro publica. At Slate and elsewhere it's Henry

540
00:32:28,200 --> 00:32:31,360
Speaker 1: Grayber and it's Dan Gross. I mean, I give you

541
00:32:31,400 --> 00:32:33,640
Speaker 1: a list of a hundred people at at Bloomberg, they're

542
00:32:33,640 --> 00:32:37,400
Speaker 1: a hundred people I follow. So what started happening is

543
00:32:38,320 --> 00:32:44,280
Speaker 1: the precursor to social media began when if you're paying attention,

544
00:32:44,320 --> 00:32:46,960
Speaker 1: you start to notice, Hey, this person is right a

545
00:32:46,960 --> 00:32:50,120
Speaker 1: whole lot more than they're wrong. I'm gonna pay attention

546
00:32:50,160 --> 00:32:54,600
Speaker 1: to what what they say and that eventually has become

547
00:32:55,120 --> 00:32:57,680
Speaker 1: so from Yahoo message boards to the street dot com

548
00:32:58,120 --> 00:33:03,200
Speaker 1: to really cherry picking the best writers to social media.

549
00:33:03,800 --> 00:33:06,800
Speaker 1: People kind of figured out that it's not a monolith

550
00:33:07,320 --> 00:33:10,760
Speaker 1: that you can pick out writers who are better than

551
00:33:10,840 --> 00:33:15,880
Speaker 1: others who have something to I mean everything. Morgan Housel

552
00:33:16,000 --> 00:33:22,080
Speaker 1: rights I devour because because he's spectacular. Um, if you're

553
00:33:22,160 --> 00:33:25,880
Speaker 1: interested in Donald Trump, then you must read every column

554
00:33:25,880 --> 00:33:30,080
Speaker 1: that Tim O'Brien writes because he has insights that nobody else,

555
00:33:30,160 --> 00:33:34,040
Speaker 1: having been sued by Trump and documents. This brings up

556
00:33:34,080 --> 00:33:36,280
Speaker 1: a good question, which is, have you ever had a

557
00:33:36,320 --> 00:33:40,120
Speaker 1: client upset about something you tweeted, maybe political or or whatnot?

558
00:33:40,160 --> 00:33:45,480
Speaker 1: Does that ever bite you? Um? It does? But you know,

559
00:33:46,480 --> 00:33:48,440
Speaker 1: I wish I could say we were so brilliant that

560
00:33:48,520 --> 00:33:51,040
Speaker 1: this whole thing is by design, But it's not. So.

561
00:33:51,800 --> 00:33:56,360
Speaker 1: The typical Wall Street adviser is very much right of center,

562
00:33:56,520 --> 00:34:00,560
Speaker 1: not even right leaning. They tend to be politically and

563
00:34:00,600 --> 00:34:04,880
Speaker 1: financially conservative. I don't know why. It just kind of

564
00:34:04,920 --> 00:34:09,319
Speaker 1: has happened over the years. Maybe that's a result of

565
00:34:09,960 --> 00:34:14,919
Speaker 1: tax policy, I'm I'm guessing, But you know, I think

566
00:34:14,920 --> 00:34:19,319
Speaker 1: of myself as fistially conservative and socially progressive with a

567
00:34:19,400 --> 00:34:23,040
Speaker 1: libertarian streak. That means, but by the way, I love

568
00:34:23,239 --> 00:34:28,000
Speaker 1: harassing my libertarian friends who I accused of being cowardly hypocrites.

569
00:34:28,320 --> 00:34:31,680
Speaker 1: So wait, the government can't get involved in euthan asia

570
00:34:31,880 --> 00:34:34,720
Speaker 1: or weed, but they can get involved in birth control

571
00:34:34,719 --> 00:34:38,040
Speaker 1: and abortion rights. You have to be intellectually consistent. Let's

572
00:34:38,040 --> 00:34:40,920
Speaker 1: say you write that, and there's a libertarian cline ever

573
00:34:40,960 --> 00:34:45,040
Speaker 1: called say Barry, come on man, stop um. So we've

574
00:34:45,280 --> 00:34:48,800
Speaker 1: we've had conversations with people. We've had conversation with people

575
00:34:48,840 --> 00:34:52,040
Speaker 1: who have said, gee, we wish you wouldn't weigh in.

576
00:34:52,480 --> 00:34:54,480
Speaker 1: So let me back up a little bit. So the

577
00:34:55,120 --> 00:34:58,600
Speaker 1: we do a monthly letter or quarterly letter, and and

578
00:34:58,640 --> 00:35:01,719
Speaker 1: when occasionally special events happens, we'll do it the night

579
00:35:01,880 --> 00:35:07,160
Speaker 1: before the election. In I write, I write my quarterly letter,

580
00:35:07,480 --> 00:35:10,799
Speaker 1: and I leave the last paragraph blank because I know

581
00:35:11,080 --> 00:35:14,480
Speaker 1: enough about random outcomes that I know I don't know

582
00:35:14,480 --> 00:35:17,560
Speaker 1: what the what the final results will be in the

583
00:35:17,600 --> 00:35:21,160
Speaker 1: pulse have been really close. But but the basic premise

584
00:35:21,239 --> 00:35:24,239
Speaker 1: of the column was the of the monthly letter was

585
00:35:24,719 --> 00:35:26,880
Speaker 1: presidents get way too much credit for when things go

586
00:35:27,000 --> 00:35:29,160
Speaker 1: right and way too much blame for when things go wrong,

587
00:35:29,760 --> 00:35:32,239
Speaker 1: And you really have to go out of your way

588
00:35:32,280 --> 00:35:36,680
Speaker 1: to screw up royally for a president to impact uh

589
00:35:36,800 --> 00:35:40,440
Speaker 1: a market and so gee, you could look at some

590
00:35:40,520 --> 00:35:45,000
Speaker 1: of the stuff Nixon did between Watergate and and some

591
00:35:45,080 --> 00:35:47,719
Speaker 1: of the other and and Vietnam. You could look at

592
00:35:47,880 --> 00:35:51,000
Speaker 1: George w Um, you could look at Carter. You could

593
00:35:51,000 --> 00:35:54,640
Speaker 1: see a number of presidents who their worst decisions probably

594
00:35:55,360 --> 00:35:58,799
Speaker 1: pressured the stock market. On the other hand, you know,

595
00:35:59,239 --> 00:36:03,480
Speaker 1: a rip roaring market doesn't care uh eighty two to

596
00:36:03,560 --> 00:36:06,000
Speaker 1: two thousand. You know, I don't. Clinton got impeached, the

597
00:36:06,040 --> 00:36:09,200
Speaker 1: market left and it kept going. Uh. The same thing

598
00:36:09,280 --> 00:36:12,560
Speaker 1: with Bush. Bush cut taxes, He did this, he did that,

599
00:36:12,920 --> 00:36:16,399
Speaker 1: and the market imploded. So it's almost as if the

600
00:36:16,440 --> 00:36:19,759
Speaker 1: markets don't care about this, which is a theme. But

601
00:36:19,880 --> 00:36:23,600
Speaker 1: the last paragraph of of the letter was which I

602
00:36:23,640 --> 00:36:25,960
Speaker 1: wrote the next morning, was Hey, many of you have

603
00:36:26,120 --> 00:36:29,000
Speaker 1: enjoyed tremendous gains over the since the market bottomed in

604
00:36:29,080 --> 00:36:32,040
Speaker 1: March o nine, and many of you have expressed concerns

605
00:36:32,080 --> 00:36:36,200
Speaker 1: about things that all good libertarians are in favor of,

606
00:36:36,320 --> 00:36:40,160
Speaker 1: like equality of marriage, or or the environment or this

607
00:36:40,320 --> 00:36:44,319
Speaker 1: or so take your ill gotten tax cuts which are

608
00:36:44,400 --> 00:36:47,440
Speaker 1: likely to come out of the recent election of Trump,

609
00:36:47,840 --> 00:36:51,200
Speaker 1: and don't be afraid to spend the money, uh with

610
00:36:51,239 --> 00:36:54,120
Speaker 1: some of your favorite causes. If if you're unhappy with

611
00:36:54,840 --> 00:36:58,640
Speaker 1: the social programs that come out of this, feel free

612
00:36:58,680 --> 00:37:03,600
Speaker 1: to put money into whatever you on. And that rationality

613
00:37:03,600 --> 00:37:09,200
Speaker 1: that basis in reality politics matters much less to markets. Hey,

614
00:37:09,280 --> 00:37:12,320
Speaker 1: does this affect discounted cash flow? Does this effect profits?

615
00:37:12,600 --> 00:37:15,880
Speaker 1: Then it's just background noise. It's not relevant. Where we're

616
00:37:15,960 --> 00:37:19,000
Speaker 1: starting to see the early signs that that might be

617
00:37:19,080 --> 00:37:23,960
Speaker 1: changing is the trade warren Tariffson. Eventually, I think tariffs

618
00:37:23,960 --> 00:37:28,799
Speaker 1: could assuming the adults don't get back in charge, it

619
00:37:28,880 --> 00:37:31,960
Speaker 1: could eventually push through and cause more inflation and close

620
00:37:32,000 --> 00:37:35,000
Speaker 1: the fete to Titan sooner, which leads to crimping of credit,

621
00:37:35,040 --> 00:37:37,240
Speaker 1: which leads to her session, which leads to the market correction.

622
00:37:37,680 --> 00:37:41,960
Speaker 1: That is what I think as a higher probability worst

623
00:37:42,000 --> 00:37:45,239
Speaker 1: case scenario, as opposed to the terrible Black Swans, or

624
00:37:45,280 --> 00:37:49,399
Speaker 1: as opposed to Everything's great forever. You know, two years out,

625
00:37:49,480 --> 00:37:51,520
Speaker 1: three years out, if we make a number, if we

626
00:37:51,600 --> 00:37:54,360
Speaker 1: continue to make a number of bad decisions, and I

627
00:37:54,400 --> 00:37:57,120
Speaker 1: will say the tariffs are really not well thought out.

628
00:37:57,560 --> 00:38:02,440
Speaker 1: The twelve billion dollar aid I think exports of they

629
00:38:02,480 --> 00:38:06,879
Speaker 1: want to cover the cost of trade war. Wait, why

630
00:38:06,920 --> 00:38:09,839
Speaker 1: are taxpayers paying for this? How are we winning If

631
00:38:09,880 --> 00:38:13,239
Speaker 1: taxpayers are paying for the negative impact of tariffs, this

632
00:38:13,320 --> 00:38:15,719
Speaker 1: sounds like a terrible idea. And if we keep doing that,

633
00:38:16,480 --> 00:38:19,600
Speaker 1: it's gonna send inflation higher. And if that happens, it's

634
00:38:19,600 --> 00:38:23,759
Speaker 1: not a good thing. So some people don't like that.

635
00:38:24,680 --> 00:38:27,680
Speaker 1: Our clients are all self selecting. Our clients come to

636
00:38:27,760 --> 00:38:31,120
Speaker 1: us because they more or less agree with us. Half

637
00:38:31,160 --> 00:38:34,480
Speaker 1: our conversations begin. My guy at fill in the blank

638
00:38:35,080 --> 00:38:38,200
Speaker 1: is a jerk. You guys seem to be making sense.

639
00:38:38,840 --> 00:38:42,719
Speaker 1: So if if one out of twenty people say I

640
00:38:42,760 --> 00:38:45,719
Speaker 1: don't like what you wrote about the president, Hey, you

641
00:38:45,760 --> 00:38:48,680
Speaker 1: should be more concerned with what he's doing to soybean

642
00:38:48,760 --> 00:38:51,600
Speaker 1: prices because you live in the Midwest, then you should

643
00:38:51,640 --> 00:38:55,279
Speaker 1: be concerned about me complaining about the By the way,

644
00:38:55,280 --> 00:38:59,319
Speaker 1: you notice how the Chinese are very, very um strategic

645
00:38:59,480 --> 00:39:03,319
Speaker 1: in how they issue there their counter tariffs. It's like,

646
00:39:03,840 --> 00:39:06,320
Speaker 1: we're gonna you. You want to play this game, Fine,

647
00:39:06,560 --> 00:39:09,120
Speaker 1: we're smarter than you. We're gonna mess with your base.

648
00:39:09,560 --> 00:39:16,400
Speaker 1: Have at it um active pass if he said, and

649
00:39:16,400 --> 00:39:18,799
Speaker 1: he is active a little bit. We've tended to see

650
00:39:18,840 --> 00:39:22,560
Speaker 1: in the flows that active fixed income mutual funds are

651
00:39:22,600 --> 00:39:24,919
Speaker 1: still taking in money, not a lot, but their treading water.

652
00:39:24,960 --> 00:39:28,279
Speaker 1: At least it's active equity that's getting just total blood bath.

653
00:39:28,960 --> 00:39:31,440
Speaker 1: Um does that a line with what what you feel

654
00:39:31,440 --> 00:39:33,520
Speaker 1: with active? Do you go active on the fixed income

655
00:39:33,640 --> 00:39:37,640
Speaker 1: sid you think there's more value? So well, the a

656
00:39:37,760 --> 00:39:42,239
Speaker 1: the academic data demonstrates that active fixed income is a

657
00:39:42,280 --> 00:39:45,920
Speaker 1: winner versus passive because if it's passive, you're buying everything good,

658
00:39:45,920 --> 00:39:49,360
Speaker 1: band and different. With active, you get to choose your price,

659
00:39:49,880 --> 00:39:52,080
Speaker 1: you get to choose your duration, you get to choose

660
00:39:52,080 --> 00:39:56,359
Speaker 1: your quality. Even within the same Hey, I want you know,

661
00:39:56,520 --> 00:39:59,359
Speaker 1: B plus plus to end up and I want five

662
00:39:59,440 --> 00:40:00,920
Speaker 1: to ten years then with this and I want that.

663
00:40:01,239 --> 00:40:06,960
Speaker 1: So the data is active fixed income is superior in

664
00:40:07,160 --> 00:40:11,239
Speaker 1: excess of the cost. So there's that. Last a year

665
00:40:11,239 --> 00:40:16,640
Speaker 1: ago we swapped out a passive bond funds for a

666
00:40:16,640 --> 00:40:20,120
Speaker 1: active bond funds and the overlap and holdings was something

667
00:40:20,160 --> 00:40:23,200
Speaker 1: like sixty or eighty percent. I'm doing it for memory,

668
00:40:23,600 --> 00:40:26,920
Speaker 1: but the twenty or that was different. I don't even

669
00:40:26,960 --> 00:40:29,279
Speaker 1: think it was. I think it was less was enough

670
00:40:29,320 --> 00:40:31,480
Speaker 1: to make a big difference in the performance at the

671
00:40:31,480 --> 00:40:35,239
Speaker 1: same risk level. So the tradeoff is you're paying a

672
00:40:35,239 --> 00:40:39,360
Speaker 1: little more, but you're getting more. Uh so, ay, that's worthwhile.

673
00:40:39,800 --> 00:40:43,319
Speaker 1: Active versus passive, I think is the wrong way to

674
00:40:43,360 --> 00:40:47,799
Speaker 1: look at it. It's expensive versus cheap. Morning Star did

675
00:40:47,880 --> 00:40:49,920
Speaker 1: a study, I want to say it was twenty one.

676
00:40:50,239 --> 00:40:53,080
Speaker 1: What the morning Stars know? What high costs to low costs?

677
00:40:53,320 --> 00:40:55,319
Speaker 1: I mean, that's the big trend. But but let's go

678
00:40:55,360 --> 00:40:58,279
Speaker 1: to fixed income active. First of all, do you use

679
00:40:58,320 --> 00:41:00,840
Speaker 1: the et F structure or the mutual funds? Mutual funds

680
00:41:00,880 --> 00:41:03,960
Speaker 1: you do? Why? Well, the holding periods are much longer

681
00:41:04,040 --> 00:41:07,200
Speaker 1: so you don't run into the tax situations. And to

682
00:41:07,320 --> 00:41:13,680
Speaker 1: be honest, a lot of the better mutual funds active,

683
00:41:15,080 --> 00:41:16,520
Speaker 1: I want to say it, make sure I'm getting us right.

684
00:41:16,520 --> 00:41:20,360
Speaker 1: Active mutual funds don't have a less expensive parallel e

685
00:41:20,440 --> 00:41:23,440
Speaker 1: t F. If you remember when Pimco we no longer

686
00:41:23,480 --> 00:41:25,880
Speaker 1: own but Pimco when they rolled out the e t

687
00:41:26,040 --> 00:41:28,680
Speaker 1: F s, they were more expensive than the mutual fund

688
00:41:29,920 --> 00:41:32,120
Speaker 1: because they didn't want to see a mass of outflux,

689
00:41:32,360 --> 00:41:34,120
Speaker 1: although it was cheaper than the A class. So if

690
00:41:34,120 --> 00:41:36,200
Speaker 1: you're a retail you got a bad deal, right. So

691
00:41:36,239 --> 00:41:37,800
Speaker 1: it's priced right in between the I and the a

692
00:41:38,480 --> 00:41:41,680
Speaker 1: What a coincidence Gunlock did the same thing. Yes, because

693
00:41:41,680 --> 00:41:43,520
Speaker 1: it makes sense to do that in the in the

694
00:41:43,560 --> 00:41:47,200
Speaker 1: when you're choosing a fixed income active fund um. I

695
00:41:47,280 --> 00:41:50,040
Speaker 1: know costs is important for you. How important is cost

696
00:41:50,160 --> 00:41:53,319
Speaker 1: versus sort of the record of the fund. So it's

697
00:41:53,320 --> 00:41:55,640
Speaker 1: a holistic approach. You have to look at everything. My

698
00:41:56,280 --> 00:42:00,680
Speaker 1: favorite morning Store research report and remember they lledge funds

699
00:42:00,760 --> 00:42:05,440
Speaker 1: on the basis of their Star report. If you can

700
00:42:05,480 --> 00:42:08,040
Speaker 1: only look at one thing when reviewing a mutual fund,

701
00:42:08,160 --> 00:42:11,080
Speaker 1: says Morning Star. It turns out cost is the most

702
00:42:11,120 --> 00:42:16,360
Speaker 1: important thing if you are choosing amongst five star funds

703
00:42:16,480 --> 00:42:21,200
Speaker 1: versus cheapest funds, choosing the cheapest outperformed the five star approach.

704
00:42:21,520 --> 00:42:23,759
Speaker 1: I give them credit not only for publishing that, but

705
00:42:24,040 --> 00:42:26,920
Speaker 1: not taking it down and revisiting it every few years.

706
00:42:27,480 --> 00:42:31,920
Speaker 1: Uh So, cost is really really important over long periods

707
00:42:31,920 --> 00:42:35,480
Speaker 1: of time. The compound makes a tremendous Compounding makes a

708
00:42:35,520 --> 00:42:39,120
Speaker 1: tremendous difference. There's a Vanguard study about you know, the

709
00:42:39,239 --> 00:42:42,480
Speaker 1: average Vanguard. I think it's like seventeen basis points at

710
00:42:43,000 --> 00:42:46,840
Speaker 1: whatever it is. It's some ungodly cheaper thing. The typical

711
00:42:47,000 --> 00:42:49,080
Speaker 1: act of mutual fund used to be about one quarter

712
00:42:49,600 --> 00:42:52,520
Speaker 1: over a thirty year period. It's an immense It's like

713
00:42:52,600 --> 00:42:56,640
Speaker 1: thirty difference in total returns compounded over that. It was

714
00:42:56,719 --> 00:43:01,840
Speaker 1: just massive, So cost matters. I don't care as much

715
00:43:01,960 --> 00:43:06,600
Speaker 1: about recent performance as I do the process. It has

716
00:43:06,640 --> 00:43:08,359
Speaker 1: to be defendable, it has to be rational, it has

717
00:43:08,400 --> 00:43:12,480
Speaker 1: to make sense, and hopefully be repeatable. You know, my

718
00:43:12,560 --> 00:43:15,920
Speaker 1: favorite example in the world of hedge funds is UH,

719
00:43:16,120 --> 00:43:19,600
Speaker 1: Paulson and Co. So when John Paulson had the greatest

720
00:43:19,640 --> 00:43:24,480
Speaker 1: trade ever bidding against the mortgage collapse, in the subprime

721
00:43:24,880 --> 00:43:27,719
Speaker 1: and derivative collapse, I think he was a like a

722
00:43:27,760 --> 00:43:31,160
Speaker 1: five billion dollar fund or whatever, and following the collapse

723
00:43:31,239 --> 00:43:33,960
Speaker 1: he swelled up to thirty or forty billion dollars and

724
00:43:34,000 --> 00:43:37,440
Speaker 1: then proceeded to underperformed for a good number of years.

725
00:43:37,480 --> 00:43:40,440
Speaker 1: So it turned out that that was a great trade,

726
00:43:40,480 --> 00:43:43,719
Speaker 1: but it wasn't a repeatable process. We run into the

727
00:43:43,760 --> 00:43:47,640
Speaker 1: same thing with UM mutual funds. Hey is this. There

728
00:43:47,680 --> 00:43:49,919
Speaker 1: was one mutual fund we had that had a huge

729
00:43:49,960 --> 00:43:56,240
Speaker 1: amount of mortgages in it UM and basically was outperforming

730
00:43:56,239 --> 00:44:01,680
Speaker 1: the comparably risk based UH corporate it's and treasuries post

731
00:44:01,719 --> 00:44:07,040
Speaker 1: financial crisis, but at a certain point, mortgage backs in

732
00:44:07,080 --> 00:44:09,080
Speaker 1: a rising rate environment are not going to do well,

733
00:44:09,120 --> 00:44:11,680
Speaker 1: So you don't want to sit with that forever. So

734
00:44:11,719 --> 00:44:14,720
Speaker 1: we ended up rotating out of that to UH a

735
00:44:14,800 --> 00:44:19,840
Speaker 1: more focused corporate and investment grade bonds. So you're giving

736
00:44:19,960 --> 00:44:22,759
Speaker 1: up a little bit of recent performance when you do that,

737
00:44:23,080 --> 00:44:26,120
Speaker 1: but you're lowering your fees and you're making your perspective

738
00:44:26,800 --> 00:44:30,400
Speaker 1: gains UH much better because it's a process that's not

739
00:44:30,440 --> 00:44:35,040
Speaker 1: dependent on one specific asset class in one specific part

740
00:44:35,120 --> 00:44:38,719
Speaker 1: of the economic cycle, which is before rates start to rise.

741
00:44:39,680 --> 00:44:42,920
Speaker 1: You're an advisor, you can see that low cost is

742
00:44:42,960 --> 00:44:46,200
Speaker 1: sort of sweeping the advisor world, especially because the move

743
00:44:46,280 --> 00:44:49,120
Speaker 1: to you know, being fiduciaries and getting a fee based

744
00:44:49,840 --> 00:44:53,120
Speaker 1: payment model as opposed to a commission. But yet the

745
00:44:53,200 --> 00:44:57,080
Speaker 1: institutional world still seems really really into sort of private

746
00:44:57,080 --> 00:45:01,680
Speaker 1: equity hedge funds picking, hiring and firing external managers right

747
00:45:01,719 --> 00:45:04,719
Speaker 1: and left. Where do you see that evolving? I think

748
00:45:04,719 --> 00:45:07,840
Speaker 1: you wrote a column once talking about what pension should do.

749
00:45:07,840 --> 00:45:11,640
Speaker 1: Do you see that institutional world evolving more to like

750
00:45:11,680 --> 00:45:13,520
Speaker 1: sort of your model, because it is interesting, like you

751
00:45:13,719 --> 00:45:17,080
Speaker 1: especially like endownminds, Like we in Business Week we profile

752
00:45:17,160 --> 00:45:20,880
Speaker 1: the small college endowment that's been all basically you know,

753
00:45:21,320 --> 00:45:24,440
Speaker 1: indexed for you Yeah, that one did the best or

754
00:45:24,480 --> 00:45:27,200
Speaker 1: one of the best. I mean there's always the outlier

755
00:45:27,280 --> 00:45:30,400
Speaker 1: like Yale or you know, they crush it, but not

756
00:45:30,600 --> 00:45:32,680
Speaker 1: for a while. But it's a great question of like,

757
00:45:33,480 --> 00:45:37,480
Speaker 1: what happens to institutional money, why don't they do that now?

758
00:45:37,640 --> 00:45:40,600
Speaker 1: So so, first of all, let me preface this by

759
00:45:40,680 --> 00:45:46,720
Speaker 1: explaining how much professionals love unsolicited advice. They love that. Second,

760
00:45:47,200 --> 00:45:50,799
Speaker 1: you've already seen that begin to take place right there.

761
00:45:50,840 --> 00:45:54,440
Speaker 1: There are a number of funds that move, have been moving,

762
00:45:55,040 --> 00:45:59,680
Speaker 1: pension funds, endowments go down the list, have been moving

763
00:45:59,800 --> 00:46:03,920
Speaker 1: at least part of their asset base. Look at Cowper's

764
00:46:03,960 --> 00:46:06,560
Speaker 1: fired all their hedge funds. Took two years to unwind

765
00:46:06,560 --> 00:46:11,000
Speaker 1: that crap. But still this is not you know, they

766
00:46:11,000 --> 00:46:16,160
Speaker 1: are not immune from the same trend that years ago.

767
00:46:16,400 --> 00:46:21,359
Speaker 1: I went to a state pension fund in the Tri

768
00:46:21,560 --> 00:46:25,200
Speaker 1: State area. They're quarterly, meaning I was invited to speak

769
00:46:25,320 --> 00:46:29,400
Speaker 1: by someone there, and I listened to a parade of

770
00:46:29,440 --> 00:46:34,239
Speaker 1: a dozen consultants explain why all the crap there in

771
00:46:34,280 --> 00:46:38,120
Speaker 1: this year, which hasn't done well, is perfectly positioned to

772
00:46:38,200 --> 00:46:40,120
Speaker 1: do well next year. And now is not the time

773
00:46:40,160 --> 00:46:42,439
Speaker 1: to sell this, to sell any of this stuff, And

774
00:46:42,440 --> 00:46:45,239
Speaker 1: and everybody around the table was nodding their head, and

775
00:46:45,320 --> 00:46:49,520
Speaker 1: I sat there just grinding my molars. And when I

776
00:46:49,600 --> 00:46:53,359
Speaker 1: got literally the head of the table, whole giant rectangular place,

777
00:46:53,640 --> 00:46:57,399
Speaker 1: I said, look, I prepared these really um smart, well

778
00:46:57,440 --> 00:47:00,920
Speaker 1: thought out remarks, but it's clear that they will be

779
00:47:00,920 --> 00:47:03,200
Speaker 1: wasted on you. And I know I'm never going to

780
00:47:03,320 --> 00:47:06,360
Speaker 1: do business with anyone in this room, So for five minutes,

781
00:47:06,560 --> 00:47:09,680
Speaker 1: let's just pull the bullshit aside and give you the

782
00:47:09,719 --> 00:47:13,279
Speaker 1: straight dope. None of these guys here know what the

783
00:47:13,280 --> 00:47:16,600
Speaker 1: hell they're talking about. They are salesmen and they are

784
00:47:16,680 --> 00:47:21,200
Speaker 1: really good at it, because halfway through their pitches, I'm like, wow,

785
00:47:21,239 --> 00:47:23,000
Speaker 1: that's great. How do I get into some of that?

786
00:47:23,440 --> 00:47:26,360
Speaker 1: Oh wait, they've underperformed every year. You've had them for

787
00:47:26,400 --> 00:47:29,399
Speaker 1: ten years and charged you a massive amount of money

788
00:47:29,440 --> 00:47:32,440
Speaker 1: for the privilege. How stupid are you? How could you

789
00:47:32,440 --> 00:47:36,440
Speaker 1: guys continue giving money to guys who are They're not

790
00:47:36,520 --> 00:47:40,799
Speaker 1: just wrong, they're wrong and consistently wrong, and you keep

791
00:47:40,800 --> 00:47:44,480
Speaker 1: buying the same line of bs every Hey, you know,

792
00:47:44,560 --> 00:47:47,920
Speaker 1: it's it's like the someone's having an affair on their wife,

793
00:47:47,920 --> 00:47:49,719
Speaker 1: and they keep saying to the level I'm gonna leave

794
00:47:49,760 --> 00:47:51,960
Speaker 1: her next year. No, no, next year is when we

795
00:47:52,080 --> 00:47:56,040
Speaker 1: finally it's one. It's year after yearfter year they're selling

796
00:47:56,120 --> 00:47:57,960
Speaker 1: telling you the same thing. They're selling you, the same

797
00:47:58,000 --> 00:48:01,520
Speaker 1: bill of goods, and it's crap. And I can't believe

798
00:48:02,160 --> 00:48:06,439
Speaker 1: people in this room with a fiduciary obligation to the

799
00:48:06,560 --> 00:48:10,319
Speaker 1: pensioners are buying into this. So really, I'm on the

800
00:48:10,360 --> 00:48:12,960
Speaker 1: wrong side of this business. I shouldn't be telling you

801
00:48:13,000 --> 00:48:16,320
Speaker 1: about asset management. I should be going to your beneficiaries

802
00:48:16,320 --> 00:48:20,359
Speaker 1: and saying, let's talk about the subsequent litigation suing these

803
00:48:20,400 --> 00:48:25,879
Speaker 1: idiots who have underperformed your portfolio because it keeps them,

804
00:48:26,400 --> 00:48:31,200
Speaker 1: uh in high paying board seats. I can't explain why

805
00:48:31,239 --> 00:48:34,919
Speaker 1: this is going on, but it's a parent um. It's

806
00:48:34,920 --> 00:48:38,880
Speaker 1: apparent that all these promises are nonsense. When are you

807
00:48:38,960 --> 00:48:42,279
Speaker 1: people gonna wake up and realize you're being sold a

808
00:48:42,320 --> 00:48:46,120
Speaker 1: bill of goods. I'm sorry, that's not as as entertaining

809
00:48:46,160 --> 00:48:48,560
Speaker 1: as what I had prepared, but I just can't. I

810
00:48:48,560 --> 00:48:51,279
Speaker 1: listened to a parade of nonsense and everybody around the

811
00:48:51,280 --> 00:48:53,120
Speaker 1: table is nodding their head. Do they invent you back?

812
00:48:53,200 --> 00:48:57,360
Speaker 1: Never Well, it's funny. We we had bogelon we interviewed

813
00:48:57,440 --> 00:49:01,560
Speaker 1: him for um uh this separate episode, and he was

814
00:49:01,560 --> 00:49:03,360
Speaker 1: saying he was upset the I C I would not

815
00:49:03,520 --> 00:49:06,000
Speaker 1: invite him to speak, and I said, I think what

816
00:49:06,040 --> 00:49:08,719
Speaker 1: you're saying to this piece of people is just too

817
00:49:09,960 --> 00:49:13,759
Speaker 1: There's definitely an internal conflict within the industry, and I

818
00:49:13,800 --> 00:49:17,239
Speaker 1: think even within companies and within people of this move

819
00:49:17,320 --> 00:49:20,279
Speaker 1: to lower feed caught goods. But if you're in the

820
00:49:20,280 --> 00:49:23,760
Speaker 1: financial industry, you're feeding off of the higher costs revenue.

821
00:49:24,200 --> 00:49:27,000
Speaker 1: And I think as investors and people a practitioners, there's

822
00:49:27,040 --> 00:49:31,080
Speaker 1: definitely some tension going on that he that he taps into.

823
00:49:31,200 --> 00:49:33,919
Speaker 1: That's my theory on why he was not invited even

824
00:49:33,960 --> 00:49:37,479
Speaker 1: though he's you know, clearly um warranted to know there's

825
00:49:37,560 --> 00:49:40,600
Speaker 1: there's the only expert explanation for I C I not

826
00:49:40,719 --> 00:49:43,960
Speaker 1: inviting him as cowardice. There's no other explanation. Listen, Apple

827
00:49:44,640 --> 00:49:49,480
Speaker 1: taught us all about cannibalization, which the financial industry has

828
00:49:49,480 --> 00:49:52,320
Speaker 1: a real hard time with. Apple puts out an iPod

829
00:49:52,400 --> 00:49:55,960
Speaker 1: for five dollars and it has to you know, ten

830
00:49:56,080 --> 00:49:58,920
Speaker 1: meg's the next year, Apple says, here's what we're gonna do.

831
00:49:59,239 --> 00:50:02,320
Speaker 1: We're gonna give you thirty megs and it's four hundred dollars,

832
00:50:02,320 --> 00:50:05,200
Speaker 1: and the next meg, next year it's a hundred megs

833
00:50:05,280 --> 00:50:07,720
Speaker 1: and it's two hundred dollars, and then it's a gig

834
00:50:07,760 --> 00:50:10,440
Speaker 1: for a hundred dollars and nobody can catch them. That

835
00:50:10,520 --> 00:50:13,520
Speaker 1: was the iPod, than the iPad, than the iPhone. Could

836
00:50:13,520 --> 00:50:18,399
Speaker 1: you imagine the average finance company saying, we know this

837
00:50:18,440 --> 00:50:20,680
Speaker 1: is one and a half percent and it's underperformed, but

838
00:50:20,760 --> 00:50:22,399
Speaker 1: here's what's gonna we're gonna give you, and now it's

839
00:50:22,400 --> 00:50:27,000
Speaker 1: seventy basis points. It doesn't happen to their credit. A

840
00:50:27,120 --> 00:50:30,840
Speaker 1: handful of companies, I'll include Fidelity in this, I'll include

841
00:50:30,840 --> 00:50:35,920
Speaker 1: Schwab in this, have have lowered fees. State Street, black

842
00:50:36,000 --> 00:50:40,040
Speaker 1: Rock have lowered fees on a number of their products.

843
00:50:40,120 --> 00:50:43,360
Speaker 1: Some companies will will choose a loss leader and say,

844
00:50:43,560 --> 00:50:46,040
Speaker 1: even Goldman Success, what a seven or a nine basis

845
00:50:46,080 --> 00:50:49,279
Speaker 1: point fund? Someone will come in and say, we'll lower this.

846
00:50:49,840 --> 00:50:53,279
Speaker 1: I think the math was that ten years ago the

847
00:50:53,560 --> 00:50:59,359
Speaker 1: cheapest funds in in uh just about every category was

848
00:50:59,560 --> 00:51:03,520
Speaker 1: seventy percent of them were Vanguard. Now the cheapest fund

849
00:51:03,680 --> 00:51:05,680
Speaker 1: in every category, I want to say it's thirty five

850
00:51:05,800 --> 00:51:08,919
Speaker 1: or Vanguard. It's not that they've raised their rates. It's

851
00:51:08,920 --> 00:51:12,360
Speaker 1: that the Vanguard effect has driven everybody else, if not

852
00:51:12,440 --> 00:51:15,200
Speaker 1: across the board, at least to pick one or two

853
00:51:15,239 --> 00:51:19,160
Speaker 1: things and really slash the price on it. So it's

854
00:51:19,440 --> 00:51:24,439
Speaker 1: very much challenging to get any industry. It's not just finance. Hey,

855
00:51:24,480 --> 00:51:26,440
Speaker 1: this is your bread and butter. You should cut your

856
00:51:26,440 --> 00:51:30,799
Speaker 1: fees fift and we cut our fees fift and when

857
00:51:30,800 --> 00:51:33,160
Speaker 1: we were debating it, it's like, Wow, that's a big

858
00:51:33,239 --> 00:51:35,040
Speaker 1: chunk of money. What's that going to do to our

859
00:51:35,040 --> 00:51:37,359
Speaker 1: gas flow? And we're a small, you know, not even

860
00:51:37,400 --> 00:51:39,960
Speaker 1: five year old company. Imagine you're a forty year old

861
00:51:39,960 --> 00:51:43,279
Speaker 1: company making billions of dollars a year and some consultant

862
00:51:43,320 --> 00:51:46,200
Speaker 1: comes in and says you should slash your fees in half.

863
00:51:50,600 --> 00:51:54,600
Speaker 1: Back to the e t F. As an avid user,

864
00:51:56,160 --> 00:52:00,600
Speaker 1: what limitations do you think they have? So there's some

865
00:52:00,640 --> 00:52:03,960
Speaker 1: obvious ones and then some less obvious ones. The to me,

866
00:52:04,120 --> 00:52:07,960
Speaker 1: the most obvious limitation is liquidity that as you get

867
00:52:08,000 --> 00:52:10,480
Speaker 1: into some of the backwaters, some of the esoteric ones,

868
00:52:11,160 --> 00:52:13,320
Speaker 1: you know, they have market caps of a hundred or

869
00:52:13,320 --> 00:52:16,560
Speaker 1: two hundred million dollars and they trade by appointment, and

870
00:52:16,560 --> 00:52:18,400
Speaker 1: and that's a little bit of a problem if the

871
00:52:18,400 --> 00:52:21,920
Speaker 1: whole idea of of e t F s or that

872
00:52:22,000 --> 00:52:25,520
Speaker 1: they trade, uh not just the tax aspect, but you

873
00:52:25,520 --> 00:52:29,040
Speaker 1: can trade during the day and then it's so there's

874
00:52:29,040 --> 00:52:32,920
Speaker 1: no advantage there. So so that's number one. Number two,

875
00:52:33,480 --> 00:52:37,840
Speaker 1: and just to clarify it, there's probably a thousand ETFs

876
00:52:37,920 --> 00:52:40,319
Speaker 1: less than a hundred millions, so that's about half. So

877
00:52:40,400 --> 00:52:42,600
Speaker 1: you as an advisor, you just sort of eliminate all

878
00:52:42,640 --> 00:52:45,600
Speaker 1: those right off the bat. They become really challenging to

879
00:52:45,640 --> 00:52:47,600
Speaker 1: work with. I don't want to say we eliminate them,

880
00:52:47,680 --> 00:52:51,760
Speaker 1: but it's a factor when you're making a decision. Uh. Second,

881
00:52:51,920 --> 00:52:55,000
Speaker 1: the entire process of bringing out an e t F

882
00:52:55,160 --> 00:52:59,879
Speaker 1: public to to that process is wildly complicated. Overly exp

883
00:53:00,080 --> 00:53:03,920
Speaker 1: ends of the internal expense ratios that these fun small

884
00:53:04,440 --> 00:53:08,000
Speaker 1: these small fund companies paying, they're pretty outrageous. And so

885
00:53:08,120 --> 00:53:11,799
Speaker 1: it's the playing field does not level. There's a huge

886
00:53:11,840 --> 00:53:15,239
Speaker 1: advantage to the black Rock state streets, van guards, etcetera.

887
00:53:15,560 --> 00:53:18,080
Speaker 1: I want to say the top three or top four

888
00:53:18,719 --> 00:53:21,520
Speaker 1: are something like seventy of the a U M. It's

889
00:53:21,520 --> 00:53:25,680
Speaker 1: something ungodly top three or se the U N. So

890
00:53:25,840 --> 00:53:28,560
Speaker 1: if we want innovation, if we want creativity, if we

891
00:53:28,600 --> 00:53:30,440
Speaker 1: want to try a bunch of things straight against the

892
00:53:30,440 --> 00:53:34,160
Speaker 1: wall and see what sticks as an industry, I think

893
00:53:34,200 --> 00:53:39,040
Speaker 1: the SEC needs to make that process a little less expensive,

894
00:53:39,040 --> 00:53:42,279
Speaker 1: a little more streamlines. I had a front row. Well,

895
00:53:42,280 --> 00:53:46,040
Speaker 1: they are right, the E t F role will do so. Now,

896
00:53:46,040 --> 00:53:47,560
Speaker 1: on the other hand, we don't want a million or

897
00:53:47,560 --> 00:53:51,080
Speaker 1: fly by night bs C tfs. But it shouldn't be

898
00:53:51,120 --> 00:53:54,480
Speaker 1: an impediment to a small firm with a good idea.

899
00:53:54,520 --> 00:53:57,040
Speaker 1: Shouldn't say I can't do this because it's gonna cost

900
00:53:57,080 --> 00:54:00,120
Speaker 1: me a million dollars. What would be your idea? Are

901
00:54:00,200 --> 00:54:03,920
Speaker 1: good idea if you launched one for an E T F?

902
00:54:05,320 --> 00:54:07,880
Speaker 1: I don't think there's a factor based E S G

903
00:54:08,120 --> 00:54:10,120
Speaker 1: E t F out there, at least when you and

904
00:54:10,120 --> 00:54:12,319
Speaker 1: I had a conversation about this last summer. When I

905
00:54:12,320 --> 00:54:15,320
Speaker 1: looked at it, I could not find a factor based

906
00:54:15,680 --> 00:54:18,719
Speaker 1: UM B S G E t F. I thought that

907
00:54:18,840 --> 00:54:21,360
Speaker 1: was interesting, Well, the problem with that M E S

908
00:54:21,400 --> 00:54:24,400
Speaker 1: G isn't selling. And factors are seven hundred of our

909
00:54:24,440 --> 00:54:28,759
Speaker 1: seven dred smart Beta. And you talked about not being you,

910
00:54:28,760 --> 00:54:30,920
Speaker 1: weren't being you weren't moved so much by factory E

911
00:54:30,960 --> 00:54:32,880
Speaker 1: T S. Would you be moved by a factor E

912
00:54:33,080 --> 00:54:35,480
Speaker 1: s G. No, that's what I mean. There should be

913
00:54:35,520 --> 00:54:38,359
Speaker 1: a factor based E s G E T F and

914
00:54:38,360 --> 00:54:41,040
Speaker 1: and but you know by the time this broadcast there

915
00:54:41,080 --> 00:54:44,000
Speaker 1: will be one. But when we first spoke about it,

916
00:54:44,960 --> 00:54:49,640
Speaker 1: and here's the thing about E s G, people have said, well,

917
00:54:49,680 --> 00:54:51,880
Speaker 1: there's not a lot of motion towards that. When you

918
00:54:51,920 --> 00:54:54,279
Speaker 1: look at the people who say they're interested in E

919
00:54:54,440 --> 00:54:58,840
Speaker 1: s G investing, environmental, social and governance investing, they tend

920
00:54:58,880 --> 00:55:02,160
Speaker 1: to be millennials, and they tend to be women. And

921
00:55:02,280 --> 00:55:06,080
Speaker 1: we are on the leading edge of a make up

922
00:55:06,080 --> 00:55:10,160
Speaker 1: a number thirty plus trillion dollar generational wealth transfer from

923
00:55:10,160 --> 00:55:14,480
Speaker 1: the boomers to the exers, and the millennials who consists

924
00:55:14,520 --> 00:55:15,920
Speaker 1: of it will go to the wife, and then we'll

925
00:55:15,960 --> 00:55:19,799
Speaker 1: go to the kids typically, And that's the people who

926
00:55:19,840 --> 00:55:22,480
Speaker 1: say they're interested in E s G. So I think

927
00:55:22,520 --> 00:55:25,160
Speaker 1: it's early to write off E s G. You disagree.

928
00:55:25,239 --> 00:55:27,680
Speaker 1: I do. And here's why you talk about boomers, right,

929
00:55:28,320 --> 00:55:32,360
Speaker 1: nobody was more progressive than they were in the sixties.

930
00:55:33,000 --> 00:55:36,359
Speaker 1: Why aren't they into E s It's the worst generation ever?

931
00:55:37,000 --> 00:55:39,600
Speaker 1: Come on, they were all into this. Look. I remember

932
00:55:39,760 --> 00:55:42,359
Speaker 1: Michael Stipe had the acid rain hat. We were all

933
00:55:42,360 --> 00:55:46,640
Speaker 1: into it too. But but general, I'm saying every generation

934
00:55:46,800 --> 00:55:49,160
Speaker 1: is into when they're young. It seems to me there's

935
00:55:49,400 --> 00:55:52,000
Speaker 1: so probably a and I don't want to say you

936
00:55:52,040 --> 00:55:54,200
Speaker 1: get corrupt or you just stop caring, But like, is

937
00:55:54,239 --> 00:55:57,880
Speaker 1: it take the kids, the soccer electricians coming about it,

938
00:55:58,160 --> 00:56:01,279
Speaker 1: so you get busy? YEA, So is it not? Millennials

939
00:56:01,280 --> 00:56:03,400
Speaker 1: are into it now. It's just whoever is young is

940
00:56:03,400 --> 00:56:05,320
Speaker 1: into it, and then they get out. That's a good theory.

941
00:56:06,040 --> 00:56:10,000
Speaker 1: I think that in the sixties climate change was a

942
00:56:10,160 --> 00:56:15,600
Speaker 1: very abstract theoretical concept other than a handful of flat earther's.

943
00:56:16,040 --> 00:56:19,799
Speaker 1: Everybody now knows that climate change is real. It's like

944
00:56:19,880 --> 00:56:21,880
Speaker 1: I wouldn't buy a place in in on the coast

945
00:56:21,880 --> 00:56:24,520
Speaker 1: in Florida. Now I would rent because that's gonna be

946
00:56:24,560 --> 00:56:27,000
Speaker 1: underwater soon. Now it might be a hundred years, it

947
00:56:27,040 --> 00:56:31,640
Speaker 1: might be fifty years unless technology comes along with a

948
00:56:31,719 --> 00:56:36,680
Speaker 1: magic little thing, and and sufficiently advanced technology is indistinguishable

949
00:56:36,800 --> 00:56:40,000
Speaker 1: from from magic. If we eventually come up a way

950
00:56:40,040 --> 00:56:42,560
Speaker 1: to pull CEO two out of the atmosphere and to

951
00:56:42,640 --> 00:56:45,960
Speaker 1: reduce the greenhouse effect, then all the worst case scenarios

952
00:56:45,960 --> 00:56:51,120
Speaker 1: don't come to fruition, and I really hope technology solves that. However,

953
00:56:52,160 --> 00:56:54,319
Speaker 1: right now it looks like this is gonna be an

954
00:56:54,320 --> 00:56:56,480
Speaker 1: issue that the next few generations are going to have

955
00:56:56,520 --> 00:56:59,680
Speaker 1: to wrestle with, uh long after we shuffle off this

956
00:56:59,719 --> 00:57:03,840
Speaker 1: mortal coil. So I think this generation is more serious

957
00:57:03,920 --> 00:57:07,640
Speaker 1: about it than the Boomers, the worst generation. We're in

958
00:57:07,680 --> 00:57:10,279
Speaker 1: the sixties. By the way, everything bad in the world

959
00:57:10,360 --> 00:57:12,799
Speaker 1: you can blame on the Boomers. All the debt is

960
00:57:12,800 --> 00:57:15,719
Speaker 1: blamed on the Boomers. The music was good STDs, I'll

961
00:57:15,719 --> 00:57:19,120
Speaker 1: give you that, Okay, STDs. You can blame on the

962
00:57:19,120 --> 00:57:22,080
Speaker 1: the movies in the sixties, with a handful of exceptions.

963
00:57:22,200 --> 00:57:26,240
Speaker 1: Graduate unwatchable. Graduate is much later than that apocalypse. Now,

964
00:57:26,280 --> 00:57:29,240
Speaker 1: the seventies was really the Golden Yes apocalypse, right, So

965
00:57:29,360 --> 00:57:32,920
Speaker 1: my my movie washing is thirties and forties, fifties. The

966
00:57:33,040 --> 00:57:35,880
Speaker 1: sixties is a is a. There are some good movies,

967
00:57:35,920 --> 00:57:38,720
Speaker 1: but it's a so you I blame most of bad

968
00:57:38,760 --> 00:57:41,840
Speaker 1: things that happen on on the baby Boomers, of which

969
00:57:41,960 --> 00:57:44,720
Speaker 1: I don't consider myself. I'm I'm in the valley between

970
00:57:45,240 --> 00:57:50,320
Speaker 1: the exers of the boom. So that's it for episode one,

971
00:57:50,720 --> 00:57:54,040
Speaker 1: but we're not done talking with Barry red Holtz. To

972
00:57:54,160 --> 00:57:56,160
Speaker 1: keep listening, though, you'll have to go back to your

973
00:57:56,160 --> 00:58:00,360
Speaker 1: favorite podcast op and find episode two.