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Speaker 1: I PC. This is Masters in Business with Barry Riddholts
Speaker 1: on Boomberg Radio. This week. On the podcast, I have
Speaker 1: Ken Fisher and just a really quick story. The first
Speaker 1: time I had Ken Fisher as a guest. Uh. We
Speaker 1: had a conversation that was quite fascinating. I'm intrigued by
Speaker 1: the business he's built and how successful he's been operating
Speaker 1: in a way that the rest of the world to
Speaker 1: finance just hasn't and he really has created what is
Speaker 1: a unique path to build a very successful firm. After
Speaker 1: we finished the interview, we walked over and we I
Speaker 1: think we were in the green room um of the
Speaker 1: television area. He had a somewhere else he was heading
Speaker 1: to or appearing, and we started talking. After we talked
Speaker 1: for ninety minutes last time, and that ten minute or
Speaker 1: so conversation made it clear to me, Gee, there's a
Speaker 1: ton of stuff I didn't get to. I want to
Speaker 1: talk to you about his business, how he grew, with
Speaker 1: the things he did, and so when I saw he
Speaker 1: was coming back into town. I think it's about uh
Speaker 1: two years since our last interview, UM, I jumped at
Speaker 1: the opportunity to interview him again. This is a very
Speaker 1: much a business focused conversation. We talked about markets and
Speaker 1: stocks and everything else, and his love of annuities, but
Speaker 1: we also talked about how he built his business. UH,
Speaker 1: and I found that absolutely fascinating and I think you
Speaker 1: will also, So, with no further ado, my conversation with
Speaker 1: Ken Fisher. This is Master's in Business with Barry Ridholtz
Speaker 1: on Boomberg Radio. My special guest today is Ken Fisher. UH.
Speaker 1: He is the founder and chief executive of Fisher Investments,
Speaker 1: which manages just under eighty billion dollars. Ken has been
Speaker 1: named one of the twenty five most influential figures in
Speaker 1: the financial industry. He's the author of a dozen or
Speaker 1: so books, half of which have been New York Times
Speaker 1: best sellers. He was named I Think you were Number
Speaker 1: two twenty five on the Forbes four hundred list. Is that, Uh,
Speaker 1: that's good because normally under two hundreds, No, it doesn't
Speaker 1: count you. You're not even median, really, so median meet medians,
Speaker 1: you know, two hundreds. So I was always below average. Well,
Speaker 1: Ken Fisher, welcome back to Bloomberg, you know, and and
Speaker 1: and it's tough to be above average. It is tough
Speaker 1: to be above everybody in money matter. So let's jump
Speaker 1: right into the concept of building a business based on
Speaker 1: the dying art of stock picking. And the first question
Speaker 1: is is it truly a dying art? You know, I
Speaker 1: think stock picking was always very tough. I don't think
Speaker 1: it's any tougher than it ever was. I think there's
Speaker 1: more light being shown on that. Now. That's a really
Speaker 1: interesting fact is that when I was young, a long
Speaker 1: time ago, there was very little, uh sort of data analytics. Uh,
Speaker 1: there was very just think a computerization and all those
Speaker 1: features on how primitive that was in that world then.
Speaker 1: And the I was at an event yesterday and John
Speaker 1: Bogo was speaking, and he was making the point that
Speaker 1: he had actually done analytical work in nineteen sixty one
Speaker 1: showing that average on average active investors lagged uh the market.
Speaker 1: And yet while you could do that analytical work in
Speaker 1: nineteen sixty one. Uh, the public perception of it really
Speaker 1: didn't much exist for a very very long time. And
Speaker 1: he talked to some length about how agonizingly slow that
Speaker 1: was for him. Uh. And yet often things that change
Speaker 1: in the world change like that, where for a long
Speaker 1: time they go nowhere fast and then lowly they start
Speaker 1: getting traction and continue. Um. I don't think countered at
Speaker 1: some people's perception because passive is all the rage right now.
Speaker 1: I don't think active ever disappears. Um. But stock picking
Speaker 1: an active management have always been tough to do and
Speaker 1: succeed at. So a couple of I'm hearing a couple
Speaker 1: of things. First, the analytics are much more readily available
Speaker 1: to anybody who wants to sit down at at Google
Speaker 1: Finance or Bloomberg Terminal and look at the numbers. But
Speaker 1: then you mentioned Jack Boglane. They didn't launch their index
Speaker 1: funds till seventy four, and he describes it as a
Speaker 1: colossal failure at first, that the five years, five years
Speaker 1: of failure, right just did nothing attracted almost no ask
Speaker 1: no I remember that world. I mean, I was, you know,
Speaker 1: I was in this realm of endeavor in those days.
Speaker 1: And I remember that world at the time, and of
Speaker 1: course you know the big cahuna and mutual funds at
Speaker 1: the time with Dreyfuss and uh, yet the war was
Speaker 1: for it different. And I also remember that in those days,
Speaker 1: you know, Forbes big annual issue was its mutual fund special,
Speaker 1: and the mutual fund special had I'm not talking about
Speaker 1: a couple of hundred fund families. They had a couple
Speaker 1: of hundred funds in the mutual fund special because there
Speaker 1: weren't that many mutual funds in the world a where
Speaker 1: there are today. All of this evolution is a slow
Speaker 1: evolution and that's not abnormal that that's that's fascinating the
Speaker 1: fifty five years later. You know the old joke isn't
Speaker 1: only takes only takes a decade to be an overnight sensation. Um,
Speaker 1: so you've built a huge r I A based on
Speaker 1: what I have to think is a somewhat different process
Speaker 1: than many of the larger asset managers build. What what
Speaker 1: makes the ken Fisher approach so unique? When I was young,
Speaker 1: I became very enamored early, very early on in nineteen
Speaker 1: with New Course Steel and New Course Steel New Ork operation,
Speaker 1: the steal manufacturer when it was just starting into steal
Speaker 1: ken Iverson. I came by coincidence to get to know
Speaker 1: and I was very impressed by what he was doing.
Speaker 1: And uh, he taught me that steel production was a
Speaker 1: function of multiple compound yields and if you could keep
Speaker 1: you didn't have to be the best in any one
Speaker 1: of them. You had to have the best combination of
Speaker 1: all of them. And then sounds like a portfolio. Then
Speaker 1: when I studied IBM, I saw that they never ever
Speaker 1: had the best computer. They always had a very good computer,
Speaker 1: but they never ever the best one. But if you
Speaker 1: took all of the pieces of what they did sales
Speaker 1: serve us, all of the pieces together they compounded to
Speaker 1: the best totality for the customer. And what I would
Speaker 1: like to think is that we from the beginning started
Speaker 1: thinking about all of those pieces. So, you know, people
Speaker 1: tend to think of us in terms of our advertising
Speaker 1: because that's what they see. That's a really wrong notion.
Speaker 1: We do a lot of advertising, that's true, but we're
Speaker 1: not actually very good at it as nearly as good
Speaker 1: as I'd like to be. We, on the other and
Speaker 1: are exceptional at service. And people don't have a most
Speaker 1: people in the world don't have a clue about our
Speaker 1: service capabilities. We do all kinds of things in service
Speaker 1: other people don't do, and then we have a good
Speaker 1: give me for instance, or is that like the secret
Speaker 1: source that secrets you know? We We have an elaborate
Speaker 1: array across the English speaking world of UM a variety
Speaker 1: of forms of client only seminars. These are not sales seminars.
Speaker 1: These service seminars for clients and their families that come
Speaker 1: in different types because different people receive information differently, and
Speaker 1: they range from very large ones with five people at
Speaker 1: a crack run by senior people at the firm, providing
Speaker 1: hours literally hours of both couple hours of presentation of
Speaker 1: detailed information as to how we're seeing things and why
Speaker 1: we're thinking this and why we're not thinking that, etcetera, etcetera,
Speaker 1: which include an education component all along with DNA, followed
Speaker 1: by a couple of hours of Q and A now
Speaker 1: all the way down to tiny little events run by
Speaker 1: people who are MN I see tiny little ten twelve people,
Speaker 1: ten TOLF customers and with technical answers being only answering questions.
Speaker 1: Two events that we do to nobody else in the
Speaker 1: world would do where we put you know, twelve twenty
Speaker 1: clients together for a lunch and there's nobody from Fisher
Speaker 1: there at all, and we let them talk about whatever
Speaker 1: they want to talk about, so they can talk about
Speaker 1: us behind their back. Because for a lot of people,
Speaker 1: actually that's the proof of the pudding is being able
Speaker 1: to talk about their advisor behind their back and know
Speaker 1: that the advisor trusts them enough to do that. Therefore
Speaker 1: they have an increased trust level in the advisor. I'm
Speaker 1: Barry Ridhults. You're listening to Masters in Business on Bloomberg Radio.
Speaker 1: My special guest today is Ken Fisher of Fisher Investments,
Speaker 1: a firm that manages just about eighty billion dollars in assets.
Speaker 1: Let's talk a little bit about where we are today
Speaker 1: in the world. It's seventeen for those you listening to
Speaker 1: this far off in the future. Valuations in the US
Speaker 1: have been called high. Interest rates are low, there's not
Speaker 1: a whole lot of inflation, and the Fed has said
Speaker 1: that they're starting a series of rate hikes to normalize
Speaker 1: interest rates. First question is how unusual a set of
Speaker 1: circumstances is the stock market in today? UM I would
Speaker 1: say that the stock market is in its um usual
Speaker 1: unique position. The stock market I went to wait, wait,
Speaker 1: before you go forward, I have to put that in quotes,
Speaker 1: usual unique position. Yeah, the stock market is always full
Speaker 1: of what appears to be morphing into different unique things.
Speaker 1: People are almost always to my opic about the features
Speaker 1: that we confront today that always seem to be so
Speaker 1: different and so unique and so unusual, and in retrospect
Speaker 1: appear not to be when I say retrospect, far retrospect,
Speaker 1: and um, all of the things that you said are
Speaker 1: quite literally correct. Uh, but I don't think that has
Speaker 1: much to do with real fundamentals. So how do the
Speaker 1: fundamentals look here? What do you see at this point
Speaker 1: in in the market cycle. Valuations are high because interest
Speaker 1: rates are low. Uh, they of course important interest rate
Speaker 1: that really matters is the long rate, not the short
Speaker 1: rate so much. And uh, you know, people have been
Speaker 1: forecasting long rates to rise for a long time, and
Speaker 1: they've always been wrong, and they'll be wrong again this year.
Speaker 1: And uh, I mean you can just kind of count
Speaker 1: on them being wrong every ry, you know, every once
Speaker 1: in a while they get to be right for a
Speaker 1: little while before they end up being wrong. But the
Speaker 1: consensus has to be wrong, because that's the market pre
Speaker 1: pricing all widely known information. That's what capital markets theory
Speaker 1: says markets do for a living, and they do it
Speaker 1: pretty well, not perfectly, but pretty well. So valuations in
Speaker 1: the US are stretched. What about I don't think though
Speaker 1: you don't think so. I think valuations are if you
Speaker 1: think of pees. For first of all, I'm getting ready
Speaker 1: for that. He ees have never been predictive, for sure.
Speaker 1: And uh, the Schiller cape pe folk always talk about
Speaker 1: that it's really only intended for ten years down the road,
Speaker 1: but then they apply it almost always to next month.
Speaker 1: And the fact of the matter is that the Schiller
Speaker 1: kpe P has been wrong so long, so many times
Speaker 1: that anyone should know not to use it for any
Speaker 1: kind of even intermediate term timing, and yet people forget that.
Speaker 1: I keep let's stay with k SEK. I totally agree
Speaker 1: with you. I think going back to CAPE has been
Speaker 1: above its long term average for the time. However, as
Speaker 1: Bob Shiller would say, when you buy, if you take
Speaker 1: the average CAPE at fifteen or sixteen, if you're buying
Speaker 1: stocks when you're at above average valuations, your forward expected
Speaker 1: return should be below average. And when you're buying Cape
Speaker 1: at below average PE, your forward expectations should be above average.
Speaker 1: Is that a fair statement the professor makes or do
Speaker 1: you disregard that? I think it totally ignores behavioral realities
Speaker 1: of what humans are. Uh. What the way humans are
Speaker 1: is that if the next ten years are going to
Speaker 1: be lousy, but the next five years are going to
Speaker 1: be great, Uh, people are gonna lose their mind before
Speaker 1: the next five years are over, and then they'll lose
Speaker 1: their mind differently five years after them. Okay, and that's fair.
Speaker 1: And the fact of the matter is that, uh, the
Speaker 1: CAPE has never been good at short term timing, and
Speaker 1: therefore that should have nothing to do with what your
Speaker 1: short term expectations are. And the reality is that a little,
Speaker 1: as I was saying before, if we could say with certainty,
Speaker 1: which of course we cannot, that the market was going
Speaker 1: to be great for the next three or four years,
Speaker 1: people would want to be in it. And the notion
Speaker 1: that I'm going to stay out of the market for
Speaker 1: three or four years while it does rate, or be
Speaker 1: out of the market for three or four years while
Speaker 1: it does great, or suffer three or four years of
Speaker 1: terrible nous. Look at the people that became Perma Bears
Speaker 1: after two thousand seven nine and got totally whips odd
Speaker 1: and in record all the time. I got out No. Eight,
Speaker 1: but I thought people crazy jumping back in in March
Speaker 1: O nine. And I've said on the sidelines for seven
Speaker 1: years that is not a rare state. No, it's it's
Speaker 1: it's more common than not. It's what behavioralism says, people.
Speaker 1: Do you know? So again, I was in the earlier
Speaker 1: segment I mentioned listening to John Bogo yesterday, and I
Speaker 1: admire the man greatly, but he said some things are
Speaker 1: just wrong, such as, uh, well, the first part of
Speaker 1: what he said here was right. He said that one
Speaker 1: of the things that slowed down the growth of passive
Speaker 1: was that the eighties and nineties or two decades back
Speaker 1: to back, with seventeen percent average annuals five hundred returns.
Speaker 1: That seems reasonable, and that's true. And then he said,
Speaker 1: and uh, the average mutual fund did a couple of
Speaker 1: percent worse than the equity mutual fund did a couple
Speaker 1: of percent worse. Not got about fifteen. And he said,
Speaker 1: since investor sounds probable, Yeah, he said, so, since investors
Speaker 1: were getting fifteen, they didn't really care. So much about
Speaker 1: relative returns because the high absolute returns and made him happy.
Speaker 1: All that sounds plausible, but the reality is that that's wrong.
Speaker 1: The reality is they didn't get anything light close to
Speaker 1: fifteen percent because as all the behavioral studies show people
Speaker 1: in and out of all the wrong times and they
Speaker 1: typically get about half the return of the equity funds
Speaker 1: because they end owed him at all the wrong time.
Speaker 1: The dl BAR studies shows people underperform their own investments,
Speaker 1: which on the surface sounds ridiculous, but for your reasons,
Speaker 1: it's normal for behavioral purposes. And so in reality, what
Speaker 1: he said that was wrong is that in that period
Speaker 1: people didn't get returns like our returns to look more
Speaker 1: like seven and they actually switched quite a lot from
Speaker 1: this to that and chase things. And in the mid
Speaker 1: nineties and nine, four and five, before the market took off,
Speaker 1: they get terribly desponded. And it was all that period
Speaker 1: where you know the uh. In UH two, George rowarka
Speaker 1: Bush is running for reelection and he's saying the recessions
Speaker 1: over and people saying, no, it's not, and Bill Clinton
Speaker 1: saying it's the economy stupid. Well, in retrospective recession, was over.
Speaker 1: That's not the way people felt, and people voted with
Speaker 1: the way they felt. And also they invested the way
Speaker 1: they felt. And that's the problem. People invest the way
Speaker 1: they feel, and the way they feel is almost always
Speaker 1: backward looking, and and they in and out at all
Speaker 1: the wrong times, and that generates much more cost than
Speaker 1: anything else. And there's all these studies going back to
Speaker 1: things like dal Bar that are perverse in that they
Speaker 1: show that things like load mutual funds do worse than
Speaker 1: no load mutual funds. But the people that invest in
Speaker 1: the load mutual funds do better than the people invest
Speaker 1: in the no load mutual funds because they feel trapped
Speaker 1: in them, and they hold them much longer, which is
Speaker 1: very perverse, that is, you know. And then and then
Speaker 1: everybody says, I would never do that, And then of
Speaker 1: course that's true for a very small percentage of the population.
Speaker 1: Most people do that. I saw something very recently, and
Speaker 1: I don't I don't want to cite the wrong them
Speaker 1: that wrote it, but they pointed out the difference between
Speaker 1: soft economic data like sentiment and actual hard and economic
Speaker 1: data like GDP seals, etcetera. And they said the gap
Speaker 1: between the sentiment and the reality is the biggest it's
Speaker 1: been as long as you've been tracking such. So another
Speaker 1: way to say that verry that I've become fond of
Speaker 1: is that economic marginality, as taught by Alfred Marshall, marginality
Speaker 1: has been marginalized. Marginality has been marginalized. Yes, the reality
Speaker 1: of economic marginality is that intuitively, an idiot knows that
Speaker 1: the difference between the viability of a loan for a
Speaker 1: CAPEX project at today's interest rates versus half a point
Speaker 1: higher or lower should be immaterial to whether the CAPEX
Speaker 1: project should go forward or not, because if you can't
Speaker 1: justify the return at a half a point higher or
Speaker 1: lower from where we are today, it's got to be
Speaker 1: a pretty lousy project to begin with. And the fact
Speaker 1: is that it really more about what hasn't been marginalized
Speaker 1: is a shift in animal spirits, which is your sentiment point,
Speaker 1: and we really need to find ourselves in a CAPEX
Speaker 1: sense and in all other ways. Uh, moving toward that
Speaker 1: animal spirit that says I'm not afraid because of agency risk,
Speaker 1: which you know after two thousand nine CEO s were
Speaker 1: hunkered down for for agency purposes. I am optimistic that
Speaker 1: this project will work, and I'm going to invest in
Speaker 1: this project and make this improvement for the benefit of
Speaker 1: my customers and the world. And that's really a sentiment issue.
Speaker 1: It's not really uh, interest rates or a quarter point higher,
Speaker 1: So I'm not going to move forward. I'm very rid Helts.
Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My
Speaker 1: guest today is Ken Fisher. He is the executive chairman
Speaker 1: and co chief investment officer of Fisher Investments, a twenty
Speaker 1: person firm manage in just under eighty billion dollars. He's
Speaker 1: the author of a number of best selling books on
Speaker 1: markets and investing. Let's talk a little bit about an
Speaker 1: insurance product that you're pretty vocal about. I keep reading
Speaker 1: why does Ken Fisher hate annuities? That that's an advertisement
Speaker 1: that I've seen online. Tell us about your views of annuities.
Speaker 1: Let's see. Um, let me just say the simple line,
Speaker 1: I hate annuities. Uh uh so why why do you?
Speaker 1: First of all, let's define annuities. For for most people,
Speaker 1: it's a tax deferred products that is sold by insurance
Speaker 1: breakers with a fairly substantial six eight nine commission up
Speaker 1: front that essentially can do more or more than nine
Speaker 1: percentidden and essentially is a rapper around mutual funds, equities, bonds,
Speaker 1: whatever you want to put in there that you can
Speaker 1: go out and purchase from a broker. That is that
Speaker 1: a fair assessment. Annuities are a lot of different things.
Speaker 1: Annuities are a contract of some type that is very complicated,
Speaker 1: almost always that are almost never really understood by the consumer,
Speaker 1: even though they often think they understand them, and they're
Speaker 1: almost always sold on a misleading basis. When I say that,
Speaker 1: when you actually take the contract and go through it
Speaker 1: with the customer and and then call the insurance the
Speaker 1: number that's associated with the contract, where you get a
Speaker 1: service person, not salesperson, and you say not does this
Speaker 1: mean this? Or does it mean that? And then they
Speaker 1: tell you what it really means. The customer is almost
Speaker 1: always appalled, and they in that regard I say, they're
Speaker 1: always almost always sold on a misleading basis. So you know,
Speaker 1: the sales guy will say something like, well where else
Speaker 1: can you get us guaranteed six percent return? Except for
Speaker 1: that's going to be a return of their cap will
Speaker 1: not a return of not an income return. It's not
Speaker 1: a return like we think of in the investing world.
Speaker 1: It's a return of their capital, which anybody can do
Speaker 1: for themselves just by taking their principle, putting it wherever
Speaker 1: they want, and taking x percent of it out. On
Speaker 1: that basis, you can have a thirty return until you
Speaker 1: run out of money. You just return your capital, right,
Speaker 1: So so what about invested in nothing and have a
Speaker 1: percent return? One of the more interesting aspects of the
Speaker 1: change in fiduciary rules, which is UM at this point,
Speaker 1: I assume everybody knows, but on the off case that
Speaker 1: we're not, people aren't as tracking this as closely as
Speaker 1: we are. Uh. The last administration changed the rule for
Speaker 1: governing retirement plans and that could include four oh one
Speaker 1: ks and four three b s and I risen things
Speaker 1: like that and said that the advisor has to treat
Speaker 1: the client UM has to operate in the client's best interest,
Speaker 1: which the current administration is not sure they want to
Speaker 1: continue that rule. But since the fiduciary rule chains were announced,
Speaker 1: many of the big insurance insurance companies that underwrite annuities
Speaker 1: have seen their sales fall off a cliff, especially with
Speaker 1: people who service four own case and four three b s.
Speaker 1: So what what is your view of the fiduciary rule
Speaker 1: and what that might mean for for annuity sales. I
Speaker 1: think it's a stupid rule with great intent when you
Speaker 1: actually look at the devil in details. Devil in the
Speaker 1: details is that it's largely fraudulent in that. Uh, you
Speaker 1: get the vice exemption best interest contract exemption, which has
Speaker 1: some specific wording that you're allowed to kind of bury
Speaker 1: in a big complicated contract. So the customer, you know,
Speaker 1: it's like sign here, signed there. Uh, you know, I
Speaker 1: got your best interests at heart, but the government makes
Speaker 1: me have you do all this paperwork. So a cleaner,
Speaker 1: simpler best interest client and the sentence would have been
Speaker 1: better a be there's no governmental enforcement of this. What's, however, zero.
Speaker 1: The only company compliance enforcing these sort of things, whether
Speaker 1: the insurance I doubt that they'll even know, they haven't
Speaker 1: known in the past. Thirdly, uh, the only enforcement is
Speaker 1: a claimate's lawyer. This is a This is set up
Speaker 1: for PIABA, the Public Investor's Arbitration Bar Association, of which
Speaker 1: I don't have a problem with PIABA, but the reality
Speaker 1: is it is the only enforcement arm of this. There
Speaker 1: is no part where the government comes in at any
Speaker 1: point in time and says you company X have violated
Speaker 1: the fiduciary standard. Therefore, and therefore we are doing something
Speaker 1: to you that doesn't happen under this law. This law,
Speaker 1: in my opinion, toothless Yes, well, no, no, I wouldn't
Speaker 1: go that far. It's kind of like it's got a
Speaker 1: rotted tooth dangling out the side of an otherwise empty mouth,
Speaker 1: and that rotted tooth is the is the claimate's bar.
Speaker 1: When this was announced, we saw a ton of motion
Speaker 1: from everyone from Bank America, Mery Lynch down to small
Speaker 1: one person's shops and having to adjust to the change
Speaker 1: in advisories because I don't think they actually understand. I
Speaker 1: think you'll which you'll see if it goes forward, is
Speaker 1: them moving that way at first and then slowly backsliding
Speaker 1: into what they've traditionally done, which is to do a
Speaker 1: word that's otherwise profane on the radio to their customers. Okay,
Speaker 1: I'm sure that that won't make it through the sensors,
Speaker 1: But let me ask you one more things backwardly, I mean,
Speaker 1: people have done things backwardly forever. Get these sensors to
Speaker 1: lighten up a little bit. So what do you do
Speaker 1: when a new prospective client comes to Fisher Investments and
Speaker 1: you're looking at their portfolio and you say, what is this, Oh,
Speaker 1: that's an annuity I bought some years ago. Are you
Speaker 1: just stuck with that? Or can you work your way
Speaker 1: out of that without it being an egregious problem for
Speaker 1: the investor. Again, an annuity is a specific contract, so
Speaker 1: they're not a blanket rule. You can say, but all
Speaker 1: annuities but blanket ruletor can say is that we have
Speaker 1: our people who are specialized in this, So we'll look
Speaker 1: at that contract to take the customer and call the
Speaker 1: number associated with that, go through it with the clients
Speaker 1: so they really understand what the contract is, and if
Speaker 1: they want to get out, we will pay the fee
Speaker 1: that's the penalty fee to get them out under certain circumstances,
Speaker 1: which they then amortize rolling forward against their costs of
Speaker 1: being a client with us, and the I think we're
Speaker 1: the only people in the world to do that. What
Speaker 1: we do is perfectly legal, and it's legal in all
Speaker 1: fifty stage. Well, there's a lot of annuity sales people
Speaker 1: that don't think it should be legal. We actually get
Speaker 1: questions periodically from UH state insurance commissioners that don't actually
Speaker 1: understand what we do, and they say, how can you
Speaker 1: be doing this? Know? How can how can? We don't
Speaker 1: say things like that to them, but they say, you know,
Speaker 1: how can you be doing this in our state? And
Speaker 1: then we explain it to them and then they say okay, Um,
Speaker 1: but they don't out at first because they don't really
Speaker 1: know what we're doing. And until they know what they're doing,
Speaker 1: why why wouldn't they want to ask? And uh? Then Um.
Speaker 1: The reality is that, as I said earlier, it is
Speaker 1: almost never true that these people customers really understand what
Speaker 1: the annuity contract does correctly, and they're almost always appalled
Speaker 1: when they truly find out. And while there are exceptions
Speaker 1: to that, they're rare and um, and I'm delighted for
Speaker 1: the exceptions, but almost always, whatever it was they thought
Speaker 1: they were going to do with the annuity, there's a
Speaker 1: better way to do by owning principal underlying securities. Let's
Speaker 1: do that a different way. Fundamentally, what the insurance company
Speaker 1: does is takes the money, invest in a bunch of
Speaker 1: securities with a lot of fees put on top, and
Speaker 1: somehow you're supposed to get this magical, spectacular return. Well,
Speaker 1: if that's the case, why aren't these the greatest active
Speaker 1: managers in the world, and why haven't they actually come
Speaker 1: to take all of the business to pass. It does
Speaker 1: away from all the passive people because they're so great
Speaker 1: at doing this stuff that they can put these complicated,
Speaker 1: big fees on doing the same things that other people
Speaker 1: would do. The fact is that's all nonsense. The fact
Speaker 1: of the matter is they buy principle underlying securities. The
Speaker 1: people can accomplish the same end result if done correctly
Speaker 1: with principal underlying security, and have it be much cheaper.
Speaker 1: I'm very rid Halts. You're listening to Masters in Business
Speaker 1: on Bloomberg Radio. My special guest today is Ken Fisher.
Speaker 1: He is an author, raconteur, preserver of redwood forests, and
Speaker 1: perhaps most famously, a well regarded stock picker. Tell us
Speaker 1: about the process that you use to select stocks. It's
Speaker 1: called lousy. Um. I'm not really a good stock picker,
Speaker 1: so I thought of as a stock picker in some ways,
Speaker 1: but I'm really not. What I'm good at doing is
Speaker 1: sort of like somebody that goes fishing, and I figure
Speaker 1: out a good pond of fishing, as opposed to act
Speaker 1: actually being good at getting the fish specifically. So if
Speaker 1: you can pick the right pond to fishing, it helps
Speaker 1: a lot. That's half the battle, isn't it. Uh So
Speaker 1: I would describe myself as a top down guy, not
Speaker 1: a bottom up guy. And most of the world kind
Speaker 1: of sees itself at bottom up. Explain the difference between
Speaker 1: the two four people who may not be uh insiders
Speaker 1: understanding that. So the way the way I would start
Speaker 1: looking at the world is I would say I'm managing
Speaker 1: against this part of the world here and get geographically
Speaker 1: or BBSMP five could be the world could be, if
Speaker 1: could be what you picked the benchmark, and then I
Speaker 1: say it's made up of this stuff in these proportions.
Speaker 1: And then I think these are the parts of the
Speaker 1: world in those proportions that would do better or worse.
Speaker 1: And I'm gonna want to overweight here and underweight there,
Speaker 1: and that would be both by things like geography, but
Speaker 1: also things like sector and things like size and things
Speaker 1: like valuation. I'm not a constant guy to want to
Speaker 1: be a value guy or a constant guy to want
Speaker 1: to be a growth guy, because sometimes the one does
Speaker 1: better and the others on smalltock to better, big stock
Speaker 1: to better, sometimes foreign stocks to better, sometimes US stocks
Speaker 1: do better, on and on and on, and so I
Speaker 1: winnow that down and that leads me to what I
Speaker 1: was earlier kind of referring to as the ponds you
Speaker 1: want to be in. And then I say, so, now
Speaker 1: I need to own if I'm going to be overweight
Speaker 1: to this and underweight to that and this and that,
Speaker 1: then I need to own, you know, five out of
Speaker 1: these seventeen. And then I'm going to look at those
Speaker 1: seventeen and I need to own three of these twenty
Speaker 1: and and that's where the stock picking comes. It's extracting.
Speaker 1: The actual stock picking is extracting those from the ones
Speaker 1: that fit the criteria. But by the time you get
Speaker 1: down to selecting individual stocks, you've already made a number
Speaker 1: of decisions in terms of valuation, capitalization, location, sector, et ceteras,
Speaker 1: your allocation decisions. It's almost the individual stock is almost irrelevant,
Speaker 1: and not completely, but it's a it's it comes towards
Speaker 1: the end of the process, and then that decision comes
Speaker 1: to where I'm prepared to throw out some of the
Speaker 1: baby with the bathwater. So I look at the at
Speaker 1: the at the at the universe of those and then
Speaker 1: I say, okay, I want to throw out the ones
Speaker 1: that have like funny accounting, because I always distrust funny.
Speaker 1: It's true, Uh that doesn't always mean that they're bad,
Speaker 1: but it means they're different, and I want the category.
Speaker 1: So if they do things, if they're weird for the category,
Speaker 1: I'm going to throw them out too. They might be
Speaker 1: exceptionally good, but I'm prepared to throw out exceptionally good.
Speaker 1: Funny accounting always means increased risk of something untoward happen.
Speaker 1: But it's not just funny accounting. That's right, but it's
Speaker 1: not just that. It's also if it's in a sector,
Speaker 1: but it doesn't really seem like it's the sector, and
Speaker 1: it doesn't act like the sector. I want that quality,
Speaker 1: so so I throw a bunch out. And then I
Speaker 1: look among the others for what I call competitive advantages,
Speaker 1: and competitive advantages of things like low cost production, high
Speaker 1: relative market share, uh superior distribution system. And then I
Speaker 1: look to see as the management awhere truly of their
Speaker 1: relative competitive position, and are they doing things to try
Speaker 1: to maximize that? And I am a fan of uh
Speaker 1: Mr Buffett's line that you know when and I'm not
Speaker 1: sure that I'm paraphrasing him perfectly, but that when a
Speaker 1: bad management meets a great business model or vice versa,
Speaker 1: it's a management reputation. It's likely to change, not the
Speaker 1: business great. Great businessmen don't usually turn allousy business into
Speaker 1: a great one. It could happen, but it's not the
Speaker 1: usual thing. And lousy businessmen don't usually destroy a great
Speaker 1: business model. Um, it does happen, but it's not the usual. Usually,
Speaker 1: if lousy businessmen become the head of a great business model,
Speaker 1: they've become seen as great soon. Um And uh so
Speaker 1: I'm really looking for those attributes. And then it finally
Speaker 1: comes the valuation feature. Last. I've never been a believer
Speaker 1: that valuations are predictive of much of anything. Uh And
Speaker 1: there's a time and fact where I want high valuations
Speaker 1: because that's the time where people are paying up for equality,
Speaker 1: for perception. That that's the ninth nineties verses the nineteen
Speaker 1: seventies at last year, okay, and last year. Well, I
Speaker 1: use the nineties as an example. Expensive stocks became more
Speaker 1: expensive and you had great returns. In the seventies stocks
Speaker 1: were cheap and they got a whole lot cheaper. So
Speaker 1: so a standard thing that happens. You know, one of
Speaker 1: the things that's important in thinking about the market in
Speaker 1: general is you know, people say, and it's not true
Speaker 1: that markets hate uncertainty. What markets hate is rising uncertainty.
Speaker 1: Markets like high levels of uncertainty that are falling. If
Speaker 1: you've got high levels of uncertainty that are falling, you're
Speaker 1: moving to lower levels of uncertainty, and markets like that
Speaker 1: a lot. So when that happens, and you give me
Speaker 1: it for instance, on that, I have to wrap my
Speaker 1: head around that. When when do we have high levels
Speaker 1: of uncertainty for a falling Last year, it's a perfect example.
Speaker 1: At the beginning of the year, you've got sixteen Republicans
Speaker 1: running for president. Nobody knows who's gonna nomine you're gonna be.
Speaker 1: You've got five people running on the Democratic side. Most
Speaker 1: people think Hillary Clinton will be the nominee. Then you
Speaker 1: don't know which one of those will win. You got
Speaker 1: a Brickxit out coming up. Nobody knows what will happen,
Speaker 1: but it scared people a lot. There was a lot
Speaker 1: of the beginning of the year with the correction that occurred,
Speaker 1: a lot of fears about China implosion. You go on
Speaker 1: and on with uncertain the beginning of last year. By
Speaker 1: the time you get to the end of last year,
Speaker 1: all that's gone away. We got a winner, well, but
Speaker 1: you have that the political uncertain who goes away, but
Speaker 1: you still have completely but it falls, it falls. Isn't
Speaker 1: the way completely? When Mr Trump gets elected, we still
Speaker 1: have but it's less than we had before. Is there
Speaker 1: going to be a trade war? Is there gonna be
Speaker 1: the what's gonna happen to the dollar? Are we going
Speaker 1: to have still in a process of falling uncertainty? And
Speaker 1: I don't want to get into, you know, fighting about
Speaker 1: right now, but but we've gone through a period of
Speaker 1: falling uncertainty and we're going to continue this year into
Speaker 1: more falling uncertainty, and that's why we have a bull market.
Speaker 1: But in that as you have falling uncertainty, you typically
Speaker 1: extend forecasts further out into the future. And as you
Speaker 1: extend those forecasts further out of the future, people become
Speaker 1: more growth oriented. Huh, that's interesting. Let's let's let me
Speaker 1: shift gears you a little bit. We keep reading that
Speaker 1: private companies want to stay private for longer, and if
Speaker 1: you look at the universe, at least in the US
Speaker 1: of number of public companies. There were seven thousand companies
Speaker 1: that were publicly traded twenty years ago. Now that's down
Speaker 1: to four thousand. The joke is the Wilshire five thousand
Speaker 1: is now I think thirty seven hundreds something like that.
Speaker 1: What does this mean for the process of stock selection?
Speaker 1: What does this mean? What does this say about the
Speaker 1: environment publicly traded companies find themselves in? Well, I think
Speaker 1: the tour are somewhat separate issues. The thinking of it
Speaker 1: from the public company's viewpoint. Uh Sarbanes Oxley increased the
Speaker 1: costs for small companies going public. The I p O
Speaker 1: market is not been buoyant because, you know, in the
Speaker 1: John Templeton phraseology, bowl markets are born on pessimism, growing skepticism,
Speaker 1: ature and optimism and die of euphoria. And we clearly
Speaker 1: have had a very long bowl market. That's been what
Speaker 1: I've referred to for a long time is the most
Speaker 1: joyless bowl market in history, because we haven't had those
Speaker 1: multiple years of very high end That's a great phrase.
Speaker 1: The most joyless bowl market I've been calling Jos, I've
Speaker 1: been calling it the most hated bowl market. But joy
Speaker 1: less is a different components. It's clearly been a bowl market.
Speaker 1: It's clearly been long, and it's been joyless. And what
Speaker 1: that means is we haven't gotten to the exuberance part.
Speaker 1: And it's usually in that optimism transitioning to exuberance that
Speaker 1: you get high levels of I p O. You know,
Speaker 1: in my book, I wrote a lot about how I
Speaker 1: p O means it's probably overpriced. And the fact of
Speaker 1: the matter is that I p O s are done
Speaker 1: at the pricing benefit of the company. A'ssure not pricing
Speaker 1: benefit of the consumers. And so in the process of
Speaker 1: this we haven't really gotten to that phase. Regulatory costs
Speaker 1: are higher because of our bins Oxley. The public has
Speaker 1: become in the aftermath of two thousand seven nine, often
Speaker 1: critical of things that relate to public companies in terms
Speaker 1: of attacking people. People don't like to in management executives.
Speaker 1: People don't like to be attacked. Uh, And so you say,
Speaker 1: why do I want to do that? And then there's
Speaker 1: actually lots of what are thought of as alternative lending
Speaker 1: practices now that allow people to borrow money at what
Speaker 1: to Again, going back to my point about the traditional
Speaker 1: Alfred Martial concept of economic marginality, has been marginalized. The
Speaker 1: fact is paying up a little bit in the private
Speaker 1: market for loan market is actually cheap compared to equity
Speaker 1: capital today on an after tax basis. So you know,
Speaker 1: going back to the so called infamous Fed model and
Speaker 1: forget about the treasury rate, but think about corporate rates
Speaker 1: and think about tax rates and adjust them. It's actually
Speaker 1: much cheaper and better for the company on average, unless
Speaker 1: you're thought of as a very low quality company to
Speaker 1: be borrowing money rather than issuing stock. So staying private
Speaker 1: seems to be a rational decision because why why do
Speaker 1: the other If people want to find your works, where,
Speaker 1: where's best place for them to go to read about
Speaker 1: some of your views, commentary and everything. Well, hey, I
Speaker 1: still write a monthly column as they have for four
Speaker 1: years at Financial Times, and you can go to their website. Uh,
Speaker 1: my older stuff is you know, all on Forbes still
Speaker 1: uh I uh, right around in other places, and I'm
Speaker 1: hoping to find a new home post Forbes in America
Speaker 1: for things that aren't the Financial Times. I love the
Speaker 1: Financial Times. It's a great publication and I encourage anybody
Speaker 1: to read the Financial Times because it really is the
Speaker 1: global business newspaper. It's the Global business newspaper. And if
Speaker 1: you don't think global in this era, you're actually parking
Speaker 1: up the wrong tree. I just want to take a
Speaker 1: second ago off on a tangent America lad the market
Speaker 1: for years and years now, and I believe that this
Speaker 1: is the year where foreign takes over in US lags
Speaker 1: and that that accelerates in the back half of this year.
Speaker 1: And I might be wrong about that, but it will
Speaker 1: happen at some point if I'm wrong about it now.
Speaker 1: And the folks that and I don't have a problem
Speaker 1: with passiveness, but the folks that are passive with us
Speaker 1: only better be prepared than to be in a three
Speaker 1: four year period where they're not actually getting what they
Speaker 1: think of is as well as the other stuff. And
Speaker 1: if in fact you want to be passive, you have
Speaker 1: to come to a self searching argument. When that moment occurs,
Speaker 1: do you switch to a passive vehicle that gives you
Speaker 1: more foreign exposure? And if you do that, is that
Speaker 1: a passive decision or is that an active decision using
Speaker 1: passive vehicles both? You know, if I'm doing this off
Speaker 1: the top of my head by memory, but I want
Speaker 1: to say the ten year return for the SMP is
Speaker 1: about and the ten year return for take Europe is flat,
Speaker 1: and that assumes dividends reinvesting. I don't know if we've
Speaker 1: had that big a gap for that long period. Yes
Speaker 1: we have, we have, But let me just say that
Speaker 1: in the long term, and this is so basic that
Speaker 1: people can't get it. In the long term, pricing controlled
Speaker 1: by shifts in the supply of securities, not demand. Demand
Speaker 1: doesn't fluctuate by as big a bandwidth the supply can,
Speaker 1: because supply is created a destroyed by shifts and paper product.
Speaker 1: And if you've got the right economics and a little
Speaker 1: bit of regulatory costs, you can overwhelm any level of demand.
Speaker 1: And in the long term you will. In the short
Speaker 1: term you won't. And in that uh, in the long
Speaker 1: term it is axiomatical with a very long history that
Speaker 1: shows that US and form returns end up eventually in
Speaker 1: the same place. They just do it in wildly varying cycles,
Speaker 1: and one leads for a long time, then the other
Speaker 1: catches up, then the other takes over, and it is
Speaker 1: axiomatic that eventually foreign catches up with US, and so
Speaker 1: then you can debate when. But the point is that
Speaker 1: the passive investor that's gone US only has to be
Speaker 1: prepared for long periods where US under So if you're
Speaker 1: a passive investor, you would advocate being a global Yes,
Speaker 1: I believe that in this era if you do not,
Speaker 1: no matter what your tactics are going to be, if
Speaker 1: you don't think globally, you know there's quite a lot.
Speaker 1: I don't have any political arguments, but the politics, I
Speaker 1: mean I study politics about how many political arguments that
Speaker 1: I'm passionate about in terms of making. But the populism
Speaker 1: movement is a nationalistic movement wherever it exists. But that
Speaker 1: doesn't mean you shouldn't also be thinking global at the
Speaker 1: same time. Makes sense. We have been speaking with Ken Fisher.
Speaker 1: He is the co c I O and executive chairman
Speaker 1: of Fisher Investments. Be sure and stick around for a
Speaker 1: podcast extras where we keep the tape rolling and continue
Speaker 1: to talk about all things investing. Check out my daily
Speaker 1: column on Bloomberg View dot com or you can follow
Speaker 1: me on Twitter at rit Halts. I'm Barry Rihults. You're
Speaker 1: listening to Masters in Business on Bloomberg Radio. What could
Speaker 1: your future hold? More than you think? Because at Merrill
Speaker 1: Lynch we work with you to create a strategy built
Speaker 1: around your priorities. Visit mL dot com and learn more
Speaker 1: about Mery Lynch. An affiliated Bank of America, Mary Lynch
Speaker 1: makes available products and services offered by Merrill Lynch Pierce
Speaker 1: Federan Smith, Incorporated, Register Broker Dealer. Remember s I PC Ken,
Speaker 1: Thank you so much for doing this. This is it's
Speaker 1: always fascinating to to speak with you, and my pleasure
Speaker 1: bearer is always fun to speak with you. And I, uh,
Speaker 1: there's so much stuff we didn't get to. I wanna.
Speaker 1: I want to continue discussing for for people who are
Speaker 1: listening at home who either I have heard of Ken
Speaker 1: Fisher or have seen his advertisements on UM the internet.
Speaker 1: You're fairly ubiquitous. It's it's hard to google anything and
Speaker 1: not see you come up anything related to finance. We
Speaker 1: spend a lot of money advertising, do you We've been
Speaker 1: a lot of money doing a lot of things. People
Speaker 1: see our advertising. I told you that earlier, and they
Speaker 1: think of us in terms of adverting. They just don't
Speaker 1: see all the rest of what we do. So what
Speaker 1: I find fascinating, But by most definitions, over the past
Speaker 1: thirty years thirty plus years, you've built what is essentially
Speaker 1: the largest r I A in in America by any
Speaker 1: standard other than a UM where Financial Engines is bigger,
Speaker 1: but in all other ways than just straight at u M,
Speaker 1: we're bigger than Financial Right and they're really a four
Speaker 1: mostly four one K provider there for a large defined
Speaker 1: contribution plans for very large You're you're a registered investment
Speaker 1: advisory servicing PYE net worth individuals and institutions. How many
Speaker 1: clients do you guys have at this point and employees?
Speaker 1: That sounds like you figured out how to scale something
Speaker 1: that most other people are having a hard time scaling. Well,
Speaker 1: that's I'm unable to speak for most people. But we're
Speaker 1: comfortable with the business we do. I mean, the fact
Speaker 1: of the matter is that we have a very low
Speaker 1: termination rate and basically we have happy clients, and we
Speaker 1: operate in lots of places, and uh, we're not I mean,
Speaker 1: we're as I've said often, we don't have any market share.
Speaker 1: I mean, we're bigger than others, but weren't any market share.
Speaker 1: We're a peanut. Eight billion dollars is not a lot
Speaker 1: of money in a world where there's you know, sixty
Speaker 1: trillion dollars of suggestible assets. What's a couple of billion dollars.
Speaker 1: But that said, within the universe of advisory firms, you're
Speaker 1: essentially the largest. I'm fascinated. I'm fascinated by the business
Speaker 1: side of that and the steps you took when you
Speaker 1: took them to grow that business, because listen, the whole
Speaker 1: world of people in the in finance. This is what
Speaker 1: I think a lot of people don't understand. That guy
Speaker 1: got lucky, he was born on third base. That sort
Speaker 1: of stuff. The universe exists as it as it exists
Speaker 1: at any given moment. You are looking at the world
Speaker 1: of finance at that time and said I think I'm
Speaker 1: gonna do this, this and this, and then thirty years later,
Speaker 1: oh look, we're running eighty billion dollars. That's an amazing
Speaker 1: process to me because everybody is essentially looking at or
Speaker 1: has access to look at the same things, but not
Speaker 1: everybody reaches the same conclusions and executes the same plan
Speaker 1: to go forward. And I'm just fascinated by how you've
Speaker 1: accomplished what you've accomplished. It is called masters in business.
Speaker 1: After all. You know, as I told you the last
Speaker 1: time that I was here with you, I'm a youngest
Speaker 1: brother and My older brothers were by definition older, bigger, stronger.
Speaker 1: Both of them happened to be smarter. And I knew
Speaker 1: when I was a little kid that if I wanted something,
Speaker 1: I couldn't want what they wanted and take them head on.
Speaker 1: It just couldn't work, and so I had to try
Speaker 1: to be This is kind of the beginnings of me
Speaker 1: being what some people might call contrarian. But I had
Speaker 1: to figure out either different things I wanted or going
Speaker 1: about getting them a different way. And that's been true
Speaker 1: for me all of my life. I've always had the
Speaker 1: little brother complex, and the little brother complex from the
Speaker 1: beginning has had me trying to figure out how I
Speaker 1: could get what I wanted in the face of superior competition.
Speaker 1: And there's an abundant amount of big guns out there
Speaker 1: already to shoot. And so then I've also been prepared
Speaker 1: to operate by trial and error and trying this and
Speaker 1: it doesn't work. And you can do a huge amount
Speaker 1: of things on a small scale and testament and see
Speaker 1: if they work, and then if they work, do them
Speaker 1: on a bigger scale, and if they don't work, move
Speaker 1: on to the next one. And so you know, again,
Speaker 1: yesterday when I was here in Town. Investment News was
Speaker 1: giving me this award as one of their inaugural innovation winners.
Speaker 1: And you know, we've just done a lot of things
Speaker 1: that people in our realm of endeavor always thought were
Speaker 1: stuff either you couldn't do or you shouldn't do, not
Speaker 1: that they were illegal. But you know, for example, you
Speaker 1: talk about our advertising, people in our realm of endeavor
Speaker 1: have never advertised the ways we do. We started off
Speaker 1: doing direct mail, and then we moved into direct email,
Speaker 1: and then we moved into Internet banners, and we just
Speaker 1: kept rolling in marketing tests over time, over a long
Speaker 1: period of time. Mind you too, this has now been
Speaker 1: twenty years that we are still doing direct mail. Absolutely
Speaker 1: it's in effective. Yeah, we do it differently than we
Speaker 1: used to, and it's not as effective as it was
Speaker 1: at first, because when we were doing it at first,
Speaker 1: it was like going back to my fishing analogy. The
Speaker 1: first time that you you know, you cast your line
Speaker 1: into a clear pool and there's no fish that have
Speaker 1: been taken out of the pool at all. Your odds
Speaker 1: are greater than after you've taken ten fish out. And
Speaker 1: so but yes, direct marketing works for us, and we
Speaker 1: know more about direct marketing, on the other hand, and
Speaker 1: we did when we started. Uh, you know, we're not
Speaker 1: maestros at this. I disagree. I think you're an evil
Speaker 1: marketing genius. I've described you that, not evil, but a brilliant.
Speaker 1: First of all, if we were competing direct head on
Speaker 1: with Procter and Gamble for their business, we would get
Speaker 1: our clock cleaned. But but you don't know anything about
Speaker 1: selling toothpastes. Don't know. But I don't know anything about
Speaker 1: marketing compared to Procter and Gamble. That's my point. And
Speaker 1: and the fact of matters. Yes, I don't know anything
Speaker 1: about two days. I have used the stuff, but but occasionally,
Speaker 1: but it's every Saturday, whether you need it or not.
Speaker 1: I forget some santacas, I forget. But but but you
Speaker 1: have to admit your approach to marketing to individuals has
Speaker 1: been wildly successful compared in the industry. What we thought
Speaker 1: for a long time was that there was no reason
Speaker 1: you couldn't do these kinds of things in our realm
Speaker 1: of endeavor that other people weren't. But we're doing in
Speaker 1: other realms of endeavor. And what I've tried to do
Speaker 1: a lot in my career is to do things that
Speaker 1: people were doing in other realms of endeavor that they
Speaker 1: weren't in this the forty act advisory world. And uh
Speaker 1: so you know we were early in computerization. Uh. We
Speaker 1: have all kinds of service models that we use that
Speaker 1: other people don't do. Uh, we're very we've customized sales
Speaker 1: and ways that other people haven't give me. For instance,
Speaker 1: by the way, I love the annuity thing. How how
Speaker 1: you buy people out of their contracts? What do you
Speaker 1: do that you need in terms of service that other
Speaker 1: people don't do. So we have a whole series of
Speaker 1: different types and different sizes of customized client only seminar
Speaker 1: and events to communicate to them how we're seeing things
Speaker 1: about various things. And that's because we've learned that different
Speaker 1: people receive information best differently. And so we have a
Speaker 1: huge we we we we have clients at over. We
Speaker 1: have over fifty seven thousand client event contacts a year
Speaker 1: where clients go to events and interact. This is not
Speaker 1: These are not sales events. These are service events where
Speaker 1: clients go to these events of different types all around
Speaker 1: the English speaking world and a little bit in Germany
Speaker 1: and talk to our people. Some small events, some big events.
Speaker 1: We separate completely sales from service. So our sales people
Speaker 1: do no service. It's completely specialized. We're extreme and specialization
Speaker 1: of labor and we and we have been forever because
Speaker 1: I didn't want the salesperson to be able to do
Speaker 1: post sales service. Because if the sales person um does
Speaker 1: the boom doggle on the sales person on the customer
Speaker 1: and and and and you know, lies and cheets and steals,
Speaker 1: and they do post sales service, they can keep it
Speaker 1: keep someone else. Second, we want a prophylactic protection at
Speaker 1: the point of client intake. And so at the point
Speaker 1: the contracts signed, the service people come in take over
Speaker 1: and start all over again, and they don't get commissions.
Speaker 1: So they're sitting there seeing and the sales people know that.
Speaker 1: So the sales people are less prone to want to
Speaker 1: do the U. That makes sense, And you build in
Speaker 1: a structural oversight that's even separate from the compliance department,
Speaker 1: just your process has because it provides a prophylactic protection.
Speaker 1: Uh lie was. Our orientation in general is somewhat different,
Speaker 1: I think than most people because we push very hard
Speaker 1: what we consider to be needs based investing versus what
Speaker 1: we see as goals based investing. And not a financial
Speaker 1: plan or no, no, no. What what I mean is
Speaker 1: an awful lot of people ask client questions like, so,
Speaker 1: what's your risk tolerance? And you know, I did work
Speaker 1: twenty years ago that they can't. It's it's whatever the
Speaker 1: market's doing the past half hour and now, yes, exactly
Speaker 1: if you don't understand that. But but I don't think
Speaker 1: most of the world fully gets that that. It's a
Speaker 1: little like a boxing analogy, where most people haven't haven't
Speaker 1: been hitting the gut hard enough enough times the way
Speaker 1: a good boxer would know how they react when they
Speaker 1: get hitting the gut. The good boxer actually knows what
Speaker 1: is risk tolerance is to a gut punch, but the
Speaker 1: average person doesn't. In the market gives you gut punches
Speaker 1: all the time, and so we focus on needs orientation
Speaker 1: and then adapting the service to whatever that recent thing
Speaker 1: is that's a gut punch to keep the customer going
Speaker 1: to what they need, and what they need is almost
Speaker 1: always a much longer time horizon than they think, because
Speaker 1: unlike prior generations, people are going to live longer than
Speaker 1: they ever have before. They need to stretch their money
Speaker 1: much further than they ever have in the myopic view
Speaker 1: that says, when I'm sixty five, I need to get
Speaker 1: real conservative was perfectly fine in the days that to
Speaker 1: find benefit pension plans were first invented, and people live
Speaker 1: to be sixty five, retired and died at seventy. But
Speaker 1: now you're probably talking on average, and this is not
Speaker 1: what the actual royal tables say. This is what I'm
Speaker 1: telling you. It probably happens on average thirty years. And
Speaker 1: that thirty years, yeah, because people's lives keep getting longer
Speaker 1: in their lives and even more complex. If you make
Speaker 1: it to seventy five, it means you didn't die as
Speaker 1: a teenager. You didn't die and childbirth, you didn't die.
Speaker 1: All these previous windows where whether these big demographic surges
Speaker 1: and the odds are you going to go another x years?
Speaker 1: So ironically to that point, Berry, if you actually look
Speaker 1: at the survivors of the Donner Party, the survivors of
Speaker 1: the Donner Party, who by definition were tougher than the
Speaker 1: non survivors, lived to be really really old, all of
Speaker 1: them because they were just tough. And the fact is
Speaker 1: that longer living leads to longer living. But in this
Speaker 1: day and age, within that longer time period. We have
Speaker 1: all of these advances being made in medicine that push
Speaker 1: our lives longer and longer. When I was young, when
Speaker 1: you were young, senior sports didn't exist when I was
Speaker 1: I just was reading about this ninety year old marathon,
Speaker 1: astonishing because in the old days, a guy got to
Speaker 1: be post retirement age and he sat in a chair
Speaker 1: and of course, and of course women didn't get to
Speaker 1: retirement age, didn't work, and that was just a different world.
Speaker 1: And the world has shifted, and now your time horizon
Speaker 1: post retirement is so much longer, but people haven't emotionally
Speaker 1: learned to adapt to that and plan for that long
Speaker 1: time horizon. That needs to really say, the most brutal
Speaker 1: thing that I can do is run out on money
Speaker 1: when I'm really old, and your poverty is the most
Speaker 1: brutal thing that you could do to something. That is
Speaker 1: the biggest question that you hear from people not in
Speaker 1: their twenties and thirties who have a long enough time
Speaker 1: horizon to save, but in their fifties. Hey, I'm concerned
Speaker 1: I'm going to run out of money when I'm fill
Speaker 1: in the blank. Well, you know, one of the problems
Speaker 1: we've always had in behavioralism is people don't save enough.
Speaker 1: And I'm not going to get on the soapbox about saving.
Speaker 1: People are what people are. But then when they get
Speaker 1: to be retirement age, whatever it is they have, they
Speaker 1: need to plan for a long time. And so if
Speaker 1: that's retirement agent they don't have the money, that means
Speaker 1: they need to find another way to work. Uh and
Speaker 1: uh oh, I'm just gonna get money from this or
Speaker 1: that or the other, social security, what have you. Well,
Speaker 1: if you think you're going to rely on some dependency,
Speaker 1: you've made yourself a depend and and that's a tough
Speaker 1: go to. You know, people get these things wrong, but
Speaker 1: we have a long life. Young people. Young people ought
Speaker 1: to do age appropriate stuff. People always asked, not always
Speaker 1: has me. People often ask me, so, what kind of
Speaker 1: advice would you give to an eighteen year old? And
Speaker 1: my view would be, well, if you're an eighteen year
Speaker 1: old guy, you know what I do. I chase girls.
Speaker 1: And if you're an eighteen year old girl, I'd worry
Speaker 1: about how the guys chase you. And I think that's
Speaker 1: age appropriate. And you know, it's better to be chasing
Speaker 1: girls when you're eighteen than chasing girls when you're a grandpa.
Speaker 1: That's for darn share. And uh. The fact of the
Speaker 1: matter is age appropriate activity is one that people have
Speaker 1: a hard time scoping out correctly. But part of age
Speaker 1: appropriate activity is realizing that you're going to live to
Speaker 1: be much like long, much longer likely than you envision
Speaker 1: that you will. When I was young, I bought a
Speaker 1: term insurance policy, and then I outlived the need of
Speaker 1: the term insurance policy, and it sat in a drawer
Speaker 1: for a long time. When I got to be post fifty,
Speaker 1: I went back and looked at it, and in the
Speaker 1: twenty five five years from fifty, the life expectancy of
Speaker 1: a fifty year old had I looked at the terms
Speaker 1: that went with it, and the life expectancy of the
Speaker 1: fifty year old had grown by seven years. In those
Speaker 1: twenty five years, more or less, I got almost a
Speaker 1: year for every three that I lived, added on to
Speaker 1: what the life expectancy of a fifty year old would be.
Speaker 1: And that process isn't over yet. We're still extending life
Speaker 1: as we know it, and we're also making better quality
Speaker 1: of life later and so all of the features even
Speaker 1: for and again, we've got a lot of clients, we
Speaker 1: hear a lot of stories uh, widows and divorced people
Speaker 1: in older ages trying to figure out things like I'm
Speaker 1: eighty two and my spouse died, and now I want
Speaker 1: to move to be closer to where my grandchildren are,
Speaker 1: and how do I go about finding someplace where I
Speaker 1: can be an active, healthy, eighty two year old because
Speaker 1: I am, Because they've never thought about that before, because
Speaker 1: they were living in the house they were living in.
Speaker 1: They weren't planning to move, they weren't planning to change.
Speaker 1: And activities in your eighties aren't something that anybody ever
Speaker 1: said in school, Oh, here's what you should do when
Speaker 1: you're in your eighties, because we don't have stuff like that.
Speaker 1: So I know I only have you for another fifteen
Speaker 1: minutes or so, is that right? What time are we
Speaker 1: out of here? Twelve thirty one o'clock? As Charlie, I
Speaker 1: think we have to be out of twelve thirty. Um,
Speaker 1: So let me jump into my favorite questions. And there
Speaker 1: are a few I really wanna go over. God, you know,
Speaker 1: there's so many questions we did not get to. You're
Speaker 1: You're easy to talk to when we we you ask
Speaker 1: your question for both is good and he is good.
Speaker 1: On an interview, and I sucked the airspace out of
Speaker 1: the interview. That's right now, you did, not twelve thirty. Alright,
Speaker 1: So I'm gonna I'm gonna go over my five favorite
Speaker 1: UM questions. Tell us about your early mentors. Who are
Speaker 1: the people who influenced the way you looked at the world. Ah, well,
Speaker 1: of course with almost everyone, my mother and my father.
Speaker 1: Uh and your father especially was a famous author and
Speaker 1: uh yeah, But when I was very young, he was
Speaker 1: a father and he was actually marvelous in weird ways.
Speaker 1: He was a weird man. He was on you. When
Speaker 1: I say weird, I mean out the bell curve, and
Speaker 1: he was. He was weird. I don't mean weird as bad,
Speaker 1: I mean weird. And he was statistically unusual. He had
Speaker 1: Asperger's before Aspergers was understood. And on the other hand,
Speaker 1: he was as marvelous bedtime storyteller. And I didn't understand
Speaker 1: at the time that in the bedtime stories he was
Speaker 1: telling me, he was telling me what he wanted me
Speaker 1: to be. Um. I still choke up when I think
Speaker 1: about him what he wanted me to be. When I
Speaker 1: grew up, he was telling me in these fictional stories
Speaker 1: that he made up, what he wanted of me. Was
Speaker 1: he making these stories up, like right off the top
Speaker 1: of his head. I don't know that. I never knew
Speaker 1: if he was making him up off the top of
Speaker 1: his head or if he pre planned them. Uh. And
Speaker 1: they were different every night. Sometimes he told me the
Speaker 1: same stories over and over again because because because those
Speaker 1: were the ones he really wanted to drill into my head.
Speaker 1: And then also my grandfather was terribly important to me.
Speaker 1: I one died before I was born, and if christ
Speaker 1: didn't know him, but my paternal grandfather and I were
Speaker 1: very close and I idolized him and he was He
Speaker 1: was a big influence on my life in other ways,
Speaker 1: in ways of what's good, what's bad, what do you do?
Speaker 1: How do you do things? Uh? He was an important
Speaker 1: role model to me. He was in a lot of ways.
Speaker 1: There was a guy named Clarence Bennett after after my
Speaker 1: grandfather died that became a kind of a substitute grandfather
Speaker 1: for me. He was a former New York life insurance
Speaker 1: guy and he was also a great tree explorer and
Speaker 1: a great and a great explorer. Um he discovered the
Speaker 1: largest and oldest Western juniper in the world. Still famous
Speaker 1: tree that Bennett juniper, and uh, he kind of became
Speaker 1: a very famous tree when when when I became older
Speaker 1: and I got involved in trees, and all my tree
Speaker 1: buddies knew that I had known Clarence Bennett when I
Speaker 1: was young. They were like, whoa, um anyway, um, Now,
Speaker 1: by the way, I have to just stop you and ask.
Speaker 1: So when you say when I became a tree guy,
Speaker 1: let's let's dig into that. You you have committed to
Speaker 1: advancing the world's understanding of redwood forest and the ecology
Speaker 1: they represent. You endowed at Humboldt State University the Ken
Speaker 1: Fisher Redwood Forest Ecology Chair. So that's how you, Bennett,
Speaker 1: is what led you to your interest in redwood forest. No,
Speaker 1: I was already interested in being in the way. When
Speaker 1: I could, I could hop over my parents back fence
Speaker 1: and be out in the woods when I was a
Speaker 1: little boy, and I just loved being in the woods,
Speaker 1: and I loved everything about it. And I already loved that.
Speaker 1: But Clarence Bennett had a huge impact on me. He
Speaker 1: lived not that far away and I could. I worked
Speaker 1: for him when I was a little kid. I mean
Speaker 1: I picked fruit for him and I tended his vegetable
Speaker 1: gardens and he was retired by then, and uh and
Speaker 1: he was a great guy and uh and uh and
Speaker 1: he's influenced me a huge But then I went to
Speaker 1: forestry school at Humble State, and then I decided that
Speaker 1: would be a lousy career, but I maintained it might
Speaker 1: love r us And yes, I've done that. But I also,
Speaker 1: you know, have finance research and Douglas for uh uh
Speaker 1: western spruce, uh western red cedar through Japokata. And I'm
Speaker 1: big on what you would view as the ecology of
Speaker 1: big and tall and old tree species, on the code
Speaker 1: discoverer of the single oldest known uh um uh sequoias
Speaker 1: and provirons extent in the world. What do you wi
Speaker 1: is this in Redwood National Park? What do you make
Speaker 1: of the pushback against and through pogenic global warming? And
Speaker 1: what's going on with e p A today. It looks
Speaker 1: like we're seeing a big shift at the government level
Speaker 1: versus the past eight years. I don't really get into
Speaker 1: all that stuff very much. I can tell you this,
Speaker 1: which nobody wants to believe, um, but I know it's
Speaker 1: true because I've been fundamental to to again most most big,
Speaker 1: most big, tall and old western tree science in recent
Speaker 1: years has been done under my large house, and uh,
Speaker 1: we've done the only long term project on the health
Speaker 1: of redwoods in relation to climate change. And they don't
Speaker 1: give a rats darn. They they just blow off whatever
Speaker 1: climate does that. I don't mean in the short term
Speaker 1: they necessary. You're talking about over thousands. They are so
Speaker 1: adaptive compared to other species that they know how to
Speaker 1: wiggle and give and move to gain competitive advantage against
Speaker 1: other tree species, and trees sort of invest in this
Speaker 1: versus that at a point in time, and they know
Speaker 1: they're more adaptive, Like a simperviruns is a hex eployd.
Speaker 1: It's got a much more complex chromosome makeup than other
Speaker 1: tree species and it just knows how to take advantage
Speaker 1: of the circumstance to it no matter what the circumstances are. Well,
Speaker 1: you drop a nuclear bomb on if that's not going
Speaker 1: to be the climate climate, not whether climate climate. So
Speaker 1: if it's appreciably cooler or possibly warmer, you get drought,
Speaker 1: you get heavy rain, you get warmer, you get colder. Now,
Speaker 1: mind you, that's again shy of like some catastrophe, an
Speaker 1: ice age, normal climate that would include the incremental changes
Speaker 1: that we talk about when we talk about climate change,
Speaker 1: I'm not again talking about you know, some some huge
Speaker 1: asteroid from outer space. It's the world. You know something
Speaker 1: even an ice age when you have glaciers coming south
Speaker 1: off the North Pole. Uh, that that's a once. I
Speaker 1: don't know how how many terms of anything that would
Speaker 1: happen for our grandchildren's lifetimes. Redwoods in terms of nature, Uh,
Speaker 1: not only redwoods. Douglas firs are more adaptive than people
Speaker 1: ever thought. Western red cedars more adaptive than people ever thought.
Speaker 1: These trees got to where they are because of that
Speaker 1: feature through lots of stuff in the past. And in fact,
Speaker 1: redwoods are gaining relative share in forests, to within their landscape,
Speaker 1: to other tree species. In warming climates, redwoods gaining market share.
Speaker 1: Redwoods dominate. So let's talk about you mentioned mentors. What
Speaker 1: investors influenced your approach to to invest in well, in
Speaker 1: a textbook sense, you know, the standards of the past.
Speaker 1: I mean, you know, people like Um Buffett Um, but
Speaker 1: people like Graham Um, my father, John Templeton personally, I
Speaker 1: was a big Templeton fan. I mean he was just
Speaker 1: a marvelous human being. Uh it seems fascinated. Oh no,
Speaker 1: he was a great guy. He was he was his spirituality.
Speaker 1: His spirituality led him to a form of int a
Speaker 1: calmness that's rare, uh in that he would make investment
Speaker 1: decisions without the emotion that so many other people had
Speaker 1: because he was more at peace with himself than most
Speaker 1: people are. That's interesting. And and of course, as we
Speaker 1: all know, most people's emotion as their worst enemy when
Speaker 1: it comes to investing. Uh. You might deal with that
Speaker 1: this way, and you might deal with that that way.
Speaker 1: But he was a very at peace human being. And
Speaker 1: uh so those would be uh the main ones. And uh,
Speaker 1: you know then that's a good run that for Oh, no, no,
Speaker 1: you know, I don't have anything unique. Um, you mentioned textbooks.
Speaker 1: Let's let's talk about books. This is the question people
Speaker 1: ask more than anything else. What are some of your
Speaker 1: favorite books? Well, my alternate favorite book is Hunting with
Speaker 1: Bow and Arrow by Saxton Pope. Pope was a friend
Speaker 1: of my grandfather's and was the father of modern bow hunting.
Speaker 1: And I had different impacts on me because a lot
Speaker 1: of other things that I like in life are sort
Speaker 1: like hunting. Uh. And when I was young, I actually
Speaker 1: was very interested in be hunting. I did be hunting
Speaker 1: when I was young. Um. But I also am a
Speaker 1: big fan of an old book by a guy named
Speaker 1: Frank Hibbin called Hunting American Lions, which is another book
Speaker 1: about chasing stuff, because ultimately, investing is a different form
Speaker 1: of chasing stuff. It's a metaphor. I read it over
Speaker 1: and over and over again. Um. Oh yeah, and you
Speaker 1: know what it's also both of those books are really
Speaker 1: good for grandchildren. Um and uh. Then I like, um,
Speaker 1: and you're not going to find this surprising. An old
Speaker 1: book by guy named Edgar Cherry called uh Redwood and
Speaker 1: California Forests, And there's only thirty seven known copies in
Speaker 1: the world, and I owned three of them. And I'm
Speaker 1: a big fan of that book. But you can you
Speaker 1: can get you can get reproductions of it on Amazon.
Speaker 1: So you can't get the original. No, no, you know,
Speaker 1: if you find one, I probably catch you ten grand
Speaker 1: But um, but if you find one, let me know
Speaker 1: what all by it. I'd corner the market in that book.
Speaker 1: Um uh. And then you know, when investing books, it's
Speaker 1: pretty much just the old standards and all the old standards.
Speaker 1: When I was young, you know, I pretty much read
Speaker 1: all of them. That I could get my hands on,
Speaker 1: ranging from you know, all of the standard names that
Speaker 1: you know, there's none, none of the standards. Give us
Speaker 1: give us one or two plus your plus your dad
Speaker 1: of course, Intelligion Investors, Security Analysis by Graham, those two
Speaker 1: classic gram book, my father's book, you know, Common Stocks
Speaker 1: and in Common Profits, which you know is still a
Speaker 1: great book. You have to take up any of those
Speaker 1: books like that and kind of adapt them in your
Speaker 1: mind for all of the modern technology. Uh, intuitively that's
Speaker 1: people kind of forget that sometimes when they read that stuff.
Speaker 1: Those guys wrote those things without My father operated in
Speaker 1: a world with a hand crank adding machine and a pencil, right, uh,
Speaker 1: and difference then we have a different world. But the
Speaker 1: principles largely apply. If you extract away, how would you
Speaker 1: have done things then with a pencil versus today with
Speaker 1: the computer, Um would be the same. But for example,
Speaker 1: I was always a big fan of of Jerald Lobes books,
Speaker 1: which a lot of people always decried and and and
Speaker 1: I think Jerald Lobe actually had a bigger impact on me.
Speaker 1: My father knew Gerald Lobe pretty well, and he did
Speaker 1: not like Jerald Lobe. But Jerald Lobe was actually Uh.
Speaker 1: Interesting in the Jerald Lobe brought understanding to commonplace investors
Speaker 1: that they did not have before he appeared on the
Speaker 1: on the on the horizon. He was in some ways
Speaker 1: sort of a Jim Cramer of his day. And uh,
Speaker 1: and there's a valuable function in that. The battle for
Speaker 1: investment survivals is the I couldn't pull. That's his iconic
Speaker 1: And then and then and then of course, oh and
Speaker 1: I'm having Uh I used Google. I cheated because I
Speaker 1: was having that same moment. There were all of the
Speaker 1: Adam Smith books. And then uh, there's all of the
Speaker 1: the Great Crash. Uh. And then there's the Hilbrunner books.
Speaker 1: What are the Hilbrunner books, all the economic ones, Robert
Speaker 1: Howe Brunner. Uh. And then of course then forgetting about those,
Speaker 1: you know, must reads are How to Lie with Statistics
Speaker 1: by Darryl Hoff Suh. I mean, if if hey, I
Speaker 1: encourage anybody ever to always take the what I always
Speaker 1: considered the core education classes, you know, which include stat
Speaker 1: core economics. Uh, you know, you're a calculus I mean,
Speaker 1: if you don't understand, if you don't understand marginality, calculus
Speaker 1: will get you to or you understand marginality called Kyle Brunner.
Speaker 1: The one book I know is The Worldly Philosophers, that's
Speaker 1: one of his classics. And the Making of Economic Society.
Speaker 1: So that's what I was gonna about to say, teaching, um,
Speaker 1: the essential Adam Smith, Marxism, for and Against the Making
Speaker 1: of economic society, the Nature and Logic of Capitalism. He
Speaker 1: has a run of great The Human proSP Behind the
Speaker 1: Veil of Economics, Visions of the Future, the Debt and
Speaker 1: the Deficit Force Alarms, and he's got a huge run
Speaker 1: of books, Five Economic Challenges. I didn't realize he was
Speaker 1: that so prolific. Uh. And then uh, um, if you
Speaker 1: can find Angus Black's two books, Angus Black is really
Speaker 1: Roger Lee roy Miller. Um. But Angus Black's two books,
Speaker 1: Radical Guide Economic Reality and The Radical Guide to Environmental Reality. Uh,
Speaker 1: they're actually classics. They're hard to find today. Um. But
Speaker 1: Roger Lee roy Miller is the great economic textbook writer. Uh.
Speaker 1: And I mean I think he the Devil's Covin. No,
Speaker 1: that's a different Angus Black, one less Radical Guide Economic
Speaker 1: Reality and Radicals Guide to Environmental Reality. Angus Black. Yep,
Speaker 1: it does a pen name that he made Uh. He
Speaker 1: was a universe Chicago PhD from the sixties. Uh, was
Speaker 1: a very good communicator. He's still around, he still exists,
Speaker 1: he's well, he's older now. Guide to economic well better
Speaker 1: than the alternately. Yeah, absolutely, A radicals guide to economic
Speaker 1: reality of radicals. Guide to self destruction, a radicals guide.
Speaker 1: So those are the two big ones, self destruction and economics.
Speaker 1: I heard a lecture by him once when I was young,
Speaker 1: and in an hour, he moved me along quite a
Speaker 1: lot in one hour because he was he was a
Speaker 1: great communicator. Uh. I mean I studied a lot of
Speaker 1: economics by the time I heard him, and he was
Speaker 1: kind of like watching all the moving parts work together.
Speaker 1: Suddenly you see the engine working. It just clicks. Yeah. No,
Speaker 1: he's a great communicator. Um and uh. And you know
Speaker 1: you asked me these questions, and there's so much that
Speaker 1: I forget about because it's been a long time. I
Speaker 1: warned people, these are the questions that require recall. Well,
Speaker 1: you know, the older you get, the more I worry
Speaker 1: about do I have dementia? And uh And that started
Speaker 1: around fifty. But I used to have an encyclopedic memory
Speaker 1: of album names, songs, and now I can't remember I
Speaker 1: left the encyclopedia. It's just it's just so, my wife
Speaker 1: likes to say. Well, at a certain point, your head
Speaker 1: gets filled up with enough facts that if you want
Speaker 1: to enter a new one, you gotta lose an old one.
Speaker 1: So UM, let me get to my last few questions
Speaker 1: before they come kick us out of here. Let's talk
Speaker 1: about what you do to keep mentally and physically fit?
Speaker 1: And what do you do what makes you think that
Speaker 1: I mentally and physically fit? Well, we were just talking
Speaker 1: about de mansia. What what do you do to stay entertained?
Speaker 1: What do you do to relax outside of the office
Speaker 1: other than go to the forest? Uh? Well, I do
Speaker 1: spend as much time as I can in the woods.
Speaker 1: I do try to take care of myself physically. I
Speaker 1: am UM. When I was very young, I get captured
Speaker 1: by this female and I've been a prisoner to her
Speaker 1: ever since. Uh, and I UM like to spend time
Speaker 1: with her grandchildren. Uh. They're the most marvelous human beings
Speaker 1: that I've ever known. And I that's They're a prime
Speaker 1: form of relaxation for me. And uh, although most people
Speaker 1: don't think of children is relaxing. Almost every game, almost
Speaker 1: every grandparent does, and most of them are misled in
Speaker 1: that regard because I do. And um they're they're just wrong.
Speaker 1: And uh the the you know, there's these age old features.
Speaker 1: I mean, how in the world these children that you
Speaker 1: have that don't know a darned thing, that grow up
Speaker 1: and then have these most miraculous children. It's like somehow
Speaker 1: jeans just get a generation. And um so I, Uh,
Speaker 1: I am a very heavy diet fan. I I used
Speaker 1: to weigh a lot. I used to a hundred pounds
Speaker 1: more than our way and I while I was younger then,
Speaker 1: and I worked very hard hundred pounds less than I
Speaker 1: was I was younger to that. Do we just trade? Yeah?
Speaker 1: I think so. I think I won the trade. Um
Speaker 1: I I so, I spend a fair effort trying to.
Speaker 1: I've got a very bizarre diet and I focus on
Speaker 1: my weight a lot. And when you say bizarre diet,
Speaker 1: what what makes you diet bizarre? Well, the greatest principle
Speaker 1: because I when I wait a lot more, I was
Speaker 1: prone to overeat a lot of things. My definition is
Speaker 1: that I try not to everat anything I like. That's
Speaker 1: a lot of discipline there. So you only eat things
Speaker 1: you don't really care for. No, that's not true. I
Speaker 1: try to only eat things I don't care for. When
Speaker 1: you travel, you get stuck with stuff. That's the worst part.
Speaker 1: Traveling is the toughest. But when I'm at home, I
Speaker 1: only eat stuff I don't like. Oh, I'm basically a
Speaker 1: vegetable and fruit guy. And then for I eat a
Speaker 1: handful of walnuts every day at home, and then I
Speaker 1: have to drink some milk for calcium. And I also,
Speaker 1: you know, a minuteing vitamins and all that kind of nonsense.
Speaker 1: But stay with the let's skip the vitamins unless you
Speaker 1: really do radical calcium pills? Are you doing? Like when
Speaker 1: you get older? When you get older, you're gonna worry
Speaker 1: about Austina. You're not that much older than me. I'm
Speaker 1: gonna tell you, I'm not that far away. I don't
Speaker 1: know how old you are, Berry, I know how old
Speaker 1: I am. That's the key thing is knowing yourself. I'm
Speaker 1: sixty six. I was gonna say mid sixties, the most
Speaker 1: early sixties, and I'd like to live in this thirty
Speaker 1: years and have that be a good life. And so
Speaker 1: it's spent a lot of time taking care myself. The
Speaker 1: old joke. It's not the years, it's the miles. That's
Speaker 1: the like. I'd like to have both. I'd like to
Speaker 1: have years and miles and uh so again, I walk
Speaker 1: a lot. On average, I walk about twenty miles a week.
Speaker 1: I love this thing, even though it's annoying, because it
Speaker 1: gives me a baseline of how much I'm walking around.
Speaker 1: And they want you to do ten thousand steps a
Speaker 1: day and I'm pretty consistently doing fifteen thousand. I think
Speaker 1: the typing is probably sets it off a little bit.
Speaker 1: Maybe I'm cheating a little bit. I take it off
Speaker 1: as the equivalent when when we were young, when they
Speaker 1: when they actually had phone books and you let your
Speaker 1: fingers through the walking white. But it's every now and then.
Speaker 1: I'll there days when young people don't know about phone books.
Speaker 1: No they don't they I told people about the post office.
Speaker 1: People don't understand about you know, you could be able
Speaker 1: to go to this building and give them a letter
Speaker 1: and they would send it somewhere like what do you
Speaker 1: mean a letter like t or people don't understand how
Speaker 1: it It's amazing to watch the transition, and we've spent
Speaker 1: enough time watching the next generation come in that we
Speaker 1: learned how to use computers. We've adapted to them. Computers
Speaker 1: are just part of the background. There's always been computers
Speaker 1: to them, so it's a very different interaction. To me,
Speaker 1: it's this is still a thing of joy and wonder.
Speaker 1: To them, it just what do you mean it's a computer.
Speaker 1: There's that's supposed to be mobile, right, Well, the piece
Speaker 1: of glass that you carry around with you is a
Speaker 1: computer to them. But to us it's a music. Yeah,
Speaker 1: And to them it's just part of the background. All right.
Speaker 1: Before they throw us out, let me get to my
Speaker 1: last speaking. Think of what you think of how my
Speaker 1: great grandfather would have thought about life. If my grandfather
Speaker 1: could have told him about truly what he would see
Speaker 1: by the time he died in the nineteen fifties, my
Speaker 1: great grandfather would have thought that my grandfather was out
Speaker 1: of his gourd. And now just from the fifties to today,
Speaker 1: it's ten x's. Although my grandfather's generation saw more relative change,
Speaker 1: that's ute change, that's right. They went from They went
Speaker 1: from late industrial to late electronic, early electronic too late electronic,
Speaker 1: to early computers. My grandfather was born in seventy five,
Speaker 1: before the Industrial Revolution, took hold and the industal revolutions
Speaker 1: eighties thing in America, and so the steam engine is
Speaker 1: really a thing of his youth in terms of mass
Speaker 1: in America. That transition to go to there, to radio,
Speaker 1: to telephones, to television, to airplanes, to actually know that
Speaker 1: computers existed, not that the computers would exist like we
Speaker 1: have them now, but that they existed in the way
Speaker 1: IBM and would have had them in as opposed to.
Speaker 1: So let me share something fascinating with you about airplanes.
Speaker 1: We were talking about the other day in the office
Speaker 1: about bad news and good news, and one of the
Speaker 1: examples that I used of good news, my head of research,
Speaker 1: Mike Batnick, did this whole thing about all this good
Speaker 1: news on the chart, and most of the good news
Speaker 1: that came out you would never have thought twice about
Speaker 1: over the past decade because it's just a tiny little thing.
Speaker 1: And you know what, even when the iPhone first came out,
Speaker 1: no one really paid much attention to how big a
Speaker 1: deal is it? But think about flight and think about
Speaker 1: nineteen o three Kitty Hawk. Now that North Carolina has one,
Speaker 1: uh the n c A A. It's it's so I'll
Speaker 1: tie it into recent news. There were no newspaper articles.
Speaker 1: It never made the New York Times. They flew I
Speaker 1: want to say, a half dozen or a dozen times
Speaker 1: before the local whatever you want to call it, newspaper
Speaker 1: or newsletter or whatever, had it like a paragraph, mentioned
Speaker 1: a blurb. The Right Brothers managed to get their heavier
Speaker 1: than aircraft to fly fifty yards. They've done it five
Speaker 1: or six times. Whoop do you do? And yet think
Speaker 1: of the impact of that. So even when you're in
Speaker 1: the midst of an incredible technological change, you may not
Speaker 1: even be aware of the significance of it. Forget centuries later,
Speaker 1: just a few decades later. It's it's I find that
Speaker 1: just fascinating it. I'm pretty sure that people like the
Speaker 1: Right Brothers couldn't have predicted exactly how it would go,
Speaker 1: but that they would have thought that it would have
Speaker 1: been an important thing. This is significant. They would have
Speaker 1: known it was something that mattered. They wouldn't know exactly
Speaker 1: how all that well. I don't think anybody can forecast
Speaker 1: all those little wiggles with accuracy in the slightest, in
Speaker 1: the same way that you know. When I was listening
Speaker 1: to John Bogol yesterday, he was talking about with confidence
Speaker 1: that yes, for five years this wasn't working, but he
Speaker 1: was sure it was the right thing to do, and
Speaker 1: that eventually if we could survive. But that wouldn't say
Speaker 1: that the thing was wrong. It just implied that if
Speaker 1: he couldn't survive, someone else would probably have to do
Speaker 1: it later, and that you'd have to be some crazy
Speaker 1: guy like he was to do that, which has always
Speaker 1: been true of anybody that was ever entrepreneurial about anything. Sure,
Speaker 1: you know, they're always kind of the wing, that crazy guy.
Speaker 1: And and and you managed to do it before, you know,
Speaker 1: the right brothers probably didn't cash in a whole lot
Speaker 1: on flight um Bogel is one of the lucky people
Speaker 1: started young enough that forty years later. You know, the
Speaker 1: the other one that they awarded yesterday in the icon mode.
Speaker 1: I mean they had a bunch of us that were
Speaker 1: awarded in the innovator mode, and then they had these
Speaker 1: two that were awarded in the icon mode. And the
Speaker 1: other was Chuck Schwab. And the same thing in a
Speaker 1: way was true with Schwab when he first started the
Speaker 1: five Well, when he first started it wasn't a discount
Speaker 1: brokerage firm, which first started as a standard little Brook firm,
Speaker 1: that he then got the idea for the discount after
Speaker 1: he started the firm, and then he went with that.
Speaker 1: And again in the early days, Schwab of course was
Speaker 1: laughed at in San Francisco where I was in my time.
Speaker 1: I mean, I'm a young guy in the realm of
Speaker 1: endeavor at the time, and people laughed at Schwab in
Speaker 1: those days. And of course a lot of time people
Speaker 1: start businesses that don't work and fail. There's lots of
Speaker 1: failures for every success. And yet Schwab was a tremendous
Speaker 1: success and a continuous innovator. How old does Chuck Schuab
Speaker 1: these days, Uh, I don't know exactly, but he's uh late,
Speaker 1: very late seventies. I don't know exactly. You know, any
Speaker 1: big could looked that up on Wickham. He's he's no
Speaker 1: longer than you don't see him as the face of
Speaker 1: the firm as much, but he you know, you've seen
Speaker 1: him around for a long long time. He had a
Speaker 1: huge impact as an innovator for a long time, which
Speaker 1: is how he became an icon. But again that again
Speaker 1: that this is this notion of the you know, the
Speaker 1: instant success. The instant success does not happen. Even Bill
Speaker 1: Gates and Microsoft took a long time, had a huge
Speaker 1: impact on the world, but it took a long time
Speaker 1: before the world fully was doing that. Uh in scale
Speaker 1: seventy he is seventy nine years old. I was more
Speaker 1: or less right to the last two questions before they
Speaker 1: come throw us out of here. Uh So, millennial, a
Speaker 1: recent college graduate comes to you and says, I'm interested
Speaker 1: in getting into the world to finance. What sort of
Speaker 1: advice would you give them? Talk to people that are
Speaker 1: about five years older than you are, that have done it,
Speaker 1: because they know more about it than I do. Older
Speaker 1: than them, people would have done it recently, So you're
Speaker 1: saying it's a young man's game, not a or young
Speaker 1: person's game. I know the course that they have to
Speaker 1: follow is different than the course that I had to
Speaker 1: follow once upon a time, because the world has evolved
Speaker 1: and the people that have done it recently understand that.
Speaker 1: So seek out young mentors for what I gotta do,
Speaker 1: and then simultaneously remember that it's a long run. It's
Speaker 1: a long life. The people that think they're gonna hit
Speaker 1: big and you know, go retire in five years are
Speaker 1: barking up the wrong tree. Because that's not really the
Speaker 1: way the world works. You're in it for the wrong
Speaker 1: motivation if you think you're going to make If you're
Speaker 1: just in it to make money, you're doing the wrong thing.
Speaker 1: You know. I'm, as you said in the introduction, supposed
Speaker 1: to be something like the four richest person in America,
Speaker 1: and it was never about money for me. The money
Speaker 1: is a result. It's not a consistent theme I hear
Speaker 1: from people who I interview. The reality is, if you're
Speaker 1: doing it for the money, you're not really doing it
Speaker 1: for the customers. And if you're doing it for something
Speaker 1: other than the customers, you're barking up the wrong tree.
Speaker 1: In the longer term, the the you mentioned how long
Speaker 1: it is. I love the expression the days are long,
Speaker 1: but the decades are short, and that that really yeah,
Speaker 1: I really like that. I know know what I'm stealing
Speaker 1: that from, but I'm sure some reader will tell us.
Speaker 1: And and lastly, what is it that you know about
Speaker 1: the world of investing in markets that you wish you
Speaker 1: knew thirty five years ago when you were first getting
Speaker 1: your legs underneath you. Uh So, maybe this sounds strange
Speaker 1: to you, but I wish that I would have understood.
Speaker 1: And I don't know it's thirty five years ago, but
Speaker 1: twenty years ago, I wish that I would have understood
Speaker 1: the course in the transition that would occur to journalism. Really,
Speaker 1: that's interesting because I think journalism has big impacts for
Speaker 1: good and for bad on sentiment in investing, no doubt,
Speaker 1: and that that world has morphed quite a lot in
Speaker 1: ways that I try to understand, but I'm not sure
Speaker 1: I fully do, and but I work out it a lot.
Speaker 1: And um, the fact is that in an awful lot
Speaker 1: of what we see in journalism today, journalism has lost
Speaker 1: its way and forgotten the core principles of journalism, and
Speaker 1: so much of journalism today does not start the way
Speaker 1: it did when I study journalism in school, which is
Speaker 1: to lead with the five when, why and how? And
Speaker 1: from that lack in the lead, which was why it
Speaker 1: was always supposed to be other than the opinion page. Uh,
Speaker 1: I mean opinion opinion. The news stories are so to
Speaker 1: lead with a five Disney age. Uh. Now so often
Speaker 1: you look at the news and you can't actually find
Speaker 1: early in the story anything but opinion, and it's, you know,
Speaker 1: thought to be. In journalism school, they teach you to
Speaker 1: be hard hitting journalists, and so the stories are hard hitting,
Speaker 1: but its opinion, and that creates a lot of shrill
Speaker 1: that becomes noise to people, and people have a hard
Speaker 1: time getting to the facts. They get impatient. And so
Speaker 1: then you can parallel out with gallops. Uh now, uh,
Speaker 1: twenty five year history of tracking media credibility by the
Speaker 1: same standards and seeing media credibility fall, and as media
Speaker 1: credibility falls, not in a straight line but in an
Speaker 1: irregular line. Obviously facts and circumstances contribute and to tract
Speaker 1: from that, but as that has happened, it changes the
Speaker 1: impact of media on sentiment. And I wish I had
Speaker 1: understood that better because I spast time studying sentiment and
Speaker 1: media twenty five years ago. But I never anticipated I mean,
Speaker 1: if you just look at worlds that you and I know,
Speaker 1: and what's happened to things like I was talking to
Speaker 1: Jim Cramer this morning and uh early, and he was
Speaker 1: recalling to my memory that when he started writing, he
Speaker 1: started writing for Smart Money, And then I thought about
Speaker 1: why I haven't thought about Smart Money magazine in a
Speaker 1: long time. They haven't been around. Yeah, exactly, That's the
Speaker 1: point the world publication the world just you know, and
Speaker 1: you know, you guys here at Bloomberg bought Business Week
Speaker 1: for a dollar literally a dollar plus thirty eight million
Speaker 1: dollars worth a dead of memory is yeah. But you know,
Speaker 1: if you think about it, this whole world has had
Speaker 1: these features and you know, as we speak, time warners
Speaker 1: up for sale and uh, you know the world. You
Speaker 1: look at the transition and evolution of The New York Times,
Speaker 1: which has been going downhill at an irregular pace. I mean,
Speaker 1: recently they've gotten a trump uptick. That's a huge uptick. Yeah,
Speaker 1: but it's a short term phenomena. The trend for that
Speaker 1: has been downhill for twenty years. And well, everything that's
Speaker 1: printed on pulp trees and and not digital has become
Speaker 1: uh dinosaur and his fading. Uh. And then with that, uh,
Speaker 1: you know, the nature of employment inside journalism has shifted.
Speaker 1: I mean, Bloomberg is really quite an exception to the
Speaker 1: general It's a data services company with the media attached
Speaker 1: to it. And and and you know, so Thompson Reuters
Speaker 1: has a little bit of that too. Um. But the
Speaker 1: traditional core journalism world as it existed has shifted to
Speaker 1: where there's not enough compensation to justify heavy research. In
Speaker 1: most places, the channels are more narrow uh, compensations constrained. Uh.
Speaker 1: And from that, you know, one should be neither hostile
Speaker 1: nor sympathetic to journalists one way or the other anymore
Speaker 1: than other category. But from that, the output has moved
Speaker 1: evermore to this principle of trying to gain short term
Speaker 1: attention to shrillness at the loss of longer term credibility,
Speaker 1: which then forces the investor to find ways to become
Speaker 1: more self reliant. No doubt about that, you know, And
Speaker 1: that need to become self reliant alters the way we
Speaker 1: should think about sentiment. That's interesting. You know, you have
Speaker 1: some new formats coming out, like pro Publica or even
Speaker 1: The Guardian, which was basically turned into a giant trust
Speaker 1: um with its own funding as opposed to having to
Speaker 1: sell newspapers. They still sell newspapers, but they're now a
Speaker 1: self funded, freestanding entity. Same with Pro Publica. It's an
Speaker 1: outside investment that allows them to be free standing. Who
Speaker 1: knows what's going to happen to the ft or the
Speaker 1: New York Times. I think the Wall Street Journal is stable,
Speaker 1: but is we move more towards indexing? Who knows? You
Speaker 1: know well. I was in London last week talking to
Speaker 1: John Redding and the CEO of the FT, and they
Speaker 1: seem to be pretty on top of No. No, I think,
Speaker 1: I think they're doing great. But they have learned likewise
Speaker 1: that they have to do a multiplicity of things and
Speaker 1: that they have to adapt. And so there's the one
Speaker 1: part of the world that I think, you know people
Speaker 1: readily except, which is that they got to be strong
Speaker 1: in the online side. And then the other part that
Speaker 1: they've done very well is to build up their conference business.
Speaker 1: And there's actually a cyclically regular need increasingly for people
Speaker 1: to get together, because getting together is another form of
Speaker 1: increasing your credibility and what's going on, you know, World
Speaker 1: War Ide, less trust media. If I get together with
Speaker 1: people and I hear stories and we swap information, I
Speaker 1: can gain greater sense of confidence in what I'm doing.
Speaker 1: So their conference business has been growing and I and
Speaker 1: and of course John in particular is a big fan
Speaker 1: of uh the importance of print being a piece of
Speaker 1: the puzzle, the puzzle because it provides tangibility. And so
Speaker 1: I don't see the pink, which is you know, the
Speaker 1: legendary name for the FT. I don't see the pink disappearing.
Speaker 1: But it's thinner than it used to be, and it's
Speaker 1: done differently than it used to be, and that's necessary
Speaker 1: in this era. But more and more, you know, I
Speaker 1: just think of the world of local newspapers that used
Speaker 1: to exist, most of which has been completely wiped out,
Speaker 1: going away, going to digital. When you think about eBay
Speaker 1: replacing classified ads along with Gregg'slist, well you just took
Speaker 1: the heart of the financial business model away from it.
Speaker 1: We we could digress about this. I know they're literally
Speaker 1: throwing us out of here in five minutes. Ken, thank
Speaker 1: you so much for being so generous with your time,
Speaker 1: Thanks for having me. And uh for those of you
Speaker 1: who are listening, Um, we have been speaking, still listening
Speaker 1: to us after all this time, we have been speaking
Speaker 1: with Ken Fisher of Fisher Investments. If you enjoy this conversation,
Speaker 1: be sure and look up an inch or down an
Speaker 1: inch on Apple iTunes and you can see any of
Speaker 1: the other hundred and forty three or so of these
Speaker 1: conversations that that we have had. I would be remiss
Speaker 1: if I did not thank my head of research, Michael
Speaker 1: bat Nick, for helping put together some of the subjects
Speaker 1: and questions we discussed today along with Taylor Riggs, who
Speaker 1: is my producer booker. UM, I'm Barry Ridholtz. You're listening
Speaker 1: to Masters in Business on Bloomberg Radio. Our world is
Speaker 1: always moving, so with Mery Lynch you can get access
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