1
00:00:03,240 --> 00:00:07,560
Speaker 1: This is Masters in Business with Barry Ridholes on Bloomberg Radio.

2
00:00:08,560 --> 00:00:11,840
Speaker 1: This week on Masters in Business on Bloomberg Radio, my

3
00:00:12,039 --> 00:00:16,360
Speaker 1: guest is Charlie Rotblood. Charlie is vice president at the

4
00:00:16,400 --> 00:00:21,200
Speaker 1: American Association of Individual Investors and he not only is

5
00:00:21,239 --> 00:00:25,880
Speaker 1: the editor who oversees the a AII Journal, but also

6
00:00:26,200 --> 00:00:31,880
Speaker 1: conducts a number of surveys, sentiment surveys of individuals which

7
00:00:32,000 --> 00:00:35,239
Speaker 1: have been in existence for gee, they go back to

8
00:00:36,880 --> 00:00:41,240
Speaker 1: it's unusual to find a sentiment survey with the same

9
00:00:41,680 --> 00:00:46,640
Speaker 1: methodology asking questions of individual investors. Going back that far,

10
00:00:47,159 --> 00:00:51,160
Speaker 1: we speak about the Weekly Sentiment Survey, which I find

11
00:00:51,200 --> 00:00:54,680
Speaker 1: a little noisy, but it extremes it certainly can be useful,

12
00:00:55,280 --> 00:00:59,720
Speaker 1: and the A A II Ascid Allocation Survey, which I

13
00:00:59,760 --> 00:01:04,119
Speaker 1: find to be tremendously useful. It has pretty much marked

14
00:01:04,160 --> 00:01:10,800
Speaker 1: the bottom of every major UH market correction since UM

15
00:01:10,840 --> 00:01:14,440
Speaker 1: as well as marked the top at at major highs.

16
00:01:14,480 --> 00:01:16,400
Speaker 1: And and it was one of the things that were

17
00:01:16,480 --> 00:01:20,640
Speaker 1: screaming up and down late early two thousand that hey

18
00:01:20,720 --> 00:01:26,360
Speaker 1: market have gotten U way too way too uh frothy,

19
00:01:26,400 --> 00:01:30,480
Speaker 1: and that investors are wildly overweight equities relative to their

20
00:01:30,520 --> 00:01:35,280
Speaker 1: historic averages. UH. He's an interesting character. He he does

21
00:01:35,640 --> 00:01:39,800
Speaker 1: a number of fascinating things for a AII. If you're

22
00:01:40,000 --> 00:01:44,120
Speaker 1: interested in what individual investors are doing, thinking, saying, and

23
00:01:44,160 --> 00:01:49,160
Speaker 1: how they're allocating their portfolios, I think you'll enjoy this podcast. So,

24
00:01:49,240 --> 00:01:53,720
Speaker 1: with no further ado, my interview with a AI eyes

25
00:01:54,240 --> 00:02:01,280
Speaker 1: Charles Rotblood. This is Masters in Business with Barry Ridholds

26
00:02:01,480 --> 00:02:06,480
Speaker 1: on Bloomberg Radio. My special guest this week is Charles Rotblood.

27
00:02:06,800 --> 00:02:10,560
Speaker 1: He is the vice president at the American Association of

28
00:02:10,639 --> 00:02:16,560
Speaker 1: Individual Investors. He's also the editor of the AII Journal UH.

29
00:02:16,600 --> 00:02:18,760
Speaker 1: He's a c f A, and he is the author

30
00:02:19,200 --> 00:02:23,240
Speaker 1: of Better Good Than Lucky, How Savvy Investors create a

31
00:02:23,320 --> 00:02:28,520
Speaker 1: fortune with the risk reward ratio. Charles Rotblood, Welcome to Bloomberg.

32
00:02:28,639 --> 00:02:32,640
Speaker 1: Thanks for having me so. I've been following your work

33
00:02:32,800 --> 00:02:36,280
Speaker 1: for a long time. I'm a big fan of of

34
00:02:37,320 --> 00:02:42,799
Speaker 1: some of the surveys that aii UH performs, Not so

35
00:02:42,880 --> 00:02:45,320
Speaker 1: much the day to day or weekly things, but the

36
00:02:45,400 --> 00:02:51,440
Speaker 1: longer term asset allocation number I find absolutely a compelling UH.

37
00:02:51,480 --> 00:02:53,200
Speaker 1: They say you don't ring a bell, but there are

38
00:02:53,240 --> 00:02:56,799
Speaker 1: times when that UM survey rings a bell. But before

39
00:02:56,840 --> 00:03:00,800
Speaker 1: we get into the nitty gritty of exactly the surveys

40
00:03:00,840 --> 00:03:04,400
Speaker 1: and other things you do. I told my wife I

41
00:03:04,480 --> 00:03:08,280
Speaker 1: was interviewing you and I described your title and she goes,

42
00:03:08,520 --> 00:03:12,080
Speaker 1: she asked me, um, well, what does he actually do?

43
00:03:12,200 --> 00:03:14,359
Speaker 1: When I go, I'll ask him. So when people say

44
00:03:14,360 --> 00:03:16,560
Speaker 1: to you, what do you do for a living, how

45
00:03:16,600 --> 00:03:18,680
Speaker 1: do you answer that? Well? I start off by just

46
00:03:18,720 --> 00:03:21,440
Speaker 1: saying a magazine editor, and that of course lets you

47
00:03:21,440 --> 00:03:24,440
Speaker 1: well what magazine and who publishes that? So kind of

48
00:03:24,440 --> 00:03:27,440
Speaker 1: give a long answer. But main job as I am

49
00:03:27,440 --> 00:03:31,960
Speaker 1: the editor of the AI Journal, which really compels really

50
00:03:32,200 --> 00:03:35,640
Speaker 1: really it's a matter of providing information about how do

51
00:03:35,680 --> 00:03:38,120
Speaker 1: you invest better? Uh So we do a lot stuff

52
00:03:38,120 --> 00:03:39,720
Speaker 1: in the house. I reach out to a lot of

53
00:03:39,760 --> 00:03:42,520
Speaker 1: smart people on Wall Street. But in addition to that,

54
00:03:42,560 --> 00:03:44,920
Speaker 1: we're focused on investor education, and part of the way

55
00:03:45,000 --> 00:03:49,680
Speaker 1: we do that is we provide different model portfolios. We

56
00:03:49,760 --> 00:03:53,119
Speaker 1: have a Stock Superstars Report which invests in different types

57
00:03:53,160 --> 00:03:55,680
Speaker 1: of strategy, so we're diversifying by strategy, growth value and

58
00:03:55,680 --> 00:03:59,880
Speaker 1: not only by industry a dividend investing portfolio. We're also

59
00:03:59,880 --> 00:04:02,920
Speaker 1: no of our microcap portfolio, which is run by our chairman,

60
00:04:03,280 --> 00:04:07,560
Speaker 1: Jim Cluton at Investor Microcap Stock. So part editorial, part

61
00:04:07,800 --> 00:04:11,120
Speaker 1: portfolio management, and also just a lot of speaking to

62
00:04:11,200 --> 00:04:14,320
Speaker 1: people and and for people who may not be familiar

63
00:04:14,360 --> 00:04:17,320
Speaker 1: with A I I. You're a nonprofit, you have a

64
00:04:17,400 --> 00:04:20,520
Speaker 1: hundred and seventy thousand members. Is that about right? That's right?

65
00:04:20,880 --> 00:04:25,039
Speaker 1: And essentially you guys have been around for over thirty years.

66
00:04:25,080 --> 00:04:27,560
Speaker 1: Is that about right? Yeah, we actually started in nineteen seventies.

67
00:04:27,800 --> 00:04:31,800
Speaker 1: We are actually started by Jim Clunen, who's who is

68
00:04:31,839 --> 00:04:34,320
Speaker 1: a professor de Paul and he's still still at the office.

69
00:04:34,320 --> 00:04:39,440
Speaker 1: Saw him on Monday. So now we know what AIII

70
00:04:39,560 --> 00:04:42,480
Speaker 1: is and we know it does um. I think you

71
00:04:42,520 --> 00:04:48,440
Speaker 1: guys are actually one of the largest successful subscriber newsletters

72
00:04:48,480 --> 00:04:51,880
Speaker 1: that really doesn't specialize in making forecasts. Is that a

73
00:04:51,880 --> 00:04:54,680
Speaker 1: fair statement? Yeah, it is. We don't. We do not

74
00:04:54,760 --> 00:04:57,760
Speaker 1: make any market forecasts. We actually think people overall are

75
00:04:57,800 --> 00:05:01,440
Speaker 1: better offically just didn't make any forecasts because the tendencies

76
00:05:01,440 --> 00:05:03,520
Speaker 1: to have this confidence. So I'm saying this with isis

77
00:05:03,560 --> 00:05:06,359
Speaker 1: I'm saying this with China. You don't worried about Janet Yellen.

78
00:05:06,440 --> 00:05:09,680
Speaker 1: And the reality is it doesn't matter what the market's

79
00:05:09,680 --> 00:05:12,920
Speaker 1: gonna do next week. It really matters when you're ninety,

80
00:05:13,080 --> 00:05:14,919
Speaker 1: do you still have cash in your account that you

81
00:05:14,920 --> 00:05:17,080
Speaker 1: can live in, and it's very hard for people to

82
00:05:17,160 --> 00:05:20,520
Speaker 1: lose sight of that because that doesn't necessarily grab headlines.

83
00:05:20,640 --> 00:05:23,240
Speaker 1: But as an individual investor, your goal is to really

84
00:05:23,240 --> 00:05:25,880
Speaker 1: get to your last day and still have still have

85
00:05:25,960 --> 00:05:28,800
Speaker 1: at least a dollar in your bank account. And let's

86
00:05:28,800 --> 00:05:34,440
Speaker 1: talk about your membership. Who who's a typical AII member, Well,

87
00:05:34,480 --> 00:05:38,800
Speaker 1: we care individual investors are. Average member is in the sixties, affluent,

88
00:05:38,960 --> 00:05:42,240
Speaker 1: college educated, and that's really demographic. If you talk to

89
00:05:42,240 --> 00:05:45,640
Speaker 1: a morning Star about their consumer division, look at various

90
00:05:45,640 --> 00:05:48,719
Speaker 1: investment newsletters, it's it's all pretty much the same demographic.

91
00:05:48,760 --> 00:05:50,440
Speaker 1: And I would love to get people in their twenties

92
00:05:50,440 --> 00:05:53,000
Speaker 1: and thirties and involved because we could help them so

93
00:05:53,080 --> 00:05:56,000
Speaker 1: much at such a young age. But in general, even

94
00:05:56,000 --> 00:05:58,400
Speaker 1: when I said invest hoals in Zack previously, it always

95
00:05:58,440 --> 00:06:01,240
Speaker 1: tended to be older men and who could clean, who

96
00:06:01,320 --> 00:06:04,160
Speaker 1: actually had built wealth over their life for their careers.

97
00:06:04,960 --> 00:06:07,479
Speaker 1: That tends to be the key demographic for really any

98
00:06:07,560 --> 00:06:11,400
Speaker 1: individual investor type of newsletter or service. Well, if you

99
00:06:11,440 --> 00:06:14,480
Speaker 1: want more millennials, you have to make your acronyms sound

100
00:06:14,520 --> 00:06:17,599
Speaker 1: less like a r P. I think they see a

101
00:06:17,720 --> 00:06:19,600
Speaker 1: A and they don't even get to the I I fart.

102
00:06:19,680 --> 00:06:23,440
Speaker 1: They just see that and uh and run. You mentioned

103
00:06:23,520 --> 00:06:27,360
Speaker 1: morning Star. Who do you guys consider your your competitors.

104
00:06:27,360 --> 00:06:31,160
Speaker 1: Who's out there, if not an identical space, who's who's

105
00:06:31,160 --> 00:06:33,960
Speaker 1: in a similar space to a AI. Yeah, there really

106
00:06:34,040 --> 00:06:36,200
Speaker 1: isn't one. I mean morning Star on us do overlap.

107
00:06:36,240 --> 00:06:39,000
Speaker 1: We have some competitive products, but then we have a

108
00:06:39,000 --> 00:06:42,200
Speaker 1: lot of people from the organizations. I think Christine Ben's

109
00:06:42,240 --> 00:06:44,719
Speaker 1: talks to more of our members than I do. Uh.

110
00:06:44,760 --> 00:06:47,159
Speaker 1: But you know, better investings out there they do education,

111
00:06:47,360 --> 00:06:50,800
Speaker 1: though they're more focused on investment clubs UM and they

112
00:06:50,800 --> 00:06:53,480
Speaker 1: have their own stock picking system. We're really the only

113
00:06:53,600 --> 00:06:58,760
Speaker 1: organization that's really focused on comprehensive investment education out there,

114
00:06:58,800 --> 00:07:02,360
Speaker 1: at least that I'm aware of. And you know, UM.

115
00:07:02,520 --> 00:07:05,800
Speaker 1: I interviewed Dr Robert Johnson, who was at the c

116
00:07:05,960 --> 00:07:09,520
Speaker 1: FA Institute and is now president of the American College

117
00:07:09,520 --> 00:07:14,440
Speaker 1: of Finance, and he's another person who advocates for investor finance.

118
00:07:15,240 --> 00:07:20,560
Speaker 1: But I'm starting to wonder how successful investor education can be.

119
00:07:20,640 --> 00:07:23,680
Speaker 1: It seems like people make the same mistakes over and

120
00:07:23,720 --> 00:07:27,520
Speaker 1: over and over. Can we ever really reach a critical

121
00:07:27,560 --> 00:07:30,720
Speaker 1: mass of people? Uh? And and prevent them from shooting

122
00:07:30,720 --> 00:07:33,400
Speaker 1: themselves in the foot. You know, I'd like to do that.

123
00:07:33,480 --> 00:07:36,080
Speaker 1: I think it's always gonna be hard because people are

124
00:07:36,120 --> 00:07:39,320
Speaker 1: always being torn in different directions. There's always gonna be services.

125
00:07:39,800 --> 00:07:41,640
Speaker 1: Do this now that make money, do that now they

126
00:07:41,720 --> 00:07:44,840
Speaker 1: make money. I'm in just a pure emotions when I speak.

127
00:07:44,880 --> 00:07:47,360
Speaker 1: One of the very first slides I show actually has

128
00:07:47,360 --> 00:07:50,440
Speaker 1: a quote from Charlie Ellis who said, as in Driving,

129
00:07:50,440 --> 00:07:53,520
Speaker 1: the secret, the secret to success is avoiding the big mistakes.

130
00:07:53,520 --> 00:07:55,280
Speaker 1: And I tell people, if you want to make a

131
00:07:55,280 --> 00:07:57,760
Speaker 1: lot of money in the markets, just don't screw up.

132
00:07:57,800 --> 00:08:00,720
Speaker 1: And if you avoid those behavioral errors that cause you

133
00:08:00,760 --> 00:08:03,080
Speaker 1: to make a big mistake, that's gonna put you a

134
00:08:03,160 --> 00:08:06,040
Speaker 1: light years aheavy game. But it's easier said than done.

135
00:08:06,200 --> 00:08:08,240
Speaker 1: So in the last minute, we have in this segment,

136
00:08:08,560 --> 00:08:12,400
Speaker 1: what is one of the biggest errors that investors make?

137
00:08:12,720 --> 00:08:15,200
Speaker 1: You know, I think it's really panicking and selling at

138
00:08:15,200 --> 00:08:18,120
Speaker 1: the wrong time, Panicking when there's a bear market, panicking

139
00:08:18,160 --> 00:08:20,480
Speaker 1: when it's a market correction. Because when people do it,

140
00:08:20,960 --> 00:08:22,680
Speaker 1: they just tend to stay out with the market too

141
00:08:22,680 --> 00:08:25,360
Speaker 1: long and they basically lock in losses and miss out

142
00:08:25,440 --> 00:08:28,680
Speaker 1: on the chance to recoup those losses. I'm Barry Ridhults.

143
00:08:28,760 --> 00:08:32,120
Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My

144
00:08:32,200 --> 00:08:36,080
Speaker 1: special guest today is Charles Rotblood. He is vice president

145
00:08:36,200 --> 00:08:40,719
Speaker 1: and editor of the American Association of Individual Investors as

146
00:08:40,760 --> 00:08:44,320
Speaker 1: well as the a ai I Journal. I wanted to

147
00:08:44,360 --> 00:08:47,280
Speaker 1: talk a little more about some of the sentiment measures

148
00:08:47,320 --> 00:08:52,360
Speaker 1: that ai I does. Probably the most famous one is

149
00:08:52,400 --> 00:08:56,040
Speaker 1: the weekly sentiment measure. Tell us about that? Sure? So

150
00:08:56,080 --> 00:08:58,160
Speaker 1: we started this in eighty seven and we ask our

151
00:08:58,200 --> 00:09:01,439
Speaker 1: members a very simple question. Over the next six months,

152
00:09:01,480 --> 00:09:05,840
Speaker 1: I feel the market will be up, bullish, unchanged, neutral, down,

153
00:09:05,920 --> 00:09:08,880
Speaker 1: bearish UH. And we've tracked this weekly and we've seen

154
00:09:09,160 --> 00:09:12,720
Speaker 1: since eighty seven seven, and we've seen over time, when

155
00:09:12,880 --> 00:09:15,720
Speaker 1: you know, near peaks, bull sentent hits very high levels.

156
00:09:16,320 --> 00:09:20,360
Speaker 1: During bear markets hits very low levels. March five, two

157
00:09:20,400 --> 00:09:23,320
Speaker 1: thousand nine, right at the very bottom of the bear market,

158
00:09:23,679 --> 00:09:27,400
Speaker 1: bullish sentiment was below UH. And what's interesting about is

159
00:09:27,400 --> 00:09:30,079
Speaker 1: everyone focuses on a weekly changes, but it's really when

160
00:09:30,160 --> 00:09:33,560
Speaker 1: it's way off kilter, when it's just way beyond the averages,

161
00:09:33,600 --> 00:09:36,600
Speaker 1: that's when you have to pay attention, particularly bull sentiments.

162
00:09:36,800 --> 00:09:40,160
Speaker 1: When I've looked at it, eliminated all hindsight, when you

163
00:09:40,160 --> 00:09:44,040
Speaker 1: see bull sement unusually low optimistic levels, and you would

164
00:09:44,080 --> 00:09:47,079
Speaker 1: say below is how often does it hit that? Then

165
00:09:47,240 --> 00:09:49,840
Speaker 1: not very often, not very many times in the history

166
00:09:49,880 --> 00:09:53,160
Speaker 1: of the survey. So so the really you're you're looking

167
00:09:53,160 --> 00:09:57,439
Speaker 1: to more or less that's interesting, the noisy week to

168
00:09:57,520 --> 00:10:02,080
Speaker 1: week stuff, But where really is in an vestable decision

169
00:10:02,120 --> 00:10:04,520
Speaker 1: is when it reaches the extreme. Yeah, And the other

170
00:10:04,559 --> 00:10:06,480
Speaker 1: thing that's interesting, and I'm curious to see what's gonna

171
00:10:06,480 --> 00:10:07,960
Speaker 1: happen now because we've seen it a lot of the

172
00:10:08,000 --> 00:10:11,000
Speaker 1: last twelve months. But when neutral sentiments a way above

173
00:10:11,080 --> 00:10:14,800
Speaker 1: its average that's also been correlated with rising markets. Has

174
00:10:14,840 --> 00:10:18,160
Speaker 1: that happened previously. It's happened previously, but it's mostly prior

175
00:10:18,200 --> 00:10:20,960
Speaker 1: to two thousand and so. Now over the last year,

176
00:10:20,960 --> 00:10:23,680
Speaker 1: we've had several readings with it being unusually high, and

177
00:10:23,800 --> 00:10:25,240
Speaker 1: kind of will let I want to let things play

178
00:10:25,280 --> 00:10:28,040
Speaker 1: out to say, do we now see this correlation pop

179
00:10:28,120 --> 00:10:31,199
Speaker 1: up again? It's not causal, but there's certainly a correlated

180
00:10:31,240 --> 00:10:36,160
Speaker 1: link between sentiment being very off and the market's changing direction.

181
00:10:37,760 --> 00:10:41,320
Speaker 1: That's that's quite interesting. So that's consistent with what I

182
00:10:41,440 --> 00:10:45,240
Speaker 1: know about um sentiment. You really want to take a

183
00:10:45,480 --> 00:10:49,200
Speaker 1: take a notice when it reaches um, when it reaches

184
00:10:49,200 --> 00:10:53,160
Speaker 1: an extreme. So that raises the question of of when

185
00:10:53,200 --> 00:10:56,880
Speaker 1: we have a whole lot of bullishness um or very

186
00:10:56,960 --> 00:11:03,559
Speaker 1: little bullishness. Are these sort of booms and bus bubbles

187
00:11:03,600 --> 00:11:07,120
Speaker 1: and and collapses? Is this the inevitable fate of markets?

188
00:11:07,160 --> 00:11:11,000
Speaker 1: This is this just the way human beings behave? Yeah? Unfortunately,

189
00:11:11,000 --> 00:11:13,079
Speaker 1: I think so. We just we tend to be greedy

190
00:11:13,080 --> 00:11:17,120
Speaker 1: by nature, we tend to be risk adverse, and everyone thinks, well,

191
00:11:17,240 --> 00:11:19,120
Speaker 1: risk of version means I'm afraid to lose money, but

192
00:11:19,160 --> 00:11:21,920
Speaker 1: it also means you're afraid of not making money when

193
00:11:21,920 --> 00:11:24,240
Speaker 1: you see everybody else making money. So read is just

194
00:11:24,280 --> 00:11:26,600
Speaker 1: the inverse a panic? Yeah, absolutely, And you know it's

195
00:11:26,600 --> 00:11:29,120
Speaker 1: just human nature. And we have very short histories. We

196
00:11:29,200 --> 00:11:32,440
Speaker 1: have volumes of market history. Anyone can pick up security

197
00:11:32,440 --> 00:11:35,000
Speaker 1: analysis and read about what happened leading up to the

198
00:11:35,000 --> 00:11:38,760
Speaker 1: Great Depression. But you know next, lots of exuberance, lots

199
00:11:38,760 --> 00:11:42,320
Speaker 1: of lots of frothy sentiment, and people just no longer

200
00:11:42,320 --> 00:11:44,959
Speaker 1: paid attention to the traditional metrics. Yeah, you know, I

201
00:11:44,960 --> 00:11:47,880
Speaker 1: think if you changed probably seven words in that whole book,

202
00:11:48,200 --> 00:11:50,319
Speaker 1: reprinting a two thousand you would have thought it was

203
00:11:50,360 --> 00:11:52,920
Speaker 1: about the tech bubble. It's funny. Funny you say that.

204
00:11:52,960 --> 00:11:57,040
Speaker 1: There's a book by Richard Wycoth written in nine and

205
00:11:57,120 --> 00:12:01,120
Speaker 1: it's called called How I Trade Stocks and Ones, And

206
00:12:01,480 --> 00:12:07,360
Speaker 1: the stuff he talks about are telegraph and telecom, railroads,

207
00:12:07,400 --> 00:12:10,160
Speaker 1: like a handful of major industries, And you could swap

208
00:12:10,200 --> 00:12:14,240
Speaker 1: out the names of the industries you couldn't tell the

209
00:12:14,280 --> 00:12:17,000
Speaker 1: difference as if it was written yesterday. No one's talking

210
00:12:17,040 --> 00:12:20,840
Speaker 1: about telegraph. But if you swap telephone and telegraph for Internet,

211
00:12:21,200 --> 00:12:22,960
Speaker 1: you would not be able to tell the difference. It's

212
00:12:23,000 --> 00:12:27,439
Speaker 1: the exact same narrative. It's quite fascinating. Um So, so

213
00:12:27,559 --> 00:12:31,200
Speaker 1: the next question, the related question to this is given

214
00:12:31,280 --> 00:12:34,800
Speaker 1: that these booms and bus are inevitable, given that we're

215
00:12:34,840 --> 00:12:38,160
Speaker 1: always gonna have bubbles, we're always gonna have crashes, how

216
00:12:38,200 --> 00:12:40,959
Speaker 1: should investors deal with their own emotions? How do they

217
00:12:41,040 --> 00:12:44,000
Speaker 1: deal with fear and greed? You know? I think that's

218
00:12:44,000 --> 00:12:46,840
Speaker 1: where it ties into weight loss, where they talk about triggers,

219
00:12:46,880 --> 00:12:48,800
Speaker 1: something that prompts you to eat, and I think people

220
00:12:48,880 --> 00:12:51,040
Speaker 1: need to be aware what promps you to trade and

221
00:12:51,080 --> 00:12:54,839
Speaker 1: setting up barriers. I I personally advocate for rebalancing because

222
00:12:54,840 --> 00:12:56,960
Speaker 1: I think when you are scared or you're feeling greedy,

223
00:12:57,040 --> 00:13:00,199
Speaker 1: it gives you a positive emotional outlet take in your

224
00:13:00,200 --> 00:13:03,560
Speaker 1: portfolio back to your targeted allocation. So, in other words,

225
00:13:03,559 --> 00:13:07,680
Speaker 1: the market has gotten she'll act, it's down where it was,

226
00:13:08,200 --> 00:13:10,800
Speaker 1: and your portfolio is supposed to be making up round

227
00:13:10,880 --> 00:13:17,319
Speaker 1: numbers US equities, developed x US and ten percent emerging

228
00:13:17,440 --> 00:13:20,280
Speaker 1: market and all of those have moved off of those

229
00:13:20,800 --> 00:13:24,960
Speaker 1: preset measures. By rebalancing, you mean you're gonna sell a

230
00:13:24,960 --> 00:13:27,760
Speaker 1: little bit of everything else that's run up and move

231
00:13:27,880 --> 00:13:33,960
Speaker 1: these allocations to their previous levels. So if you're supposed

232
00:13:33,960 --> 00:13:37,360
Speaker 1: to be US and now it's twenty seven, you're gonna

233
00:13:37,360 --> 00:13:39,600
Speaker 1: move it back to thirty. Yeah, And the beauty of

234
00:13:39,600 --> 00:13:42,000
Speaker 1: it is two things. A you're buying low selling, high

235
00:13:42,160 --> 00:13:45,440
Speaker 1: proven strategy, but you're also giving yourself back that sense

236
00:13:45,480 --> 00:13:48,560
Speaker 1: of control where okay, this is going on, and here's

237
00:13:48,600 --> 00:13:50,520
Speaker 1: something I can actually do and I know why I'm

238
00:13:50,559 --> 00:13:53,720
Speaker 1: doing it, and that alone, from emotional standpoint, I think

239
00:13:53,760 --> 00:13:56,160
Speaker 1: can help people a lot. It's certainly not the only way,

240
00:13:56,640 --> 00:13:59,600
Speaker 1: but I like it. From a behavioral standpoints quite quite

241
00:13:59,600 --> 00:14:02,959
Speaker 1: interesting thing. Um, anytime people can do something that doesn't

242
00:14:02,960 --> 00:14:05,719
Speaker 1: shoot themselves in the foot, especially when they're dealing with

243
00:14:05,760 --> 00:14:09,280
Speaker 1: their own emotions. Uh, is a really really good thing.

244
00:14:09,800 --> 00:14:12,800
Speaker 1: Let's let's talk a little bit about valuations. Are our

245
00:14:12,960 --> 00:14:16,840
Speaker 1: US markets expensive, cheap or fairly valued? You know, I

246
00:14:16,880 --> 00:14:19,840
Speaker 1: think they're fairly valued when you look at it. Obviously,

247
00:14:19,840 --> 00:14:22,440
Speaker 1: the big question is do we get earnings and revenues growth?

248
00:14:22,520 --> 00:14:25,520
Speaker 1: And that that's a big question. Uh. If we don't

249
00:14:25,560 --> 00:14:28,240
Speaker 1: get earnings, we don't get revenue started up, then obviously

250
00:14:28,280 --> 00:14:30,800
Speaker 1: we can make an argument that stocks are of our valued.

251
00:14:31,320 --> 00:14:34,920
Speaker 1: But I think right now they're probably fairly valued. Um.

252
00:14:35,040 --> 00:14:36,920
Speaker 1: And you know, some people can point to CAPE saying, well,

253
00:14:36,960 --> 00:14:38,920
Speaker 1: that's out of whack, but but that's been out of

254
00:14:38,960 --> 00:14:41,520
Speaker 1: whack for a long time. Yeah, we actually decades out

255
00:14:41,560 --> 00:14:43,800
Speaker 1: of whack. Yeah, we actually are giving an investing portflow.

256
00:14:43,800 --> 00:14:45,920
Speaker 1: We actually just the numbers and thought, okay, what if

257
00:14:45,920 --> 00:14:49,120
Speaker 1: we start out when races first started being raised. Uh back,

258
00:14:49,160 --> 00:14:52,040
Speaker 1: I guess twenty years ago. I started when started peaked,

259
00:14:52,040 --> 00:14:55,160
Speaker 1: they started coming back down from two, and we looked

260
00:14:55,160 --> 00:14:57,360
Speaker 1: at the CAPE from there and based on that measure,

261
00:14:57,400 --> 00:15:00,000
Speaker 1: it's about average. So if you figure, okay, we're an

262
00:15:00,000 --> 00:15:03,400
Speaker 1: slow interest rate environment, it makes sense if you really

263
00:15:03,400 --> 00:15:06,400
Speaker 1: are convinced the Fed's gonna raise rates and every four

264
00:15:06,480 --> 00:15:09,320
Speaker 1: days aggressively, right, and every forecast about that's been wrong

265
00:15:09,360 --> 00:15:12,040
Speaker 1: for six years running. Now. Uh, you know, it's it's

266
00:15:12,040 --> 00:15:15,440
Speaker 1: hard to argue that stocks are expensive on that measure.

267
00:15:15,520 --> 00:15:18,200
Speaker 1: What do you think is a good measure evaluation for

268
00:15:18,680 --> 00:15:22,040
Speaker 1: the average individual investor? Yeah, I think on an average

269
00:15:22,080 --> 00:15:24,400
Speaker 1: level looking at stocks, UM, I like price the book.

270
00:15:24,440 --> 00:15:27,000
Speaker 1: I think price earnings a price of sales from the

271
00:15:27,080 --> 00:15:30,200
Speaker 1: market overall. Uh, the pe is just good because it's

272
00:15:30,200 --> 00:15:32,560
Speaker 1: so easy to find and it's just out there. I'm

273
00:15:32,680 --> 00:15:35,160
Speaker 1: very rid helps you're listening to Masters in Business on

274
00:15:35,200 --> 00:15:38,200
Speaker 1: Bloomberg Radio. My guest this week is Charles Rotblood. He

275
00:15:38,280 --> 00:15:41,000
Speaker 1: is a vice president at the A A I I

276
00:15:41,960 --> 00:15:47,560
Speaker 1: out of Chicago, a nonprofit association of individual investors. I

277
00:15:47,640 --> 00:15:52,760
Speaker 1: mentioned earlier the A A II Acid Allocation Survey, which

278
00:15:52,800 --> 00:15:57,680
Speaker 1: I've been a big fan of, mostly because it only

279
00:15:57,800 --> 00:16:03,640
Speaker 1: makes really significant CAN readings on rare occasions. So first

280
00:16:03,840 --> 00:16:07,560
Speaker 1: let's talk about the survey itself. Tell us about the survey.

281
00:16:07,600 --> 00:16:10,120
Speaker 1: What do you ask people and how often are you

282
00:16:10,160 --> 00:16:12,400
Speaker 1: asking it? Can we do the survey monthly and we

283
00:16:12,480 --> 00:16:16,480
Speaker 1: ask members how much your alacane, the stocks, stock funds, bonds,

284
00:16:16,640 --> 00:16:20,880
Speaker 1: bond funds, and cash. We've done it since seven. We've

285
00:16:20,920 --> 00:16:23,240
Speaker 1: occasionally had people asked, we'll want to include gold, why

286
00:16:23,240 --> 00:16:26,720
Speaker 1: don't you add real estate commodities? Yeah, and our reason is, well,

287
00:16:26,760 --> 00:16:29,400
Speaker 1: we have this history that's been pretty stable that we

288
00:16:29,440 --> 00:16:32,560
Speaker 1: can now compare it against, so to update it, we'd

289
00:16:32,560 --> 00:16:36,800
Speaker 1: lose all that long term records. Yeah, what's the average

290
00:16:36,960 --> 00:16:41,120
Speaker 1: long term history? What is the typical equity exposure stocks

291
00:16:41,120 --> 00:16:46,080
Speaker 1: and stock funds that you get from UM your AII members.

292
00:16:46,200 --> 00:16:50,760
Speaker 1: It's been so about six and I've noticed that there

293
00:16:50,760 --> 00:16:57,720
Speaker 1: are times where it's significantly underweight as well as significantly overweight,

294
00:16:58,200 --> 00:17:02,440
Speaker 1: But it only reaches these streams on rare occasions. In fact,

295
00:17:02,920 --> 00:17:06,000
Speaker 1: you could go back to it was really at a

296
00:17:06,160 --> 00:17:10,879
Speaker 1: very very low level, as overboard as I've ever seen

297
00:17:10,920 --> 00:17:14,280
Speaker 1: it in in later oh two it was back to

298
00:17:14,320 --> 00:17:17,960
Speaker 1: those levels early ninety levels, and then again in O

299
00:17:18,160 --> 00:17:21,840
Speaker 1: nine was the lowest I've ever seen it UM. So

300
00:17:21,880 --> 00:17:24,960
Speaker 1: that's what five four or five signals over over thirty

301
00:17:25,040 --> 00:17:30,440
Speaker 1: years is. This is essentially the intention of the allocations survey.

302
00:17:30,560 --> 00:17:33,359
Speaker 1: Very rarely does it reach those extremes. Yeah, Well, we

303
00:17:33,359 --> 00:17:35,600
Speaker 1: serve our members, and we started just because no one

304
00:17:35,600 --> 00:17:37,760
Speaker 1: else was tracking it? How are you allocating it? So

305
00:17:37,880 --> 00:17:41,520
Speaker 1: we look at more as information, but should certainly coincides

306
00:17:41,560 --> 00:17:43,840
Speaker 1: where he sees the market peaks in these market bottoms

307
00:17:44,280 --> 00:17:46,800
Speaker 1: where people adjust their portfolios, and part of it's just

308
00:17:46,880 --> 00:17:50,400
Speaker 1: portfolios dropping, but part of it, even though we encourage

309
00:17:50,400 --> 00:17:52,159
Speaker 1: our members to be long term, they get to the

310
00:17:52,200 --> 00:17:55,399
Speaker 1: point where fear takes over, our greed takes over, and

311
00:17:55,440 --> 00:17:59,159
Speaker 1: their portfolio goes to extreme levels. So how did the

312
00:17:59,200 --> 00:18:01,959
Speaker 1: survey come ab out? Was it simply, Hey, no one

313
00:18:02,000 --> 00:18:04,760
Speaker 1: else is doing this, let's just start asking our our

314
00:18:04,800 --> 00:18:08,040
Speaker 1: members how they're allocated exactly. It was really a case

315
00:18:08,080 --> 00:18:11,040
Speaker 1: where we just didn't feel like anybody was giving voice

316
00:18:11,040 --> 00:18:14,040
Speaker 1: to individual investors. And that's what really started the sentiment

317
00:18:14,080 --> 00:18:16,919
Speaker 1: survey and the ass allocation survey. Let's give our members

318
00:18:16,920 --> 00:18:19,960
Speaker 1: a voice. Let's actually figure out what they're doing and

319
00:18:20,040 --> 00:18:22,680
Speaker 1: let them explain to everybody else this is what I'm

320
00:18:22,680 --> 00:18:25,679
Speaker 1: actually doing, versus having people, you know, guests as to

321
00:18:25,960 --> 00:18:29,760
Speaker 1: how the individual investors reacting. So you know, we've only

322
00:18:29,800 --> 00:18:34,640
Speaker 1: seen four really extreme um overboord er oversold signals going

323
00:18:34,680 --> 00:18:37,960
Speaker 1: back to you can even say was a was a

324
00:18:38,040 --> 00:18:42,880
Speaker 1: fairly over oversold signals. So let's call it five. Where

325
00:18:42,920 --> 00:18:46,719
Speaker 1: where is the allocation model today? You know, it's pretty

326
00:18:46,760 --> 00:18:49,320
Speaker 1: close to average. Stocks have been running a little bit

327
00:18:49,400 --> 00:18:52,200
Speaker 1: of average, but they're still in a low sixties. Uh.

328
00:18:52,240 --> 00:18:55,080
Speaker 1: And the one thing I hear consistently from our members

329
00:18:55,800 --> 00:18:58,119
Speaker 1: as I can't get any interests, I can't get any yield.

330
00:18:58,600 --> 00:19:00,440
Speaker 1: A lot of our members because they were hire res

331
00:19:00,480 --> 00:19:02,960
Speaker 1: or their near retirement, they're thinking about I need cash,

332
00:19:03,040 --> 00:19:04,840
Speaker 1: I need want to earn something in my cash. So

333
00:19:05,320 --> 00:19:07,159
Speaker 1: I do think there's a lot of investors who are

334
00:19:07,680 --> 00:19:10,479
Speaker 1: either holding cash are investing in stocks because they just

335
00:19:10,600 --> 00:19:13,440
Speaker 1: don't like bonds and they're frustrated with low interest rates

336
00:19:13,440 --> 00:19:17,080
Speaker 1: and they're fearful at some point rates will rise, even

337
00:19:17,080 --> 00:19:20,119
Speaker 1: though that fair has been around for a while. Now, Well,

338
00:19:20,320 --> 00:19:23,280
Speaker 1: I have to think that eventually rates are gonna rise,

339
00:19:23,400 --> 00:19:25,720
Speaker 1: but you don't know when that eventually is going to be,

340
00:19:26,359 --> 00:19:29,600
Speaker 1: and you need the income. Now that that's why they've

341
00:19:29,640 --> 00:19:33,359
Speaker 1: invented bond ladders, so you can basically, as rates go up,

342
00:19:33,440 --> 00:19:37,040
Speaker 1: you sell the most recent year and and reinvested that.

343
00:19:37,040 --> 00:19:40,760
Speaker 1: That should be a fairly standard approach for most bond investors.

344
00:19:40,760 --> 00:19:42,800
Speaker 1: Shouldn't it be. Yeah, it should be. And even if

345
00:19:42,800 --> 00:19:45,240
Speaker 1: somebody doesn't want to own bond funds, they can buy

346
00:19:45,320 --> 00:19:48,600
Speaker 1: there's bullet shairs, which basically our bond ladder funds that

347
00:19:49,119 --> 00:19:51,520
Speaker 1: mature a certain dates. So there's certainly options are you

348
00:19:51,560 --> 00:19:54,400
Speaker 1: could even do it with CDs. Uh even I think

349
00:19:54,400 --> 00:19:55,879
Speaker 1: a lot of people just look at that low interest

350
00:19:55,960 --> 00:19:57,840
Speaker 1: rates and they have a hard time. They can good,

351
00:19:57,840 --> 00:20:00,159
Speaker 1: I'm gonna get one percent of my interest are one

352
00:20:00,160 --> 00:20:02,600
Speaker 1: and a half percent interest and it's hard conceptually to

353
00:20:02,640 --> 00:20:05,760
Speaker 1: figure that out. But they're not thinking, yeah, you're not

354
00:20:05,760 --> 00:20:08,480
Speaker 1: getting paid any interest, but you're also not going to

355
00:20:08,600 --> 00:20:13,360
Speaker 1: lose any money. So so let's talk about the divon investing.

356
00:20:13,400 --> 00:20:16,080
Speaker 1: As long as we're talking about field, you guys have

357
00:20:16,359 --> 00:20:18,720
Speaker 1: in the last minute we have you have the Dividend

358
00:20:18,840 --> 00:20:23,920
Speaker 1: Investing newsletter. I keep hearing from individuals that they're looking

359
00:20:23,960 --> 00:20:27,520
Speaker 1: at dividend stocks as a bond substitute. Are you are

360
00:20:27,520 --> 00:20:30,720
Speaker 1: you hearing anything like that? And what is the dividend

361
00:20:30,800 --> 00:20:34,040
Speaker 1: Investor letter? Like, Yeah, we do, but definitely here about that.

362
00:20:34,119 --> 00:20:37,160
Speaker 1: We hold twenty four dividend paying stocks. We focus on

363
00:20:37,320 --> 00:20:40,679
Speaker 1: growth and low evaluations, so I do think they can

364
00:20:40,720 --> 00:20:43,919
Speaker 1: supplement income. But I think investors need to view bonds

365
00:20:43,920 --> 00:20:45,800
Speaker 1: as this is what I want to use for safety,

366
00:20:46,160 --> 00:20:48,600
Speaker 1: to protect my short term assets, and maybe dip into

367
00:20:48,680 --> 00:20:51,359
Speaker 1: when I need to buy stocks on a dip, versus

368
00:20:52,359 --> 00:20:54,800
Speaker 1: as solely the sources of income. And I think dividends,

369
00:20:54,840 --> 00:20:57,840
Speaker 1: particularly for retired investor can help. But even for someone

370
00:20:58,080 --> 00:21:01,040
Speaker 1: away from retirement, you know, you're just basically juicing the

371
00:21:01,080 --> 00:21:03,359
Speaker 1: game because you get the increasing in your stock price

372
00:21:03,720 --> 00:21:05,480
Speaker 1: and then you're in cash on the side that you

373
00:21:05,520 --> 00:21:08,760
Speaker 1: can then reinvest in stocks and obviously get more dividends

374
00:21:08,920 --> 00:21:12,480
Speaker 1: from doing that reinvestment. I'm Barry Reholts. You're listening to

375
00:21:12,600 --> 00:21:15,879
Speaker 1: Masters in Business on Bloomberg Radio. My special guest this

376
00:21:15,920 --> 00:21:19,639
Speaker 1: week is Charles Rodblood. He is vice president at the

377
00:21:19,680 --> 00:21:23,919
Speaker 1: American Association of Individual Investors. He is also the author

378
00:21:24,000 --> 00:21:27,320
Speaker 1: of Better Good Than Lucky, How Savvy Investors can create

379
00:21:27,359 --> 00:21:31,400
Speaker 1: a fortune with the Risk Reward Ratio, as well as

380
00:21:31,720 --> 00:21:35,760
Speaker 1: editor of the a AII Journal. So we've been talking

381
00:21:35,760 --> 00:21:40,040
Speaker 1: a lot about sentiment and what it means for investing.

382
00:21:40,600 --> 00:21:43,080
Speaker 1: Let's let's get into a little more of the details

383
00:21:43,560 --> 00:21:48,800
Speaker 1: the segment. How important is sentiment analysis to the average

384
00:21:48,840 --> 00:21:52,640
Speaker 1: stock market investor? Yeah, I think it provides some colors

385
00:21:52,680 --> 00:21:55,040
Speaker 1: to what's going on. Um. I definitely think it can

386
00:21:55,080 --> 00:21:58,680
Speaker 1: be an alert to go look closer, particularly if you

387
00:21:58,720 --> 00:22:01,280
Speaker 1: see sentiment being way off, that should be a signed

388
00:22:01,400 --> 00:22:04,399
Speaker 1: what else is going on. I don't think sentiment initially

389
00:22:04,480 --> 00:22:07,760
Speaker 1: higher low drive stock prices in the other direction, but

390
00:22:07,840 --> 00:22:10,480
Speaker 1: it's usually assigned there's some other things going on. Maybe

391
00:22:10,520 --> 00:22:14,040
Speaker 1: evaluations are too high, maybe evaluations too low. Maybe there's

392
00:22:14,040 --> 00:22:16,639
Speaker 1: too much fear being priced into the market. Uh So

393
00:22:16,680 --> 00:22:18,520
Speaker 1: I think it's a good alert to take a step

394
00:22:18,560 --> 00:22:21,320
Speaker 1: back and start looking at the broader forests instead of

395
00:22:21,359 --> 00:22:25,120
Speaker 1: focusing on one tree and asking yourself, have things swung

396
00:22:25,280 --> 00:22:31,080
Speaker 1: too far? And what's causing them to swing too far? Interesting? Um?

397
00:22:31,160 --> 00:22:35,960
Speaker 1: And relevant to this. When do you think sentiment analysis

398
00:22:36,000 --> 00:22:39,760
Speaker 1: works best. Is it something that's just there in the

399
00:22:39,760 --> 00:22:43,159
Speaker 1: background for color, or is there time where it seems

400
00:22:43,200 --> 00:22:45,360
Speaker 1: to be more astute than others? You know, I think

401
00:22:45,359 --> 00:22:47,560
Speaker 1: it's very astute. Whenever you see the market getting very

402
00:22:47,600 --> 00:22:50,359
Speaker 1: expensive or very cheap um. And I think that's the

403
00:22:50,400 --> 00:22:52,440
Speaker 1: time where you can start getting a sense that maybe

404
00:22:52,440 --> 00:22:54,879
Speaker 1: people are going overboard. Uh. I mean we saw this

405
00:22:54,920 --> 00:22:57,080
Speaker 1: with housing when you get to two thousand seven, where

406
00:22:57,080 --> 00:23:00,520
Speaker 1: people were buying no interest loans, you know, over paying

407
00:23:00,520 --> 00:23:03,520
Speaker 1: on houses where everyone's saying, oh, housing can't lose um

408
00:23:03,560 --> 00:23:05,880
Speaker 1: and you start seeing things on magazine covers, it's usually

409
00:23:05,920 --> 00:23:08,360
Speaker 1: a sign that maybe there's too much greed being put

410
00:23:08,359 --> 00:23:11,600
Speaker 1: into the system. And anytime you hear filling the blank

411
00:23:11,760 --> 00:23:14,760
Speaker 1: can't lose, you know there's trouble comming. Absolutely so that

412
00:23:14,840 --> 00:23:19,640
Speaker 1: raises another question. How significant is investor behavior to their

413
00:23:19,640 --> 00:23:23,880
Speaker 1: own ability to generate decent returns. I think it's absolutely critical.

414
00:23:24,040 --> 00:23:26,320
Speaker 1: There's a study I can't recall where it was done,

415
00:23:26,320 --> 00:23:29,120
Speaker 1: but they looked at professional traders and they actually gave

416
00:23:29,160 --> 00:23:32,720
Speaker 1: them cortisol the racer stress hormones, and what the researchers

417
00:23:32,760 --> 00:23:35,359
Speaker 1: figured out was that as the stress hormones were raised,

418
00:23:35,800 --> 00:23:38,960
Speaker 1: these traders who are professionals, became more and more risk adverse.

419
00:23:39,600 --> 00:23:42,560
Speaker 1: Uh So, I think there's definitely a biological components um

420
00:23:42,600 --> 00:23:45,520
Speaker 1: as Conoman and diverse Key found out Daniel Koneman and

421
00:23:45,600 --> 00:23:49,120
Speaker 1: Mr vers Key Bill Laureate Winners and Economics for their

422
00:23:49,119 --> 00:23:52,360
Speaker 1: psychology work. Exactly, they figured out that we're risk adverse

423
00:23:52,440 --> 00:23:55,040
Speaker 1: and we'll pretty much do everything we can to avoid

424
00:23:55,400 --> 00:23:57,960
Speaker 1: occurring losses. Are to limit the pain of losses were

425
00:23:58,000 --> 00:24:01,520
Speaker 1: more focus as humans on avoiding the pain of losses

426
00:24:01,520 --> 00:24:06,160
Speaker 1: than we are gain those gains we feel we feel uh,

427
00:24:06,280 --> 00:24:09,480
Speaker 1: the pleasure of gains half as intensely as we do

428
00:24:09,880 --> 00:24:13,320
Speaker 1: the pain of losses. A rule of thumb, yes, I

429
00:24:13,359 --> 00:24:18,240
Speaker 1: mean really, I find the stuff endlessly um fascinating. So

430
00:24:18,600 --> 00:24:22,680
Speaker 1: from a related perspective and and from your seat dealing

431
00:24:22,720 --> 00:24:25,639
Speaker 1: with a lot of different individual investors, what do you

432
00:24:25,720 --> 00:24:30,160
Speaker 1: think that the average American investor is overly concerned with?

433
00:24:30,480 --> 00:24:33,320
Speaker 1: I know you had mentioned ISIS and the election, but

434
00:24:33,440 --> 00:24:37,680
Speaker 1: those are kind of passing news events. What from a

435
00:24:37,880 --> 00:24:44,760
Speaker 1: thirty thousand foot view, are they consistently over um concerned with? Yeah?

436
00:24:44,760 --> 00:24:47,080
Speaker 1: I think in the day, it's what's front of front

437
00:24:47,080 --> 00:24:48,920
Speaker 1: of mine, what's going on right now? Why are they

438
00:24:49,000 --> 00:24:52,399
Speaker 1: sing at versus thinking long term? I think they just

439
00:24:52,520 --> 00:24:56,800
Speaker 1: succumbed too often to recency bias versus thinking I have

440
00:24:56,840 --> 00:24:58,879
Speaker 1: this portfolio and it needs to last for the end

441
00:24:58,880 --> 00:25:00,960
Speaker 1: of my life, and not even realizing that if you're

442
00:25:00,960 --> 00:25:04,040
Speaker 1: a ter at sixty nowadays, you can be looking at

443
00:25:04,119 --> 00:25:07,040
Speaker 1: thirty or forty years more of life and not thinking

444
00:25:07,040 --> 00:25:09,560
Speaker 1: in terms of those long periods. And it's hard to

445
00:25:09,600 --> 00:25:12,600
Speaker 1: do I think everyone's too focused on the very short term,

446
00:25:12,600 --> 00:25:16,120
Speaker 1: on the immediate headlines, and not thinking over the long

447
00:25:16,240 --> 00:25:19,480
Speaker 1: term and what has history suggested works over the long term.

448
00:25:19,520 --> 00:25:22,280
Speaker 1: I know I'm gonna mangle the statistic because I'm doing

449
00:25:22,280 --> 00:25:25,679
Speaker 1: it from memory, but I recall reading something along the

450
00:25:25,680 --> 00:25:29,639
Speaker 1: lines of if as of today, you make it to

451
00:25:29,760 --> 00:25:33,280
Speaker 1: age seventy five, you have a two and three chance

452
00:25:33,359 --> 00:25:36,320
Speaker 1: of making it to ninety or or something along those lines.

453
00:25:36,760 --> 00:25:39,760
Speaker 1: It's because when you look at the longevity the average lifespan,

454
00:25:40,560 --> 00:25:45,119
Speaker 1: it's relative to you know, how many people died in childbirth,

455
00:25:45,160 --> 00:25:47,760
Speaker 1: and there's a whole series of things that affect the

456
00:25:47,800 --> 00:25:51,120
Speaker 1: average lifespan. But if obviously you make it seventy five,

457
00:25:51,240 --> 00:25:54,520
Speaker 1: you've bypassed all those things, the odds of making it

458
00:25:54,560 --> 00:25:59,159
Speaker 1: to ninety just go up dramatically versus uh the average person,

459
00:25:59,560 --> 00:26:04,200
Speaker 1: which significantly impacts how much money you're gonna need across

460
00:26:04,280 --> 00:26:07,160
Speaker 1: the course of your retirement. Yeah. Absolutely, I mean there's

461
00:26:07,200 --> 00:26:09,720
Speaker 1: things that happened throughout life. People diarly because the diseases,

462
00:26:09,760 --> 00:26:13,399
Speaker 1: their accidents, what have you. And you're right, people get

463
00:26:13,440 --> 00:26:16,760
Speaker 1: to a certain age and then life inspectancies actually started increasing.

464
00:26:16,920 --> 00:26:20,400
Speaker 1: The average life inspectacies, because once you get to seventy five,

465
00:26:20,440 --> 00:26:22,240
Speaker 1: you have all those people that have lived to a

466
00:26:22,320 --> 00:26:25,879
Speaker 1: hundred or older pushing their number reports. So have you

467
00:26:25,880 --> 00:26:29,000
Speaker 1: guys come down on the active versus passive debate? I

468
00:26:29,040 --> 00:26:32,760
Speaker 1: can't say I've seen anything recently along those lines. How

469
00:26:32,920 --> 00:26:35,840
Speaker 1: how do you guys feel about indexing and how important

470
00:26:36,040 --> 00:26:41,360
Speaker 1: is active stock selection to long term returns? Yeah? We're

471
00:26:41,400 --> 00:26:43,719
Speaker 1: both um and I tell people, look, if you have

472
00:26:43,760 --> 00:26:46,439
Speaker 1: no interest, you just don't want to spend time on it.

473
00:26:46,760 --> 00:26:50,360
Speaker 1: Too passive and really passive investing should be your benchmark.

474
00:26:50,400 --> 00:26:52,159
Speaker 1: Can you do better? Can you get more return and

475
00:26:52,240 --> 00:26:55,160
Speaker 1: more income? But I think someone who's willing to take

476
00:26:55,200 --> 00:26:58,119
Speaker 1: some control, particularly if they're willing to step outside the

477
00:26:58,200 --> 00:27:01,359
Speaker 1: SP five hundred and really look at the other several

478
00:27:01,400 --> 00:27:04,639
Speaker 1: thousand stocks that never get mentioned. Uh, they certainly can

479
00:27:04,720 --> 00:27:07,360
Speaker 1: get much higher returns than the SNP five hundred over

480
00:27:07,400 --> 00:27:10,800
Speaker 1: the long term. Are you seeing individuals using a lot

481
00:27:10,880 --> 00:27:13,080
Speaker 1: of e t f s. I know that they're cranking

482
00:27:13,080 --> 00:27:14,679
Speaker 1: out a million of them now has got to be

483
00:27:14,720 --> 00:27:18,800
Speaker 1: over a thousand e t f s. How um useful

484
00:27:18,840 --> 00:27:22,440
Speaker 1: have these become as a tool for individual investors? I

485
00:27:22,480 --> 00:27:24,680
Speaker 1: think it's split I see some people are are using

486
00:27:24,680 --> 00:27:26,920
Speaker 1: them a lot, I think particularly it's I can't really

487
00:27:26,920 --> 00:27:29,000
Speaker 1: say what type. I do think a lot of people

488
00:27:29,040 --> 00:27:30,800
Speaker 1: are using them, but I still see people who are

489
00:27:30,840 --> 00:27:33,440
Speaker 1: fearful about using them. They hear about the higher frequency

490
00:27:33,480 --> 00:27:36,399
Speaker 1: traders UM and these you know, things being kind of

491
00:27:36,400 --> 00:27:38,399
Speaker 1: wild and some bad news when you have some of

492
00:27:38,440 --> 00:27:41,480
Speaker 1: these specialized ones that really just trade out of whack.

493
00:27:42,359 --> 00:27:44,320
Speaker 1: But I think it's mixed, and I haven't necessarily seen

494
00:27:44,359 --> 00:27:46,639
Speaker 1: in a trend where everyone's shifting. The t fs are

495
00:27:46,640 --> 00:27:49,640
Speaker 1: there not UM. You know, I think when people look

496
00:27:49,680 --> 00:27:52,480
Speaker 1: at it really comes down to what's easy and also

497
00:27:52,560 --> 00:27:55,119
Speaker 1: how are you investing if your dollar cost averaging A

498
00:27:55,240 --> 00:27:58,080
Speaker 1: mutual fund works better just because you can buy this

499
00:27:58,240 --> 00:28:01,800
Speaker 1: fractional shares, but you know, a commission explained fractional shares,

500
00:28:01,840 --> 00:28:04,400
Speaker 1: because I bet some listeners are not familiar. You buy

501
00:28:04,400 --> 00:28:07,240
Speaker 1: any TF, you're buying one share of THETF. But with

502
00:28:07,280 --> 00:28:09,679
Speaker 1: the mutual funds, the mutual fund you can buy you know,

503
00:28:09,800 --> 00:28:12,040
Speaker 1: point one oh weight shares. You can buy a thousand

504
00:28:12,040 --> 00:28:14,040
Speaker 1: dollars worth of things that turns out not to be

505
00:28:14,119 --> 00:28:16,760
Speaker 1: an even number. You get the fractional share and they

506
00:28:16,760 --> 00:28:19,440
Speaker 1: can track that exactly, so your entire money goes into

507
00:28:19,480 --> 00:28:21,439
Speaker 1: worth an E T F. Uh. You know, if you

508
00:28:21,440 --> 00:28:23,400
Speaker 1: have an et F and I RA, maybe you have

509
00:28:23,560 --> 00:28:25,959
Speaker 1: twenty dollars and fifty cents and change sitting there in

510
00:28:26,000 --> 00:28:29,159
Speaker 1: cash because it's not enough to buy share of anything,

511
00:28:29,160 --> 00:28:31,680
Speaker 1: single share and over time that on a dollar coast

512
00:28:31,720 --> 00:28:34,840
Speaker 1: averaging basis, that can add up to a lot of money. Absolutely,

513
00:28:35,400 --> 00:28:37,240
Speaker 1: So let's talk a little bit about your book, because

514
00:28:37,280 --> 00:28:40,200
Speaker 1: we really didn't get to that last segment. Better Good

515
00:28:40,200 --> 00:28:44,200
Speaker 1: than Lucky, tell us what is the risk reward ratio? Well,

516
00:28:44,200 --> 00:28:46,360
Speaker 1: I came out with a ten point plan for analyzing

517
00:28:46,360 --> 00:28:50,040
Speaker 1: a stock, looking at valuation, looking at growth rates, looking

518
00:28:50,040 --> 00:28:52,479
Speaker 1: at the balance sheet, and the idea was, how can

519
00:28:52,520 --> 00:28:55,120
Speaker 1: you analytically look at a stock to determine as at

520
00:28:55,200 --> 00:28:58,040
Speaker 1: risky or is it actually a good value um? And

521
00:28:58,080 --> 00:29:00,280
Speaker 1: the whole idea is really has some quantitative where you

522
00:29:00,280 --> 00:29:03,600
Speaker 1: can actually measure stock against. What I'm doing right now

523
00:29:03,640 --> 00:29:06,600
Speaker 1: is I'm actually refining the strategy, trying to actually simplify

524
00:29:06,640 --> 00:29:09,160
Speaker 1: it a little bit more because I really realized at

525
00:29:09,160 --> 00:29:11,720
Speaker 1: the end of the day, if you just get value momentum,

526
00:29:11,800 --> 00:29:15,800
Speaker 1: those two factors which are completely uncorrelated, low value and

527
00:29:15,960 --> 00:29:19,640
Speaker 1: upward moving price. That alone is the cornerstone you need.

528
00:29:19,800 --> 00:29:22,440
Speaker 1: And then just overlay some of factors to get rid

529
00:29:22,480 --> 00:29:25,520
Speaker 1: of the junkier stocks, the stocks with bad balance sheets,

530
00:29:25,560 --> 00:29:28,480
Speaker 1: the stocks are less profitable and add to it. So

531
00:29:28,480 --> 00:29:31,760
Speaker 1: I'm actually revising the strategy right now. But the ideas

532
00:29:31,800 --> 00:29:34,520
Speaker 1: you have a quantitative measure that you can use to

533
00:29:34,640 --> 00:29:37,000
Speaker 1: analyze the stock and determine whether or not it's a

534
00:29:37,000 --> 00:29:41,040
Speaker 1: good value or not. So ultimately, if you are looking

535
00:29:41,080 --> 00:29:44,160
Speaker 1: to identify are these when you say good value, is

536
00:29:44,200 --> 00:29:47,440
Speaker 1: it lower cost stocks or is it just good value

537
00:29:47,560 --> 00:29:51,200
Speaker 1: relative to other characteristics? What what matters most? You know?

538
00:29:51,280 --> 00:29:53,240
Speaker 1: I I look for a low valuation, low price the

539
00:29:53,280 --> 00:29:56,920
Speaker 1: book I'm actually testing right now looking at absolute which

540
00:29:56,960 --> 00:29:59,200
Speaker 1: I used in my book originally looking for a price

541
00:29:59,200 --> 00:30:03,400
Speaker 1: that earnings below twelve price the book below too, but

542
00:30:03,440 --> 00:30:06,920
Speaker 1: I'm also now trying to test it below twelve price

543
00:30:06,960 --> 00:30:08,840
Speaker 1: of the book below too correct? And how does that

544
00:30:08,880 --> 00:30:13,320
Speaker 1: compare to the historical averages for both of those metrics,

545
00:30:13,320 --> 00:30:16,880
Speaker 1: And they tend to actually be in a lower over time.

546
00:30:16,880 --> 00:30:21,280
Speaker 1: I mean obviously at the exactly yes, absolutely times you're

547
00:30:21,280 --> 00:30:23,120
Speaker 1: a little bit higher at the times a little bit lower.

548
00:30:23,440 --> 00:30:25,760
Speaker 1: But in general that seems to mesh pretty well over

549
00:30:25,800 --> 00:30:29,040
Speaker 1: the long term. And and so how does one use

550
00:30:29,120 --> 00:30:32,239
Speaker 1: this metric? Is it just a matter of sorting And

551
00:30:32,280 --> 00:30:35,680
Speaker 1: here's a list of these are the cheapest stocks straight down?

552
00:30:35,800 --> 00:30:37,400
Speaker 1: Is that? Is that the upologe? Yeah? The ideas you

553
00:30:37,400 --> 00:30:39,040
Speaker 1: can use it for a screen or if you know,

554
00:30:39,080 --> 00:30:42,000
Speaker 1: you're watching news and someone says ACTE Incorporated is the

555
00:30:42,040 --> 00:30:45,000
Speaker 1: new company, it's great. You can then take this measure. Okay,

556
00:30:45,040 --> 00:30:48,239
Speaker 1: I'm hearing about the stock. How does it actually stack up?

557
00:30:48,280 --> 00:30:50,400
Speaker 1: And I think for investors, even if they're not using

558
00:30:50,400 --> 00:30:53,400
Speaker 1: that system, just having a set of quantitative measures where

559
00:30:53,400 --> 00:30:56,200
Speaker 1: we can take any stock and measure it against We'll

560
00:30:56,240 --> 00:30:59,320
Speaker 1: give you a quick five minute you know analysis. Is

561
00:30:59,320 --> 00:31:01,400
Speaker 1: this something worth pursuing or is this something I should

562
00:31:01,400 --> 00:31:04,560
Speaker 1: walk away from? And if people want to learn more

563
00:31:04,720 --> 00:31:08,680
Speaker 1: about AII, where would they go to find out more information?

564
00:31:09,000 --> 00:31:12,240
Speaker 1: AII dot com write our websites and they could they

565
00:31:12,240 --> 00:31:14,600
Speaker 1: could become a member, they could subscribe to the journal

566
00:31:14,680 --> 00:31:17,880
Speaker 1: there and your writings are on the AII blog. There

567
00:31:17,960 --> 00:31:20,520
Speaker 1: is that correct, Yes, on the blog. I do actually

568
00:31:20,560 --> 00:31:23,360
Speaker 1: do a weekly email, the AI Investor Update that's on

569
00:31:23,400 --> 00:31:26,160
Speaker 1: the website. Uh, if people want to join it's twenty

570
00:31:26,240 --> 00:31:29,360
Speaker 1: nine dollars a year, so it's very cheap to actually

571
00:31:29,440 --> 00:31:33,240
Speaker 1: subscribe and be a member. That sounds great. We've been

572
00:31:33,280 --> 00:31:36,000
Speaker 1: speaking with Charles Rodblood. He is the vice president of

573
00:31:36,040 --> 00:31:41,360
Speaker 1: the American Association of Individual Investors. If you enjoy this conversation,

574
00:31:41,480 --> 00:31:44,600
Speaker 1: be sure and stick around for the podcast extras, where

575
00:31:44,600 --> 00:31:48,080
Speaker 1: we keep the tape rolling and continue chatting about all

576
00:31:48,160 --> 00:31:52,280
Speaker 1: things investing. Be sure and check out my daily column

577
00:31:52,280 --> 00:31:56,120
Speaker 1: on Bloomberg View dot com. Follow me on Twitter at

578
00:31:56,280 --> 00:32:00,000
Speaker 1: rit Halts. I'm Barry rit Halts. You're listening to Masters

579
00:32:00,000 --> 00:32:03,720
Speaker 1: and Business on Bloomberg Radio. Welcome back to the podcast.

580
00:32:03,760 --> 00:32:06,000
Speaker 1: I don't know why I do this every time, Charlie,

581
00:32:06,040 --> 00:32:08,320
Speaker 1: thank you so much for doing this. This is really interesting.

582
00:32:08,440 --> 00:32:13,320
Speaker 1: I have been either reading your surveys, following the asset

583
00:32:13,320 --> 00:32:16,960
Speaker 1: Allocation model, or or seeing your name in print for

584
00:32:17,600 --> 00:32:19,120
Speaker 1: I don't know how long have you been with them.

585
00:32:19,200 --> 00:32:20,800
Speaker 1: It's been years and years and yeah, I've been there

586
00:32:20,800 --> 00:32:22,520
Speaker 1: about six and a half years now, Okay, but I

587
00:32:23,280 --> 00:32:26,800
Speaker 1: and I've been following a I I stuff, especially that

588
00:32:26,880 --> 00:32:29,960
Speaker 1: asset allocation model, which I've posted on the blog a

589
00:32:29,960 --> 00:32:33,680
Speaker 1: few times for I don't know how long, for for decades.

590
00:32:34,120 --> 00:32:39,600
Speaker 1: I've always anything that generates a signal very infrequently becomes

591
00:32:39,640 --> 00:32:44,080
Speaker 1: really fascinating and people forget about it. Oh yeah, this

592
00:32:44,120 --> 00:32:48,240
Speaker 1: thing hasn't thrown off a signal in in fifteen years.

593
00:32:48,320 --> 00:32:51,720
Speaker 1: Just just ignore it, they said in nine and then

594
00:32:52,520 --> 00:32:57,040
Speaker 1: it went from moderley overweight to aggressively overweight to wow,

595
00:32:57,080 --> 00:33:00,400
Speaker 1: we've never seen this at seventy seven percent when average

596
00:33:00,440 --> 00:33:06,560
Speaker 1: is that's pretty significant. So people kind of forget that

597
00:33:06,680 --> 00:33:10,760
Speaker 1: these things exist because they're most of the time they're

598
00:33:10,760 --> 00:33:13,000
Speaker 1: in the middle of the range. But once they get

599
00:33:13,040 --> 00:33:17,000
Speaker 1: to these extremes, it's really it's really quite fascinated. Yeah,

600
00:33:17,040 --> 00:33:19,560
Speaker 1: and absolutely, I think you're right. People forget what history

601
00:33:19,640 --> 00:33:21,800
Speaker 1: is and it's very easy to do it. But as

602
00:33:21,840 --> 00:33:24,000
Speaker 1: I said earlier, it really comes down to if it's

603
00:33:24,040 --> 00:33:27,960
Speaker 1: reaching those levels, it's a good little trigger stop, look

604
00:33:28,040 --> 00:33:31,760
Speaker 1: what's going on, because it usually one hits his extremes. Uh,

605
00:33:31,960 --> 00:33:34,680
Speaker 1: usually it's pretty close to market bottom or usually pretty

606
00:33:34,680 --> 00:33:37,480
Speaker 1: close to our market peak, and there's usually some other

607
00:33:37,560 --> 00:33:39,680
Speaker 1: things going on. But you're in a day to day

608
00:33:39,680 --> 00:33:42,880
Speaker 1: news the headlines, it's very easy to lose sight that

609
00:33:42,920 --> 00:33:45,120
Speaker 1: you have these longer term indicators, and you can even

610
00:33:45,160 --> 00:33:49,400
Speaker 1: point to the Shiller's Cape and other things where there

611
00:33:49,440 --> 00:33:52,120
Speaker 1: there are long term but once they hit those levels,

612
00:33:52,800 --> 00:33:55,600
Speaker 1: it's really worth paying attention and taking a step back

613
00:33:55,640 --> 00:33:59,120
Speaker 1: and doing that broader analysis. So how did you find

614
00:33:59,160 --> 00:34:01,600
Speaker 1: your way to a AII You've been there for six

615
00:34:01,600 --> 00:34:03,840
Speaker 1: and a half years. How did you Let's let's go

616
00:34:03,920 --> 00:34:06,760
Speaker 1: way back. Where did you tell us about your background?

617
00:34:06,760 --> 00:34:09,680
Speaker 1: Where did you start in in finance? Yeah, I actually

618
00:34:09,719 --> 00:34:13,000
Speaker 1: started finance for a small business valuation firm. And what

619
00:34:13,160 --> 00:34:16,279
Speaker 1: happened was I actually my degrees in journalism, worked in

620
00:34:16,320 --> 00:34:19,160
Speaker 1: advertising for six years UM and then I was doing

621
00:34:19,200 --> 00:34:21,640
Speaker 1: some temp work and I got a call to work

622
00:34:21,680 --> 00:34:23,719
Speaker 1: for a firm and I joined. It was a small

623
00:34:23,760 --> 00:34:27,000
Speaker 1: business valuation firm, so we were valuing closely held businesses

624
00:34:27,560 --> 00:34:30,440
Speaker 1: and I knew Microsoft Excel and the owner when the

625
00:34:30,440 --> 00:34:32,719
Speaker 1: owners of the company said to me, I think it's

626
00:34:32,760 --> 00:34:36,080
Speaker 1: easier to teach accounting than Microsoft Excel. And this is

627
00:34:36,120 --> 00:34:39,600
Speaker 1: the mid nineties where a lot of people weren't computer literate. Uh,

628
00:34:40,040 --> 00:34:41,920
Speaker 1: just happened to be a good fit and that was

629
00:34:42,040 --> 00:34:46,279
Speaker 1: I guess twenty two years ago. I'm assuming you're still

630
00:34:46,520 --> 00:34:49,640
Speaker 1: a regular user of Excel absolutely? Do you like the

631
00:34:49,719 --> 00:34:52,840
Speaker 1: latest version that I was so annoyed. They all the

632
00:34:52,880 --> 00:34:56,439
Speaker 1: buttons that I've grown to love, They've moved hidden, made

633
00:34:56,719 --> 00:34:59,360
Speaker 1: more difficult to find. Oh, I hate the new menu.

634
00:34:59,480 --> 00:35:00,960
Speaker 1: I wish they would go back to the old one.

635
00:35:00,960 --> 00:35:03,680
Speaker 1: I can't find exactly how I feel. You know, I

636
00:35:03,840 --> 00:35:06,040
Speaker 1: kept an old one for as long as I could,

637
00:35:06,360 --> 00:35:10,760
Speaker 1: but eventually the upgrades around it, the operating system upgrades,

638
00:35:10,800 --> 00:35:14,640
Speaker 1: eventually it broke the old Excel, which was just so

639
00:35:14,760 --> 00:35:17,160
Speaker 1: much better than than No. One. Yeah, I don't mind

640
00:35:17,200 --> 00:35:19,040
Speaker 1: when itows ten, but I just hate the way Office

641
00:35:19,040 --> 00:35:21,279
Speaker 1: in General's design. I wish they just give me the

642
00:35:21,320 --> 00:35:24,440
Speaker 1: option to have the old menus back. So I'm waiting

643
00:35:24,480 --> 00:35:27,399
Speaker 1: to go on Stephanie Rules Show a couple of months ago,

644
00:35:28,040 --> 00:35:30,920
Speaker 1: and I'm just sitting there reading through my mail, and

645
00:35:30,960 --> 00:35:33,239
Speaker 1: I look up and there's Bill Gates standing all by

646
00:35:33,320 --> 00:35:36,279
Speaker 1: himself in the back of the room. So I walk

647
00:35:36,360 --> 00:35:38,520
Speaker 1: over and introduced myself. Hey, you should come on our podcast,

648
00:35:38,520 --> 00:35:42,200
Speaker 1: blah blah blah, and uh, I had to tweet something

649
00:35:43,040 --> 00:35:45,360
Speaker 1: and I couldn't just tweet. Met Bill Gates in the

650
00:35:45,400 --> 00:35:49,440
Speaker 1: green room at at at Bloomberg Go. So I I

651
00:35:49,440 --> 00:35:52,279
Speaker 1: swear this is on Twitter, I added complained to him

652
00:35:52,320 --> 00:35:55,800
Speaker 1: about the buttons on on the new Excel, asked to

653
00:35:55,840 --> 00:35:58,680
Speaker 1: go back to the old style, and people like yelled

654
00:35:58,719 --> 00:36:01,200
Speaker 1: at me, like I actually did that. You know, he's

655
00:36:01,200 --> 00:36:05,279
Speaker 1: not a Microsoft anymore. It was a joke exactly. So

656
00:36:05,320 --> 00:36:07,719
Speaker 1: I'm glad to hear when when someone else is an

657
00:36:07,719 --> 00:36:11,799
Speaker 1: Excel Power user and hates those buttons. I used to

658
00:36:11,840 --> 00:36:13,759
Speaker 1: know my way around the program, and now I feel

659
00:36:13,800 --> 00:36:16,279
Speaker 1: like I'm wandering in a in a jee I've never

660
00:36:16,280 --> 00:36:18,960
Speaker 1: been in this town before, and it's been like three years.

661
00:36:19,000 --> 00:36:21,719
Speaker 1: I still haven't adapted to everything. Yeah, I've learned where

662
00:36:21,760 --> 00:36:23,600
Speaker 1: certain things are, if I still find myself clicking on

663
00:36:23,719 --> 00:36:26,120
Speaker 1: things Where's this, Where's that? Because it used to be

664
00:36:26,160 --> 00:36:29,000
Speaker 1: so intuitive. It used to be right there, it's prettier.

665
00:36:29,040 --> 00:36:33,720
Speaker 1: Now it's just much less useful. Absolutely, I completely agree. Um, so,

666
00:36:33,719 --> 00:36:37,200
Speaker 1: so you start out from journalism, how did you eventually

667
00:36:37,239 --> 00:36:40,439
Speaker 1: get to to a AII. Well, so, I started working

668
00:36:40,440 --> 00:36:42,719
Speaker 1: for a small Missis valuation firm and I think it

669
00:36:42,800 --> 00:36:45,879
Speaker 1: was there for about six months and my boss, who's

670
00:36:45,880 --> 00:36:47,759
Speaker 1: also my mentor, looked at me and said, I think

671
00:36:47,800 --> 00:36:49,680
Speaker 1: you should take the CFA exam. I don't think you

672
00:36:49,680 --> 00:36:52,040
Speaker 1: should pass it, but I think you should try, and

673
00:36:52,040 --> 00:36:54,600
Speaker 1: so I took it ended up passing all three on

674
00:36:54,680 --> 00:36:57,360
Speaker 1: the first try. So I go to him, Yeah exactly.

675
00:36:57,360 --> 00:36:59,160
Speaker 1: I guess he knew how to motivate me. And then

676
00:36:59,200 --> 00:37:01,799
Speaker 1: from there, um, I went to work for well, what's

677
00:37:01,840 --> 00:37:05,080
Speaker 1: now Investorals Think or Swim back then it was Telscan

678
00:37:05,160 --> 00:37:10,200
Speaker 1: back then worked for them part of t D exactly exactly. Um,

679
00:37:10,239 --> 00:37:12,600
Speaker 1: So I was with them for about five and a

680
00:37:12,640 --> 00:37:15,319
Speaker 1: half years. Uh. Then I actually took a job in

681
00:37:15,400 --> 00:37:19,240
Speaker 1: Denver working for Curian Capital, which was under the Jackson

682
00:37:19,320 --> 00:37:22,879
Speaker 1: National Life credentials a big shop at one point. Yeah

683
00:37:22,920 --> 00:37:24,239
Speaker 1: it was, and I was working for him. They were

684
00:37:24,280 --> 00:37:27,600
Speaker 1: still pretty much in start up stage. Worked there for

685
00:37:28,320 --> 00:37:31,960
Speaker 1: almost a year. Uh. True. Sequence of events, we had

686
00:37:31,960 --> 00:37:35,200
Speaker 1: our holiday party investco Field, they let the president go,

687
00:37:35,320 --> 00:37:37,239
Speaker 1: and then they had a massive layoff at the firm,

688
00:37:37,280 --> 00:37:40,600
Speaker 1: all in about a span of about six weeks. Yeah.

689
00:37:40,800 --> 00:37:44,520
Speaker 1: So what what led you eventually to to this gig? Well,

690
00:37:44,560 --> 00:37:47,680
Speaker 1: I was in Chicago working for ZAS afterwards, and our

691
00:37:47,800 --> 00:37:50,640
Speaker 1: vice president, Ai is an old Fratorney brother of mine

692
00:37:50,680 --> 00:37:53,719
Speaker 1: from college, and one night he called up and said,

693
00:37:53,760 --> 00:37:57,160
Speaker 1: we have this position. Our editor is retiring. You should

694
00:37:57,200 --> 00:37:59,239
Speaker 1: come in and talk to us and I looked at

695
00:37:59,239 --> 00:38:01,400
Speaker 1: my wife and I said, I know what the organization is.

696
00:38:01,440 --> 00:38:04,080
Speaker 1: I don't know much about this position. By no, Adam

697
00:38:04,120 --> 00:38:07,880
Speaker 1: still going and talk, and pretty soon I into the conversation,

698
00:38:07,920 --> 00:38:11,080
Speaker 1: I realized this could be a really good fit. Yes,

699
00:38:11,239 --> 00:38:15,440
Speaker 1: so it's the Wall Streets old boy network at work. Yeah,

700
00:38:15,480 --> 00:38:20,240
Speaker 1: absolutely so. So you mentioned one of your early mentors earlier,

701
00:38:20,239 --> 00:38:24,160
Speaker 1: but you didn't get any more specific. Who were your mentors? Uh? Well,

702
00:38:24,200 --> 00:38:27,160
Speaker 1: I think for investing, probably my biggest mentor was Jeff Schumacher,

703
00:38:27,239 --> 00:38:30,400
Speaker 1: my first boss. He passed away several years ago, but

704
00:38:30,800 --> 00:38:32,960
Speaker 1: he was a CPA that focused on business valuation, and

705
00:38:32,960 --> 00:38:36,440
Speaker 1: he just really understood the concept of evaluation. And I

706
00:38:36,480 --> 00:38:38,200
Speaker 1: know a lot of people get their start on Wall

707
00:38:38,200 --> 00:38:41,200
Speaker 1: Street working with a big investment banks, but there's something

708
00:38:41,200 --> 00:38:43,359
Speaker 1: about I think working on that private side where you're

709
00:38:43,680 --> 00:38:46,520
Speaker 1: really being hands on and really look at these small businesses,

710
00:38:46,719 --> 00:38:50,440
Speaker 1: understanding how they're actually being run, having to really look

711
00:38:50,440 --> 00:38:53,120
Speaker 1: at the cashlow statement, and I think having evaluation, if

712
00:38:53,160 --> 00:38:55,920
Speaker 1: it goes to court, you're able to defend it. I

713
00:38:55,920 --> 00:38:58,200
Speaker 1: think it definitely. I think from my standpoint, it gave

714
00:38:58,239 --> 00:39:04,279
Speaker 1: me a better background. Quite quite intriguing. Um So he

715
00:39:04,360 --> 00:39:08,000
Speaker 1: was a mentor. What other investors influenced the way you

716
00:39:08,080 --> 00:39:12,120
Speaker 1: think about investor? Yeah, I think Warren Buffett actually did

717
00:39:12,360 --> 00:39:14,319
Speaker 1: his name comes up all the time. Yeah, And and

718
00:39:14,400 --> 00:39:16,640
Speaker 1: really because of Warren Buffett, I sat down and read

719
00:39:16,680 --> 00:39:19,520
Speaker 1: Security Analysis, the whole whatever you have, the whole eight

720
00:39:19,560 --> 00:39:22,920
Speaker 1: hundred pages or whatever it is. Um. I read Phelip

721
00:39:22,960 --> 00:39:26,840
Speaker 1: Fisher's Common Stocks and Common Profits. That that's the second

722
00:39:26,840 --> 00:39:29,480
Speaker 1: time that book has come up in the past a

723
00:39:29,560 --> 00:39:32,360
Speaker 1: couple of weeks. It's it's one of those things that

724
00:39:32,719 --> 00:39:35,520
Speaker 1: is just a classic. Yeah, it is, it really is.

725
00:39:35,560 --> 00:39:38,280
Speaker 1: And so I read a lot of books because of that. Um,

726
00:39:38,320 --> 00:39:40,680
Speaker 1: you know, and that what other investors, you know, other

727
00:39:40,719 --> 00:39:42,920
Speaker 1: investors that influenced me. I mean he's the best a

728
00:39:42,920 --> 00:39:45,239
Speaker 1: lot of people. I just look at things they do. Uh,

729
00:39:45,280 --> 00:39:47,399
Speaker 1: Carl Richards, I try to look at his stuff all

730
00:39:47,440 --> 00:39:49,960
Speaker 1: the time. He does a sketch column for the New

731
00:39:50,040 --> 00:39:54,000
Speaker 1: York Times, and I just love his ability to simplify things. Um.

732
00:39:54,040 --> 00:39:57,360
Speaker 1: I do find myself constantly look at Jim and Shoughness

733
00:39:57,360 --> 00:40:00,640
Speaker 1: sees what works on Wall Street where he book basically

734
00:40:00,800 --> 00:40:05,320
Speaker 1: looks at various indicators for stocks, varias measures how they've worked.

735
00:40:06,040 --> 00:40:08,120
Speaker 1: But I just try to read what other people say.

736
00:40:08,160 --> 00:40:10,760
Speaker 1: This is a really famous book where the customers yachts.

737
00:40:10,800 --> 00:40:13,560
Speaker 1: I know that's been mentioned. It's very funny. Yeah, you know,

738
00:40:13,600 --> 00:40:16,880
Speaker 1: people don't realize it's really a very amusing book. Absolutely,

739
00:40:16,880 --> 00:40:19,440
Speaker 1: and the education sort of sneaks in when you're not

740
00:40:19,440 --> 00:40:21,880
Speaker 1: paying attention. Yeah. And actually recently for an article, I

741
00:40:21,960 --> 00:40:24,919
Speaker 1: picked up Peter Lynch's One Up on Wall Street and

742
00:40:24,960 --> 00:40:27,040
Speaker 1: there's something through that. It was amazed how much in

743
00:40:27,080 --> 00:40:29,680
Speaker 1: that book never gets pointed out too. And he has

744
00:40:29,760 --> 00:40:33,000
Speaker 1: a lot about selling stocks, and all people think is, oh,

745
00:40:33,000 --> 00:40:36,000
Speaker 1: Peter Lynch by what you know, But there's far more

746
00:40:36,080 --> 00:40:40,160
Speaker 1: to strategies than that. He's he's really a fascinating guy.

747
00:40:40,239 --> 00:40:42,839
Speaker 1: I think he's still chairman emeritus or something like that

748
00:40:42,960 --> 00:40:45,480
Speaker 1: at Fidelity up in Boston. Yeah. I don't know what

749
00:40:45,520 --> 00:40:47,440
Speaker 1: his status is right now in terms of career what

750
00:40:47,480 --> 00:40:50,240
Speaker 1: he's doing. It could be possibly. So he stepped down

751
00:40:50,600 --> 00:40:57,480
Speaker 1: um from was it Magellangell like just fantastic time and

752
00:40:57,560 --> 00:41:01,719
Speaker 1: got there ranked wracked up fantastic numbers for a decade,

753
00:41:02,040 --> 00:41:04,839
Speaker 1: oh not even a little less step down at the

754
00:41:04,880 --> 00:41:07,719
Speaker 1: top and kind of just became a marketing person for them.

755
00:41:08,120 --> 00:41:11,799
Speaker 1: But man, what an amazing track record he accrued in

756
00:41:11,800 --> 00:41:15,360
Speaker 1: in a very short period of time. It's really impressive,

757
00:41:15,400 --> 00:41:16,759
Speaker 1: and it would have been curious to see what he

758
00:41:16,840 --> 00:41:19,520
Speaker 1: would have done afterwards. And I think the one advantage

759
00:41:19,560 --> 00:41:21,799
Speaker 1: Warren Buffett has ever Peter Lynch is not having them

760
00:41:21,800 --> 00:41:24,640
Speaker 1: worry about those outflows. And you know, put Peter Lynch

761
00:41:24,680 --> 00:41:26,759
Speaker 1: in a warm buffet type situation where he doesn't have

762
00:41:26,800 --> 00:41:29,560
Speaker 1: to deal with inflows and outflows, it would be interesting.

763
00:41:29,560 --> 00:41:31,040
Speaker 1: It would have been really interesting to see what he

764
00:41:31,040 --> 00:41:33,560
Speaker 1: would have done. So you mentioned a handful of books.

765
00:41:33,600 --> 00:41:36,560
Speaker 1: You mentioned Common Stocks on Common Profits. What other books

766
00:41:36,560 --> 00:41:41,880
Speaker 1: do you find especially important, influential, or just enjoyable. Well,

767
00:41:42,000 --> 00:41:44,279
Speaker 1: one book called point Out it's coming out later this year,

768
00:41:44,400 --> 00:41:47,840
Speaker 1: a little self serving. Our chairman and founder Jim Clinton's

769
00:41:47,840 --> 00:41:51,000
Speaker 1: writting a book called Investing at Level three UH, and

770
00:41:51,080 --> 00:41:54,000
Speaker 1: it's gonna be somewhat controversial because he's basically taking on

771
00:41:54,040 --> 00:41:57,239
Speaker 1: the whole notion of portfolio management UM and his view

772
00:41:57,239 --> 00:42:00,480
Speaker 1: of risk is not the day to day volatility, UH,

773
00:42:00,760 --> 00:42:02,799
Speaker 1: having enough money to last you through the rest of

774
00:42:02,800 --> 00:42:06,920
Speaker 1: your life. So he's really advocating long term going for stocks,

775
00:42:06,960 --> 00:42:09,839
Speaker 1: and he's actually going to make the mathematical argument over

776
00:42:09,880 --> 00:42:12,920
Speaker 1: the long term, not only should you be mostly the stocks,

777
00:42:12,920 --> 00:42:17,040
Speaker 1: but you should actually use some leverage. Uh. If you're leverage,

778
00:42:17,040 --> 00:42:19,600
Speaker 1: he did the calculations, you'll never have a margin call

779
00:42:19,600 --> 00:42:22,719
Speaker 1: over a long period of time, but you'll choose returns.

780
00:42:23,160 --> 00:42:27,080
Speaker 1: But what is so the worst crash we saw huh

781
00:42:28,040 --> 00:42:34,920
Speaker 1: uh nine is gonna be a a near eight percent collapse.

782
00:42:35,040 --> 00:42:37,600
Speaker 1: Wouldn't wouldn't that have generated a margin call? He said?

783
00:42:37,600 --> 00:42:39,600
Speaker 1: Even if you just a little bit to you still

784
00:42:39,640 --> 00:42:41,879
Speaker 1: would have hit it. Yet if you if you went over,

785
00:42:42,000 --> 00:42:44,080
Speaker 1: you would have but that limit, you still have enough

786
00:42:44,120 --> 00:42:47,400
Speaker 1: in there. I mean, you had fifty seven percent recently.

787
00:42:47,800 --> 00:42:51,799
Speaker 1: That shouldn't generate margin call if you so. And I'm

788
00:42:51,800 --> 00:42:54,920
Speaker 1: gonna assume he's in the Nick Murray camp of no bonds,

789
00:42:55,080 --> 00:42:57,840
Speaker 1: just just doing equities. Yeah, his arguments just have about

790
00:42:57,880 --> 00:43:00,120
Speaker 1: four years of bonds, so if you're retired, you have

791
00:43:00,200 --> 00:43:03,239
Speaker 1: money to actually withdraw. And that's a Now I've been

792
00:43:03,239 --> 00:43:05,239
Speaker 1: hearing a lot the ideas for four years, meaning what

793
00:43:06,400 --> 00:43:08,600
Speaker 1: something he depends What depends on the size of your portfolio.

794
00:43:08,600 --> 00:43:11,759
Speaker 1: It's really four years of living expenses. So you know,

795
00:43:11,800 --> 00:43:13,640
Speaker 1: where are you getting some security? What are you getting

796
00:43:13,640 --> 00:43:15,920
Speaker 1: in pensions? And then maybe have annuities and what you

797
00:43:15,960 --> 00:43:18,239
Speaker 1: need outside of that to live on. That's going to

798
00:43:18,360 --> 00:43:21,080
Speaker 1: be a controversial book. Yeah, that'll that'll be interesting to

799
00:43:21,080 --> 00:43:24,399
Speaker 1: see when that comes out. What other books really stick

800
00:43:24,440 --> 00:43:27,120
Speaker 1: out in your mind? Uh? You know, I pointed out

801
00:43:27,360 --> 00:43:29,560
Speaker 1: what works on Wall Street. That's why I have I

802
00:43:29,600 --> 00:43:32,560
Speaker 1: have that in the office and at home. It's a tome,

803
00:43:33,000 --> 00:43:36,000
Speaker 1: but it's terrific. Absolutely, it's terrific. One book that came

804
00:43:36,000 --> 00:43:38,600
Speaker 1: out earlier this year, uh, that I don't think really

805
00:43:38,600 --> 00:43:41,520
Speaker 1: got of attention. It's called The Art of Execution by

806
00:43:41,600 --> 00:43:45,960
Speaker 1: Leaf Freeman. Sure, he's an art of execution exactly, and

807
00:43:46,000 --> 00:43:49,120
Speaker 1: it's all about selling. He he's a manager, really, he's

808
00:43:49,120 --> 00:43:52,960
Speaker 1: a money manager in London. He basically separated his accounts

809
00:43:52,960 --> 00:43:56,239
Speaker 1: around I can't remember how many traders, many traders, and

810
00:43:56,280 --> 00:43:58,280
Speaker 1: then he looked to see, okay, what were the traitors

811
00:43:58,320 --> 00:44:00,839
Speaker 1: who are doing well? What were it? Happits? Were they

812
00:44:00,880 --> 00:44:03,080
Speaker 1: do they have? And the ones you were doing, pully,

813
00:44:03,520 --> 00:44:05,839
Speaker 1: what were they doing? And he actually separated into five

814
00:44:05,840 --> 00:44:10,200
Speaker 1: different tribes, rabbits, hunters, and he basically found commonalities between

815
00:44:10,239 --> 00:44:12,680
Speaker 1: the guys that, like I think rabbits, he said, tended

816
00:44:12,719 --> 00:44:15,560
Speaker 1: to dig a hole when they were down. Versus had

817
00:44:15,560 --> 00:44:18,680
Speaker 1: some other investors where assassins. If a stock fell by

818
00:44:18,719 --> 00:44:21,239
Speaker 1: thirty percent, they would just cut the position and get out.

819
00:44:22,200 --> 00:44:24,080
Speaker 1: He had one group, he said, kind of source, which

820
00:44:24,120 --> 00:44:27,040
Speaker 1: were the most successful long term investors, but they took

821
00:44:27,080 --> 00:44:30,399
Speaker 1: profits over time, so they weren't always trying to sell

822
00:44:30,600 --> 00:44:32,600
Speaker 1: once or just wait for that one big thing, but

823
00:44:33,200 --> 00:44:35,160
Speaker 1: gradually get off of the stock. And it was It's

824
00:44:35,200 --> 00:44:37,880
Speaker 1: interesting because no one really talks so much about selling,

825
00:44:38,440 --> 00:44:41,279
Speaker 1: and he did a very good analysis of it. I

826
00:44:41,360 --> 00:44:44,200
Speaker 1: was gonna say there was one other book I'm familiar with,

827
00:44:44,280 --> 00:44:46,719
Speaker 1: and I want to say it came out in the

828
00:44:46,760 --> 00:44:49,920
Speaker 1: eighties or maybe even earlier, maybe even the seventies by

829
00:44:50,000 --> 00:44:54,400
Speaker 1: Justin Mamis, called When to Sell. But for that book,

830
00:44:54,640 --> 00:44:58,200
Speaker 1: the really you're hard pressed to find a book that says, Okay,

831
00:44:58,239 --> 00:45:01,240
Speaker 1: if you're gonna buy individual stocks, here's what you're selling.

832
00:45:01,239 --> 00:45:05,719
Speaker 1: Discipline should be. It's an amazingly overlooked part of of

833
00:45:05,760 --> 00:45:08,520
Speaker 1: the investing experience. So the name of this book again

834
00:45:08,680 --> 00:45:11,799
Speaker 1: is called the Art of Execution. Art of Execution, and

835
00:45:12,320 --> 00:45:16,040
Speaker 1: is the whole thing on uh, when to jettison stocks?

836
00:45:16,160 --> 00:45:20,520
Speaker 1: Or is it more a broader portfolio. It's it's his

837
00:45:20,640 --> 00:45:23,960
Speaker 1: analysis of those traders, of what each tribe of traders

838
00:45:24,000 --> 00:45:27,200
Speaker 1: actually did and what their commonalities were. So and so

839
00:45:27,239 --> 00:45:29,560
Speaker 1: the book is based on a study he did on

840
00:45:29,640 --> 00:45:32,719
Speaker 1: exactly how many traders did he look at. I try

841
00:45:32,800 --> 00:45:36,360
Speaker 1: to remember, right, you know, I cannot remember the numbers.

842
00:45:36,400 --> 00:45:37,880
Speaker 1: I've drunk a blank on it. But it was a

843
00:45:37,880 --> 00:45:40,080
Speaker 1: pretty I'm gonna guess it's a pretty significant that's a

844
00:45:40,080 --> 00:45:43,319
Speaker 1: pretty central size on there. Um. All right, So let's

845
00:45:43,360 --> 00:45:46,240
Speaker 1: keep going. So you've been in this industry for a while.

846
00:45:46,560 --> 00:45:49,440
Speaker 1: What has changed for the better and for the worst.

847
00:45:50,000 --> 00:45:51,600
Speaker 1: You know, I think for the better in terms of

848
00:45:51,760 --> 00:45:54,760
Speaker 1: people's ability to do research. You know, when I started,

849
00:45:54,760 --> 00:45:57,319
Speaker 1: if I needed to do research, I remember gonna Rice

850
00:45:57,440 --> 00:46:01,520
Speaker 1: University in Houston where I worked, and Hugh's done and

851
00:46:01,520 --> 00:46:05,439
Speaker 1: and go Alexis Nexus, go through periodicals, occasionally through microfish.

852
00:46:05,480 --> 00:46:07,799
Speaker 1: And now you have sites like SSRN where you can

853
00:46:07,840 --> 00:46:12,120
Speaker 1: just anyone can do research. Kenneth French's website on data

854
00:46:12,400 --> 00:46:16,680
Speaker 1: people want long term data on viouation ratios, just tremendous amount,

855
00:46:16,680 --> 00:46:22,120
Speaker 1: completely free. Chiller also has a huge of It's amazing

856
00:46:22,200 --> 00:46:26,160
Speaker 1: how much information academics not only are they publishing. But

857
00:46:26,280 --> 00:46:30,240
Speaker 1: they are doing a huge um it's a huge benefit

858
00:46:30,320 --> 00:46:32,520
Speaker 1: to anyone who's willing to roll up their sleeves and

859
00:46:32,600 --> 00:46:35,239
Speaker 1: wade into it because all the numbers are there. You

860
00:46:35,320 --> 00:46:39,640
Speaker 1: don't have to rely on anecdotes or myths or best guesses.

861
00:46:39,760 --> 00:46:42,359
Speaker 1: The data is actually there. Yeah, I think even just

862
00:46:42,400 --> 00:46:44,560
Speaker 1: a speed helps. You Remember probably in the nineties, if

863
00:46:44,560 --> 00:46:47,560
Speaker 1: you downloaded a ten K from the SEC's website, you

864
00:46:47,640 --> 00:46:49,280
Speaker 1: click on the link and then you'd go make dinner

865
00:46:49,320 --> 00:46:51,799
Speaker 1: and come back and it might be finishing up just

866
00:46:51,960 --> 00:46:56,560
Speaker 1: then you've got mail exactly. How that the dial up modems,

867
00:46:56,560 --> 00:47:00,160
Speaker 1: you weren't moving files, if it wasn't text exactly, who

868
00:47:00,160 --> 00:47:04,280
Speaker 1: could be bothered waiting for that? I totally, I totally

869
00:47:04,440 --> 00:47:09,719
Speaker 1: get that. Um. So, technology clearly has changed how how

870
00:47:09,760 --> 00:47:14,520
Speaker 1: we do business. The amount of information available is tremendous.

871
00:47:14,560 --> 00:47:18,279
Speaker 1: But if everybody has access to the same information, what

872
00:47:18,400 --> 00:47:22,480
Speaker 1: advantage does it beget to any individual investor? Yeah? I

873
00:47:22,480 --> 00:47:25,480
Speaker 1: think it comes down to being disciplined. Um. I think

874
00:47:25,520 --> 00:47:27,560
Speaker 1: individual investors, as I said earlier, I really need to

875
00:47:27,560 --> 00:47:30,279
Speaker 1: think about looking at the whole span of stocks, not

876
00:47:30,480 --> 00:47:34,200
Speaker 1: just you know exactly, not just what you hear about

877
00:47:34,200 --> 00:47:36,880
Speaker 1: in the media because those large institutional investors, as you know,

878
00:47:37,320 --> 00:47:40,839
Speaker 1: they have so much money to invest below certain market capitalization,

879
00:47:40,840 --> 00:47:42,960
Speaker 1: they just can't allocate it. They'd have to buy the

880
00:47:43,080 --> 00:47:45,680
Speaker 1: entire company. Um, And so I think investors need to

881
00:47:45,719 --> 00:47:48,800
Speaker 1: do that. I always encourage investors to just go slow,

882
00:47:49,280 --> 00:47:51,799
Speaker 1: you know, put your trade order in, step up, take

883
00:47:51,840 --> 00:47:53,879
Speaker 1: a deep breath, and just think about what you're doing.

884
00:47:54,360 --> 00:47:58,440
Speaker 1: These high frequency traders, if they're concerned about milliseconds, I

885
00:47:58,480 --> 00:48:01,200
Speaker 1: don't care what app you're used, how speaks are not

886
00:48:01,239 --> 00:48:03,960
Speaker 1: going to be exactly. You have to play a different

887
00:48:03,960 --> 00:48:09,120
Speaker 1: game exactly. Yeah, playing a different different sandbox. I can't

888
00:48:09,120 --> 00:48:13,400
Speaker 1: say I I agree. More so, given given what's changed,

889
00:48:13,560 --> 00:48:15,400
Speaker 1: what do you see as the next shifts that are

890
00:48:15,400 --> 00:48:18,640
Speaker 1: going to take place in finance? Yeah, it's interesting. Um,

891
00:48:18,680 --> 00:48:21,840
Speaker 1: I definitely think the robot advisors are probably gonna continue.

892
00:48:22,360 --> 00:48:24,960
Speaker 1: We'll see what happens with a dictionary rule. Uh yeah.

893
00:48:25,000 --> 00:48:27,440
Speaker 1: I think we're gonna see probably new products from Wall Street.

894
00:48:27,640 --> 00:48:30,920
Speaker 1: We're seeing with ets right now, where they're really reaching

895
00:48:30,960 --> 00:48:33,839
Speaker 1: with new ideas. So, um, I think at some point

896
00:48:34,000 --> 00:48:36,040
Speaker 1: someone's probably gonna come up with some new idea that

897
00:48:36,080 --> 00:48:40,920
Speaker 1: hasn't been created yet. Uh, not sure what's yet you

898
00:48:40,920 --> 00:48:44,040
Speaker 1: always have those big changes that always unexpected. But I

899
00:48:44,080 --> 00:48:46,880
Speaker 1: definitely think there's just too much money, too much creativity,

900
00:48:46,920 --> 00:48:49,760
Speaker 1: and too much type A personalities out there for something

901
00:48:49,800 --> 00:48:52,920
Speaker 1: not brand new to be created. I'm working on a

902
00:48:53,040 --> 00:48:55,760
Speaker 1: robo advisor that all it does is create new types

903
00:48:55,800 --> 00:48:59,200
Speaker 1: of ETF. So every day cranks out twenty new ETFs.

904
00:48:59,600 --> 00:49:01,680
Speaker 1: The goal as we want to have a million ETFs

905
00:49:01,760 --> 00:49:04,000
Speaker 1: by the end of the decade. It feels like that

906
00:49:04,200 --> 00:49:06,239
Speaker 1: sometimes if you look at the number of new names

907
00:49:06,320 --> 00:49:09,560
Speaker 1: that that keep coming out. Um, and now we're down

908
00:49:09,600 --> 00:49:14,680
Speaker 1: to my last two and my favorite questions. So someone

909
00:49:14,719 --> 00:49:17,880
Speaker 1: who's a recent college graduate or a millennial comes to

910
00:49:18,000 --> 00:49:21,960
Speaker 1: you and ask for advice on a career in finance,

911
00:49:22,560 --> 00:49:24,600
Speaker 1: what would you tell them? Yeah, I think the one

912
00:49:24,640 --> 00:49:26,719
Speaker 1: thing more than anything else is just figure out how

913
00:49:26,800 --> 00:49:30,760
Speaker 1: can you explain things asn't simple and asn't simple English

914
00:49:30,840 --> 00:49:33,160
Speaker 1: as possible. I know you've been at conferences. I've been

915
00:49:33,160 --> 00:49:35,960
Speaker 1: at conferences where we get a conversation and I just

916
00:49:36,040 --> 00:49:38,160
Speaker 1: want to say to him, I know what you're saying,

917
00:49:38,200 --> 00:49:40,800
Speaker 1: but let's speak English. And I think the ability to

918
00:49:40,920 --> 00:49:44,360
Speaker 1: just communicate these very complex concepts and very simple, concise

919
00:49:44,480 --> 00:49:49,080
Speaker 1: language that alone is invaluable. I couldn't possibly agree more.

920
00:49:49,160 --> 00:49:51,479
Speaker 1: When people ask me what I do for a living,

921
00:49:51,719 --> 00:49:54,359
Speaker 1: that was a question I asked you. But I always say,

922
00:49:54,960 --> 00:49:58,839
Speaker 1: my job is to take these complex, hard to understand

923
00:49:59,600 --> 00:50:03,680
Speaker 1: sit you nations, and make them simple and easy to understand.

924
00:50:04,200 --> 00:50:07,680
Speaker 1: My wife teaches art, my mother is a retired school

925
00:50:08,280 --> 00:50:12,359
Speaker 1: retired real estate agent. If I can make so when

926
00:50:12,400 --> 00:50:14,480
Speaker 1: they say to me, explain to me what h F

927
00:50:14,560 --> 00:50:18,440
Speaker 1: T is. If I could make somebody both very smart

928
00:50:18,719 --> 00:50:22,320
Speaker 1: but just not in in a field that uses a

929
00:50:22,440 --> 00:50:25,160
Speaker 1: lot of jargon and a lot of math and a

930
00:50:25,239 --> 00:50:30,040
Speaker 1: lot of uh specific financial terms, if I can make

931
00:50:30,080 --> 00:50:32,839
Speaker 1: them understand something in a way that, oh, that makes

932
00:50:32,840 --> 00:50:36,800
Speaker 1: sense and it's not complicated. I know, I've I've achieved something,

933
00:50:37,320 --> 00:50:40,440
Speaker 1: And yours seem to be saying the same thing. Taking

934
00:50:40,719 --> 00:50:46,040
Speaker 1: complex situations and making them easy to understand, that's uh,

935
00:50:46,320 --> 00:50:50,040
Speaker 1: that's something that is important. How does that apply to

936
00:50:50,120 --> 00:50:52,520
Speaker 1: a millennial or someone just starting out in a career

937
00:50:52,560 --> 00:50:54,759
Speaker 1: of finance. Well, I think that's one of the things

938
00:50:54,840 --> 00:50:56,640
Speaker 1: that I think gives them an edge, being able to

939
00:50:56,719 --> 00:50:59,239
Speaker 1: communicate those things no matter you know, whether they want

940
00:50:59,239 --> 00:51:01,120
Speaker 1: to be very calm on a tablelea base where they

941
00:51:01,160 --> 00:51:04,440
Speaker 1: want to do more journalism or editorial. Just having that

942
00:51:04,520 --> 00:51:06,359
Speaker 1: skill set. A lot of people don't have it. It's

943
00:51:06,400 --> 00:51:10,239
Speaker 1: a lot of very smart people that can't necessarily break

944
00:51:10,320 --> 00:51:13,160
Speaker 1: things down to layman's terms. And and that's one skill.

945
00:51:13,200 --> 00:51:14,600
Speaker 1: If you can do it, and you ever have a

946
00:51:14,680 --> 00:51:17,120
Speaker 1: situation where was a bad bear market and it's tough

947
00:51:17,160 --> 00:51:19,840
Speaker 1: to find a jump in finance, you then have that

948
00:51:19,960 --> 00:51:22,200
Speaker 1: skill set where you can't carry it to somewhere else.

949
00:51:22,360 --> 00:51:24,480
Speaker 1: But if you want to work in finance, I think

950
00:51:24,520 --> 00:51:26,600
Speaker 1: it just opens doors for you. But I would say

951
00:51:26,920 --> 00:51:29,680
Speaker 1: I do think in the cf A helps immensely. It's

952
00:51:29,760 --> 00:51:33,160
Speaker 1: definitely helped my career um goods of knowledge base, and

953
00:51:33,239 --> 00:51:36,160
Speaker 1: I think in the industry it's very much smiled upon.

954
00:51:36,280 --> 00:51:39,239
Speaker 1: I know that sounds self serving, Um No, it's absolutely true.

955
00:51:39,280 --> 00:51:41,800
Speaker 1: It's it's we've we've heard that if it's you versus

956
00:51:41,840 --> 00:51:44,000
Speaker 1: another candidate and you're a c f A and they're not,

957
00:51:44,320 --> 00:51:46,719
Speaker 1: you're you, as a c f A very well may

958
00:51:46,760 --> 00:51:49,120
Speaker 1: have have a big advantage there. I found it to

959
00:51:49,160 --> 00:51:52,680
Speaker 1: be completely invaluable in my career. And the final question

960
00:51:52,760 --> 00:51:55,480
Speaker 1: I have, what is it that you know about investing

961
00:51:55,600 --> 00:51:59,239
Speaker 1: today that you wish you knew twenty years ago. Yeah,

962
00:51:59,280 --> 00:52:03,279
Speaker 1: I think probably behavioral finance, and I wish I recognized

963
00:52:03,280 --> 00:52:05,120
Speaker 1: that I knew about it twenty years ago. I think

964
00:52:05,160 --> 00:52:06,759
Speaker 1: not only would have helped me and made me more

965
00:52:06,840 --> 00:52:09,440
Speaker 1: discipline twenty years ago, but I think it might have

966
00:52:09,600 --> 00:52:12,480
Speaker 1: changed the way talk about things and how I view things.

967
00:52:12,520 --> 00:52:14,919
Speaker 1: And I it's probably the last five or six years

968
00:52:15,000 --> 00:52:17,560
Speaker 1: I really started studying and really started grasping it, and

969
00:52:17,640 --> 00:52:20,800
Speaker 1: it just really like when I started really painted to

970
00:52:20,840 --> 00:52:23,800
Speaker 1: the value that really meshed. Behavioral finance really meshed. So

971
00:52:24,440 --> 00:52:26,440
Speaker 1: I really wished twenty years ago I knew more about it.

972
00:52:26,480 --> 00:52:29,440
Speaker 1: And certainly there's a lot more now about a lot

973
00:52:29,520 --> 00:52:31,480
Speaker 1: more that's come out of the last twenty years than

974
00:52:31,640 --> 00:52:34,920
Speaker 1: existed back then. But I think it explains a lot

975
00:52:35,000 --> 00:52:37,160
Speaker 1: of things, not only what other people do, but also

976
00:52:37,520 --> 00:52:40,279
Speaker 1: why we do certain things, and it allows people to

977
00:52:40,400 --> 00:52:42,680
Speaker 1: clear myself, to set up barriers and sub systems so

978
00:52:42,760 --> 00:52:47,640
Speaker 1: I don't make the same mistakes. Really interesting stuff. Charlie Roplitz,

979
00:52:47,800 --> 00:52:51,000
Speaker 1: thank you so much for coming to Bloomberg. We've been

980
00:52:51,040 --> 00:52:54,759
Speaker 1: speaking to Charles rod Blood of the American Association of

981
00:52:54,960 --> 00:52:59,120
Speaker 1: Individual Investors. If you enjoy these conversations. Be sure and

982
00:52:59,200 --> 00:53:01,920
Speaker 1: look up an entry down an inch on Apple iTunes

983
00:53:02,000 --> 00:53:04,759
Speaker 1: and you could see the other ninety or so of

984
00:53:04,880 --> 00:53:08,400
Speaker 1: our podcasts. I would be remiss if I did not

985
00:53:08,640 --> 00:53:13,480
Speaker 1: think Mark our recording engineer, Taylor Riggs, our booker, Michael

986
00:53:13,520 --> 00:53:16,960
Speaker 1: bat Nick, our head of research who helps prepare all

987
00:53:17,000 --> 00:53:21,439
Speaker 1: of these questions, and Charles Wilmer, our producer. Uh, thank

988
00:53:21,480 --> 00:53:24,120
Speaker 1: you for listening. I'm Barry Ritolts. You've been listening to

989
00:53:24,239 --> 00:53:26,560
Speaker 1: Masters in Business on Bloomberg Radio