WEBVTT - Surveillance: McCain Was A Life-Long Learner, Stavridis Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.720 Bloomberg dot com, and of course on the Bloomberg PIM. 0:00:33.720 --> 0:00:36.800 We were over the weekend, UH setting up the best 0:00:36.840 --> 0:00:40.480 way to discuss the Senator from Arizona. My first name 0:00:40.479 --> 0:00:47.000 was Trevillus. Yes, Admiral James George Well, James trevinas I said, 0:00:47.080 --> 0:00:49.520 let's get admirals trevit us out. Of course it tofts 0:00:49.880 --> 0:00:53.600 and of course this wonderful book See Power, which talks 0:00:53.640 --> 0:00:57.840 about our oceans. Uh is well, Admiral, thank you so 0:00:57.920 --> 0:01:02.160 much for joining us this morning. Your thoughts on John McCain, Well, 0:01:02.240 --> 0:01:05.520 let me start. We've been talking correctly about what it 0:01:05.600 --> 0:01:09.840 means that the nation to lose John McCain, If I may, 0:01:09.920 --> 0:01:11.200 I want to tell you what it means for the 0:01:11.360 --> 0:01:15.000 Navy to lose that. That's exactly what I wanted. He is. 0:01:15.440 --> 0:01:18.560 He really is a legend, starting back at the Naval 0:01:18.560 --> 0:01:21.800 Academy where he was the ultimate bad boy. He had 0:01:21.840 --> 0:01:25.760 more demerits than anybody in his class. He graduated at 0:01:25.760 --> 0:01:28.840 the absolute bottom of his class. He got away with 0:01:28.959 --> 0:01:33.640 everything and he was beloved for it. Flashed forward incredible 0:01:33.680 --> 0:01:36.880 heroism in Vietnam. We all know that um and then 0:01:36.959 --> 0:01:39.759 consistently for the rest of his life, the Navy continued 0:01:39.800 --> 0:01:42.160 to be a touchdown. He was the son and grandson 0:01:42.240 --> 0:01:44.560 of two fourth star admirals, and I can tell you, 0:01:44.600 --> 0:01:47.080 as a fourth star admiral myself, that is not an 0:01:47.080 --> 0:01:49.560 easy position. I look at my own children in the 0:01:49.640 --> 0:01:53.600 Navy struggling with that. John McCain was an icon for 0:01:53.680 --> 0:01:56.360 this nation, but even more so for the U. S. Navy. 0:01:56.520 --> 0:01:59.320 We will miss him deeply. Who are the new John 0:01:59.440 --> 0:02:03.560 McCain in the Navy? If you go to Annapolis today, 0:02:03.680 --> 0:02:06.440 who are the new John mccains? How do you build 0:02:06.480 --> 0:02:11.880 them today? We are fortunate that the service academies, and 0:02:11.919 --> 0:02:14.840 here I'll I'll grudgingly admit, the place just up the 0:02:14.919 --> 0:02:19.320 river called West Point does a pretty good job. Thanks 0:02:19.560 --> 0:02:22.480 as that. The Air Force Academy in Colorado, it wasn't 0:02:22.480 --> 0:02:27.079 aware of that either. And all those academies are all 0:02:27.120 --> 0:02:32.040 about duty, honor, country. They are all driven by honor 0:02:32.120 --> 0:02:35.160 codes that say we will not lie, cheat, or steel. 0:02:35.600 --> 0:02:37.840 And they produced people to throw a name out like 0:02:37.919 --> 0:02:41.040 Admiral Mike Mullen, Chairman of the Joint Chiefs for Star 0:02:41.120 --> 0:02:46.600 Admiral as straight as as an arrow and extraordinary leader. 0:02:46.960 --> 0:02:49.520 There are plenty of John McCain's out there these days. 0:02:50.160 --> 0:02:55.440 Admiral Steverda's John McCain was a naval aviator and that 0:02:55.560 --> 0:02:58.680 also had an effect on the way people look at 0:02:58.680 --> 0:03:02.520 appropriations and the power that the US Navy is able 0:03:02.560 --> 0:03:05.239 to project. I'm wondering if you could just comment on 0:03:05.360 --> 0:03:08.840 his role as an naval aviator and what legacy he 0:03:08.840 --> 0:03:12.600 will leave there. Yeah. I have to begin by saying 0:03:12.639 --> 0:03:15.600 that I came out of the Academy and I wanted 0:03:15.639 --> 0:03:17.640 to be a naval aviator, you know, like Goose and 0:03:17.760 --> 0:03:20.720 Maverick and Top Gun. By the way, the remake is 0:03:20.720 --> 0:03:23.680 coming out soon, uh, And I could never do it 0:03:23.720 --> 0:03:26.080 because every time I did a barrel role, I lost 0:03:26.120 --> 0:03:29.519 my lunch in the cockpit. So I have enormous respect 0:03:29.960 --> 0:03:33.960 for these aviators and really that ability to project power 0:03:34.040 --> 0:03:38.520 from c on these massive aircraft carriers, eight combat aircraft 0:03:38.560 --> 0:03:42.320 on the decks of each, seven acres, those sovereign American 0:03:42.400 --> 0:03:45.960 acres that go anywhere. They can move a thousand miles 0:03:45.960 --> 0:03:49.160 in a day. These are extraordinary machines of war, but 0:03:49.240 --> 0:03:53.240 they are useless without these naval aviators like John McCain. 0:03:54.240 --> 0:03:59.000 You commanded the Enterprise Carrier Strike Group and that conducted 0:03:59.040 --> 0:04:04.480 operations in the Persian Gulf operation of Rocky Freedom operation 0:04:04.520 --> 0:04:09.000 and during Freedom. What's changed in terms of the use 0:04:09.400 --> 0:04:13.520 of aircraft carriers to project not just military force but 0:04:13.720 --> 0:04:19.400 political influence. What's really changed since I had command of 0:04:19.520 --> 0:04:24.159 Enterprise and we were doing simultaneous operations in Afghanistan, in 0:04:24.200 --> 0:04:28.400 Iraq and over the Horn of Africa. That that incredible 0:04:28.520 --> 0:04:32.840 operational flexibility, that ability to maneuver, that has not changed. 0:04:32.839 --> 0:04:36.919 But what has changed is the rise of pure navies, 0:04:37.200 --> 0:04:41.479 notably China and Russia have become much more capable at sea. 0:04:41.920 --> 0:04:45.560 So instead of, if you will, getting open sea space 0:04:45.640 --> 0:04:49.560 to move those carriers and simply launch those strikes, today 0:04:49.560 --> 0:04:53.600 our carriers have to worry about other navies at sea 0:04:53.640 --> 0:04:56.360 who can compete with us, like China and Russia. That 0:04:56.440 --> 0:04:59.960 means we have to be better at missile defense, better 0:05:00.000 --> 0:05:03.160 at anti submarine warfare, better at protecting the carrier at 0:05:03.200 --> 0:05:07.480 seed than we had to previously. Admiraldu To finish up 0:05:07.520 --> 0:05:09.920 with our discussion of John McCain before we get back 0:05:09.960 --> 0:05:13.920 to more important international relations matters with your work at 0:05:14.240 --> 0:05:18.520 TuS Fletcher School. Al Hunt, in his beautiful essay, mentions 0:05:18.640 --> 0:05:23.479 John Glenn and I think there's not enough said about 0:05:24.000 --> 0:05:27.880 you know, we know of McCain over Vietnam, but the 0:05:27.920 --> 0:05:31.400 technology of the Korean War that Ted Williams and John 0:05:31.440 --> 0:05:38.159 Glenn flew in was is medieval? Is medieval the right word? Yes, 0:05:38.600 --> 0:05:41.400 medieval is the right word. And you're right to mention 0:05:41.480 --> 0:05:45.440 both of those legends, especially John Glenn, who was a 0:05:45.480 --> 0:05:49.880 lifelong naval aviator. He was a US Marine Corps and 0:05:49.920 --> 0:05:52.360 of course they're part of the Department of the Navy, 0:05:52.560 --> 0:05:56.960 and they flew basically flying crates that were very similar 0:05:56.960 --> 0:05:58.840 to what came out of World War Two. By the 0:05:58.880 --> 0:06:03.680 time John Cane was flying much more advanced radar, much 0:06:03.720 --> 0:06:07.360 better capability. You have to tip your hat to people 0:06:07.400 --> 0:06:11.719 like John Glenn when I when I look at what 0:06:11.800 --> 0:06:14.040 we're talking about here, it is about the deployment. His 0:06:14.160 --> 0:06:17.800 pin was mentioning the boats in the water today, the 0:06:18.200 --> 0:06:22.080 aircraft carrier excuse me, shift, so what I know spoken 0:06:22.120 --> 0:06:26.440 like your thank you? Yeah, God nailed nailed that as 0:06:26.480 --> 0:06:30.839 far as I got airmalster Vitas was a grumming canoe 0:06:31.320 --> 0:06:35.160 with wings, yes, with the wigs within this adimalster view. 0:06:35.200 --> 0:06:38.279 This is a new technology. Would Senator McCain know the 0:06:38.360 --> 0:06:41.240 two technology? Could he land a plane on one of 0:06:41.279 --> 0:06:45.240 these new carriers we have in a minute, And I 0:06:45.279 --> 0:06:48.799 will tell you that actually that technology makes it tom 0:06:48.880 --> 0:06:52.120 So you could probably land plane on an aircraft carrier. 0:06:52.560 --> 0:06:57.120 That's how good it is now. Seriously, John McCain, UH, open, intuitive, 0:06:57.400 --> 0:07:01.280 lifelong learner, and I think that's very important quality and 0:07:01.320 --> 0:07:05.839 a leader that ability to change and step into new technology. 0:07:05.880 --> 0:07:07.920 And John McCain did that every day. That's why he 0:07:07.960 --> 0:07:11.360 was so important on the Senate Armed Services Committee because 0:07:11.360 --> 0:07:15.040 he knew those technologies so well as he was funding 0:07:15.080 --> 0:07:17.440 them for us to take them for Well, let's finish 0:07:17.520 --> 0:07:20.000 up this discussion before we get back to uh the 0:07:20.040 --> 0:07:22.480 work at hand. Your wonderful book in my book of 0:07:22.480 --> 0:07:27.000 the Year, The Leader's Bookshelf had a seventy nine books 0:07:27.120 --> 0:07:30.840 in it. For our listeners, what is the book in 0:07:30.840 --> 0:07:34.680 your the Leader's bookshelf that has the most to do 0:07:34.800 --> 0:07:39.600 with Senator McCain. I think the one that would reflect 0:07:39.600 --> 0:07:43.280 the most would be another prisoner of war story, and 0:07:43.280 --> 0:07:46.840 that's James Stockdale, who you'll recall Tom was at one 0:07:46.840 --> 0:07:51.000 point vice presidential candidate with Rossborough. He and his wife Sybil. 0:07:51.200 --> 0:07:54.000 Stockdale and his wife Sybil wrote a book called In 0:07:54.120 --> 0:07:58.600 Love and War about Stockdale's time in the camps, alternating 0:07:58.680 --> 0:08:02.320 chapters between the two of them. It's a love story 0:08:02.480 --> 0:08:06.600 that transcends war and is also brings to focus what 0:08:06.680 --> 0:08:09.520 John McCain went you win those camps. Let's come back 0:08:09.520 --> 0:08:13.560 with James Durvinus the toughs. James Stockdale pim buried at 0:08:13.560 --> 0:08:16.720 the Naval Academy and Mr mckaine will join him. Yes, 0:08:17.240 --> 0:08:21.280 he was at most Stocktail was also he was shot down, 0:08:22.080 --> 0:08:27.960 uh in North Vietnam. That was in September. We'll come 0:08:27.960 --> 0:08:30.120 back with James Trevines. Lots to talk about on our 0:08:30.160 --> 0:08:33.199 International Relations film. I liked where you're going there with 0:08:33.280 --> 0:08:37.839 the boats at ham today and uh ships boats, ships, Yeah, well, 0:08:38.360 --> 0:08:40.480 I gotta say also, you know, just over the weekend 0:08:41.040 --> 0:08:43.640 there was a report that there were there were three 0:08:43.840 --> 0:08:51.000 Russian warships that were spotted passing through the bus Verus 0:08:51.760 --> 0:08:54.760 that connects Turkey. Let's let's come back and talk to 0:08:54.880 --> 0:08:59.360 James drevinus about that more typical themes what we thank him? First? 0:08:59.360 --> 0:09:17.760 Comments on uh Senator McCain John gollub with us listening 0:09:17.760 --> 0:09:20.400 to the opening show festivities, and there's sort of that 0:09:20.480 --> 0:09:24.600 August and in school used to start Wednesday of Labor Day, 0:09:24.600 --> 0:09:27.640 and that's sort of when you reallocated your portfolio. And 0:09:27.679 --> 0:09:30.360 as we all know, anybody with parents, we hate it. 0:09:30.360 --> 0:09:33.600 It's all starting earlier and earlier. Were there? Now, how 0:09:33.640 --> 0:09:37.280 do you reallocate this morning? Well, I'm first of all, 0:09:37.280 --> 0:09:38.960 I'm not sure that you really do relocate, but you 0:09:38.960 --> 0:09:41.280 and I were talking about this before on TV. The 0:09:41.320 --> 0:09:44.400 real question is how much of your money do you 0:09:44.440 --> 0:09:49.479 put in technology? And how how strong are they equity investment? 0:09:49.559 --> 0:09:53.800 Where do you put it in tech? Yeah? And I think, um, right, 0:09:53.880 --> 0:09:58.360 right now, these companies are just so powerful in their 0:09:58.600 --> 0:10:02.400 ability to earn and their potential upside, and even as importantly, 0:10:02.800 --> 0:10:06.160 the damage that they're doing to other large parts of 0:10:06.200 --> 0:10:09.720 the economy in the process of their success is just 0:10:09.800 --> 0:10:14.000 making them look relatively so much more attractive, relatively attractive, 0:10:14.040 --> 0:10:16.640 and that goes to the idea of value trap. Where's 0:10:16.679 --> 0:10:20.320 the value trap in the market? Our listeners. They're gonna 0:10:20.320 --> 0:10:22.800 make decisions there in cash. They've missed the bull market. 0:10:22.800 --> 0:10:24.680 Where are we twelve months trailing? I can bring this 0:10:24.760 --> 0:10:27.840 up in a Bloomberg quickly with the w E I function. 0:10:28.160 --> 0:10:31.440 It's only up eighteen percent double digit in the last 0:10:31.440 --> 0:10:35.040 twelve months. Okay, fine, where's the value trap that I 0:10:35.120 --> 0:10:37.240 want to buy cheap? But it's a mistake. Well, I 0:10:37.280 --> 0:10:40.040 will tell you. When I'm talking to traditional value investors, 0:10:40.040 --> 0:10:42.720 they're finding it hard to find anything that looks really cheap. 0:10:42.760 --> 0:10:45.160 But I think that perhaps the area might be in 0:10:45.280 --> 0:10:50.240 consumer staples. Companies that were very expensive have fallen a 0:10:50.240 --> 0:10:52.640 fair bit, are a little bit cheaper than the market 0:10:52.760 --> 0:10:56.400 right now, but their their brands are just getting demolished 0:10:56.720 --> 0:10:59.760 by technology. And we are changing the way that we're 0:10:59.800 --> 0:11:03.400 buying things because you can, you know, have you know, 0:11:03.520 --> 0:11:07.080 just search on Google or or or Amazon. I'm going 0:11:07.120 --> 0:11:09.960 to pick up a major consumers something you buy at 0:11:09.960 --> 0:11:13.199 the grocery store all the time, folks. In revenue growth 0:11:13.400 --> 0:11:17.280 is flat with the hope and prayer of single digit 0:11:17.360 --> 0:11:23.240 growth into the future. Versus a major tech company where 0:11:23.240 --> 0:11:26.800 in ninety days you can get two years of revenue 0:11:26.800 --> 0:11:31.160 growth that you get in a food company. And I 0:11:31.200 --> 0:11:33.760 know that you you love the idea of cash flows, 0:11:34.000 --> 0:11:36.200 but if you look at the price for per cash 0:11:36.200 --> 0:11:39.160 flow on these tech companies are trading at a discount 0:11:39.160 --> 0:11:42.480 to the market, partially because investors don't fully believe that 0:11:42.559 --> 0:11:45.400 this growth can continue into the future. And I think 0:11:45.400 --> 0:11:47.640 that they're likely gonna be wrong. And part of this 0:11:47.880 --> 0:11:50.960 is the management of those tech companies. Is it safe 0:11:51.000 --> 0:11:55.079 to say that that they're not making the accounting and 0:11:55.160 --> 0:11:59.520 capital deployment mistakes of previous Tech Bowl markets. I think 0:11:59.520 --> 0:12:02.480 there's a little more responsibility out there and maybe that 0:12:02.640 --> 0:12:04.559 or may just be that that some of these stories 0:12:04.600 --> 0:12:08.080 are are coming of age um and and you know, 0:12:08.200 --> 0:12:10.480 I was mentioning this again on on on the TV 0:12:10.520 --> 0:12:13.200 show this morning, but if you look at the revenue 0:12:13.720 --> 0:12:18.960 revenue chart of Amazon versus Walmart, one of them, you know, 0:12:19.000 --> 0:12:21.520 which is the Amazon line just looks like it launches, 0:12:21.640 --> 0:12:24.000 that it was at one pace for a period of 0:12:24.040 --> 0:12:27.079 time and then all of a sudden revenues and profits 0:12:27.120 --> 0:12:29.880 as we all became more comfortable with the types of 0:12:29.880 --> 0:12:32.520 brands and and this and it's not only that one 0:12:32.559 --> 0:12:34.760 company but others as well. How do you buy tech 0:12:35.400 --> 0:12:38.640 if our listeners say, I don't want to buy just 0:12:38.760 --> 0:12:42.760 the three names everybody else owns. Yeah, I mean you 0:12:42.760 --> 0:12:44.720 can buy any t I you can buy a broad portfolio. 0:12:44.800 --> 0:12:49.040 Might mind you. You know, there's a whole there's obviously 0:12:49.040 --> 0:12:52.080 there's there's there's dozens or hundreds of companies that that 0:12:52.120 --> 0:12:54.439 are part of that that ecosystem. And yeah, you don't 0:12:54.480 --> 0:12:58.439 want to buy just five or seven names. Um And 0:12:58.440 --> 0:13:01.240 and there's there's success stories in everything. In a matter 0:13:01.240 --> 0:13:03.200 of fact, if you even look in areas like reads 0:13:03.760 --> 0:13:06.200 UM with you know, real estate investment trust, which wouldn't 0:13:06.200 --> 0:13:09.040 be what you think about technology, but the most exciting 0:13:09.040 --> 0:13:12.360 companies there are companies they are building data centers UM 0:13:12.480 --> 0:13:15.960 for cloud computing, and those are interesting plays. Um. You're 0:13:15.960 --> 0:13:19.120 seeing that in you know, in in innovative consumer companies 0:13:19.320 --> 0:13:22.000 that are using technology. So it's not just in our group. 0:13:22.280 --> 0:13:24.640 Our David Wilson does a great equity update in the 0:13:24.720 --> 0:13:27.000 nine o'clock hour, sort of like the ten stocks of 0:13:27.040 --> 0:13:29.440 the day. They're moving in that and I have been 0:13:29.640 --> 0:13:33.840 really quite taken by the the the idiosyncrasies of each 0:13:33.960 --> 0:13:36.720 retail story. Now retail has got to react to Amazon. 0:13:36.840 --> 0:13:40.199 We all understand that as well. How do you how 0:13:40.200 --> 0:13:44.319 do you strategize about retail and the cacophony of the 0:13:44.360 --> 0:13:47.680 American consumption. Well, I think you have. I think you 0:13:47.679 --> 0:13:49.840 have a couple of stories here. One is that in 0:13:49.880 --> 0:13:54.959 the near term, these these companies are doing UH surprisingly 0:13:55.160 --> 0:13:59.600 well because the American consumer is in great shape and 0:13:59.800 --> 0:14:03.679 the you know, the unemployment rate is low, wages are 0:14:03.720 --> 0:14:07.120 beginning to rise, which has other side effects, but the 0:14:07.160 --> 0:14:10.200 consumers in super shape and that's helping UM a lot. 0:14:10.200 --> 0:14:16.360 But the question is is it masking UM? Perhaps? And 0:14:16.440 --> 0:14:19.240 I think that the long term story is is somewhat 0:14:19.240 --> 0:14:23.000 dire for many of these brick and mortar names, but 0:14:23.000 --> 0:14:26.680 but no different than people who have invested in Japan, 0:14:27.320 --> 0:14:30.080 where it was for twenty or thirty years a downward 0:14:30.080 --> 0:14:33.640 trend line, but with periods of brilliant jumps where you 0:14:33.720 --> 0:14:36.600 wanted to play play the game. Right now, maybe one 0:14:36.600 --> 0:14:39.160 of those times where retail, even though it's on a downtrend, 0:14:39.560 --> 0:14:44.120 looks absolutely brilliant because the consumers in great about I 0:14:44.240 --> 0:14:46.680 think that large cap companies are probably going to continue 0:14:46.680 --> 0:14:51.440 to do UH to outpage UM there in a in 0:14:51.480 --> 0:14:53.640 a world where again the economy is good right now, 0:14:53.640 --> 0:14:55.520 but in the world world. The economy has been tighter. 0:14:55.560 --> 0:15:00.360 We're managing margins has been the key to six says. 0:15:00.720 --> 0:15:03.080 Larger companies have just done a better job at managing 0:15:03.120 --> 0:15:05.720 those expenses in margins. John Golub with a start at 0:15:05.720 --> 0:15:22.440 sweets as we look at the equity Margaret, you know 0:15:22.440 --> 0:15:24.640 what in August afternoon we had animals to beat us 0:15:24.640 --> 0:15:28.160 on and wonderful comments on John McCain and talking about 0:15:28.720 --> 0:15:32.120 international relations on this day, as we did with John 0:15:32.160 --> 0:15:35.240 gobb of Credit Sweets, a little different conversation, and we 0:15:35.280 --> 0:15:39.080 could do that with Fred Lane with Lane Generational, which 0:15:39.120 --> 0:15:43.680 is a dead serious effort with Raymond James to actually 0:15:44.080 --> 0:15:49.840 talk to people about the emotion of money. Now. Granted, 0:15:50.040 --> 0:15:52.400 you know, Fred Lane, what what's your minimum investment? Two 0:15:52.600 --> 0:15:58.040 dred million, five thousand? What's a reasonable number? And to 0:15:58.080 --> 0:15:59.880 a lot of people that's upot and other people to 0:16:00.040 --> 0:16:03.000 rounding here. But the answer is, and I don't want 0:16:03.000 --> 0:16:05.240 to say, what's a doal gonna do? Should I be 0:16:05.320 --> 0:16:08.600 in the market. I want to talk about how the 0:16:08.800 --> 0:16:13.320 sweat is different now from the kids than it was 0:16:13.440 --> 0:16:16.480 twenty or forty years ago. You've got to deal with 0:16:16.520 --> 0:16:20.280 the emotion of families, the generational and how are the 0:16:20.400 --> 0:16:26.040 kids different than they were a generation ago. Well, I 0:16:26.720 --> 0:16:29.360 don't think the kids are so different. I think we 0:16:29.560 --> 0:16:33.760 as parents and some in some cases, have been overly 0:16:33.840 --> 0:16:37.600 concerned with our kids emotional well being and maybe haven't 0:16:37.960 --> 0:16:41.040 asked him to do enough chores and be self sufficient enough. 0:16:41.080 --> 0:16:44.240 I'm saying this about my own children as well. Um 0:16:44.280 --> 0:16:47.040 But I think in general that my concern is that 0:16:47.160 --> 0:16:50.280 the next generation, UM, well, I think find it a 0:16:50.320 --> 0:16:54.880 little harder to accumulate capital. Then this past generation has founded. 0:16:54.960 --> 0:16:57.000 The baby boomers have found it easier because there were 0:16:57.040 --> 0:17:00.880 so many of us entering the economy that drove GDP growth, 0:17:01.480 --> 0:17:04.359 And I think the I think today's world is a 0:17:04.359 --> 0:17:06.600 little different than it's gonna be harder to accumulate capital. 0:17:06.640 --> 0:17:10.119 I think global growth is going to be over time, 0:17:10.160 --> 0:17:12.040 it's going to be declining, and that's going to make 0:17:12.080 --> 0:17:14.879 it harder to accumulate capital. In the old days, you 0:17:15.080 --> 0:17:18.560 had a cash flow off of a pot of money 0:17:18.640 --> 0:17:23.000 and you could write ignorances tuition to whatever school. Today, 0:17:23.440 --> 0:17:27.320 pim correct me if I'm wrong. It's overwhelming. It is 0:17:27.680 --> 0:17:32.440 for families and generations. It's just overwhelming. How do you 0:17:32.480 --> 0:17:34.399 deal with that? How do you deal with somebody with 0:17:34.440 --> 0:17:37.240 a pot of money who says, look, I can't do 0:17:37.280 --> 0:17:39.520 this because I can't write the checks. I got to 0:17:39.560 --> 0:17:46.880 dip into capital. Well, Michael, actually myel no, no, we're 0:17:46.920 --> 0:17:51.200 taking notes. Yeah, no, I listen. Most of my clients 0:17:51.280 --> 0:17:55.320 aren't in that aren't directly in the crosshairs of that dilemma. However, 0:17:56.080 --> 0:17:59.159 I think the question, and I'm glad it's being asked increasingly, 0:17:59.240 --> 0:18:01.600 is is there are a good return on investment in 0:18:01.640 --> 0:18:06.160 a college education? The rack rate, the rate that's supposed 0:18:06.200 --> 0:18:09.320 to be paid frequently is not okay. So you know, 0:18:09.320 --> 0:18:13.240 you got average university, maybe they're seventy seventy five all end, 0:18:13.240 --> 0:18:15.240 but magically they come up with a scholarship for kids. 0:18:15.320 --> 0:18:17.240 But your kid could put the puck in under the 0:18:17.280 --> 0:18:22.560 crossbar from he was different, thank you. Both My kids 0:18:22.560 --> 0:18:25.320 were different because they were hockey players. And that's rather unfair. 0:18:25.359 --> 0:18:28.720 They are heavily recruited athletes and that and that they're 0:18:28.720 --> 0:18:31.240 they're putting a different class. But for the average, the 0:18:31.359 --> 0:18:35.360 really smart, hard working kid, he's probably not gonna get 0:18:35.480 --> 0:18:38.720 scholarship help if his parents have means and the and 0:18:38.800 --> 0:18:41.159 the worst people that the people who are the worst off, 0:18:41.200 --> 0:18:44.040 I should say, are the people are making two fifty 0:18:44.040 --> 0:18:46.240 thousand dollars year because they're making enough, and they've been 0:18:46.280 --> 0:18:48.840 good savers and put money away, and they have equity 0:18:48.840 --> 0:18:51.120 in their home, and the universities don't want to hear 0:18:51.560 --> 0:18:54.840 about the fact that they need help. And so you know, frankly, 0:18:54.920 --> 0:18:56.479 a lot of those kids are going to end up 0:18:56.720 --> 0:19:00.840 um the beneficiary of their parents large and the parents 0:19:00.920 --> 0:19:02.600 are gonna end up with a lot less than in 0:19:02.640 --> 0:19:05.400 the way of retirement income. And it's it's an unfortunate situation. 0:19:05.600 --> 0:19:08.840 That's one of the reasons I say to everybody, all clients, 0:19:09.119 --> 0:19:12.120 let me meet your children. Let's get the magic compounding 0:19:12.200 --> 0:19:15.879 going when they're young years old. Put away ten fifteen 0:19:15.920 --> 0:19:18.639 thousand dollars a year consistently every year. That adds up 0:19:18.680 --> 0:19:20.480 by the time you're fifty. It's a lot of money 0:19:20.480 --> 0:19:22.720 by the time you're fifty. Fred Fred Lane, I want 0:19:22.760 --> 0:19:27.000 to ask about the context in which we kind of 0:19:27.119 --> 0:19:30.280 do all these comparisons, you know, and and one of 0:19:30.320 --> 0:19:33.320 the things I've kind of noticed is everyone's trying to 0:19:33.359 --> 0:19:36.760 compare now to a period, let's say, after the Second 0:19:36.800 --> 0:19:41.120 World War, and if you look at that as the anomaly. 0:19:42.080 --> 0:19:45.360 Not everyone had any money. I mean, no one had anyoney. 0:19:45.359 --> 0:19:49.240 I can remember conversations around the dining room table where 0:19:49.320 --> 0:19:52.120 when asked about the depression, my father would say, what depression? 0:19:52.160 --> 0:19:54.000 No one had any money before, no one had any 0:19:54.000 --> 0:19:56.560 money during, and no one had any money afterwards. And 0:19:56.600 --> 0:19:59.920 I'm wondering whether we're comparing this to some nostalgic gold 0:20:00.040 --> 0:20:04.280 and age that really didn't exist from most people. Look, 0:20:04.880 --> 0:20:08.000 the standard of living for the average from Americans in 0:20:08.040 --> 0:20:12.480 general is breathtaking lee high, there's no question about it. Uh. 0:20:12.520 --> 0:20:15.640 And yet by comparison, when we see the super wealthy 0:20:15.720 --> 0:20:18.359 and the very wealthy all a function of the accumulation 0:20:18.400 --> 0:20:22.400 of wealth that's gone on, um, you know, certain people 0:20:22.400 --> 0:20:24.400 are gonna feel as if they've missed out, they missed 0:20:24.600 --> 0:20:26.720 missed because they only have two cars and they have 0:20:26.760 --> 0:20:28.280 a boat, and they don't have a summer home, and 0:20:28.320 --> 0:20:31.240 oh too bad. And and I'm not saying that dismissively. 0:20:31.320 --> 0:20:35.159 I'm not saying that dismissively risively, But I'm saying a 0:20:35.160 --> 0:20:37.720 different in a different fashion, which is the wealth effect 0:20:37.720 --> 0:20:40.119 has created a class of human being, a class, a 0:20:40.160 --> 0:20:43.560 small class who are unbelievably wealthy, but you know, it's 0:20:43.560 --> 0:20:46.240 a function time. You know you you remember, I remember 0:20:46.320 --> 0:20:49.080 Pam in six when I came to Wall Street, the 0:20:49.119 --> 0:20:51.639 dow was at six hundred in four d. If you 0:20:51.680 --> 0:20:53.800 had just put money into the market, it didn't matter 0:20:53.840 --> 0:20:56.720 what you did. You know, you you you would accumulate 0:20:56.720 --> 0:20:59.119 tremendous levels of capital. But you have to be in 0:20:59.200 --> 0:21:02.240 the game in order to benefit from the game. Patient 0:21:02.440 --> 0:21:06.320 and also unemotional, staying the course. Staying the course, you 0:21:06.359 --> 0:21:11.399 make adjustments, of course, but no pun intended. But but nonetheless, um, 0:21:11.520 --> 0:21:13.000 you have to be in the game, and you have 0:21:13.080 --> 0:21:15.639 to be unemotional and frankly, you know, when there's a 0:21:15.720 --> 0:21:18.760 rollover in the market, bingo, that's the time to be 0:21:18.800 --> 0:21:21.159 putting money to work. Where I grew up, it was 0:21:21.240 --> 0:21:26.080 people that bought Kodak, you know, from Frank Strong and 0:21:26.080 --> 0:21:28.879 George Eastman, or they bought a company called hay Lloyd, 0:21:29.119 --> 0:21:33.200 which became a company called Xerox. You must have clients 0:21:33.200 --> 0:21:37.200 about Apple for a song or Amazon when they sold books. 0:21:38.040 --> 0:21:40.400 What do you advise them to do when it becomes 0:21:41.200 --> 0:21:45.560 twenty and thirty and of a portfolio? How dare you 0:21:45.640 --> 0:21:48.520 sell that? Do you write? Puts again? It? Well? What 0:21:48.560 --> 0:21:53.760 do you do with a huge gain that overweights a portfolio. Well, 0:21:53.800 --> 0:21:56.560 I think writing some some calls against it, having some 0:21:56.920 --> 0:21:59.240 having some of that stockhold against you makes sense. I mean, 0:21:59.760 --> 0:22:02.600 they're comes a point when there's over concentration in a portfolio. 0:22:02.600 --> 0:22:04.679 I'm talking about, man, I'm not talking about some cutesy 0:22:04.760 --> 0:22:07.919 pie academics out of m I t talking about huge 0:22:08.040 --> 0:22:11.639 overconcer If someone is fifty or eighty or nine of 0:22:11.680 --> 0:22:15.360 their portfolio in one stock, you have to caution them 0:22:15.400 --> 0:22:19.440 to diversify because things happen right now. It's it's it's 0:22:19.440 --> 0:22:21.639 tricky because um, I mean, I have a client who 0:22:21.720 --> 0:22:25.199 owns tens of thousands of stock as a result of 0:22:25.200 --> 0:22:28.720 being on a board, UM, and the stock has continued 0:22:28.720 --> 0:22:31.720 to appreciate and appreciate and appreciate, appreciate. It's very well positioned. 0:22:31.760 --> 0:22:35.720 It's in the life sciences healthcare sect but well it's 0:22:36.040 --> 0:22:40.760 it's fift of this individual's net worth, So it's not excessive. 0:22:41.640 --> 0:22:44.520 It's a little excessive, quite honestly, but there's enough resources 0:22:44.520 --> 0:22:48.720 so it's it's okay. But um, you know we as 0:22:48.760 --> 0:22:50.760 you I think you know. Tom My portfolio for my 0:22:50.800 --> 0:22:54.919 growth investors is fifteen stocks we say we don't rebalance, 0:22:55.000 --> 0:22:57.040 but we do. When we get to eleven or twelve 0:22:57.119 --> 0:22:59.439 or thirteen percent, we have to rebalance. It's imprudent not 0:22:59.480 --> 0:23:03.359 to so we've owned companies, you know. But this is 0:23:03.400 --> 0:23:05.400 against in in Fred and I are on the same 0:23:05.440 --> 0:23:10.639 page on this full disclosure, folks, against the industry of rebalancing. 0:23:11.119 --> 0:23:13.720 If you get the three or four percent of a portfolio, 0:23:14.160 --> 0:23:17.120 and think of all the gain you lost on Apple 0:23:17.240 --> 0:23:21.399 or Amazon if you're smart enough to buy him. I mean, 0:23:22.440 --> 0:23:24.400 there's a whole list of stocks, look at the top. 0:23:25.920 --> 0:23:28.000 I mean, is it too too much, Fred to say 0:23:28.000 --> 0:23:30.800 it's basically on the edge of Sequoia. You and I 0:23:30.800 --> 0:23:33.119 are talking about a model that really harkens back to 0:23:33.160 --> 0:23:37.679 the genius of Sequoia. Absolutely listen. I mean concentration matters. 0:23:37.880 --> 0:23:40.439 You have to you can't. If you own the market, 0:23:40.760 --> 0:23:43.119 you will perform like the market. If you want to 0:23:43.119 --> 0:23:45.600 outperform the market, you have to be concentrated, which means 0:23:45.600 --> 0:23:47.320 you have to have a point of view, and you 0:23:47.400 --> 0:23:51.040 have to have sectors and companies that you know well 0:23:51.080 --> 0:23:54.240 that you feel will will perform in a superior way. 0:23:54.400 --> 0:23:57.080 And that's a focus on secular growth. In my experience 0:23:57.960 --> 0:24:03.040 buy stocks now. Yes, Um, although new money coming in. 0:24:03.160 --> 0:24:06.000