1 00:00:02,440 --> 00:00:08,520 Speaker 1: Bloomberg Audio Studios, podcasts, radio news because I gotta have fame. 2 00:00:18,880 --> 00:00:22,720 Speaker 1: Oscar Wilde once described a cynic as a man who 3 00:00:22,760 --> 00:00:26,239 Speaker 1: knows the price of everything, but the value of nothing. 4 00:00:27,080 --> 00:00:32,400 Speaker 1: Nowhere is understanding value more important than in the stock market. Sure, 5 00:00:32,560 --> 00:00:37,680 Speaker 1: prices get quoted every second, every tick, but value that's 6 00:00:37,720 --> 00:00:41,960 Speaker 1: a much more challenging problem. Whether you're buying broad indices 7 00:00:42,159 --> 00:00:46,680 Speaker 1: or purchasing specific stocks, it pays to not be a 8 00:00:46,760 --> 00:00:52,040 Speaker 1: cynic and understand both price and value of your investments. 9 00:00:52,680 --> 00:00:55,960 Speaker 1: I'm Barry Ritolts, and on today's edition of At the Money, 10 00:00:56,440 --> 00:00:59,800 Speaker 1: we're going to explain how to become more savvy about 11 00:01:00,120 --> 00:01:04,360 Speaker 1: understanding equity values. The value you pay for your investment 12 00:01:04,760 --> 00:01:09,200 Speaker 1: has an outsized impact on your long term returns. To 13 00:01:09,240 --> 00:01:11,240 Speaker 1: help us unpack all of this and what it means 14 00:01:11,240 --> 00:01:15,800 Speaker 1: for your portfolio, let's bring in Professor Aswath Damaduran of 15 00:01:15,959 --> 00:01:19,720 Speaker 1: NYU's School of Business. He is often referred to as 16 00:01:19,760 --> 00:01:23,639 Speaker 1: the Dean of valuation for his extensive work in the area. 17 00:01:24,000 --> 00:01:28,960 Speaker 1: He's written numerous books on the subject, including Damadoran on Valuation, 18 00:01:29,840 --> 00:01:35,880 Speaker 1: Narrative and Numbers, and the textbook Investment Valuation Tools and Techniques. 19 00:01:36,200 --> 00:01:40,600 Speaker 1: For determining the value of any asset. So, Professor, let's 20 00:01:40,640 --> 00:01:44,399 Speaker 1: just start with the basic question, why are valuations so 21 00:01:44,560 --> 00:01:46,760 Speaker 1: important when it comes to equities. 22 00:01:47,120 --> 00:01:49,160 Speaker 2: I'm going to give you a cynical answer. They're not 23 00:01:49,200 --> 00:01:52,600 Speaker 2: important if you're a trader. Traders live on pricing. In 24 00:01:52,600 --> 00:01:54,640 Speaker 2: the essence of pricing is you buy at a low price, 25 00:01:54,680 --> 00:01:56,600 Speaker 2: you set at a high price, and it doesn't really 26 00:01:56,640 --> 00:01:59,120 Speaker 2: matter why the price changes if you get the direction drive, 27 00:02:00,120 --> 00:02:03,040 Speaker 2: value matters if you're an investor. To me, the definition 28 00:02:03,080 --> 00:02:06,400 Speaker 2: of an investor is you buy something for less than 29 00:02:06,440 --> 00:02:08,520 Speaker 2: what it's worth. And the essence of values, you're trying 30 00:02:08,520 --> 00:02:12,399 Speaker 2: to estimate what something is worth. But most as I said, 31 00:02:12,440 --> 00:02:14,440 Speaker 2: it depends on the philosophy you bring in. Are you 32 00:02:14,480 --> 00:02:16,720 Speaker 2: an investor or your trader, because that's going to dry 33 00:02:16,760 --> 00:02:17,880 Speaker 2: whether value matters to you. 34 00:02:18,480 --> 00:02:23,200 Speaker 1: So let's talk about identifying that intrinsic value of what 35 00:02:23,280 --> 00:02:26,760 Speaker 1: something is worth with any specific company. How can you 36 00:02:26,840 --> 00:02:28,720 Speaker 1: determine that valuation. 37 00:02:29,560 --> 00:02:32,720 Speaker 2: It's as old as time that Venetian glass maker is 38 00:02:32,840 --> 00:02:35,840 Speaker 2: sold as business in the Middle Ages. Probably sold it 39 00:02:35,840 --> 00:02:39,679 Speaker 2: to somebody bought it because of the cash flows he generated, 40 00:02:39,840 --> 00:02:42,399 Speaker 2: the risk in those cash flows, and how much those 41 00:02:42,400 --> 00:02:44,400 Speaker 2: cash flows are going to grow. It's cash flows, growth 42 00:02:44,400 --> 00:02:47,160 Speaker 2: and risk. That's the essence of value. That's always been true. 43 00:02:48,000 --> 00:02:51,400 Speaker 2: We act like we invented valuation in the last century 44 00:02:51,600 --> 00:02:54,200 Speaker 2: in finance because we came up with all these neat 45 00:02:54,240 --> 00:02:57,640 Speaker 2: little models and metrics to measure risk and bring it 46 00:02:57,680 --> 00:03:00,800 Speaker 2: into what you need to make. But always been driven 47 00:03:00,800 --> 00:03:03,440 Speaker 2: by cash flows, growth and risk. And how you get 48 00:03:03,480 --> 00:03:07,239 Speaker 2: to that value can come from different pathways. I use 49 00:03:07,280 --> 00:03:13,079 Speaker 2: intrinsic valuation, you know, in that sense as capturing anybody 50 00:03:13,080 --> 00:03:14,760 Speaker 2: who thinks about those fundamentals. 51 00:03:14,840 --> 00:03:19,480 Speaker 1: So let's dive into that intrinsic valuation based on cash flow, 52 00:03:20,120 --> 00:03:23,720 Speaker 1: growth and risk. What different ways are there to measure 53 00:03:23,840 --> 00:03:26,960 Speaker 1: the fundamental value of a company? And how do these 54 00:03:27,000 --> 00:03:30,240 Speaker 1: different valuations reveal intrinsic value? 55 00:03:30,360 --> 00:03:33,160 Speaker 2: I mean, ultimately, cash flows, growth and risk are not 56 00:03:33,280 --> 00:03:35,560 Speaker 2: going to be different for different people. The way we 57 00:03:35,680 --> 00:03:38,360 Speaker 2: think about risk, though, can differ depending on who you 58 00:03:38,400 --> 00:03:40,600 Speaker 2: are as an investor and what do you think matters. 59 00:03:40,920 --> 00:03:42,119 Speaker 3: I mean, I'll give you an example. 60 00:03:42,160 --> 00:03:45,000 Speaker 2: In traditional finance, we think about risk by looking at 61 00:03:45,000 --> 00:03:48,160 Speaker 2: how prices move for a stock relative to the market. 62 00:03:48,880 --> 00:03:50,080 Speaker 3: But there are intrinsic value. 63 00:03:50,120 --> 00:03:52,600 Speaker 2: People argue that true measure of risk is what happens 64 00:03:52,640 --> 00:03:56,320 Speaker 2: to your earnings. Your revenues are operating metrics. So even 65 00:03:56,360 --> 00:03:58,800 Speaker 2: within people who believe in intrinsic value, we can have 66 00:03:58,920 --> 00:04:02,640 Speaker 2: disagreements about how to measure risk, what is the right 67 00:04:02,720 --> 00:04:06,160 Speaker 2: cash flow to look at, and what's the growth rate 68 00:04:06,200 --> 00:04:09,160 Speaker 2: that you think about over what periods. So while we 69 00:04:09,240 --> 00:04:11,880 Speaker 2: might have twenty people in a room, all of whom 70 00:04:12,120 --> 00:04:14,480 Speaker 2: buy into intrinsic value, we can come up with twenty 71 00:04:14,600 --> 00:04:17,840 Speaker 2: different estimates of intrinsic value for the same company at 72 00:04:17,839 --> 00:04:19,000 Speaker 2: the same point in time. 73 00:04:19,520 --> 00:04:23,000 Speaker 1: So we always hear about price to sales, price to book, 74 00:04:23,080 --> 00:04:26,440 Speaker 1: price to earnings. Are these all that different, They're just 75 00:04:26,600 --> 00:04:30,840 Speaker 1: variations on fundamentals, or are they very different ways of 76 00:04:30,880 --> 00:04:32,160 Speaker 1: looking at the same company. 77 00:04:32,800 --> 00:04:35,520 Speaker 2: Philosophically, they're very different because when you compute the price 78 00:04:35,560 --> 00:04:38,600 Speaker 2: earnings or the ev Tabidov price to book for a company, 79 00:04:38,640 --> 00:04:41,360 Speaker 2: what you do is you compare to other companies out there, 80 00:04:41,400 --> 00:04:44,040 Speaker 2: and you make a judgment and saying, in this company 81 00:04:44,120 --> 00:04:47,640 Speaker 2: trades at ten times earnings, other companies like it, and 82 00:04:47,680 --> 00:04:49,960 Speaker 2: I'm going to put quotes on like it trade at 83 00:04:50,040 --> 00:04:53,679 Speaker 2: fifteen times earnings. Therefore as cheap, that's a pricing judgment. 84 00:04:53,720 --> 00:04:57,240 Speaker 2: There's nothing value in here, there's no intrinsic value judgment. 85 00:04:57,320 --> 00:05:00,000 Speaker 2: That's why all of seal side equity research, I would argue, 86 00:05:00,800 --> 00:05:01,680 Speaker 2: is all about pricing. 87 00:05:01,720 --> 00:05:02,919 Speaker 3: It's not about valuation. 88 00:05:03,440 --> 00:05:06,159 Speaker 2: Nothing wrong with it, but we should be honest about 89 00:05:06,160 --> 00:05:09,440 Speaker 2: what we're doing. So when you use ratios, it's because 90 00:05:09,480 --> 00:05:12,039 Speaker 2: you want to find something cheap by comparing it to 91 00:05:12,240 --> 00:05:15,520 Speaker 2: other things out there that are being traded right now, 92 00:05:15,560 --> 00:05:17,840 Speaker 2: and you're looking at what other people are paying, so. 93 00:05:17,760 --> 00:05:21,280 Speaker 1: You're looking at price. When people look at stocks that way, 94 00:05:21,320 --> 00:05:26,080 Speaker 1: they're looking at price and relative valuation, non intrinsic value. 95 00:05:26,480 --> 00:05:29,600 Speaker 1: Let's talk about some of the things you've explained in 96 00:05:29,200 --> 00:05:33,880 Speaker 1: your books. Valuation requires a deeper understanding of the business, 97 00:05:34,320 --> 00:05:38,159 Speaker 1: including how it makes money and its future prospects. Give 98 00:05:38,279 --> 00:05:40,040 Speaker 1: us a little more detail on that. 99 00:05:40,800 --> 00:05:43,000 Speaker 2: I'll give you an example, and it's a personal example. 100 00:05:43,920 --> 00:05:46,719 Speaker 2: I bought in Media purely by luck in two thousand 101 00:05:46,760 --> 00:05:49,800 Speaker 2: and eighty. I didn't see AI coming, none of this stuff. 102 00:05:49,839 --> 00:05:53,880 Speaker 2: So sometimes your best investments happened by accident. So last 103 00:05:53,960 --> 00:05:57,480 Speaker 2: year I had to revalue in Vidia for a simple reason. 104 00:05:57,920 --> 00:06:00,240 Speaker 2: I mean I bought it at twenty seven dollars per Yeah, 105 00:06:00,279 --> 00:06:03,400 Speaker 2: the stock was trading at eight hundred dollars per share, 106 00:06:03,720 --> 00:06:05,560 Speaker 2: and I had to decide is it time to leave? 107 00:06:06,120 --> 00:06:08,760 Speaker 2: So as I sat down to value VideA, I started 108 00:06:08,800 --> 00:06:11,120 Speaker 2: with a presumption that was a computer chip company that 109 00:06:11,160 --> 00:06:13,400 Speaker 2: had made chips and sold them, and I had to 110 00:06:13,520 --> 00:06:16,760 Speaker 2: estimate cash flows based on that. It's only as I 111 00:06:16,800 --> 00:06:19,599 Speaker 2: started digging a little deeper that I realized that they're 112 00:06:19,640 --> 00:06:23,400 Speaker 2: not a chip maker, They're a chip designer. Every Invidia 113 00:06:23,520 --> 00:06:27,320 Speaker 2: chip is made by TSMC, which basically changes the way 114 00:06:27,360 --> 00:06:30,359 Speaker 2: you think about the business. If you're doing pricing, you 115 00:06:30,440 --> 00:06:32,559 Speaker 2: might be able to gloss over it, it doesn't matter 116 00:06:32,640 --> 00:06:35,320 Speaker 2: that they do it, but if you're doing intrinsic valuation, 117 00:06:35,600 --> 00:06:38,520 Speaker 2: because I have to estimate cash flows, I have to 118 00:06:38,560 --> 00:06:41,120 Speaker 2: think about what is it that they spend to create 119 00:06:41,200 --> 00:06:44,800 Speaker 2: these revenues, and that requires an understanding of how they 120 00:06:44,839 --> 00:06:48,279 Speaker 2: conduct their business. I mean Warren Buffett a famous saying 121 00:06:48,320 --> 00:06:51,880 Speaker 2: that he doesn't buy stocks, he buys shares of businesses. That, 122 00:06:52,040 --> 00:06:54,840 Speaker 2: to me, in essence, is what you're doing in intrinsic valuation. 123 00:06:55,400 --> 00:06:57,400 Speaker 2: You're not buying a share of Apple or a share 124 00:06:57,400 --> 00:07:01,120 Speaker 2: of Amazon. You're buying a slice of those businesses. That's 125 00:07:01,120 --> 00:07:03,960 Speaker 2: what you're doing. You better understand what you're buying before 126 00:07:04,000 --> 00:07:04,719 Speaker 2: you pay a price. 127 00:07:05,320 --> 00:07:08,760 Speaker 1: So can we apply the same theory of valuation to 128 00:07:08,920 --> 00:07:12,360 Speaker 1: broad indices as opposed to just individual stocks. 129 00:07:13,240 --> 00:07:15,680 Speaker 2: Absolutely, I mean it's cash flows, growth and risk drive 130 00:07:15,720 --> 00:07:18,640 Speaker 2: the value of Invidia. Cash flows, growth and risk, because 131 00:07:18,680 --> 00:07:20,760 Speaker 2: what drives the value the S and P five hundred 132 00:07:20,800 --> 00:07:23,880 Speaker 2: or the nasdat. In fact, that's the process I use 133 00:07:23,920 --> 00:07:25,960 Speaker 2: at the start of every month to come up with 134 00:07:26,000 --> 00:07:29,160 Speaker 2: an estimate or what investors are pricing in the S 135 00:07:29,200 --> 00:07:31,720 Speaker 2: and P five hundred and what they can expect to 136 00:07:31,760 --> 00:07:34,680 Speaker 2: earn given the cash flow. It's a very intrinsic value 137 00:07:34,800 --> 00:07:37,280 Speaker 2: view of what can you expect to make as a 138 00:07:37,360 --> 00:07:39,040 Speaker 2: rate of return on an index. 139 00:07:39,880 --> 00:07:45,240 Speaker 1: So that raises, you know, the real important question, what 140 00:07:45,320 --> 00:07:49,680 Speaker 1: do these measures of evaluations mean for future expected returns? 141 00:07:50,160 --> 00:07:52,320 Speaker 2: The more you pay for something, let's cut away from 142 00:07:52,440 --> 00:07:57,200 Speaker 2: all of the noise in this process, The more you 143 00:07:57,320 --> 00:08:01,320 Speaker 2: pay for something upfront, the low you're expected returns are 144 00:08:01,320 --> 00:08:03,720 Speaker 2: going to be. Because if you pay more upfront, and 145 00:08:03,800 --> 00:08:07,400 Speaker 2: that's just common sense. So when you buy the S 146 00:08:07,440 --> 00:08:10,960 Speaker 2: and P five hundred at fifty three hundred, you can 147 00:08:11,000 --> 00:08:13,400 Speaker 2: expect to earn a lower return than if you bought. 148 00:08:13,160 --> 00:08:14,679 Speaker 3: It at fifty one hundred. 149 00:08:15,240 --> 00:08:18,320 Speaker 2: So if you bought it last week, your expected denerve 150 00:08:18,440 --> 00:08:20,040 Speaker 2: was lower than if you bought it today. 151 00:08:20,960 --> 00:08:23,200 Speaker 3: And that's at the basis of intrinsic value. 152 00:08:23,240 --> 00:08:26,920 Speaker 2: It's about paying the right price for something upfront. 153 00:08:27,560 --> 00:08:29,200 Speaker 3: Is the most critical decision you make. 154 00:08:29,480 --> 00:08:34,560 Speaker 1: So you consistently in all your books emphasize that value 155 00:08:34,960 --> 00:08:38,880 Speaker 1: is not price. So how should investors think about the 156 00:08:38,960 --> 00:08:44,040 Speaker 1: difference between the quoted fluctuated price we see every day, 157 00:08:44,760 --> 00:08:48,280 Speaker 1: the quoted fluctuating price that we see every moment on 158 00:08:48,360 --> 00:08:51,320 Speaker 1: the market, and that deep intrinsic value. 159 00:08:51,640 --> 00:08:54,920 Speaker 2: Recognize there are two different processes. Nothing makes one better 160 00:08:54,960 --> 00:08:58,320 Speaker 2: than the other. Different processes. Values driven by changes in 161 00:08:58,360 --> 00:09:02,840 Speaker 2: your earnings, cash flows, growth risk, and that's captured by 162 00:09:02,920 --> 00:09:06,040 Speaker 2: changing value over time. So I'm not saying intrinsic value 163 00:09:06,080 --> 00:09:10,600 Speaker 2: somehow stable stagnant number. The intrinsic value in radio doubled 164 00:09:10,640 --> 00:09:14,000 Speaker 2: because of its entry into AI. Intrinsic value can change. 165 00:09:14,360 --> 00:09:18,120 Speaker 2: Price is driven by demand and supply, driven by mood 166 00:09:18,200 --> 00:09:21,320 Speaker 2: and momentum, and I think one of the best indicators 167 00:09:21,320 --> 00:09:23,080 Speaker 2: you can take a mood and momentum is when the 168 00:09:23,160 --> 00:09:27,240 Speaker 2: momentum is good All news is good news. In fact, 169 00:09:27,240 --> 00:09:31,880 Speaker 2: there's a whole segment of finance called behavioral finance, and 170 00:09:31,960 --> 00:09:35,240 Speaker 2: behavioral finance tries to explain why price can not only 171 00:09:35,320 --> 00:09:40,240 Speaker 2: deviate from value but stay different for long periods. There 172 00:09:40,400 --> 00:09:43,880 Speaker 2: this inherent belief that value investors have that price will 173 00:09:43,920 --> 00:09:47,600 Speaker 2: move towards value and it will happen quickly. That's not true. 174 00:09:47,880 --> 00:09:50,839 Speaker 2: Price can deviate from value. It can stay separated from 175 00:09:50,920 --> 00:09:53,920 Speaker 2: value for long periods, which means if you're an intrinsic 176 00:09:54,000 --> 00:09:57,360 Speaker 2: value investor, you're going to get incredibly frustrated because you 177 00:09:57,400 --> 00:09:58,120 Speaker 2: think you got. 178 00:09:57,960 --> 00:09:59,720 Speaker 3: It right, but you keep losing money. 179 00:10:00,120 --> 00:10:03,640 Speaker 1: So you're referring to mean reversion. The expectation is that 180 00:10:03,840 --> 00:10:08,400 Speaker 1: pricey things eventually come back down to fair value, and 181 00:10:08,720 --> 00:10:13,679 Speaker 1: inexpensive things will eventually be recognized and return to fair value. 182 00:10:14,160 --> 00:10:17,600 Speaker 1: How long does this process take? Is it guaranteed to happen? 183 00:10:18,040 --> 00:10:20,199 Speaker 1: Does that mean reversion always occur? 184 00:10:21,440 --> 00:10:24,959 Speaker 2: It's not just mean reversion, it's assumption that values what 185 00:10:25,120 --> 00:10:26,440 Speaker 2: matters in the long term. 186 00:10:26,920 --> 00:10:30,000 Speaker 3: I mean that's almost ill. I mean when I. 187 00:10:30,160 --> 00:10:32,520 Speaker 2: Start my valuation class, I started the question do you 188 00:10:32,559 --> 00:10:35,600 Speaker 2: have faith? My students look at me, say it's evaluation class. 189 00:10:35,600 --> 00:10:37,520 Speaker 2: What are you talking about? I said, the essence of 190 00:10:37,559 --> 00:10:40,960 Speaker 2: investing is faith. Faith that your estimated value is the 191 00:10:41,040 --> 00:10:44,960 Speaker 2: right value, and faith that the price will move to value. 192 00:10:45,400 --> 00:10:46,560 Speaker 3: And the essence of faith. 193 00:10:46,679 --> 00:10:48,800 Speaker 2: If you asked me to prove it, and if you 194 00:10:48,840 --> 00:10:50,839 Speaker 2: told me, tell me what will cause it to. 195 00:10:50,760 --> 00:10:53,160 Speaker 3: Happen, my answer is, I don't know. It's a mystery. 196 00:10:53,440 --> 00:10:54,079 Speaker 3: I mean, it's like. 197 00:10:54,080 --> 00:10:56,400 Speaker 2: Going to church and going up to your pastor or 198 00:10:56,400 --> 00:10:58,760 Speaker 2: your rabbi and saying, can you give me some proof 199 00:10:58,840 --> 00:10:59,640 Speaker 2: that God exists? 200 00:10:59,679 --> 00:11:02,320 Speaker 3: I keep coming back every you know, every week. 201 00:11:02,160 --> 00:11:06,120 Speaker 2: Because I and if that rabbi, a priest or you 202 00:11:06,120 --> 00:11:08,640 Speaker 2: know is telling you the truth, they should say look enough. 203 00:11:08,760 --> 00:11:10,439 Speaker 3: I can't give you that proof. It's faith. 204 00:11:11,080 --> 00:11:14,280 Speaker 2: And I think that's what makes investing so difficult is 205 00:11:14,320 --> 00:11:17,240 Speaker 2: it's driven by faith rather than by proof. So if 206 00:11:17,240 --> 00:11:20,400 Speaker 2: you ask me, you know, if I bought something undervalued, 207 00:11:20,559 --> 00:11:22,959 Speaker 2: am I guaranteed to make money in the long term? 208 00:11:23,000 --> 00:11:25,360 Speaker 3: Absolutely not. And you have to be okay with it. 209 00:11:25,400 --> 00:11:28,640 Speaker 2: If you're not okay with it buying a text file, 210 00:11:29,080 --> 00:11:32,520 Speaker 2: don't invest or be a trader. The essence of investing 211 00:11:32,600 --> 00:11:35,439 Speaker 2: is you can do everything right and I have nothing 212 00:11:35,480 --> 00:11:36,920 Speaker 2: to show for it, and you have to be okay 213 00:11:36,960 --> 00:11:37,200 Speaker 2: with that. 214 00:11:37,520 --> 00:11:41,720 Speaker 1: Wow, So, professor, bottom line it for us when we 215 00:11:41,800 --> 00:11:45,920 Speaker 1: think about valuation, when investors look at equities, what should 216 00:11:45,960 --> 00:11:50,000 Speaker 1: be foremost in their minds before deploying capital? 217 00:11:51,520 --> 00:11:51,760 Speaker 3: Pwice. 218 00:11:51,840 --> 00:11:55,000 Speaker 2: Be honest with yourself, Now, what is the game you're playing? 219 00:11:55,040 --> 00:11:57,920 Speaker 2: If you're playing the trading game, don't lie to yourself 220 00:11:57,920 --> 00:12:00,880 Speaker 2: about caring about fundamentals and earning and cash flows. 221 00:12:01,160 --> 00:12:02,240 Speaker 3: Just play the trading game. 222 00:12:02,640 --> 00:12:05,760 Speaker 2: Look at charts, look at technical indicators, look at mood 223 00:12:05,760 --> 00:12:08,640 Speaker 2: and momentum, because that's what you're playing. If you want 224 00:12:08,679 --> 00:12:10,800 Speaker 2: to be an investor, you need to do your homework. 225 00:12:10,840 --> 00:12:13,840 Speaker 2: You can't hide behind the fact of I've never done 226 00:12:13,840 --> 00:12:17,600 Speaker 2: an accounting or evaluation classet or understand these financial statements. 227 00:12:17,640 --> 00:12:19,600 Speaker 3: The essence of investing. 228 00:12:19,760 --> 00:12:22,080 Speaker 2: Is you've got to be able to look through those 229 00:12:22,120 --> 00:12:25,120 Speaker 2: financial statements and be able to gauge the value of 230 00:12:25,120 --> 00:12:27,840 Speaker 2: a company. You might not want to use the full 231 00:12:27,920 --> 00:12:31,400 Speaker 2: technology of intrinsic valuation, but you need to start thinking 232 00:12:31,440 --> 00:12:34,719 Speaker 2: about businesses and value in a much more in a 233 00:12:34,800 --> 00:12:37,800 Speaker 2: much deeper way than you're doing right now. If that's 234 00:12:37,880 --> 00:12:40,360 Speaker 2: not your thing, that's fine. There are lots of people 235 00:12:40,360 --> 00:12:43,240 Speaker 2: who get richest traders, and there's nothing wrong with trading. 236 00:12:43,960 --> 00:12:45,439 Speaker 3: Just play that game well. 237 00:12:45,640 --> 00:12:48,600 Speaker 1: So to wrap up, investors who have a long term 238 00:12:48,640 --> 00:12:54,080 Speaker 1: time horizon should be very aware of the variations in valuations. 239 00:12:54,679 --> 00:12:57,480 Speaker 1: The more you pay for a given stock or a 240 00:12:57,520 --> 00:13:02,040 Speaker 1: given market index, the lower your future expected returns are. 241 00:13:02,960 --> 00:13:06,240 Speaker 1: Understand that there are no guarantees in the market, and 242 00:13:06,400 --> 00:13:10,040 Speaker 1: merely buying cheap stocks is no guarantee that you're going 243 00:13:10,080 --> 00:13:14,400 Speaker 1: to outperform or even market perform in the future. I'm 244 00:13:14,440 --> 00:13:17,520 Speaker 1: Barry Retults and this is Bloomberg's at the money. 245 00:13:17,679 --> 00:13:25,680 Speaker 3: I gotta have