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Speaker 1: If you knew what I knew about the corporate bond market,

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Speaker 1: you would never buy a stock again. I don't know

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Speaker 1: anybody that can make thirty percent a year in stocks.

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Speaker 1: They're making more than thirty percent a year in bonds,

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Speaker 1: and they virtually never lose money. I'd encourage everybody who

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Speaker 1: really wants to become more educated about finance to study

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Speaker 1: the corporate bond market.

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Speaker 2: What Lenin told Keynes was that the best way to

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Speaker 2: destroy capitalism was to debouch the currency, and through a

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Speaker 2: series of inflation, they would lose all relation to money,

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Speaker 2: and the best way to get rised would be gambling

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Speaker 2: and death.

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Speaker 1: I had a thesis called the End of America that

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Speaker 1: talks about how the decision to bail out all the

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Speaker 1: banks in two thousand and eight by printing money was

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Speaker 1: going to have radical ramifications not just for our economy

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Speaker 1: but for our society. And I was predicting a collapse

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Speaker 1: in social norms. In particular, I said, you're going to

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Speaker 1: see a huge increase in political violence, You're going to

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Speaker 1: see a huge increase in prostitution, You're going to see

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Speaker 1: a huge increase in gambling, and you see a huge

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Speaker 1: increase in drug and alcohol addiction, and I wrote that,

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Speaker 1: of course in twenty ten. So I stand by all

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Speaker 1: those predictions. I think they've been exactly correct. But the

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Speaker 1: best prediction of that end of America thesis, by the way,

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Speaker 1: was that as everyone goes to contribute to their four

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Speaker 1: to one k's every month, forty percent or more of

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Speaker 1: those savings are being dumped into the same five stocks.

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Speaker 1: When that does break, there will be a tremendous loss

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Speaker 1: and equity value for investors who haven't been paying attention.

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Speaker 1: If you're buying companies with a trillion dollars in market

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Speaker 1: cap that are trading for fifty times earnings, you are

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Speaker 1: not going to have a good outcome.

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Speaker 2: Porter You've spent decades warning investors about financial risks, making

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Speaker 2: some really bold predictions, some of which probably were ridiculed

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Speaker 2: at first, but they were proven. Right now, if someone's

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Speaker 2: serious about growing and protecting their wealth over the next decade,

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Speaker 2: why is right now the most important time to listen

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Speaker 2: to this conversation and what's coming that most people aren't

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Speaker 2: prepared for.

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Speaker 1: That's a great question, mark, fantastic question. So there have

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Speaker 1: been a few periods in my career, most notably the

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Speaker 1: late nineteen nineties, and then of course at the peak

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Speaker 1: of the market before COVID in late twenty nineteen, and

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Speaker 1: then again today where there has been so much concentration

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Speaker 1: of wealth and so few firms that the process of

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Speaker 1: indexing has been broken.

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Speaker 3: And as a result, as.

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Speaker 1: Everyone goes to contribute to their four to one case

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Speaker 1: every month, forty percent or more of those savings are

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Speaker 1: being dumped into the same five stocks, and the handicapping

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Speaker 1: process of the market has been broken by this automatic

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Speaker 1: feedbar style investing where the biggest stocks receive the most inflows.

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Speaker 1: And when that does break, and of course it eventually

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Speaker 1: will break, eventually the active managers will be the big

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Speaker 1: winners and the indexers will be the big losers. There

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Speaker 1: will be a tremendous loss and equity value for investors

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Speaker 1: who haven't been paying attention. And it's it's it's unfortunate

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Speaker 1: because index investing does work over time. But the risk

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Speaker 1: to it and the downside to it is these periods

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Speaker 1: of extreme overvaluation at the end of a long bull run.

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Speaker 1: And so as you probably know from history, there's not

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Speaker 1: a lot of times where you see the S and

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Speaker 1: P five hundred go up more than twenty percent two

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Speaker 1: years in a row. And the last time we had

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Speaker 1: a run like this was the late nineteen nineties, and

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Speaker 1: at the peak, the valuations were very similar to where

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Speaker 1: they are today, where there was enormous aggregation of wealth

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Speaker 1: and a very small number of stocks and extreme overvaluation

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Speaker 1: in the market compared to the earnings. And the result

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Speaker 1: in two thousand was an eight year bear market that

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Speaker 1: saw the indexes lose sixty percent of their value. And

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Speaker 1: I don't know exactly how long or how bad the

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Speaker 1: bear market will be, and of course I don't know

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Speaker 1: exactly when it will start, but I do know that

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Speaker 1: if you're buying companies with a trillion dollars in market

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Speaker 1: cap that are trading for fifty times earnings, you are

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Speaker 1: not going to have a good outcome. And when those

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Speaker 1: stocks make up such a huge percent of the index,

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Speaker 1: the index results themselves will be skewed for a very

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Speaker 1: long time. So now is a really important time if

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Speaker 1: you are an equity investor to pay attention to the

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Speaker 1: levels of valuation and your holdings, and I think most

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Speaker 1: importantly to raise some cash. You want to have cash

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Speaker 1: to buffer against the volatility that is likely to emerge

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Speaker 1: over the next twelve to thirty six months. And you

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Speaker 1: want to have cash so that you can of course

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Speaker 1: buystocks when they become much cheaper. So those are two

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Speaker 1: simple things that I would encourage everybody to do.

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Speaker 2: And so what's coming that most people aren't prepared for

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Speaker 2: is because the indexes have gotten so concentrated by just

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Speaker 2: a couple so seven mag seven and the S and

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Speaker 2: P five hundred. I just actually recorded a video earlier.

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Speaker 2: Today's joined the Nasdaq has only reached this level of concentration.

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Speaker 2: It's the highest ever, right but since two thousand and

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Speaker 2: two thousand and eight. Because of the over concentration, if

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Speaker 2: a couple of those companies stumble, it drags the whole

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Speaker 2: index down. And that's what most people aren't prepared for.

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Speaker 1: Yeah, you know, and take a company like Apple. Look,

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Speaker 1: Apple's a great business. I'm using their products right now

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Speaker 1: during this video recording. There's nothing wrong fundamentally with the business.

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Speaker 1: But it's an enormous company and it hasn't grown its

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Speaker 1: sales or its earnings in like five years. So it

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Speaker 1: should not be trading at a gross stock multiple. It

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Speaker 1: shouldn't be trading at twenty six times earnings. It's not

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Speaker 1: worth that much. Even though it's a great business, it's

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Speaker 1: a very expensive stock. Now, if Apple was trading at

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Speaker 1: fourteen times earnings or fifteen times earnings, I'd be telling

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Speaker 1: you is probably a goodbye because it is a great business.

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Speaker 1: But that difference in valuation can make an enormous impact

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Speaker 1: on people's wealth. And because of the size of Apple

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Speaker 1: in the index, it's going to have an outsize effect

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Speaker 1: on the index itself as well. So the thing that

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Speaker 1: people aren't paying attention to, and the reason why they

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Speaker 1: should listen to this call, is because there's going to

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Speaker 1: be a sea change and the relative success of the

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Speaker 1: index investors to the value investors over the next decade.

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Speaker 1: And listen, it's a simple thing to do. You can

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Speaker 1: do something as simple as to switch out of the

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Speaker 1: S and P five hundred index into an equal weight index,

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Speaker 1: and you can avoid a lot of the carnage that's

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Speaker 1: likely to come. So it doesn't it doesn't have to

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Speaker 1: be any kind of radical change that you make, but

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Speaker 1: it is time to make that kind of change.

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Speaker 2: Yeah. Now, you mentioned sort of this sector rotation, going

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Speaker 2: from growth stocks back to potentially value stocks, which is

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Speaker 2: sort of the Warren buffet model, And I know you're

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Speaker 2: a big fan of Warren Buffet. I learned a lot

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Speaker 2: about buffets investing style from you and from your newsletters

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Speaker 2: and sort of his mode. I'm looking for capital efficient

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Speaker 2: business is the way that you've broken that down. Obviously,

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Speaker 2: we've seen that not work so well over the last

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Speaker 2: decade or two, a couple decades probably, and so you

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Speaker 2: often wonder, you know, you have these businesses you mentioned

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Speaker 2: growing at a growth multiple who don't have profits, right,

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Speaker 2: and they're certainly not efficient with that for sure. Recently

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Speaker 2: wrote up a long thread on Google showing how inefficient

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Speaker 2: it was with its capital. So I guess the question

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Speaker 2: is what you're saying is that you think there's going

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Speaker 2: to be a rotation back to that people have been

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Speaker 2: saying that for a long time. Doesn't appear to be

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Speaker 2: the case. Do you think it's possible that maybe we don't?

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Speaker 2: And part of the reason why would because what Lenin

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Speaker 2: told Keynes was that the best way to debout or

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Speaker 2: destroy capitalism was to debouch the currency, and through a

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Speaker 2: series of inflation, they would lose all relation to money,

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Speaker 2: and the best way to get rich would be gambling

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Speaker 2: and theft. And at the end of every society of

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Speaker 2: high inflation, you see gambling sort of takeover. We see

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Speaker 2: that with the meme stocks today, meme tokens and whatnot.

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Speaker 2: I mean, obviously eventually everything comes around.

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Speaker 3: But like.

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Speaker 2: I guess, do you think the value investing transition is near?

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Speaker 1: Yeah, So there's a couple different questions in there. Let

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Speaker 1: me start with what you wrote about canes and the

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Speaker 1: idea of money as being a barometer of the health

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Speaker 1: that's a society. I agree with this absolutely completely, and

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Speaker 1: as I'm sure you're aware, I've been writing.

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Speaker 3: About this topic for almost two decades.

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Speaker 1: I had a thesis called the End of America that

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Speaker 1: talked about how the decision to bail out all the

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Speaker 1: banks in two thousand and eight by printing money was

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Speaker 1: going to have radical ramifications not just for our economy

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Speaker 1: but for our society. And I was predicting a collapse

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Speaker 1: in social norms. In particular, I said, you're going to

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Speaker 1: see a huge increase in political violence, You're going to

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Speaker 1: see a huge increase in prostitution, You're going to see

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Speaker 1: a huge increase in gambling, and you see a huge

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Speaker 1: increase in drug and alcohol addiction. And I wrote that,

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Speaker 1: of course in twenty ten, so I stand by all

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Speaker 1: those predictions. I think they've been exactly correct. I also said,

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Speaker 1: unfortunately they have. Yes, yeah, I also predicted a course

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Speaker 1: of America would lose its triple A credit rating, and

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Speaker 1: you know, a lot of other specific things along the way,

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Speaker 1: including I predicted Obama's third term and talk about being

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Speaker 1: laughed at in twenty twelve, they were mocking me on

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Speaker 1: national news shows, Ladies and gentlemen, I present you Obama's

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Speaker 1: third term otherwise known as president by So you know,

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Speaker 1: I think I was right about a lot more things

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Speaker 1: than I was wrong about. But the single best prediction

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Speaker 1: of that end of America thesis, by the way, was

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Speaker 1: that a great way to hedge from these risks would

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Speaker 1: be to buy the Permian oil basin, in particular Texas

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Speaker 1: specific land, which I recommended at about twenty five dollars

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Speaker 1: a share and lately has been close to two thousand.

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Speaker 1: So you know, I'm not saying I get everything right,

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Speaker 1: but there's a couple of really good ideas and that

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Speaker 1: whole thesis. The second question that you asked was whether

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Speaker 1: or not this inflation would cause people to rotate out

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Speaker 1: of high growth stocks and into value stocks, and.

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Speaker 2: Well, specifically and more specifically, would it keep them in

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Speaker 2: the gambling mode and not have them rotate into growth.

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Speaker 3: Yeah, I actually don't think so.

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Speaker 1: I think let me explain why the gambling really came

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Speaker 1: in stocks. At least, the gambling came from the fact

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Speaker 1: that we had ridiculously artificially low interest rates for so long.

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Speaker 1: When long term bond yields during COVID went down to

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Speaker 1: one percent, there is a direct correlation between the stock

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Speaker 1: market multiple, that is, the multiple of earnings growth and

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Speaker 1: the ten year treasure yield. And so if you've got

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Speaker 1: one percent treasure yield, you know, it's the same thing

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Speaker 1: as saying that stocks can trade out one hundred times earnings.

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Speaker 1: And obviously that is not going to last for long.

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Speaker 1: So what I think you're going to see is as

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Speaker 1: that treasury yield marches higher to compensate bond investors for inflation,

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Speaker 1: the market multiple is going to move lower. Right now,

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Speaker 1: the SMP is trading, it's something like twenty five times

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Speaker 1: earnings on average, And you know that if you have

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Speaker 1: a if you have a five percent treasury yield, which

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Speaker 1: is about where it's at, that can get you to

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Speaker 1: twenty times earnings on stocks. If we go to seven

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Speaker 1: percent long term interest rates, seven percent yield on treasury,

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Speaker 1: you know you're going to see stocks trading at twelve

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Speaker 1: or fourteen times earnings. That is just that is that's

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Speaker 1: a gravity. It is because investors have a choice. I

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Speaker 1: can go get a risk free treasure yield or I

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Speaker 1: can go get an equity earnings yield. And the earnings

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Speaker 1: yield has to be higher than the treasure yield, and

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Speaker 1: right now it's not, and that is not going to

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Speaker 1: bode well for expensive stocks. But let me just say

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Speaker 1: something else that there really isn't a difference between value

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Speaker 1: investing and growth investing.

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Speaker 3: There's really not.

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Speaker 1: There are stocks that are worth more because they are

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Speaker 1: able to grow faster and produce higher free cash flow

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Speaker 1: yields over time, and then there are stocks that grow

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Speaker 1: slower and therefore we're not going to produce very much

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Speaker 1: free cash flow yield over time. And there's relative differences

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Speaker 1: in price, and of course investing is the game of

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Speaker 1: arbitraging those differences. Here's what I can tell you. If

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Speaker 1: you looked up Coca Cola's earnings this week, you saw

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Speaker 1: a business that only had a one percent growth and

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Speaker 1: its case volume. In other words, they only sold one

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Speaker 1: percent more soda this year than they did last year,

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Speaker 1: but their earnings increase twenty percent because they are able

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Speaker 1: to raise prices. So what you will really see as

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Speaker 1: the inflation comes and as the market multiple declines, is

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Speaker 1: you will see the success of businesses that have pricing

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Speaker 1: power relative to the success of businesses that do not

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Speaker 1: have pricing power. And I believe that one reason why

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Speaker 1: Google stock has been so troubled lately is because there

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Speaker 1: is very little moat around web services. There is going

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Speaker 1: to be very little moat around AI services. So all

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Speaker 1: of this capital spinning you're seeing these big tech stocks do,

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Speaker 1: they're going to have very low returns on invested capital

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Speaker 1: from those investments. I don't care whether I use AI

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Speaker 1: from Twitter or AI from Google, or AI from Apple

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Speaker 1: or AI from Ali Baba, and I don't I think

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Speaker 1: that's going to be a big problem for them. But

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Speaker 1: I definitely care who's soda I'm drinking. I definitely care

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Speaker 1: who's chocolate I'm eating. I definitely care about which hotels

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Speaker 1: I stay in. So the companies that have the moat

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Speaker 1: and they have the pricing power will be the companies

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Speaker 1: that fare best during an inflation and if I could

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Speaker 1: just give you one more idea about this, The companies

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Speaker 1: that will do the best during an inflation are the

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Speaker 1: firms that are able to get the money up front.

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Speaker 1: You know, one reason why subscription newsletter businesses are such

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Speaker 1: good businesses is we get the capital upfront. And as

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Speaker 1: you probably know and an inflation, having the money first

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Speaker 1: matters because then you're able to invest it and you're

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Speaker 1: able to usually to get a higher rate of return

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Speaker 1: than the inflation. So then you get the carry and

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Speaker 1: so businesses, particularly like property and casualty insurance companies are

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Speaker 1: going to have outstanding results during the next four or

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Speaker 1: six years because they're yield and their carry over inflation

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Speaker 1: will be very significant, and it'll be you know, think

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Speaker 1: about it, and you know an insurance company that has

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Speaker 1: twenty billion dollars in bonds, Well, during COVID, they're making

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Speaker 1: nothing on all those bonds. Now you know, you can

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Speaker 1: get money good corporate bonds for seven and nine percent,

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Speaker 1: So the earnings of these insurance.

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Speaker 3: Companies are going to come up a lot.

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Speaker 1: So certain kinds of finance businesses will do very well

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Speaker 1: during this inflation too.

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Speaker 2: Man, you dropped a lot of knowledge there. Some things

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Speaker 2: that I definitely want to come back to. I want

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Speaker 2: to get into some of your frameworks and you're investing

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Speaker 2: playbooks that you've used because you've had a really long

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Speaker 2: career and to the point that you made you made

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Speaker 2: a lot of really good calls and I remember all

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Speaker 2: those specifically, I remember the Obama's third term and the

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Speaker 2: oil patch. So I definitely want to get into that.

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Speaker 2: But you mentioned the financial publishing business being a good business,

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Speaker 2: partly because you bring the money sort of upfront. I

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Speaker 2: know you've been partnered with Bill Bonner, maybe he's the

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Speaker 2: head pioneer, but to me, you've sort of pioneered this

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Speaker 2: space of financial information, financial publishing, if you want to

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Speaker 2: call it that, finn pub I think they as it's called,

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Speaker 2: you know, for me, I obviously, through my YouTube, we

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Speaker 2: reached you know, almost one hundred million people now at

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Speaker 2: this point, and I get asked quite often like.

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Speaker 1: That's incredible, Mark, that is amazing. Yeah, And that is

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Speaker 1: not easy to do. I've seen a lot of people

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Speaker 1: try to build audiences on YouTube.

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Speaker 3: It's very difficult.

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Speaker 2: So I get asked quite often, Mark, what what investing

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Speaker 2: books should I read? And I always tell them like none,

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Speaker 2: like the books are old, right. I get sure you

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Speaker 2: can go read Value Investor, but like most of the

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Speaker 2: books are old, and I tell them I really learned

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Speaker 2: everything from from financial newsletters because it was like the

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Speaker 2: play by play, So it was getting getting explained to

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Speaker 2: me on a weekly or monthly basis and watching it

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Speaker 2: over a long period of time. That really helped me

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Speaker 2: understand that. So I want to talk about that business

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Speaker 2: in a sense for a minute. I'm not a fan

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Speaker 2: of the traditional education system at all. It's more of

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Speaker 2: like a just in time learning for me, and so

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Speaker 2: that's why it was really helpful for me. So I

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Speaker 2: want to learn some of the maybe controversies and challenges

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Speaker 2: that you had trying to build this like so for example,

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Speaker 2: bringing this information trying to help people. I was saying earlier,

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Speaker 2: I think on your newsletter you'd write every week like, hey,

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Speaker 2: this will probably lose me subscribers. Why don't I to

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Speaker 2: tell you what I think you should know, what I'd

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Speaker 2: want to know. But at the same time, you've been

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Speaker 2: attacked for that. I know there was an SEC case

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Speaker 2: brought against you at one point for maybe misleading people

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Speaker 2: or something like that. Tell me about how hard it's

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Speaker 2: been to pioneer this case of really trying to bring

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Speaker 2: education and highlight and help people with their financial literacy.

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Speaker 1: When I got into the financial newsletter business in the

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Speaker 1: mid nineteen nineties, the whole industry was populated by stock promoters.

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Speaker 3: So the idea wasn't.

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Speaker 1: That you're going to make any money in subscriptions. The

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Speaker 1: idea was that you were going to promote stocks that

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Speaker 1: you held an interest in or that you were being

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Speaker 1: paid to promote. And I'll never forget one of the

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Speaker 1: most successful quote unquote publishers at the time, when he

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Speaker 1: learned about what Steve Sugary and I wanted to do,

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Speaker 1: which was to provide you know, high, high quality and

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Speaker 1: objective good advice, he laughed at us and he said,

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Speaker 1: well that'll never work.

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Speaker 3: Forell us.

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Speaker 1: And you know, I'm not interested in I'm not interested

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Speaker 1: in a fair game. And I just had the idea

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Speaker 1: that there was no reason for otherwise very intelligent, successful

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Speaker 1: people like small business owners, doctors, lawyers, accountants. I've always

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Speaker 1: had a lot of airline pilots, people who are willing

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Speaker 1: to think and read. There's no reason for these people

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Speaker 1: to spend a percentage of their entire asset base every

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Speaker 1: year to get reasonable investment advice. So I always thought,

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Speaker 1: you know what, if we're charging a reasonable price one

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Speaker 1: hundred dollars, five hundred dollars, even one thousand dollars, and

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Speaker 1: we're providing really good advice that makes people a lot

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Speaker 1: of money, surely they'll renew and surely we can build

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Speaker 1: a business around that.

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Speaker 3: And we did.

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Speaker 1: Of course, we were extremely successful with that model, where

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Speaker 1: we never owned the stocks that we wrote about, where

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Speaker 1: we hired really smart, truly offish people in the spaces

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Speaker 1: to do the analysis, and where we kept honest track records,

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Speaker 1: I mean, simple, simple business one oh one. But at

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Speaker 1: the time, in the late nineties, it was unheard of

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Speaker 1: in the newsletter space. And we, you know, we we

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Speaker 1: ruffled a lot of feathers because we put a whole

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Speaker 1: lot of brokers out of business. And when you had,

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Speaker 1: you know, the most important account call you and say

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Speaker 1: I'm not going to be with you anymore. I'm going

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Speaker 1: with Stansbury research. That brought us a lot of attention

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Speaker 1: and a lot of you know a lot of people

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Speaker 1: in the in the in the financial industry trying to

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Speaker 1: shut us down. The most notorious example of that was

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Speaker 1: now it's called law fair, you know. Back then it

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Speaker 1: was just called you're irritating rich people were going to

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Speaker 1: come get you. And so the SEC actually sued me

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Speaker 1: for recommending a security called USEK that was spun out

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Speaker 1: of the government itself. It was a former Department of

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Speaker 1: Energy program. And what was going on was that there

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Speaker 1: were members of the government who were manipulating the stock

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Speaker 1: by with holding certain approvals until they had time to

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Speaker 1: stock up on the business. And just to give you

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Speaker 1: an idea, when I recommended the stock, it was trading

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Speaker 1: at half of book value, and it was paying an

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Speaker 1: eight percent dividend, and it was selling uranium fuel to

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Speaker 1: power plants around the world, Like this is basically a

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Speaker 1: bond is not a speculative investment to make. And they

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Speaker 1: had a pricing agreement that was going to allow them

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Speaker 1: to cut their primary cost of sales by more than

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Speaker 1: fifty percent, and they needed government approval to implement this

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Speaker 1: pricing change, and the government had been withholding that approval

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Speaker 1: for three years while the stock got manipulated by these insiders.

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Speaker 1: And I wrote up the whole story and wrote it

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Speaker 1: honestly and never owned the stock of course, and told

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Speaker 1: the truth about the whole thing. I learned a very

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Speaker 1: valuable lesson when you accuse the government of fraud and

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Speaker 1: you're not named Elon Musk get ready. So I spent

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Speaker 1: the next ten years fighting them in court. I of

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Speaker 1: course never conceded that I had done anything wrong, and

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Speaker 1: of course I lost, because you cannot fight the government

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Speaker 1: and a government court. Interestingly, during the period that we

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Speaker 1: fought the government, we found the exact same documents from

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Speaker 1: Bank of America, which was their banker, that said the

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Speaker 1: exact same thing that my report said. So the financiers

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Speaker 1: and all the people on the inside knew everything that

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Speaker 1: I knew. I had just done something the government didn't

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Speaker 1: want me to do, which is tell the public about it.

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Speaker 1: So I had to pay a million dollar fine. And

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Speaker 1: and you know, JP Morgan has spent forty billion dollars

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Speaker 1: in fines with the SEC over the last twenty years.

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Speaker 1: I've got I've paid a million dollar fine for telling

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Speaker 1: the truth about a stock and one last thing. By

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Speaker 1: the time that the case finally was adjudicated, it had

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Speaker 1: gone up three hundred percent. So I think I'm the

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Speaker 1: only only quote unquote, you know bankster whoever, whoever got

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Speaker 1: sued from making his his clients.

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Speaker 3: A whole lot of money. So that's that. Yeah, that's

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Speaker 3: that story.

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Speaker 1: But you but since I have stopped writing about government

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Speaker 1: corruption now now I only write about corporate corruption. So

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Speaker 1: I went after ge for their fraudulent accounting for a

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Speaker 1: decade before that company collapsed because of fraudulent accounting. I

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Speaker 1: went after General Motors for, you know, for just the

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Speaker 1: lunacy of its entire business model, and objected vehemently to

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Speaker 1: the quote unquote bankruptcy of General Motors. You might note

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Speaker 1: that the government spent fifty billion dollars on bailing Now

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Speaker 1: General Motors unions and the company today, fifteen years after

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Speaker 1: the bailout, it's still not worth fifty billion dollars.

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Speaker 3: I mean, just this kind of.

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Speaker 1: Lunacy is the stuff that you know, newsletter gold is

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Speaker 1: made out of people.

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Speaker 2: The kind of stuff that the do the Dodge office

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Speaker 2: is is pulling up all this waste and fraud that's

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Speaker 2: in there.

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Speaker 1: So so those are those are all been good stories

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Speaker 1: and fun things to write about.

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Speaker 3: Over the years.

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Speaker 2: A small business owner, are you buried in all types

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Speaker 2: of work keeping you from the real thing that makes

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Speaker 2: you money? Well that's where just works comes in they're

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Speaker 2: the all in one platform that supports small business growth.

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Speaker 2: You can get all their tools that help with benefits

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00:21:59,880 --> 00:22:04,600
Speaker 2: like payroll and HR and compliance with transparent pricing. Now

435
00:22:04,640 --> 00:22:08,159
Speaker 2: they helped you hire top talent internationally, internew markets, quickly

436
00:22:08,440 --> 00:22:12,480
Speaker 2: scale international operations without the workload, and for every how

437
00:22:12,520 --> 00:22:14,359
Speaker 2: do I do it? Question? You can reach out to

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Speaker 2: their expert staff from sole proprietor or a team of twenty.

439
00:22:18,480 --> 00:22:22,040
Speaker 2: Just Works empowers all kinds of small businesses with real

440
00:22:22,160 --> 00:22:26,480
Speaker 2: human support. So visit Justworks dot com slash podcast to

441
00:22:26,600 --> 00:22:29,560
Speaker 2: join the thousands of small businesses that trust Just Works

442
00:22:29,640 --> 00:22:33,080
Speaker 2: to take care of payroll, benefits, compliance and more. Again

443
00:22:33,240 --> 00:22:39,040
Speaker 2: that's Justworks dot com slash podcasts. I think you mentioned

444
00:22:39,480 --> 00:22:42,800
Speaker 2: sort of like these Wall Street fund managers sort of

445
00:22:42,800 --> 00:22:45,080
Speaker 2: making an outsize return. Right if you look at like

446
00:22:45,119 --> 00:22:47,440
Speaker 2: your traditional mutual fund for one k over the life

447
00:22:47,440 --> 00:22:49,600
Speaker 2: of that fund, in most cases, it seems like the

448
00:22:49,600 --> 00:22:52,080
Speaker 2: fund managers will make maybe up to two thirds of

449
00:22:52,119 --> 00:22:54,880
Speaker 2: the returns of that versus the individual investors. And so

450
00:22:55,400 --> 00:22:58,240
Speaker 2: it's almost like these things are over complicated in a

451
00:22:58,320 --> 00:23:00,280
Speaker 2: sense where it's like, oh, it's too much, just give

452
00:23:00,280 --> 00:23:02,280
Speaker 2: it to somebody else and let them keep it for

453
00:23:02,280 --> 00:23:05,520
Speaker 2: forty years, and you're trying to take the other side

454
00:23:05,520 --> 00:23:07,960
Speaker 2: of that, which is like, hey, look like you spent

455
00:23:08,040 --> 00:23:09,680
Speaker 2: all this time learning how to make the money, Just

456
00:23:09,720 --> 00:23:11,800
Speaker 2: spend a little bit more time on how to manage

457
00:23:11,800 --> 00:23:12,240
Speaker 2: your money.

458
00:23:13,560 --> 00:23:15,119
Speaker 1: Yeah, And there, of course, there are a lot of

459
00:23:15,160 --> 00:23:17,760
Speaker 1: really good options that people are never introduced to. I

460
00:23:17,760 --> 00:23:20,320
Speaker 1: think the biggest thing maybe I've done for investors in

461
00:23:20,359 --> 00:23:23,520
Speaker 1: my career is teach so many people about the opportunities

462
00:23:23,520 --> 00:23:26,919
Speaker 1: in the corporate bond market. I say this very sincerely.

463
00:23:27,560 --> 00:23:30,040
Speaker 1: If you knew what I knew about the corporate bond market,

464
00:23:30,119 --> 00:23:33,359
Speaker 1: you would never buy a stock again. And just to

465
00:23:33,359 --> 00:23:35,600
Speaker 1: give you some proof around that, the team that I

466
00:23:35,640 --> 00:23:39,040
Speaker 1: set up at Stansbury Research to cover corporate bonds for

467
00:23:39,119 --> 00:23:42,840
Speaker 1: our subscribers. The product is called Credit Opportunities, and it's

468
00:23:42,880 --> 00:23:47,040
Speaker 1: been published, you know, consistently for a decade now, and

469
00:23:47,080 --> 00:23:51,879
Speaker 1: they just publish their track record this week and they

470
00:23:51,960 --> 00:23:55,760
Speaker 1: have a I think it's a ninety three percent win

471
00:23:55,880 --> 00:23:59,680
Speaker 1: rate and a thirty three percent annualized return and their

472
00:23:59,720 --> 00:24:02,919
Speaker 1: record mandations. Wow, I don't know anybody that can make

473
00:24:02,960 --> 00:24:06,000
Speaker 1: thirty percent a year in stocks. They're making more than

474
00:24:06,040 --> 00:24:08,640
Speaker 1: thirty percent a year in bonds and they virtually never

475
00:24:08,720 --> 00:24:09,359
Speaker 1: lose money.

476
00:24:09,400 --> 00:24:11,840
Speaker 2: Only Stanley trug Miller. Oh he's the only one.

477
00:24:11,760 --> 00:24:16,440
Speaker 1: Right, Yeah, I mean the results are really, really outrageously good,

478
00:24:17,160 --> 00:24:20,879
Speaker 1: and so I'd encourage everybody who who really wants to

479
00:24:20,920 --> 00:24:23,919
Speaker 1: become more educated about finance to study the corporate bond market.

480
00:24:24,119 --> 00:24:26,359
Speaker 1: And of course most people again don't realize that the

481
00:24:26,400 --> 00:24:29,959
Speaker 1: bond market is way larger than the stock market. And

482
00:24:30,160 --> 00:24:32,480
Speaker 1: there's a reason why you see stocks advertised every day

483
00:24:32,480 --> 00:24:36,200
Speaker 1: on CNBC, but you never see a bond ever ever

484
00:24:36,359 --> 00:24:39,400
Speaker 1: even mentioned, And that's because the rich people don't want

485
00:24:39,400 --> 00:24:41,879
Speaker 1: you to buy them.

486
00:24:41,960 --> 00:24:45,040
Speaker 2: And if the bond is worthless, then the stock is worthless.

487
00:24:45,840 --> 00:24:46,560
Speaker 3: You got that right.

488
00:24:46,800 --> 00:24:48,720
Speaker 1: And what's pretty funny is that if you if you

489
00:24:48,760 --> 00:24:52,640
Speaker 1: try to trade distress bonds, the broker will usually tell

490
00:24:52,680 --> 00:24:55,200
Speaker 1: you that you're not allowed to buy them, but they'll

491
00:24:55,200 --> 00:24:59,360
Speaker 1: sell you the stock of the same company no problem.

492
00:25:00,040 --> 00:25:03,800
Speaker 2: So going going back to Stansbury Research, I mean, really pioneering.

493
00:25:03,840 --> 00:25:05,560
Speaker 2: And the reason why I really like this story is,

494
00:25:05,640 --> 00:25:08,000
Speaker 2: I mean, again, what you said on your Newslatyers, and

495
00:25:08,240 --> 00:25:10,400
Speaker 2: I've tried to now follow is like trying to help

496
00:25:10,440 --> 00:25:12,680
Speaker 2: other people telling them what I wish I would have

497
00:25:12,720 --> 00:25:15,040
Speaker 2: known earlier in my career. I got into a lot

498
00:25:15,040 --> 00:25:16,760
Speaker 2: of trouble in two thousand and eight, which is why

499
00:25:16,840 --> 00:25:20,200
Speaker 2: I got interested in learning what this whole market was about.

500
00:25:20,240 --> 00:25:22,760
Speaker 2: That was my interest. So in nineteen ninety nine and

501
00:25:22,760 --> 00:25:25,840
Speaker 2: you started, what were some of the big things that

502
00:25:26,040 --> 00:25:28,800
Speaker 2: really pushed Stansbury forward? I mean, was there some big

503
00:25:28,840 --> 00:25:30,399
Speaker 2: things along the way or was it really that end

504
00:25:30,400 --> 00:25:32,240
Speaker 2: of America thesis that you put out? What we was

505
00:25:32,320 --> 00:25:33,560
Speaker 2: sort of the turning points there?

506
00:25:34,800 --> 00:25:37,639
Speaker 1: Yeah, well, just a point of fact, I actually got

507
00:25:37,680 --> 00:25:40,120
Speaker 1: started writing newslatters in nineteen ninety six, and I got

508
00:25:40,119 --> 00:25:47,040
Speaker 1: started working for a small business to business research company

509
00:25:47,040 --> 00:25:49,880
Speaker 1: in Soft, Florida that was called Welt Research. Okay, and

510
00:25:50,280 --> 00:25:52,720
Speaker 1: that business ended up getting bought by Bill Bonner, who

511
00:25:52,760 --> 00:25:55,320
Speaker 1: as a major newsletter publisher. We got all moved to

512
00:25:55,359 --> 00:25:59,200
Speaker 1: a Gore moved to Bill's company, Agora in Baltimore. And

513
00:25:59,600 --> 00:26:00,920
Speaker 1: I'm not sure sure if you know what happens when

514
00:26:00,920 --> 00:26:04,080
Speaker 1: companies get acquired or merged. Usually everyone gets ended up

515
00:26:04,119 --> 00:26:06,000
Speaker 1: getting fired. So I was on the team. I was

516
00:26:06,080 --> 00:26:07,679
Speaker 1: on the team that got acquired. So I was on

517
00:26:07,720 --> 00:26:10,440
Speaker 1: the you can't work here anymore team, And so I

518
00:26:10,880 --> 00:26:13,879
Speaker 1: walked out of that business with like thirty thousand dollars

519
00:26:13,920 --> 00:26:17,320
Speaker 1: in savings and a laptop computer and I started my

520
00:26:17,359 --> 00:26:21,520
Speaker 1: own company, literally from my kitchen table, called Stansbury Research,

521
00:26:21,560 --> 00:26:24,280
Speaker 1: and we started by covering tech stocks, because that, of course,

522
00:26:24,359 --> 00:26:27,600
Speaker 1: is what people most wanted information on. And as a kid,

523
00:26:27,640 --> 00:26:30,680
Speaker 1: I had dabbled in computer programming. I'd gone to the

524
00:26:30,720 --> 00:26:33,440
Speaker 1: you know, the programming summer camps, and I knew enough

525
00:26:33,480 --> 00:26:36,640
Speaker 1: to be dangerous with programming computer and so I knew

526
00:26:36,640 --> 00:26:38,240
Speaker 1: a little bit about how the Internet was going to

527
00:26:38,240 --> 00:26:40,560
Speaker 1: really change the world. And I was excited about those ideas,

528
00:26:40,560 --> 00:26:43,840
Speaker 1: and we recommended some outrageously good investments. I'm talking about

529
00:26:43,840 --> 00:26:48,520
Speaker 1: Amazon and Broadcom and JGS, Unifas and Texas Instruments. We

530
00:26:48,600 --> 00:26:51,479
Speaker 1: had some outrageous great investments and it brought a lot

531
00:26:51,480 --> 00:26:54,080
Speaker 1: of investors to my door. And then of course there

532
00:26:54,160 --> 00:26:58,399
Speaker 1: was the tech complete blowout bear market, and you know,

533
00:26:58,480 --> 00:27:00,919
Speaker 1: to survive, I got good at figuring out how to

534
00:27:00,920 --> 00:27:03,400
Speaker 1: make other kinds of safe investments too, and I brought

535
00:27:03,400 --> 00:27:06,880
Speaker 1: another analyst, and we grew the business and by two

536
00:27:06,920 --> 00:27:08,760
Speaker 1: thousand and four, so this is just five years after

537
00:27:08,800 --> 00:27:11,320
Speaker 1: we started, we were a gore as big as biggest

538
00:27:11,359 --> 00:27:15,439
Speaker 1: and best business by far, and then so bringing in

539
00:27:15,440 --> 00:27:20,639
Speaker 1: Steve sugar Roode, bringing in Dan Ferris, bringing in David Lashmett,

540
00:27:21,280 --> 00:27:24,679
Speaker 1: bringing in David Eifrig, bringing in some really excellent people.

541
00:27:24,720 --> 00:27:29,199
Speaker 1: I mean Ifrig was a prop trator for Goldman for

542
00:27:29,240 --> 00:27:31,560
Speaker 1: twenty years and there's not many people who know more

543
00:27:31,560 --> 00:27:34,720
Speaker 1: about the options markets than he does. So those are

544
00:27:34,760 --> 00:27:37,480
Speaker 1: just the kind of talent we brought in that really helped.

545
00:27:38,040 --> 00:27:39,920
Speaker 1: And then just you know, just putting one foot in

546
00:27:39,960 --> 00:27:42,520
Speaker 1: front of the other, just building. My whole goal every

547
00:27:42,560 --> 00:27:45,280
Speaker 1: year was to increase our renewal income, and so I

548
00:27:45,320 --> 00:27:47,600
Speaker 1: wasn't worried about the top line. I was just worried

549
00:27:47,640 --> 00:27:49,960
Speaker 1: about satisfying the customers and doing a great job because

550
00:27:49,960 --> 00:27:52,680
Speaker 1: I figured if you could keep people, then over time,

551
00:27:52,840 --> 00:27:57,280
Speaker 1: you know that that return on marketing spend would just

552
00:27:57,280 --> 00:27:59,880
Speaker 1: grow enormously. And by the time I retired from Stansbury

553
00:28:00,000 --> 00:28:03,879
Speaker 1: Research Mark we had we had an average lifetime value

554
00:28:03,880 --> 00:28:05,800
Speaker 1: and excess of three thousand dollars per customer.

555
00:28:05,920 --> 00:28:06,240
Speaker 3: Wow.

556
00:28:06,520 --> 00:28:09,359
Speaker 1: So by focusing on delivering value to the subscribers, we

557
00:28:09,400 --> 00:28:10,960
Speaker 1: built an amazingly good.

558
00:28:10,840 --> 00:28:14,600
Speaker 2: Business lifetime value of three thousand Is that what you said?

559
00:28:15,440 --> 00:28:17,600
Speaker 3: Yeah, could have.

560
00:28:17,560 --> 00:28:18,880
Speaker 2: Just sold the more expensive products.

561
00:28:20,760 --> 00:28:24,040
Speaker 1: Well, we definitely upgraded people as they stayed with us.

562
00:28:24,359 --> 00:28:26,919
Speaker 3: I'm joking by that, Yeah, yeah, but I.

563
00:28:26,920 --> 00:28:28,960
Speaker 1: Mean we But you don't you know, as you know,

564
00:28:29,040 --> 00:28:30,800
Speaker 1: you don't sell. You don't go from selling somebody one

565
00:28:30,840 --> 00:28:32,760
Speaker 1: hundred dollar newsletter to selling them a ten thousand dollars

566
00:28:32,760 --> 00:28:34,600
Speaker 1: newsletter unless you've done something right for them.

567
00:28:34,480 --> 00:28:37,159
Speaker 2: Right, Yeah, for sure, you have to prove that. I

568
00:28:37,240 --> 00:28:41,960
Speaker 2: was recently telling some youngsters about starting my first business

569
00:28:42,040 --> 00:28:45,680
Speaker 2: in the mid nineties or late nineties actually, and that

570
00:28:45,800 --> 00:28:48,560
Speaker 2: was like pre internet days, and so I was explaining

571
00:28:48,600 --> 00:28:49,920
Speaker 2: to him. I was like, I mean, I was just

572
00:28:50,000 --> 00:28:51,840
Speaker 2: twenty years old in my early twenties, and I got

573
00:28:51,880 --> 00:28:54,000
Speaker 2: this office and I'm trying to build this high tech

574
00:28:54,040 --> 00:28:57,400
Speaker 2: medical equipment company. But that was like pre Internet, So like,

575
00:28:57,720 --> 00:29:00,480
Speaker 2: how did I even learn about business? How do I

576
00:29:00,560 --> 00:29:02,680
Speaker 2: even reach out to customers? Right? It was like this

577
00:29:02,760 --> 00:29:04,680
Speaker 2: crazy world. And so you built this sort of like

578
00:29:04,760 --> 00:29:07,680
Speaker 2: pre internet as well, So like how do you scale

579
00:29:07,720 --> 00:29:10,400
Speaker 2: a business like that without being able to advertise on

580
00:29:10,400 --> 00:29:13,480
Speaker 2: Facebook or run ads or anything like that?

581
00:29:14,320 --> 00:29:15,800
Speaker 3: Can I tell you the truth? Yeah, I'd love to

582
00:29:16,800 --> 00:29:18,200
Speaker 3: you rip off a lot of printers.

583
00:29:18,440 --> 00:29:22,680
Speaker 1: Okay, what does that mean, yeah, I mean you had

584
00:29:22,680 --> 00:29:25,360
Speaker 1: to print everything. So we would we would we would

585
00:29:25,440 --> 00:29:28,440
Speaker 1: send out books in the mail. So I would write

586
00:29:28,480 --> 00:29:31,440
Speaker 1: a book about something like the New Railroad across America,

587
00:29:31,480 --> 00:29:34,040
Speaker 1: which was all about the Internet, and we would publish

588
00:29:34,120 --> 00:29:36,200
Speaker 1: a book and we would put it in a number

589
00:29:36,240 --> 00:29:38,240
Speaker 1: ten envelope, and we would send it to as many

590
00:29:38,280 --> 00:29:40,479
Speaker 1: people as we thought would would be interested in it,

591
00:29:40,640 --> 00:29:43,520
Speaker 1: and the book would be free, and then you know,

592
00:29:43,520 --> 00:29:45,440
Speaker 1: there'd be a reply device in the back of the book,

593
00:29:45,440 --> 00:29:48,479
Speaker 1: a coupon basically that they had to send back to

594
00:29:48,560 --> 00:29:52,400
Speaker 1: us with a check, and they could also facts in orders.

595
00:29:52,400 --> 00:29:54,200
Speaker 1: I remember when I started, I'd go down to the

596
00:29:54,200 --> 00:29:56,880
Speaker 1: fax machine every morning and see what see what the

597
00:29:57,000 --> 00:30:00,640
Speaker 1: night had brought. But the only way you could make

598
00:30:00,640 --> 00:30:02,960
Speaker 1: that work, because printing was very expensive and so is

599
00:30:03,000 --> 00:30:05,280
Speaker 1: mailing things. The only way you can make that work

600
00:30:05,360 --> 00:30:07,840
Speaker 1: is if you got like, you know, six month terms

601
00:30:07,840 --> 00:30:11,000
Speaker 1: from your printer, so they they'd have to they'd have

602
00:30:11,040 --> 00:30:14,360
Speaker 1: to print everything for free for you and depend on

603
00:30:14,400 --> 00:30:17,480
Speaker 1: you to pay them back once you got the subscriptions.

604
00:30:16,880 --> 00:30:17,280
Speaker 3: To come in.

605
00:30:17,960 --> 00:30:21,880
Speaker 1: Got it, And today oftentimes the subscriptions didn't come in,

606
00:30:21,880 --> 00:30:25,640
Speaker 1: in which case he said, I'm really sorry to the

607
00:30:25,880 --> 00:30:26,640
Speaker 1: to the poor printer.

608
00:30:26,840 --> 00:30:28,920
Speaker 2: Yeah, oh, that's that's how you get to that. And

609
00:30:29,000 --> 00:30:31,800
Speaker 2: now nowadays in the online world, they have like these

610
00:30:31,840 --> 00:30:34,040
Speaker 2: book funnels, right, so that's like a common thing now, right,

611
00:30:34,080 --> 00:30:36,160
Speaker 2: So now you give the book away for free plus

612
00:30:36,200 --> 00:30:38,280
Speaker 2: shipping and then you get them into your funnel. I'm

613
00:30:38,280 --> 00:30:40,120
Speaker 2: sure you're probably well aware of that. It's and then

614
00:30:40,160 --> 00:30:42,600
Speaker 2: and then now we have print on demand, right, So

615
00:30:43,040 --> 00:30:44,520
Speaker 2: I try to tell these kids, like you have no

616
00:30:44,560 --> 00:30:47,000
Speaker 2: idea how easy it doesn't make money these days. Pre

617
00:30:47,080 --> 00:30:49,000
Speaker 2: internet it was hard, I mean trying to make those

618
00:30:49,000 --> 00:30:49,640
Speaker 2: deals like that.

619
00:30:51,640 --> 00:30:53,520
Speaker 1: You know, I'm not so sure about that mark. I.

620
00:30:54,000 --> 00:30:56,960
Speaker 1: I think it was actually easier when I got started

621
00:30:57,400 --> 00:31:01,760
Speaker 1: because there I didn't have any competition. It was there

622
00:31:01,840 --> 00:31:05,440
Speaker 1: was such a big capital hurdle to advertising that the

623
00:31:05,520 --> 00:31:09,360
Speaker 1: advertising channel was a lot quieter. Today it is so

624
00:31:09,640 --> 00:31:13,760
Speaker 1: noisy out there. Everyone can be a publisher, everyone can advertise.

625
00:31:14,840 --> 00:31:17,960
Speaker 1: It's very very hard to break to get your message

626
00:31:18,040 --> 00:31:19,360
Speaker 1: to break through the noise.

627
00:31:20,880 --> 00:31:23,680
Speaker 2: What do you think about in regards to that and

628
00:31:23,800 --> 00:31:28,360
Speaker 2: the change? So you mentioned a couple names frig or

629
00:31:28,400 --> 00:31:32,160
Speaker 2: whatever that were like Goldman prop traders, but like nobody

630
00:31:32,200 --> 00:31:32,960
Speaker 2: knows who they are.

631
00:31:33,240 --> 00:31:33,440
Speaker 3: Like it.

632
00:31:33,480 --> 00:31:38,200
Speaker 2: We're Goldman cool with thousands of other people, right Whereas today,

633
00:31:38,400 --> 00:31:41,440
Speaker 2: you know, you have all these TikTokers and Instagrammers and

634
00:31:41,520 --> 00:31:44,960
Speaker 2: YouTubers like me that build up brands and are able

635
00:31:44,960 --> 00:31:47,080
Speaker 2: to sell that more off of like a name, like

636
00:31:47,120 --> 00:31:51,640
Speaker 2: a brand name, as opposed to like trying to push

637
00:31:51,800 --> 00:31:54,920
Speaker 2: like even though somebody maybe has this storied career decades

638
00:31:55,160 --> 00:31:57,680
Speaker 2: in the trenches of some of the most prestigious financial institutions,

639
00:31:57,680 --> 00:32:00,880
Speaker 2: but nobody really knows them, how is that chat affected you?

640
00:32:01,240 --> 00:32:02,200
Speaker 2: We're trying to deal with that.

641
00:32:02,440 --> 00:32:06,840
Speaker 1: I think in my space, your resume matters a great deal.

642
00:32:07,680 --> 00:32:12,200
Speaker 1: I mean, Eifrid was one of the story people that

643
00:32:12,400 --> 00:32:16,360
Speaker 1: was on this legendary Goldman options team that included.

644
00:32:16,040 --> 00:32:18,520
Speaker 3: Robert Rubin and a lot of other really.

645
00:32:18,400 --> 00:32:23,360
Speaker 1: Successful smart folks that pioneered a lot of the quantitative

646
00:32:23,400 --> 00:32:25,760
Speaker 1: trading that now dominates the markets.

647
00:32:25,840 --> 00:32:28,440
Speaker 3: So in the financial world he was very.

648
00:32:28,360 --> 00:32:31,120
Speaker 1: Well known and for example, like the guy who does

649
00:32:31,160 --> 00:32:35,040
Speaker 1: all my corporate distress bond investing at my new firm,

650
00:32:35,160 --> 00:32:40,160
Speaker 1: Portero and Company. His name is Martin Fritzen, and he

651
00:32:40,240 --> 00:32:44,800
Speaker 1: literally created the high yield research business for fixed income

652
00:32:44,840 --> 00:32:46,640
Speaker 1: on Wall Street. He started at Solomon brothers in the

653
00:32:46,680 --> 00:32:50,080
Speaker 1: nineteen seventies. He's in his late seventies, and there isn't

654
00:32:50,120 --> 00:32:53,080
Speaker 1: anybody in the entire corporate fixed income world that doesn't

655
00:32:53,080 --> 00:32:56,320
Speaker 1: know who he is and hasn't read his books. He's

656
00:32:56,680 --> 00:33:00,320
Speaker 1: iconic in fixed income, and so I think having those

657
00:33:00,320 --> 00:33:03,560
Speaker 1: people is really important if you're gonna if you're gonna

658
00:33:03,560 --> 00:33:06,720
Speaker 1: be a first class financial publisher, you have to have

659
00:33:06,840 --> 00:33:10,160
Speaker 1: absolutely first rate analysts and you have produced work that

660
00:33:10,320 --> 00:33:15,760
Speaker 1: is demonstratably better than the competition. And that's I just

661
00:33:15,800 --> 00:33:17,800
Speaker 1: had an instinct for that. I had an instinct that

662
00:33:18,320 --> 00:33:21,440
Speaker 1: the best guy in the world at distressed corporate bonds

663
00:33:22,000 --> 00:33:25,640
Speaker 1: is probably worth about ten thousand times more, you know,

664
00:33:25,760 --> 00:33:28,400
Speaker 1: than the fourth best guy in the world of that

665
00:33:28,400 --> 00:33:33,160
Speaker 1: that that that genius and experience in those markets is

666
00:33:33,280 --> 00:33:36,520
Speaker 1: worth an enormous premium. And so that's the way I

667
00:33:36,560 --> 00:33:39,520
Speaker 1: always But I went about trying to build our teams,

668
00:33:39,520 --> 00:33:42,960
Speaker 1: which was you know, just gent honally, just offering to

669
00:33:42,960 --> 00:33:45,440
Speaker 1: pay more money than other people and hoping that we

670
00:33:45,480 --> 00:33:47,600
Speaker 1: could drive gross margin with that talent.

671
00:33:48,480 --> 00:33:51,280
Speaker 2: But now you're trying to get you have to give

672
00:33:51,320 --> 00:33:53,760
Speaker 2: that story to retail because probably most mom and pops

673
00:33:53,760 --> 00:33:56,560
Speaker 2: who have somebody managing their money for them through their

674
00:33:56,640 --> 00:33:58,360
Speaker 2: you know, four on and K mutual fund, et cetera.

675
00:33:58,680 --> 00:34:00,520
Speaker 2: Maybe aren't aware of that. Then you sort of have

676
00:34:00,560 --> 00:34:02,680
Speaker 2: to kind of use that resume market that resume out

677
00:34:02,680 --> 00:34:05,840
Speaker 2: to him.

678
00:34:05,920 --> 00:34:08,600
Speaker 3: I think that you just you just have to explain it.

679
00:34:08,719 --> 00:34:09,080
Speaker 2: Yeah.

680
00:34:09,120 --> 00:34:12,239
Speaker 1: Once once they once they see who this person is

681
00:34:12,280 --> 00:34:15,520
Speaker 1: and they see that he has worked at every important

682
00:34:15,560 --> 00:34:18,520
Speaker 1: fixed income desk in the world, and once they see

683
00:34:18,520 --> 00:34:21,600
Speaker 1: his track record, the light bulb turns on. It's kind

684
00:34:21,640 --> 00:34:24,239
Speaker 1: of like this. You know, if you're if you're going

685
00:34:24,320 --> 00:34:27,320
Speaker 1: to go, if you're going to go get prostate surgery,

686
00:34:28,160 --> 00:34:30,239
Speaker 1: do you do you want to go to the Mayo

687
00:34:30,320 --> 00:34:32,960
Speaker 1: clinic And do you want to have the guy who's

688
00:34:33,000 --> 00:34:35,440
Speaker 1: seventy years old and has done fifty thousand of these

689
00:34:35,480 --> 00:34:38,680
Speaker 1: operations or do you want the twenty four year old

690
00:34:38,680 --> 00:34:41,000
Speaker 1: who just got out of med school at your you know,

691
00:34:41,120 --> 00:34:41,960
Speaker 1: at your local clinic.

692
00:34:42,000 --> 00:34:44,520
Speaker 2: Definitely want the resume, you definitely do it.

693
00:34:44,600 --> 00:34:46,359
Speaker 1: And so I think when I think when it comes

694
00:34:46,360 --> 00:34:49,640
Speaker 1: to people's harder and savings, they're willing to pay up

695
00:34:49,680 --> 00:34:52,200
Speaker 1: for quality, and they you know, and as long as

696
00:34:52,200 --> 00:34:54,440
Speaker 1: you're as from where I sit as a business person,

697
00:34:54,520 --> 00:34:57,560
Speaker 1: as long as I deliver on that than what I

698
00:34:57,600 --> 00:34:59,920
Speaker 1: have found is that you can. It's just a way better, Bui.

699
00:35:00,520 --> 00:35:04,120
Speaker 1: I mean, our first class business is way better than not.

700
00:35:05,640 --> 00:35:08,200
Speaker 2: I want to get into the future, because you've done

701
00:35:08,200 --> 00:35:10,759
Speaker 2: really well with some of these really big calls in

702
00:35:11,040 --> 00:35:12,839
Speaker 2: your career, as we've already discussed. I want to talk

703
00:35:12,840 --> 00:35:15,680
Speaker 2: about the future, upcoming trends, and so maybe we get

704
00:35:15,680 --> 00:35:18,279
Speaker 2: some more porter predictions from you. But before we do that,

705
00:35:18,360 --> 00:35:20,840
Speaker 2: I want to establish a baseline and more of like

706
00:35:20,840 --> 00:35:23,799
Speaker 2: a framework, and so I can understand sort of, you know,

707
00:35:23,960 --> 00:35:26,800
Speaker 2: the playbooks and the frameworks that you use to invest

708
00:35:26,840 --> 00:35:31,360
Speaker 2: off of. So, for example, like acid allocation seems to

709
00:35:31,440 --> 00:35:34,880
Speaker 2: be a big framework of yours. What are some of

710
00:35:34,960 --> 00:35:37,360
Speaker 2: like the lenses that you view the world through. Give me,

711
00:35:37,520 --> 00:35:39,799
Speaker 2: give me some of your core frameworks that you would

712
00:35:39,800 --> 00:35:41,440
Speaker 2: build build your portfoliof of.

713
00:35:42,640 --> 00:35:45,200
Speaker 1: I say, the biggest one is that I figured out

714
00:35:45,239 --> 00:35:48,359
Speaker 1: that after two thousand and eight that there was no

715
00:35:49,719 --> 00:35:54,600
Speaker 1: there was no intrinsic value and fixed income, that you

716
00:35:54,640 --> 00:35:58,680
Speaker 1: weren't safer in bonds than you were in stocks. And

717
00:35:59,640 --> 00:36:02,200
Speaker 1: you know, and I say that because I saw that

718
00:36:02,239 --> 00:36:04,799
Speaker 1: the governments were printing money and using that printed money

719
00:36:04,840 --> 00:36:07,680
Speaker 1: to buy bonds to force down the interest rates. Now, listen,

720
00:36:07,719 --> 00:36:09,640
Speaker 1: if you're a bond trader, that's great news. It's going

721
00:36:09,680 --> 00:36:11,400
Speaker 1: to force up the price of bonds, and you're going

722
00:36:11,440 --> 00:36:14,480
Speaker 1: to make money in the short term. But I thought

723
00:36:14,480 --> 00:36:18,560
Speaker 1: that over time that the resulting inflation will be far

724
00:36:18,640 --> 00:36:21,799
Speaker 1: worse than the gains that you were going to make

725
00:36:21,840 --> 00:36:23,920
Speaker 1: in the bonds, and that that would lead to trouble.

726
00:36:24,600 --> 00:36:27,240
Speaker 1: And I would point to Bank of America's very serious

727
00:36:27,280 --> 00:36:30,279
Speaker 1: problem right now as being one of the really one

728
00:36:30,280 --> 00:36:33,759
Speaker 1: of the biggest unaddressed problems in the financial markets. Bank

729
00:36:33,800 --> 00:36:38,080
Speaker 1: of America bought seven hundred billion, maybe a little bit

730
00:36:38,080 --> 00:36:41,400
Speaker 1: more of these bonds in the summer of twenty twenty,

731
00:36:41,920 --> 00:36:44,239
Speaker 1: and the value of those bonds is now fallen by

732
00:36:44,360 --> 00:36:48,280
Speaker 1: seventy five eighty percent, and so they're sitting on huge losses.

733
00:36:48,480 --> 00:36:50,520
Speaker 1: I mean, I'm just estimating, because I don't know exactly

734
00:36:50,560 --> 00:36:52,399
Speaker 1: how they've hedged. I don't, I can't, you know, I'm

735
00:36:52,400 --> 00:36:54,880
Speaker 1: not privy to all that. But they have said publicly

736
00:36:54,920 --> 00:36:57,280
Speaker 1: that the losses are an excess of one hundred billion dollars.

737
00:36:58,160 --> 00:37:01,080
Speaker 1: I mean, that's a really bad outcome for their shareholders.

738
00:37:01,120 --> 00:37:03,560
Speaker 1: And that's a bad outcome for anybody who's been in bonds,

739
00:37:04,160 --> 00:37:06,080
Speaker 1: and I'd point out to you that there's some you know,

740
00:37:06,120 --> 00:37:09,440
Speaker 1: there's some really good hedge funds. For example, Bridgewaters All

741
00:37:09,520 --> 00:37:12,880
Speaker 1: Weather Fund is about forty percent allocated to bonds, and

742
00:37:12,960 --> 00:37:16,200
Speaker 1: their performance since twenty twenty has been really poor. And

743
00:37:16,239 --> 00:37:17,640
Speaker 1: I think you're just going to see a lot of

744
00:37:17,680 --> 00:37:19,600
Speaker 1: that that the folks who are relying on the sixty

745
00:37:19,680 --> 00:37:23,840
Speaker 1: forty asset allocation stocks and bonds, the bond allocation is

746
00:37:23,880 --> 00:37:26,200
Speaker 1: going to really hurt them over the next decade. And

747
00:37:26,239 --> 00:37:29,000
Speaker 1: so the first thing is, I think you have to

748
00:37:29,040 --> 00:37:31,560
Speaker 1: get out of court of you have to get out

749
00:37:31,600 --> 00:37:33,920
Speaker 1: of government bonds, and corporate bonds are a little bit

750
00:37:33,960 --> 00:37:36,719
Speaker 1: different than government bonds. And you know, short duration is

751
00:37:36,719 --> 00:37:39,879
Speaker 1: different than long duration. The bond market is complicated. I'm

752
00:37:39,920 --> 00:37:44,360
Speaker 1: speaking particularly about long dated mortgages and government bonds. So

753
00:37:44,440 --> 00:37:47,719
Speaker 1: stuff that's ten years and longer in duration is just

754
00:37:47,800 --> 00:37:52,520
Speaker 1: simply uninvestable in my view. And I and so the

755
00:37:52,560 --> 00:37:55,520
Speaker 1: money that used to be in there for safety is

756
00:37:55,560 --> 00:37:58,040
Speaker 1: going to fleet a bitcoin, it's going to flee to gold,

757
00:37:58,440 --> 00:38:00,520
Speaker 1: It's going to flee at a very high quality equity.

758
00:38:01,200 --> 00:38:03,840
Speaker 1: If you get a company like Coca Cola or Hershey,

759
00:38:04,040 --> 00:38:06,319
Speaker 1: and they're able to increase their dividends every year, they

760
00:38:06,320 --> 00:38:09,680
Speaker 1: can protect you from inflation. And those are the kind

761
00:38:09,719 --> 00:38:13,160
Speaker 1: of businesses that I see replacing bonds as and the

762
00:38:13,160 --> 00:38:16,640
Speaker 1: asset allocations of major funds. So that's the first lens,

763
00:38:16,640 --> 00:38:19,239
Speaker 1: which is that bonds are no longer safe and we've

764
00:38:19,280 --> 00:38:22,440
Speaker 1: got to find some other way of managing volatility. And

765
00:38:22,480 --> 00:38:24,040
Speaker 1: the way that I would suggest that you do it

766
00:38:24,080 --> 00:38:27,400
Speaker 1: is by hedging with gold, hedging with bitcoin, hedging with cash,

767
00:38:28,280 --> 00:38:31,879
Speaker 1: hedging with property casualty insurance companies which own a lot

768
00:38:31,920 --> 00:38:35,239
Speaker 1: of bonds but own them, and actively managed portfolios where

769
00:38:35,239 --> 00:38:38,600
Speaker 1: they can hedge against the interest rate risk, and of

770
00:38:38,600 --> 00:38:42,839
Speaker 1: course owning very low beta, low volatility corporate equity as

771
00:38:43,080 --> 00:38:46,040
Speaker 1: a way of hedging the portfolio in lieu of holding bonds.

772
00:38:47,880 --> 00:38:50,440
Speaker 2: Do you also see those things? I mean, the way

773
00:38:50,440 --> 00:38:52,400
Speaker 2: I was supposed to work in the past is like

774
00:38:52,600 --> 00:38:54,960
Speaker 2: I mean, the rayd aalio is fund that's not working anymore.

775
00:38:55,000 --> 00:38:56,480
Speaker 2: To your point, I think they have had like seventy

776
00:38:56,520 --> 00:38:58,920
Speaker 2: billion dollars in redemptions in the last couple of years,

777
00:38:59,280 --> 00:39:01,600
Speaker 2: but you know, some assets going down and other assets

778
00:39:01,640 --> 00:39:04,799
Speaker 2: sort of making up for that. Whereas now you're talking

779
00:39:04,800 --> 00:39:09,239
Speaker 2: about moving into lower volatility assets, but they're not really

780
00:39:09,320 --> 00:39:12,359
Speaker 2: working opposite. Everything's still working in unison. It's just some

781
00:39:12,400 --> 00:39:14,360
Speaker 2: stuff doesn't go down as far as others.

782
00:39:16,120 --> 00:39:19,239
Speaker 1: Well, I think that the losses you've had in long

783
00:39:19,320 --> 00:39:22,160
Speaker 1: term government bonds in the last five years are historic.

784
00:39:22,400 --> 00:39:25,480
Speaker 1: I don't think that bonds have ever seen the kind

785
00:39:25,520 --> 00:39:29,160
Speaker 1: of carnage that we've experienced, and you know, people don't

786
00:39:29,160 --> 00:39:31,440
Speaker 1: talk about that in the nightly news. I'm not sure why,

787
00:39:31,560 --> 00:39:35,560
Speaker 1: but those are very, very big and important losses, and

788
00:39:35,600 --> 00:39:38,640
Speaker 1: most of those losses are held inside our banking system,

789
00:39:39,480 --> 00:39:42,480
Speaker 1: and the view is that they'll just eventually get papered

790
00:39:42,520 --> 00:39:45,759
Speaker 1: over one way or another, and I think that's going

791
00:39:45,800 --> 00:39:49,600
Speaker 1: to be very inflationary. Likewise, I think that it's a

792
00:39:49,680 --> 00:39:51,680
Speaker 1: it's a pipe dream to believe that we can pay

793
00:39:51,719 --> 00:39:55,600
Speaker 1: for our government by taxing our foreign trading partners.

794
00:39:56,760 --> 00:39:58,040
Speaker 3: I wish Trump all.

795
00:39:58,080 --> 00:40:01,520
Speaker 1: The best in the world to lower tariffs around the world,

796
00:40:01,560 --> 00:40:04,880
Speaker 1: to expand markets for American products. I think that's great,

797
00:40:04,920 --> 00:40:07,640
Speaker 1: and I hope he's able to accomplish that. But I

798
00:40:07,640 --> 00:40:09,920
Speaker 1: don't think that anybody in our country should be cheering

799
00:40:09,960 --> 00:40:13,600
Speaker 1: the creation of yet another government revenue center, whether it's

800
00:40:13,920 --> 00:40:17,279
Speaker 1: external revenue or internal revenue. What we badly need in

801
00:40:17,320 --> 00:40:19,960
Speaker 1: our country for economy to grow is simply less government

802
00:40:20,040 --> 00:40:24,239
Speaker 1: overhead in total and lower taxes. And until you see that,

803
00:40:24,440 --> 00:40:26,840
Speaker 1: I don't think you're going to see any material change

804
00:40:27,160 --> 00:40:29,560
Speaker 1: in the rate of inflation or the risk to inflation.

805
00:40:30,160 --> 00:40:32,040
Speaker 2: I want to come back to that. That's a big topic.

806
00:40:32,440 --> 00:40:35,080
Speaker 2: But going back to the Barbels or not the Barbell

807
00:40:35,120 --> 00:40:38,600
Speaker 2: but but acid allocation strategy, So sixty forty dead out

808
00:40:38,600 --> 00:40:42,799
Speaker 2: of bonds, hedging with other assets low volatility. Specifically, you

809
00:40:42,840 --> 00:40:46,960
Speaker 2: also said bitcoin and gold. I'm a big bitcoin guy.

810
00:40:47,560 --> 00:40:51,239
Speaker 2: That's sort of my main domain. Most people would say

811
00:40:51,239 --> 00:40:54,440
Speaker 2: that bitcoin is too volatile. Bitcoin is a big time

812
00:40:54,560 --> 00:40:58,920
Speaker 2: risk on asset. I think it sniffs out almost inflation

813
00:40:58,960 --> 00:41:01,960
Speaker 2: before any other assets. It's so sensitive to that. I

814
00:41:02,000 --> 00:41:05,200
Speaker 2: wouldn't typically think about people hedging their portfolio with that.

815
00:41:07,160 --> 00:41:08,960
Speaker 2: I mean I do, but I'm just curious that is

816
00:41:09,000 --> 00:41:12,040
Speaker 2: not like mainstream financial advice that typically you would use it,

817
00:41:12,080 --> 00:41:16,160
Speaker 2: maybe to I guess, increase the volatility to the upside.

818
00:41:17,480 --> 00:41:20,799
Speaker 1: Well, I think that. I think that both gold and

819
00:41:20,880 --> 00:41:24,760
Speaker 1: bitcoin have become risk on assets and this latest market

820
00:41:24,800 --> 00:41:32,560
Speaker 1: cycle since since the COVID bottom in twenty twenty. That's

821
00:41:32,600 --> 00:41:37,560
Speaker 1: interesting because gold used to be completely a counter position.

822
00:41:37,640 --> 00:41:39,480
Speaker 1: It used to do the opposite of what the markets

823
00:41:39,520 --> 00:41:43,720
Speaker 1: would do, the stock market would do, And so.

824
00:41:43,719 --> 00:41:45,839
Speaker 3: It may You may be very right. It could.

825
00:41:45,920 --> 00:41:48,840
Speaker 1: It could be that right now that gold and bitcoin

826
00:41:48,880 --> 00:41:52,719
Speaker 1: no longer provide much of a hedge against a collapse

827
00:41:52,920 --> 00:41:57,200
Speaker 1: and stock prices. But I think that the bigger risk

828
00:41:57,560 --> 00:41:59,800
Speaker 1: is a collapse in the personal power of the dollar.

829
00:42:00,600 --> 00:42:04,840
Speaker 1: We our entire treasury system is completely out of control,

830
00:42:04,920 --> 00:42:07,840
Speaker 1: and I'm very hopeful and optimistic that Elon and his

831
00:42:07,920 --> 00:42:11,360
Speaker 1: efforts will be successful and they'll get an uncontrol. But currently,

832
00:42:11,440 --> 00:42:14,040
Speaker 1: right now, this year, in twenty twenty five, we've already

833
00:42:14,080 --> 00:42:17,840
Speaker 1: racked up an eight hundred and fifty billion dollars primary

834
00:42:17,840 --> 00:42:21,879
Speaker 1: deficit in government spending, which puts us on track for

835
00:42:21,960 --> 00:42:26,160
Speaker 1: you know, something between three and four trillion in deficit.

836
00:42:25,800 --> 00:42:26,520
Speaker 3: Spending this year.

837
00:42:27,320 --> 00:42:31,080
Speaker 1: And you know, Mark, I would love to be wrong,

838
00:42:31,320 --> 00:42:35,600
Speaker 1: but you fucking call me when government spending actually declines,

839
00:42:36,680 --> 00:42:38,360
Speaker 1: and I'll come rub your feet or something.

840
00:42:38,360 --> 00:42:40,240
Speaker 3: I mean, I just I just don't.

841
00:42:40,640 --> 00:42:43,320
Speaker 1: I will believe it when I see it, and until

842
00:42:43,360 --> 00:42:46,560
Speaker 1: I see it. The idea that we're running something between

843
00:42:46,560 --> 00:42:49,799
Speaker 1: eight and ten percent of GDP and deficit spending with

844
00:42:49,920 --> 00:42:54,880
Speaker 1: full employment, that is a recipe for outrageous levels of inflation.

845
00:42:55,080 --> 00:42:57,640
Speaker 1: I mean, I people, this is an absolutely out of

846
00:42:57,640 --> 00:43:00,760
Speaker 1: consensus call, like many of my calls that and over time,

847
00:43:01,480 --> 00:43:03,880
Speaker 1: but I think you'll see at least a fifty percent

848
00:43:04,000 --> 00:43:07,120
Speaker 1: devaluation of the dollar over the next six to eight years.

849
00:43:07,200 --> 00:43:09,560
Speaker 1: And I don't even think that's an aggressive call. I

850
00:43:09,600 --> 00:43:14,920
Speaker 1: think that's absolutely inevitable and so and so. Yeah, I

851
00:43:15,280 --> 00:43:19,640
Speaker 1: think you've got to hedge against the decline of the

852
00:43:19,760 --> 00:43:22,719
Speaker 1: dollar in both bitcoin and gold.

853
00:43:22,960 --> 00:43:24,560
Speaker 2: I'm one hundred percent with you on that. I would

854
00:43:24,600 --> 00:43:27,000
Speaker 2: say it's in five years, not six eight years, right,

855
00:43:27,040 --> 00:43:29,120
Speaker 2: I mean, we've seen it already drop fifty percent, and

856
00:43:29,200 --> 00:43:32,280
Speaker 2: it obviously depends on what you're measuring it against. Certainly

857
00:43:32,280 --> 00:43:34,400
Speaker 2: to bitcoin is dropped more than that. But you know,

858
00:43:34,560 --> 00:43:37,399
Speaker 2: media and US real estate and most of the big

859
00:43:37,400 --> 00:43:39,960
Speaker 2: staples has dropped fifty percent in five years. And at

860
00:43:39,960 --> 00:43:42,200
Speaker 2: the rate of the government debasement, I mean, the FED

861
00:43:42,280 --> 00:43:45,600
Speaker 2: balance sheet is expanding by sixteen percent a year over

862
00:43:45,640 --> 00:43:46,600
Speaker 2: the last four years.

863
00:43:47,719 --> 00:43:50,080
Speaker 3: So yeah, like I said, I don't think my call

864
00:43:50,160 --> 00:43:51,120
Speaker 3: is even that aggressive.

865
00:43:51,560 --> 00:43:54,080
Speaker 1: Looking at the I think I think it's it's but listen,

866
00:43:54,120 --> 00:43:58,359
Speaker 1: it's scary though it is. And folks, look, that's why

867
00:43:58,360 --> 00:44:01,920
Speaker 1: you've got to have cash as well as bitcoin and gold.

868
00:44:02,080 --> 00:44:04,839
Speaker 2: Why if it's going to lose fifty percent, why would

869
00:44:04,840 --> 00:44:05,880
Speaker 2: you want to have a lot of cash.

870
00:44:06,000 --> 00:44:09,000
Speaker 1: Well, because you just can't know exactly how it's going

871
00:44:09,080 --> 00:44:11,480
Speaker 1: to unfold. But I can tell you this, I would

872
00:44:11,520 --> 00:44:16,360
Speaker 1: not be surprised to see CPI with a double digit

873
00:44:16,480 --> 00:44:20,440
Speaker 1: run rate inside at some point in the next four

874
00:44:20,520 --> 00:44:23,759
Speaker 1: years during Trump's term, if we have a real trade war,

875
00:44:24,280 --> 00:44:27,040
Speaker 1: if he's not able to get the government spend under control,

876
00:44:27,239 --> 00:44:30,239
Speaker 1: there's going to be huge repercussion repercussions and it'll be

877
00:44:30,360 --> 00:44:33,680
Speaker 1: very inflationary. If you get a double digit CPI number,

878
00:44:34,040 --> 00:44:36,080
Speaker 1: you're going to have the ten year treasury at twelve

879
00:44:36,200 --> 00:44:40,560
Speaker 1: or fourteen percent and stocks will fall by fifty percent

880
00:44:40,600 --> 00:44:43,000
Speaker 1: in that case. And I think if you've got a

881
00:44:43,000 --> 00:44:47,720
Speaker 1: plummeting stock market, you've got soaring inflation. I don't believe

882
00:44:48,280 --> 00:44:50,920
Speaker 1: that bitcoin and gold are going to do that well.

883
00:44:50,960 --> 00:44:52,960
Speaker 1: I think they're going to do better than the stock market,

884
00:44:53,239 --> 00:44:55,239
Speaker 1: but I don't think their nominal price is going to

885
00:44:55,239 --> 00:44:57,120
Speaker 1: increase I think. I think it will be risk off

886
00:44:57,320 --> 00:44:59,440
Speaker 1: and people are just going to be afraid, and when

887
00:44:59,480 --> 00:45:02,560
Speaker 1: they get a free they're going to go into treasury bills,

888
00:45:02,560 --> 00:45:04,640
Speaker 1: they're going to go into thirty day paper that's going

889
00:45:04,680 --> 00:45:07,720
Speaker 1: to be yielding fifteen percent, and they're just going to hide.

890
00:45:07,840 --> 00:45:09,319
Speaker 1: And so I think that's why you have to have

891
00:45:09,400 --> 00:45:12,720
Speaker 1: cash now, because there could be a very large nominal

892
00:45:12,800 --> 00:45:16,680
Speaker 1: price correction to both stocks, gold and bitcoin. Well that's

893
00:45:16,719 --> 00:45:18,759
Speaker 1: not my base case, by the way, I'm just saying

894
00:45:18,760 --> 00:45:22,560
Speaker 1: that that that outlook cannot be dismissed. That's say a

895
00:45:22,600 --> 00:45:25,920
Speaker 1: thirty percent probability in the next four years, and it

896
00:45:26,080 --> 00:45:29,120
Speaker 1: used to be that was a zero zero probability outcome.

897
00:45:29,400 --> 00:45:32,680
Speaker 1: So that as that continues to increase, you have to

898
00:45:32,719 --> 00:45:35,680
Speaker 1: be hedged, and an important hedge is cash.

899
00:45:36,360 --> 00:45:40,840
Speaker 2: So the going from the crash up or melt up thesis,

900
00:45:40,880 --> 00:45:44,200
Speaker 2: which was your big time base case, it's now diminishing

901
00:45:44,239 --> 00:45:48,320
Speaker 2: a little bit to the potential of maybe having some crash,

902
00:45:48,480 --> 00:45:49,000
Speaker 2: is what you're saying.

903
00:45:49,080 --> 00:45:51,200
Speaker 1: Yeah, my my base case is that you're going to

904
00:45:51,239 --> 00:45:53,640
Speaker 1: see inflation at six to eight percent for the next

905
00:45:53,719 --> 00:45:57,360
Speaker 1: five years, and that you'll see you'll see treasury bonds

906
00:45:57,400 --> 00:46:00,000
Speaker 1: at you know, bouncing around between five and seven percent,

907
00:46:01,080 --> 00:46:04,319
Speaker 1: and that you'll see stocks trading, you know, depending upon

908
00:46:04,360 --> 00:46:08,600
Speaker 1: growth rates at at eighteen to twenty times, and that

909
00:46:08,640 --> 00:46:11,640
Speaker 1: you'll see gold and bitcoin continue to appreciate. I don't

910
00:46:11,640 --> 00:46:13,719
Speaker 1: think you're going to see gold appreciate at forty percent

911
00:46:13,760 --> 00:46:17,759
Speaker 1: a year every year, but yeah, I you know, I

912
00:46:19,080 --> 00:46:22,319
Speaker 1: think that there is a very very substantial risk of

913
00:46:22,400 --> 00:46:25,600
Speaker 1: a big correction and equity priceis but that correction does

914
00:46:25,640 --> 00:46:29,360
Speaker 1: not need to come in a nineteen eighty seven twenty

915
00:46:29,400 --> 00:46:32,759
Speaker 1: two percent one day move. It could easily come as

916
00:46:32,760 --> 00:46:36,560
Speaker 1: it did in the nineteen seventies, primarily through the impact

917
00:46:36,600 --> 00:46:39,759
Speaker 1: of inflation. So you could have a decade where the

918
00:46:39,760 --> 00:46:42,840
Speaker 1: stock market goes up and down, doesn't really go anywhere nominally,

919
00:46:43,160 --> 00:46:45,680
Speaker 1: but loses fifty percent of its value because of inflation.

920
00:46:46,440 --> 00:46:48,560
Speaker 1: And that's why I think the most important thing is

921
00:46:49,040 --> 00:46:52,320
Speaker 1: I'm recommending that you have at least twenty five percent

922
00:46:52,320 --> 00:46:55,200
Speaker 1: of your portfolio in gold and bitcoin, and at least

923
00:46:55,200 --> 00:46:57,360
Speaker 1: twenty five percent of your portfolio in cash.

924
00:46:57,680 --> 00:46:59,560
Speaker 3: And let me recommend let me explain what I mean

925
00:46:59,600 --> 00:47:01,040
Speaker 3: by cash. Cash is just.

926
00:47:01,200 --> 00:47:05,160
Speaker 1: Very short duration treasury bills, so that can be thirty

927
00:47:05,239 --> 00:47:07,360
Speaker 1: day paper It could be sixty day paper, could be

928
00:47:07,440 --> 00:47:09,919
Speaker 1: ninety day paper. If you need a little more yield,

929
00:47:09,960 --> 00:47:11,760
Speaker 1: you can even go out to like three year paper.

930
00:47:11,760 --> 00:47:14,680
Speaker 1: You'll probably be okay. But you want to have short

931
00:47:14,760 --> 00:47:19,680
Speaker 1: duration fixed income to be liquid in the event that

932
00:47:19,719 --> 00:47:20,960
Speaker 1: there is a sharp correction.

933
00:47:21,520 --> 00:47:23,879
Speaker 2: When you say sharp, I mean you referenced a couple

934
00:47:23,960 --> 00:47:27,279
Speaker 2: time periods. I think about a sharp correction probably more

935
00:47:27,360 --> 00:47:30,920
Speaker 2: taking the shape of like a twenty twenty V shape.

936
00:47:31,160 --> 00:47:31,319
Speaker 3: Right.

937
00:47:32,440 --> 00:47:35,480
Speaker 2: You mentioned where everything's sort of changed in two thousand

938
00:47:35,480 --> 00:47:37,839
Speaker 2: and eight, and that's sort of I kind of look

939
00:47:37,880 --> 00:47:40,040
Speaker 2: at the market that way as well, and it showed

940
00:47:40,120 --> 00:47:42,279
Speaker 2: like a difference in appetite for letting the market's crash,

941
00:47:42,360 --> 00:47:44,359
Speaker 2: but also because of the system that's so leveraged up,

942
00:47:44,400 --> 00:47:47,080
Speaker 2: it just can't get de leveraged. And so you know,

943
00:47:47,239 --> 00:47:50,160
Speaker 2: in twenty twenty, we saw the FED buy up all

944
00:47:50,200 --> 00:47:52,640
Speaker 2: types of things, set up all types of SVPs to

945
00:47:52,640 --> 00:47:54,520
Speaker 2: buy up all types of things, and obviously we saw

946
00:47:54,600 --> 00:47:57,560
Speaker 2: a really really quick recovery of V shape recovery. Now

947
00:47:57,680 --> 00:48:00,640
Speaker 2: there's a big difference in nominal prices and per in power,

948
00:48:00,640 --> 00:48:03,440
Speaker 2: and so I love that you make that distinction, and

949
00:48:03,480 --> 00:48:06,000
Speaker 2: I think that's a super important distinction everyone has to understand.

950
00:48:06,960 --> 00:48:10,000
Speaker 2: But so when you say sharp correction, like sharp question

951
00:48:10,080 --> 00:48:13,160
Speaker 2: like twenty twenty, or sharp crashing down with a long

952
00:48:13,200 --> 00:48:14,000
Speaker 2: time coming.

953
00:48:13,760 --> 00:48:17,560
Speaker 1: Back, you know, I asked my wife to check this morning,

954
00:48:17,600 --> 00:48:19,920
Speaker 1: and apparently both my balls are not crystal.

955
00:48:20,960 --> 00:48:22,839
Speaker 2: We're talking hypothetical, so it's hard to say.

956
00:48:22,880 --> 00:48:26,200
Speaker 1: It's hard to say, I just I can't. I don't

957
00:48:26,239 --> 00:48:28,959
Speaker 1: want to pretend that I can. I don't have any

958
00:48:29,000 --> 00:48:31,680
Speaker 1: idea what might happen. Somebody wants to ask me if

959
00:48:31,680 --> 00:48:35,160
Speaker 1: I if I was if I had predicted the breakout

960
00:48:35,200 --> 00:48:37,920
Speaker 1: of COVID from Wuhan, China, and I said no, I

961
00:48:37,960 --> 00:48:40,359
Speaker 1: didn't even know they eat bats in China. You know

962
00:48:40,400 --> 00:48:43,799
Speaker 1: there there are Let me put to you this way.

963
00:48:43,960 --> 00:48:45,399
Speaker 1: I think this is a better way of thinking of it.

964
00:48:46,160 --> 00:48:50,320
Speaker 1: So many people say, what caused the eighty seven crash

965
00:48:50,760 --> 00:48:57,120
Speaker 1: was this financial innovation of doing dynamic hedging where you

966
00:48:57,160 --> 00:49:00,319
Speaker 1: would buy more put options as stocks fell, and that's

967
00:49:00,320 --> 00:49:03,239
Speaker 1: said in this loop that crashed the market, and that's

968
00:49:03,280 --> 00:49:06,000
Speaker 1: technically what did happen. A lot of people say what

969
00:49:06,120 --> 00:49:12,360
Speaker 1: caused the correction and text doocs was the increase was

970
00:49:12,360 --> 00:49:17,400
Speaker 1: the rapidly increasing depreciation schedule of telecom equipment because of innovation,

971
00:49:17,840 --> 00:49:20,359
Speaker 1: And that's true. That debt made a huge difference in

972
00:49:20,600 --> 00:49:24,560
Speaker 1: the balance sheets of the largest telecom companies and cost

973
00:49:24,600 --> 00:49:26,759
Speaker 1: investors a lot of money, which led to selling and

974
00:49:26,800 --> 00:49:30,120
Speaker 1: then a route. People say, oh, it was all the

975
00:49:30,160 --> 00:49:35,160
Speaker 1: fraud and the in the ninja mortgages that led to

976
00:49:35,280 --> 00:49:37,839
Speaker 1: the collapse in eight which is true. That's all those

977
00:49:37,880 --> 00:49:41,240
Speaker 1: things are all true. But I look at it very differently.

978
00:49:42,080 --> 00:49:46,920
Speaker 1: What caused the eighty seven crash was the enormous growth

979
00:49:47,120 --> 00:49:51,600
Speaker 1: and leverage and in financial innovation that created very high

980
00:49:51,680 --> 00:49:54,799
Speaker 1: multiples of stock prices and the face of relatively high

981
00:49:54,840 --> 00:49:58,959
Speaker 1: interest rates. What caused the crash in two thousand wasn't

982
00:49:59,040 --> 00:50:02,359
Speaker 1: the depreciations sc the telecom equipment. It was the fact

983
00:50:02,400 --> 00:50:05,920
Speaker 1: that stocks are trading in fifty times earnings. What caused

984
00:50:05,960 --> 00:50:08,840
Speaker 1: the mortgage bubble wasn't just the fraud. It was the

985
00:50:08,880 --> 00:50:13,520
Speaker 1: fact that there was ten trillion dollars in mortgage debt

986
00:50:13,600 --> 00:50:17,880
Speaker 1: that that had never existed before five years earlier, and

987
00:50:17,920 --> 00:50:20,600
Speaker 1: that couldn't possibly have ever been paid off or maintained.

988
00:50:21,280 --> 00:50:24,400
Speaker 1: So when I see the S and P five hundred

989
00:50:24,400 --> 00:50:27,319
Speaker 1: trading at twenty five times earnings, and I see ten

990
00:50:27,400 --> 00:50:31,319
Speaker 1: year yield at five percent that does not compute. And

991
00:50:31,400 --> 00:50:34,520
Speaker 1: when it doesn't compute, it will eventually correct. I just

992
00:50:34,600 --> 00:50:37,719
Speaker 1: can't tell you how. Yeah, but the problem won't be

993
00:50:37,960 --> 00:50:41,239
Speaker 1: the technical thing that causes the route. The problem will

994
00:50:41,280 --> 00:50:44,040
Speaker 1: be the grosser evaluation in the first place.

995
00:50:44,880 --> 00:50:49,200
Speaker 2: Yeah, well said, Well said, well, Port, We've grabb We've

996
00:50:49,320 --> 00:50:51,880
Speaker 2: covered a lot of ground here. I really appreciate you

997
00:50:51,880 --> 00:50:55,239
Speaker 2: taking the time to break all that down for us.

998
00:50:56,480 --> 00:50:58,760
Speaker 2: As I said earlier, you know, I learned so much

999
00:50:58,920 --> 00:51:02,000
Speaker 2: just from reading your your weekly, not your digest, and

1000
00:51:02,040 --> 00:51:04,920
Speaker 2: obviously subscribing to your newsletters. I know you're still writing

1001
00:51:04,960 --> 00:51:08,439
Speaker 2: a daily journal, right, a Porter's Daily Journal dot com.

1002
00:51:08,440 --> 00:51:09,319
Speaker 2: I believe that's right.

1003
00:51:09,480 --> 00:51:12,440
Speaker 1: Yeah, Porter's Daily Journal is free, and I'd love to

1004
00:51:12,440 --> 00:51:14,600
Speaker 1: get to know you. If you're in the market for

1005
00:51:14,680 --> 00:51:18,359
Speaker 1: investment research, certainly we would love to serve you. I'm

1006
00:51:18,360 --> 00:51:20,279
Speaker 1: in my fifties now. I think I've gotten better at

1007
00:51:20,320 --> 00:51:22,760
Speaker 1: it over time, and I think that the next decade

1008
00:51:22,840 --> 00:51:25,319
Speaker 1: is going to be fascinating from a financial standpoint. There's

1009
00:51:25,320 --> 00:51:29,680
Speaker 1: going to be lots and lots of opportunities. People like

1010
00:51:29,719 --> 00:51:32,520
Speaker 1: to say that their crisis I might know. Oh, come on,

1011
00:51:32,560 --> 00:51:35,439
Speaker 1: that's just another way of spell opportunity. So if you've

1012
00:51:35,440 --> 00:51:39,840
Speaker 1: got liquidity and your conservative this is a this is

1013
00:51:39,880 --> 00:51:43,879
Speaker 1: a very interesting time because all of these things are

1014
00:51:43,920 --> 00:51:48,080
Speaker 1: not going to last, and you will be richly rewarded

1015
00:51:48,080 --> 00:51:48,760
Speaker 1: if you're prepared.

1016
00:51:50,200 --> 00:51:52,640
Speaker 2: Well, that's a great place to end it. Porter again,

1017
00:51:52,719 --> 00:51:57,160
Speaker 2: thanks so much. I agree, it's also exciting. Just be prepared.

1018
00:51:58,800 --> 00:51:59,800
Speaker 3: Well. Thanks very much for having me.

1019
00:52:00,000 --> 00:52:02,200
Speaker 1: I'd love to come back and talk about all these

1020
00:52:02,200 --> 00:52:05,120
Speaker 1: things in another year when we'll have some idea of

1021
00:52:05,160 --> 00:52:07,800
Speaker 1: how it's all going to unfold.

1022
00:52:08,040 --> 00:52:09,760
Speaker 2: All right, we'll do that. Thanks for you