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Speaker 1: This is Mesters in Business with Very Results on Bloomberg Radio.

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Speaker 1: Verry would helps you're listening to Masters in Business on

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Speaker 1: Bloomberg Radio. My special guest this week is Spencer Jacob.

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Speaker 1: He is an editor at the Wall Street Journals heard

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Speaker 1: on the Street column. Before that, he wrote the Ahead

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Speaker 1: of the Tape column and was the lex column author

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Speaker 1: for The Financial Times. He just wrote a new book,

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Speaker 1: The Revolution That Wasn't Game Stop. Read It and the

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Speaker 1: Fleecing of Small Investors. Spencer Jacob, Welcome to Bloomberg. Thank

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Speaker 1: you so. First of all, I really enjoyed the book.

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Speaker 1: I read it on the beach this summer and a

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Speaker 1: couple of weekends. Uh. Really reads like a fascinating novel. Um.

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Speaker 1: If it wasn't a work of nonfiction, it could never

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Speaker 1: have been made into a work of fiction because it

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Speaker 1: just wouldn't be believable with it. It's crazy, right It's

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Speaker 1: it lends itself to a to a book, and I

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Speaker 1: knew that right away. When the story began to unfold,

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Speaker 1: I sent an email. I had a three quarters written

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Speaker 1: book proposal about something else, sitting at home during the pandemic,

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Speaker 1: and I wrote an email to the acquisitions editor Penguin

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Speaker 1: random House person. I don't even know. I didn't know then,

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Speaker 1: and when I saw this story begin to unfold, I

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Speaker 1: had first article had not been written about it. One

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Speaker 1: of my sons, let me stop you and and just

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Speaker 1: say the book came about and please pardon my language,

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Speaker 1: because your son's self describe themselves as degenerates, apes and retards.

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Speaker 1: Can you explain why a group of people would self

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Speaker 1: describe themselves that way. So I have three sons, and

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Speaker 1: two of them are are very online. They're all online,

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Speaker 1: but two of them are very online. They are on

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Speaker 1: read It all the time. And they were on this

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Speaker 1: forum on Reddit called Wall Street Bets, which was at

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Speaker 1: the epicenter of this story and the people on this forum.

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Speaker 1: It's an investing forum, but not really an investing corn.

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Speaker 1: There's a different investing forum on unreddit called r investing.

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Speaker 1: This is our Wall Street Bets, which is an entirely

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Speaker 1: different speculative lots of access to grind, lots of social

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Speaker 1: issues come up. It's not a straight up investing group. Now.

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Speaker 1: It's like Jackass for finance, That's what it is. It's like,

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Speaker 1: you know, you do crazy stuff on there, and you

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Speaker 1: show off crazy stuff and you. I don't know if

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Speaker 1: a lot of the crazy stuff actually ever happens because

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Speaker 1: you can't tell people are using pseudonyms. But they were

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Speaker 1: all over that. And my oldest boy, he's not twenty three,

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Speaker 1: he was a college senior when this happened, came over

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Speaker 1: and he said, Dad, are you going to write something

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Speaker 1: about Game Stop? And you know, so game Stop they're

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Speaker 1: all into video games. I've driven them there lots of times.

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Speaker 1: They were going there less and less over time, which

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Speaker 1: is a problem with Game Stop as a business. It's

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Speaker 1: you know, it's in a mall, it's it's old school,

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Speaker 1: it's it's the block uster video games. Totally, totally, that's

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Speaker 1: and that's the problem. That's why I had been losing

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Speaker 1: money for years. That's why that's how it found itself

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Speaker 1: at the center of the story. The book is not

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Speaker 1: really about game Stop. And people always asked me about

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Speaker 1: don't you think this? Don't you think that about Game Stopped?

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Speaker 1: Like I can talk to about game stuff, But that's

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Speaker 1: not really the interesting thing here. The interesting thing is

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Speaker 1: this unprecedented thing that made it the most traded security

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Speaker 1: in the world for a while, the most search term

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Speaker 1: in the world for a while, you know, and from

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Speaker 1: just total obscurity, and um, I said no, why you know?

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Speaker 1: And his friend of mine, this kid who I've known

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Speaker 1: since he was you know, my as tall as my

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Speaker 1: knee had had bought it. And uh, I took a

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Speaker 1: look and said, well, he's doubled his money in the

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Speaker 1: last two days. Maybe he should sell. They're talking about

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Speaker 1: it on Wall Street bets. And I've seen this dozens

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Speaker 1: of times before, you know, it's a kind of a

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Speaker 1: flash in the pan. And he I really wouldn't hang

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Speaker 1: on too long. And and what kind of got my

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Speaker 1: attention was he said, no, he's not going to sell. Ever,

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Speaker 1: No he can't sell. So what I he can't sell?

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Speaker 1: And so the you know, I started reading the board

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Speaker 1: and I was like, oh my god, they're they're executing

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Speaker 1: a corner on this stock. So they all sort of

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Speaker 1: agreed online to buy as much as they could and

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Speaker 1: not sell and then buy options to which forces further

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Speaker 1: buying buy options dealers. So it was this trap is

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Speaker 1: this thing that you can't really do, as you know, Barry, like,

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Speaker 1: you can't not legally legally right when I can't get

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Speaker 1: together and do this. But a bunch of anonymous teenagers

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Speaker 1: and others. It wasn't just teenagers could talk about it

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Speaker 1: in this venue without real fear of reprisal, because there

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Speaker 1: are a bunch of little guys engaging in some speculative

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Speaker 1: wishful thinking. That's right. And if you take at that point,

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Speaker 1: there were about one point nine million people on the forum.

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Speaker 1: By the end of the next month, there were eleven

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Speaker 1: million people. So they quadrupled in in four days the

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Speaker 1: number of people on this forum. As it just became

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Speaker 1: people got so excited by it and so there that

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Speaker 1: those people individually may not have had a lot of money,

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Speaker 1: but they did two things. First all their a lot

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Speaker 1: of them, and they all rushed in in the same

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Speaker 1: way into the same stocks, especially game Stop. And also

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Speaker 1: people were telling them, hey, if you want to get

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Speaker 1: real bank for your buck, don't even buy the stock

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Speaker 1: by way out of the money, call options on the stock.

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Speaker 1: And then the options dealers will have to basically as

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Speaker 1: it goes up, they'll have to buy, and they'll buy

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Speaker 1: a lot more than the money that you put down.

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Speaker 1: In professional terms, that's a gamma squeeze. Yes, it's a

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Speaker 1: gama squeeze. And most of these these kids were very

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Speaker 1: few of these kids knew what a Gama squeeze was,

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Speaker 1: but it was all explained there. I was reading all

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Speaker 1: about it on the board. I don't think they were

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Speaker 1: breaking the law because they're talking about it openly, right, right,

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Speaker 1: This this was no dark conspiracy. So so let's talk

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Speaker 1: a little bit about Wall Street bets. When it first

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Speaker 1: started to erupt, I think the knee jerk response, and

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Speaker 1: I'm as guilty as anybody was. How is this any

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Speaker 1: different than the nine nineties and Yahoo message boards and

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Speaker 1: raging bull But there was a slightly different factor what

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Speaker 1: made this so different than what we saw thirty years

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Speaker 1: So you've heard it. It's a cliche by now, but

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Speaker 1: it is true more or less that the four most

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Speaker 1: dangerous words and investing are This time is different, right,

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Speaker 1: And that's that's something I'm a real student of financial history.

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Speaker 1: I was Templeton very famously said that totally, and I

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Speaker 1: went into this with that echoing, and I had to

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Speaker 1: go into everything with that echoing in my head. Whenever

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Speaker 1: there's a crash or mania or panic that people. Human

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Speaker 1: psychology is basically unchanged since Paleolithic times, and so the

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Speaker 1: way that that we react to something financially is never good,

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Speaker 1: but it's always very similar. So history rhymes, doesn't repeat,

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Speaker 1: but it rhymes that that's the reason it's it's the

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Speaker 1: way that our our brains are wired. But this was different,

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Speaker 1: and tell us, tell us what was different about it.

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Speaker 1: The difference is that private companies understand psychology too. They

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Speaker 1: have psychologists who work for them, They have social psychologists

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Speaker 1: who work for them, and the same people who Uh.

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Speaker 1: You go into a Vegas casino and there are no

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Speaker 1: fox on the wall, there are no windows. People are

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Speaker 1: bringing you drinks. The same people who designed sports gambling

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Speaker 1: apps and things like that, designed social media and designed

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Speaker 1: the the brokerage apps that that these young people were

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Speaker 1: using to access this, and they induced all kinds of

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Speaker 1: They just put these speculative tendencies on steroids, basically is

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Speaker 1: what they did. Social media and the investing apps together

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Speaker 1: on the same device on your smartphone being used by

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Speaker 1: the same people al along with Wall Street, Bets and Reddit.

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Speaker 1: So the difference this time was different because uh, and

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Speaker 1: to the fact that everybody stuck at home. Most of

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Speaker 1: us got stimulus checks, so people have cash in their

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Speaker 1: pocket and there's no gambling, there's no sports. Their usual

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Speaker 1: entertainment is shut down. This really seems and you describe

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Speaker 1: it in the book as a perfect storm that teed

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Speaker 1: up to send this, to use their parlance, to the moon. Yeah.

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Speaker 1: I mean it's so interesting because several things had to

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Speaker 1: happen really all at once for this to happen. Um.

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Speaker 1: And so I trace that and explain the social forces,

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Speaker 1: because I think that's I mean that that's how you

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Speaker 1: tell the whole story. Uh, And it's very interesting, but

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Speaker 1: it's also how you understand what it means going forward.

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Speaker 1: And I want there, you know, and I hope that

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Speaker 1: there are lessons in the book for people who invest,

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Speaker 1: people who invest their own money, people on Wall Street

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Speaker 1: to take away from this, to understand how it happened,

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Speaker 1: not that it's going to happen exactly this way again,

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Speaker 1: because as I said, it was a perfect storm. But

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Speaker 1: you have to go back to two thousand and eighteen

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Speaker 1: when you had sports gambling legalized outside of Vegas in

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Speaker 1: most of the US, and so you had all these young,

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Speaker 1: mainly men playing daily fantasy sports. They had the apps already,

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Speaker 1: the Vanduel Draft Kings and what have you on their phones,

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Speaker 1: and all of a sudden they were actually gambling there's

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Speaker 1: a legal distinction between daily fantasy sports and gambling gambling.

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Speaker 1: It's the only type of sports that that negatively correlates

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Speaker 1: with with age is sports gambling. Uh then then totally

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Speaker 1: everything else is the older you are, the more likely

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Speaker 1: are to play slots and things like that, but not this.

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Speaker 1: Then you had um in late so you had a

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Speaker 1: five year period when half of the new brokerage accounts

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Speaker 1: opened in the US were opened by robin Hood, which

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Speaker 1: is a tiny broker Even then in that data point, again,

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Speaker 1: half of all new brokerage counts were robin Hood. Yeah,

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Speaker 1: not in dollar value because they were tiny's The median

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Speaker 1: value of those accounts was two forty one dollar, which

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Speaker 1: is peanuts. But the number of accounts, that's that's something.

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Speaker 1: And I would love to to go into how what

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Speaker 1: made robin Hood possible? Okay, because there's some changes there.

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Speaker 1: So let's let's just blow that right now. Why was

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Speaker 1: robin Hood and ps um? You know, I looked at

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Speaker 1: robin Hood and in a seed round and I wait,

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Speaker 1: you want to give free trade in two millennials. This

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Speaker 1: is the single dumbest investing idea I've ever heard of,

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Speaker 1: and I passed on it. What made that possible, robin

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Speaker 1: Hood possible, where twenty years ago you couldn't have had

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Speaker 1: the sort of app on your phone like robin Hood. Well,

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Speaker 1: our our mutual friend Howard Lind'son was one of the

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Speaker 1: early investors in robin Hood. He's the one to pitch

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Speaker 1: me on it. Literally, Howard, that's the dumbest blank idea

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Speaker 1: I've ever Wait, the trades are free and you're giving

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Speaker 1: it to the least wealthy people in the world. How

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Speaker 1: are they ever going to make money? Howard will video.

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Speaker 1: He was kind of a dummy about it too, because

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Speaker 1: he was smart enough to invest, but then he was

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Speaker 1: dumb enough to say, guys, this is a great app.

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Speaker 1: You should charge like a dollar or two dollars for it,

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Speaker 1: like people will pay that, which was totally wrong because

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Speaker 1: the fact that and and so you still have to

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Speaker 1: link it to a bank account, right, but you could

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Speaker 1: download it for free, and once you went through the

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Speaker 1: process of opening the account, that's when you found out

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Speaker 1: they need this info, they need your phone number, they

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Speaker 1: need that, they need your bank account, And before you

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Speaker 1: know it, you've opened up your financial life completely to

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Speaker 1: robin Hood and your first brokerage account and it's it's

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Speaker 1: cost seventy bucks to get out to sort of, you know,

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Speaker 1: to move your account to somewhere somewhere else, so you

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Speaker 1: don't you liquidated and move on exactly. Yeah, that's that

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Speaker 1: would be the smarter thing to do. Not that their

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Speaker 1: customers always did the smarter thing, but we'll get into

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Speaker 1: that later. But yeah, so they, I mean, in late

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Speaker 1: every other broker said we'll screw this, you know, we're

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Speaker 1: if you can't, you know, can't beat them, then join

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Speaker 1: them and for a Schwab or fidelity that has much

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Speaker 1: wealthier customers. They sell all kinds of services that Robin

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Speaker 1: who doesn't. They're like, well, well, we're gonna lose some

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Speaker 1: money on this, but we have to match them. And

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Speaker 1: it shows you how dumb they were, because they all

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Speaker 1: were wringing their hands about cutting their commissions to zero.

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Speaker 1: It was no longer the bulk of the money they

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Speaker 1: made anyway, but it was still a pretty nice chunk

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Speaker 1: of change for them, and they thought that it would

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Speaker 1: cost them money, and it made them money because you

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Speaker 1: had an explosion in trading activity as a result of

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Speaker 1: everyone going to zero. And so that there's a psychological

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Speaker 1: concept that's not appreciated. I mean, you have you learn

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Speaker 1: all about e losticity of demand, and you learn that

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Speaker 1: that when things get cheaper, people will desire more of it.

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Speaker 1: But it depends what kind of thing it is. There's

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Speaker 1: only up to a point, only up to a point,

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Speaker 1: but there's a special kind of product where people once

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Speaker 1: you go from costing something doesn't matter how little to nothing,

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Speaker 1: people will go crazy that it will explode. And that's

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Speaker 1: specifically fun things. And so you don't think about buying

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Speaker 1: a stock is a fun thing, but robin Hood made

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Speaker 1: it fun the same dopamine hit as as gambling or

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Speaker 1: getting on a roller coaster or just a smidge in

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Speaker 1: a heroine for the weekend. Totally, and it's the same

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Speaker 1: thing as think about when you're you're a few years older,

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Speaker 1: the means, so you remember like if you had to

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Speaker 1: call somebody long distance. I mean, you know, my family,

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Speaker 1: my parents are immigrants, and we had you know, relatives

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Speaker 1: far away, and I remember, like, you know, the very

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Speaker 1: rare occasion they would spring for a phone call. Like

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Speaker 1: everyone had to be lined up next to the phone

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Speaker 1: and you got your you know, your one minute on

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Speaker 1: the phone and then hand the phone to the next person.

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Speaker 1: And then it was like, oh, they're tearing their hair

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Speaker 1: out about how much it would cost. Now calling anyone

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Speaker 1: in the world anywhere is free, and so people do

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Speaker 1: it all the time. You know, they do it way

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Speaker 1: way more than if it just cost a tiny amount

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Speaker 1: of money, because these there's no cost to it. There's

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Speaker 1: no incremental cost to it, right And and as a

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Speaker 1: note with Schwab, when they and they were the first

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Speaker 1: major broker that seemed to have introduced um free trading,

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Speaker 1: and that all the other dominos fell after them. When

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Speaker 1: you looked at their revenue the next quarter, I think

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Speaker 1: something like fift of their pre free um revenue came

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Speaker 1: from just float on cash and trading volume was really

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Speaker 1: really you know, high single digits, low double digit and

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Speaker 1: then eventually payment for order flow more than made that up.

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Speaker 1: So and a lot of assets flowed into them. So

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Speaker 1: old told this was a win win at least four

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Speaker 1: established Wall Street farms, and they were like, why don't

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Speaker 1: we wait so long to do this? This is great?

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Speaker 1: They were all, you know, just gushing about how smart

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Speaker 1: they were to do this, even though they had held

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Speaker 1: off on doing it for a while. And then that

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Speaker 1: was late. Then what happened early is you had the pandemic,

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Speaker 1: and the pandemic was just the perfect thing to kick

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Speaker 1: off the speculative excess. Of course, you you know, you'd

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Speaker 1: had free money for many years, basically, you know, you'd

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Speaker 1: had zero would real cause credit, but but literal free

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Speaker 1: money showing up in the mail in the form of

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Speaker 1: a check or a direct deposit that that kicked in

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Speaker 1: um in the second quarter of If you were twenty

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Speaker 1: three years old and you you know, had been let's say, working,

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Speaker 1: maybe living with friends, all of a suddenly you're mom

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Speaker 1: and Dad's basement. You get this check for bucks. Uh,

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Speaker 1: you might be getting extended unemployment benefits. Uh, you're not

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Speaker 1: spending money going out every night. You know, you're at

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Speaker 1: the age where you you spend money as soon as

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Speaker 1: you make it. All of a sudden, you weren't your board.

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Speaker 1: You're sitting there looking at your phone for twelve hours

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Speaker 1: a day, and you're looking you're looking at social media.

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Speaker 1: All of a sudden, all these new social media people

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Speaker 1: are popping up talking about stocks, the stock market. You know,

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Speaker 1: there's this whole rise of of influencers, and so you

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Speaker 1: go and you know, your buddy tells you to open

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Speaker 1: up a robin Hood account, and you open up robin

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Speaker 1: Hood account because he already has a robin Hood account,

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Speaker 1: and he'll get he got a free shriff stock when

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Speaker 1: he opened it, and he'll get another free shaff stock. Mystery,

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Speaker 1: Like it's like a sweepstakes because it could be a

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Speaker 1: two dollar stock, but it could possibly be a fifty

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Speaker 1: dollar stock. Right, you don't know, it's it's it's like

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Speaker 1: you know, I mean, it's like, that's a cheap cost

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Speaker 1: of acquisition for a brokerage firm. Right. All told, the

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Speaker 1: average payback period was five months for that investment, so

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Speaker 1: they didn't really need to add. They did have advertisements,

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Speaker 1: and their advertisements were really kind of too kind of um,

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Speaker 1: you know, make themselves look it. Basically, it wasn't to

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Speaker 1: get new customers. Their their their ads. We're all touchy feely.

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Speaker 1: You were born an investor. I never thought I could

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Speaker 1: do this. And the people they show in their ads

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Speaker 1: are not the typical lucrative customers they had either. They

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Speaker 1: were you know, um, mainly female, a few older people.

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Speaker 1: It was young males primarily. And and the thing is

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Speaker 1: they did most of their customers they don't make money

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Speaker 1: on but there's a subset on which they make a

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Speaker 1: lot of money, and so those are the people they're

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Speaker 1: trying to get. It was young risk seeking, uh, you know,

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Speaker 1: kind of not maybe not two wise men. And as

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Speaker 1: a father of three young men, I can I know

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Speaker 1: what I'm talking about. Uh. And and you know, and

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Speaker 1: so that that's when you had the explosion during the panemic,

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Speaker 1: and you had all this volatility which was just just addictive.

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Speaker 1: It was like crack cocaine, you know, you couldn't stop.

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Speaker 1: And then in the year from the pandemic bear market

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Speaker 1: bottom to a year after nine percent of American stocks rose,

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Speaker 1: which was crazy number. So so let's talk a little

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Speaker 1: bit about the revolution that that wasn't by using game

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Speaker 1: Stop as an example, as you did so well in

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Speaker 1: the book. And and it has to begin with a

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Speaker 1: guy whose name we now know as Keith gill Um.

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Speaker 1: Since this is a family station, I can only use

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Speaker 1: an acronym. He went by DFV on on Reddit and

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Speaker 1: on YouTube. He was Roaring Kitty and he basically takes

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Speaker 1: all of his money, some fifty something thousand dollars buys

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Speaker 1: leaps like a year or two oft in the future,

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Speaker 1: way out of the money and this just looks like

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Speaker 1: a wild So he buys calls betting the stock will

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Speaker 1: go up on game stop, which is a couple of

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Speaker 1: bucks a buck or two or three at the time,

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Speaker 1: and he posts it um without a whole lot of

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Speaker 1: commentary on game Wall street bets on Reddit, just to

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Speaker 1: picture of his brokerage account with the options there in

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Speaker 1: his portfolio, apparently nothing else, and the word phrase I

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Speaker 1: like the stock, yep, yolo. You only live once. So

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Speaker 1: he is a really really fascinating character and unusual character.

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Speaker 1: And one of the interesting things is, let me tell

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Speaker 1: you that. I mean, of course, his whole history is

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Speaker 1: there to be seen, but for ninety percent of of

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Speaker 1: this story, he's there in the background doing these these

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Speaker 1: videos four hour five hour long, you know, videos, talking

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Speaker 1: about the stock and talking about investing, making these posts,

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Speaker 1: responding to people who mainly made fun of him on

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Speaker 1: this message board, like a lot. He took a lot

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Speaker 1: of heat, and you know, he was he was unusual

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Speaker 1: in a lot of ways on this forum Wall street Bets.

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Speaker 1: One thing is he wrote in complete sentences. The other

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Speaker 1: is like he was, I mean you I think can

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Speaker 1: advocate people go out and buy it. He just said

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Speaker 1: I like the stock that basically as much as as

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Speaker 1: much influencing as he did was here's a picture of

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Speaker 1: my account. I'm gonna live and die on it. You guys,

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Speaker 1: go do what you want. You want a textbook example

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Speaker 1: of not how not to influence people online and that

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Speaker 1: and that's it. Because he was cerebral, he was polite,

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Speaker 1: uh you know he people would kind of make fun

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Speaker 1: of him and said, well, that's not the way I

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Speaker 1: think about it, because you know, behavioral finance dictates that

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Speaker 1: blah blah blah, and uh, as I follow the teachings

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Speaker 1: of as Watamurana and whatever like, you know, stuff like that,

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Speaker 1: no one knows, yeah, exactly the valuation guru and n

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Speaker 1: y u No, I think these kids know who that

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Speaker 1: was or there you know, right, I mean, And so

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Speaker 1: he was just basically sort of you know, it's like

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Speaker 1: a tree falling in the woods. I mean, some people

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Speaker 1: were like, you know, sometimes he would make money and

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Speaker 1: then I say hey, you should sell and like no, no, no,

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Speaker 1: And then he'd lose half of it. And people were

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Speaker 1: following and said, wow, what an idiot. You know, for

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Speaker 1: the money that you lost, I could have done this

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Speaker 1: and that you could have bought a Game Stop franchise. Yeah,

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Speaker 1: so he invested fifty three dollar is of his money.

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Speaker 1: He's not a rich guy at all. He was working.

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Speaker 1: He didn't say anything about himself, by the way, and

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Speaker 1: he was and I think had he said this, he

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Speaker 1: probably would have had less influence. He's a charter financial analyst,

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Speaker 1: which was a difficult qualification. One, two, and three have

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00:20:13,520 --> 00:20:16,679
Speaker 1: each have like a fifty something percent fail rate. So

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Speaker 1: he's in the industry. And then he being being smart

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Speaker 1: and hard working is always good, but getting a little

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Speaker 1: lucky is better. And and not long afterwards, along comes

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Speaker 1: Michael Burry of the Big Short fame and basically takes

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Speaker 1: a position in Game Stop saying, hey, you know this

393
00:20:35,400 --> 00:20:39,040
Speaker 1: is a classic cigar butt. Uh, there's some value here

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Speaker 1: and and there's way too much negativity about it. What

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Speaker 1: happens from there, Well, I'll tell you that this is

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Speaker 1: interesting too, because I'll I won't say the entire name,

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Speaker 1: but it's df V is deep effing value. So value

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Speaker 1: is part of his moniker And he was upset. He said,

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Speaker 1: you know, thanks a lot Bury for jacking up my

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Speaker 1: cost basis because most peopore Well, so now it's going

401
00:21:02,240 --> 00:21:05,080
Speaker 1: to be more expensive to buy more, and he would

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00:21:05,119 --> 00:21:07,680
Speaker 1: build a position over a couple of years. The technical

403
00:21:07,760 --> 00:21:10,640
Speaker 1: term is pyramiding. You keep adding to an existing position

404
00:21:11,080 --> 00:21:16,520
Speaker 1: as prices gradually rise. But they practically doubled overnight, right,

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Speaker 1: And he and most people, I mean people on this

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Speaker 1: board would be like I bought these options and like,

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Speaker 1: now it doubled my money, you know, because because the

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Speaker 1: stock went up because Michael Burry shows up, who was

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Speaker 1: played by Christian Bale. That's why most people think of

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Speaker 1: Christian picture of Christian Bale instead of the drum set

411
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Speaker 1: in the Big Short. Yeah, totally. And so and people

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Speaker 1: are like, what what's wrong with you? Like you should sell?

413
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Speaker 1: Like you know, he this is like a stroke of luck,

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Speaker 1: and it's not how he viewed it at all, which

415
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Speaker 1: is a very rare form of thinking. So he I

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Speaker 1: think like he was surprisingly long time for someone buying options, totally.

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Speaker 1: And I think I would not be surprised if this

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Speaker 1: guy shows up one day, five years, ten years, not

419
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Speaker 1: even that long, you know, managing some kind of you know,

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Speaker 1: value fund just sort of like a kind of a

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Speaker 1: hip Warren Buffett or something. Because he really he has

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Speaker 1: that way of thinking. First of all, obviously has analytical

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Speaker 1: chops by having had a cf A not maybe not

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Speaker 1: Buffett like, but he certainly knows what he's talking about.

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Speaker 1: But he he just has that that kind of unusual

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Speaker 1: way of of looking at things and inverting things that

427
00:22:22,440 --> 00:22:26,399
Speaker 1: that you need for success. But at the same time,

428
00:22:26,640 --> 00:22:29,720
Speaker 1: as we'll see later, he he's got that. You know,

429
00:22:29,760 --> 00:22:32,680
Speaker 1: he's cool and young and use thirty three thirty four

430
00:22:32,760 --> 00:22:36,280
Speaker 1: during this this this episode and the point at which

431
00:22:36,320 --> 00:22:39,119
Speaker 1: he became really super influential that were the most followed

432
00:22:39,160 --> 00:22:42,600
Speaker 1: people on the planet basically for a couple of weeks. Uh,

433
00:22:42,640 --> 00:22:45,520
Speaker 1: he wasn't posting any kind of analysis, you know, he

434
00:22:45,800 --> 00:22:48,399
Speaker 1: was like he became the hero briefly of this, this

435
00:22:48,440 --> 00:22:51,760
Speaker 1: whole movement. So so following Michael Burry not much longer

436
00:22:51,800 --> 00:22:55,320
Speaker 1: than that, Ryan Cohen, who is the founder of Chewy,

437
00:22:55,520 --> 00:23:01,119
Speaker 1: which essentially um is the most successful online and pet

438
00:23:01,320 --> 00:23:04,879
Speaker 1: food and and good store essentially with pets dot Com

439
00:23:05,280 --> 00:23:10,320
Speaker 1: couldn't do Chewy became and Ryan Cohen then says, hey,

440
00:23:10,840 --> 00:23:15,320
Speaker 1: we think game stop can become an online purveyor of

441
00:23:15,400 --> 00:23:18,480
Speaker 1: video games. Forget the brick and mortar that that's just

442
00:23:18,560 --> 00:23:21,160
Speaker 1: where they were. Let's talk about the future. And now

443
00:23:21,200 --> 00:23:24,520
Speaker 1: the stock takes another leg up from one and two

444
00:23:24,520 --> 00:23:27,600
Speaker 1: and three dollars to five and ten dollars. Tell us

445
00:23:27,640 --> 00:23:31,320
Speaker 1: what happens next. Yeah, so he shows up, and then

446
00:23:31,359 --> 00:23:35,760
Speaker 1: things start to get interesting. Um it starts going up

447
00:23:35,800 --> 00:23:38,720
Speaker 1: to the point that it was at the point that

448
00:23:38,720 --> 00:23:42,840
Speaker 1: that deep effing value would have sold. You know, he said,

449
00:23:42,880 --> 00:23:44,520
Speaker 1: like I think you know this. He had made it

450
00:23:44,600 --> 00:23:47,359
Speaker 1: up money. He was a millionaire, just a million, just

451
00:23:47,480 --> 00:23:50,639
Speaker 1: one million, one million and two million, couple of million,

452
00:23:50,720 --> 00:23:54,000
Speaker 1: not no big deal and life changing before to exactly

453
00:23:54,040 --> 00:23:57,800
Speaker 1: before taxes. But then a light bulb goes off. And

454
00:23:58,160 --> 00:24:00,000
Speaker 1: even before this, a light bulb kind of went all

455
00:24:00,000 --> 00:24:03,920
Speaker 1: from his head, uh, some months before because someone had

456
00:24:03,960 --> 00:24:07,959
Speaker 1: pointed out on this this board, like hey, this this

457
00:24:08,040 --> 00:24:11,840
Speaker 1: could be the greatest short squeeze of your life, the

458
00:24:11,880 --> 00:24:14,440
Speaker 1: mother of all shorts, the mother of all short squeezes,

459
00:24:14,560 --> 00:24:17,720
Speaker 1: you know, the kind of the saddam language. And and

460
00:24:17,840 --> 00:24:21,000
Speaker 1: it briefly doubled uh and and then settled back down.

461
00:24:21,040 --> 00:24:22,640
Speaker 1: But that was a foretaste. And that's the first time

462
00:24:22,640 --> 00:24:25,120
Speaker 1: you mentioned, like, hey, in addition to all the good

463
00:24:25,119 --> 00:24:27,800
Speaker 1: stuff I think about game stop, there's this additional possibility.

464
00:24:27,800 --> 00:24:29,960
Speaker 1: I'm not gonna really count on it that there could

465
00:24:29,960 --> 00:24:34,440
Speaker 1: be a short squeeze, because you know, the thing that

466
00:24:34,440 --> 00:24:36,880
Speaker 1: that game stopping the other they call the meme stocks,

467
00:24:36,920 --> 00:24:39,240
Speaker 1: you know, had in common was that they're all kind

468
00:24:39,240 --> 00:24:42,800
Speaker 1: of losers. They weren't a MC, the big movie chain

469
00:24:42,840 --> 00:24:46,600
Speaker 1: which was dying on the vine during the pandemic hurts,

470
00:24:46,920 --> 00:24:50,320
Speaker 1: which had already declared bankruptcy and was waiting for the

471
00:24:50,320 --> 00:24:53,560
Speaker 1: court to just doll out the assets, which is insane.

472
00:24:54,200 --> 00:24:56,639
Speaker 1: What were some of the other ones in BlackBerry? Remember right?

473
00:24:56,800 --> 00:25:00,440
Speaker 1: Nokia was another one that popped up like we Bath

474
00:25:00,480 --> 00:25:03,280
Speaker 1: and Beyond. We used to call that dumpster diving when

475
00:25:03,320 --> 00:25:06,919
Speaker 1: you're looking through the wreckage on Wall Street to find

476
00:25:06,960 --> 00:25:10,400
Speaker 1: that cigar stuff? What can I still smoke that someone

477
00:25:10,480 --> 00:25:14,720
Speaker 1: else has thrown away in two two twenty was possibly

478
00:25:14,760 --> 00:25:17,520
Speaker 1: the worst year ever for short sellers, or people who

479
00:25:17,560 --> 00:25:21,160
Speaker 1: bet that stocks are going to decline, usually by borrowing

480
00:25:21,240 --> 00:25:25,080
Speaker 1: the stock and and selling it. So basically they they

481
00:25:25,119 --> 00:25:29,280
Speaker 1: opened themselves up to unlimited losses in theory and and

482
00:25:29,359 --> 00:25:32,000
Speaker 1: limited gains. And so two thousand twenty was a terrible year.

483
00:25:32,000 --> 00:25:33,879
Speaker 1: You've had all kinds of dumb stuff going up that

484
00:25:33,920 --> 00:25:36,320
Speaker 1: they were betting against. Nicola and you know, I can

485
00:25:36,359 --> 00:25:38,200
Speaker 1: go on and on and on, so let's put let's

486
00:25:38,200 --> 00:25:41,000
Speaker 1: put some flesh on those bones. And this is data

487
00:25:41,080 --> 00:25:48,359
Speaker 1: from the book it in the We Saw Drop. And

488
00:25:48,400 --> 00:25:54,640
Speaker 1: then beginning on March, markets rallied to finish up more

489
00:25:54,640 --> 00:25:59,360
Speaker 1: than for the year. And during that year, short sellers

490
00:25:59,440 --> 00:26:04,440
Speaker 1: lost collectively two hundred and forty five billion dollars, which

491
00:26:04,480 --> 00:26:07,600
Speaker 1: is pretty astounding. But then when you look at the

492
00:26:07,760 --> 00:26:13,280
Speaker 1: three months leading into January one, when the MEME stocks

493
00:26:13,320 --> 00:26:18,719
Speaker 1: really exploded, UM, a basket of the fifty most shorted

494
00:26:18,880 --> 00:26:22,800
Speaker 1: stocks uh that had a market cap of at least

495
00:26:22,800 --> 00:26:27,480
Speaker 1: a billion dollars, that basket doubled. Those are some insane

496
00:26:27,560 --> 00:26:30,240
Speaker 1: stats if you're a short seller. Yeah, that that is

497
00:26:30,440 --> 00:26:32,240
Speaker 1: just a world of pain if you're a short seller.

498
00:26:32,680 --> 00:26:34,880
Speaker 1: And so think about it if you're I mean, there

499
00:26:34,880 --> 00:26:36,760
Speaker 1: there are people out there, Jim chain Os and what

500
00:26:36,800 --> 00:26:39,679
Speaker 1: have you who are dedicated short sellers. Um, there are

501
00:26:39,720 --> 00:26:42,320
Speaker 1: a lot more people out there who have short selling

502
00:26:42,359 --> 00:26:44,439
Speaker 1: as part of their strategy. That that's the bulk of

503
00:26:44,440 --> 00:26:48,480
Speaker 1: short selling. Some people are are just fine, bad companies

504
00:26:48,520 --> 00:26:51,760
Speaker 1: a bit against them. Others run what's called like a

505
00:26:51,760 --> 00:26:54,880
Speaker 1: one thirty thirty along short portfolio. Where you're a hundred

506
00:26:54,920 --> 00:26:57,760
Speaker 1: and thirty percent long and then thirty percent short, so

507
00:26:57,960 --> 00:27:00,399
Speaker 1: net you're a hundred percent long, but you have a

508
00:27:00,480 --> 00:27:04,080
Speaker 1: hedge if the market goes down on the bet that

509
00:27:04,320 --> 00:27:07,320
Speaker 1: the worst stocks will for more than the best stops totally,

510
00:27:07,720 --> 00:27:10,960
Speaker 1: and and that's that's usually a smart bet because you

511
00:27:11,000 --> 00:27:14,800
Speaker 1: usually don't worry about something terrible happening to you being ruined, right,

512
00:27:14,800 --> 00:27:17,200
Speaker 1: I mean, you don't think, what's the worst thing that's

513
00:27:17,200 --> 00:27:19,320
Speaker 1: gonna happen. You bet against game stop. And then let's

514
00:27:19,320 --> 00:27:23,200
Speaker 1: say somebody shows the best boy shows up in bodies. Okay,

515
00:27:23,240 --> 00:27:25,600
Speaker 1: you had a really bad box, right, you had a

516
00:27:25,720 --> 00:27:28,040
Speaker 1: terrible day, But that's it. Not a terrible day. You

517
00:27:28,080 --> 00:27:29,800
Speaker 1: had a bad day. It's probably some small part of

518
00:27:29,800 --> 00:27:34,720
Speaker 1: your your huge portfolio. And so what these meme stocks

519
00:27:34,720 --> 00:27:37,320
Speaker 1: had in common was that they're all losers like that,

520
00:27:37,359 --> 00:27:39,320
Speaker 1: they're all companies that have not made money in years,

521
00:27:39,520 --> 00:27:42,800
Speaker 1: were headed for possible bankruptcy, were sort of just anachronisms,

522
00:27:42,840 --> 00:27:46,040
Speaker 1: like like BlackBerry, the companies that, like in two thousand

523
00:27:46,040 --> 00:27:48,240
Speaker 1: and one were sort of hot, not in two thousand

524
00:27:48,240 --> 00:27:51,560
Speaker 1: and twenty one, right, And so they were in a

525
00:27:51,680 --> 00:27:54,600
Speaker 1: horrible year for short selling. They felt safe betting against

526
00:27:54,600 --> 00:27:57,199
Speaker 1: these companies. But they felt too safe, And that was

527
00:27:57,280 --> 00:28:00,480
Speaker 1: the kind of the dry kindling that started as fire,

528
00:28:00,920 --> 00:28:02,879
Speaker 1: was that they felt so safe betting against some of

529
00:28:02,960 --> 00:28:07,320
Speaker 1: these companies that their short positions left them no exit

530
00:28:07,520 --> 00:28:10,440
Speaker 1: if things really went wrong. But what's no one. As

531
00:28:10,480 --> 00:28:11,919
Speaker 1: we said at the beginning of the show, it's not

532
00:28:11,960 --> 00:28:13,600
Speaker 1: like you and I would be illegal for us to

533
00:28:13,640 --> 00:28:16,320
Speaker 1: gang up and say, hey, I happen to know that

534
00:28:16,640 --> 00:28:19,600
Speaker 1: x y Z hedge fund is very heavily short this thing,

535
00:28:20,320 --> 00:28:23,680
Speaker 1: and we can ambush him by basically all colluding, putting

536
00:28:23,680 --> 00:28:26,800
Speaker 1: all our money together and pushing it to the you know,

537
00:28:27,200 --> 00:28:29,960
Speaker 1: to the moon. But because then he would be forced

538
00:28:29,960 --> 00:28:32,280
Speaker 1: to buy back then his money, he would pile his

539
00:28:32,359 --> 00:28:34,320
Speaker 1: buying on top of ours to buy back the stock,

540
00:28:34,359 --> 00:28:36,480
Speaker 1: and then there'll be a stampede for this sort of

541
00:28:36,520 --> 00:28:39,160
Speaker 1: it's like shouting fire in a crowded theater. Short squeezes

542
00:28:39,200 --> 00:28:41,480
Speaker 1: happened all the time, but you don't like those ambushes.

543
00:28:41,840 --> 00:28:44,760
Speaker 1: They used to happen before there was an SEC Now

544
00:28:44,800 --> 00:28:48,080
Speaker 1: you can't do that. So so again, more more data points.

545
00:28:48,560 --> 00:28:53,400
Speaker 1: You know, a normal stock, a billion dollar plus stock

546
00:28:53,920 --> 00:28:57,160
Speaker 1: might have a short interest of ten or twent if

547
00:28:57,200 --> 00:29:01,680
Speaker 1: that gets up to thirty forty, and that's called a

548
00:29:01,680 --> 00:29:04,680
Speaker 1: crowded short. Hey, too many people are betting against it.

549
00:29:05,120 --> 00:29:09,560
Speaker 1: Some of these um small cap and microcap stocks had

550
00:29:09,600 --> 00:29:14,680
Speaker 1: shortest interests of game Stop had a short interest of

551
00:29:14,720 --> 00:29:18,440
Speaker 1: a hundred and forty percent. This was a lot of

552
00:29:18,520 --> 00:29:23,200
Speaker 1: dry kindling and people lighting sparks, wasn't it. It totally

553
00:29:23,240 --> 00:29:26,000
Speaker 1: was I mean to the float and people. And of

554
00:29:26,040 --> 00:29:28,280
Speaker 1: course they're they're ongoing sort of you know, complaints and

555
00:29:28,320 --> 00:29:31,960
Speaker 1: conspiracy theories like that's illegal. You can't you know, it

556
00:29:32,120 --> 00:29:34,920
Speaker 1: is not illegal because there's a process called re hypothication

557
00:29:35,000 --> 00:29:36,800
Speaker 1: where if you you know, if you go on the

558
00:29:36,840 --> 00:29:39,080
Speaker 1: market today and you buy a stock, uh, and then

559
00:29:39,080 --> 00:29:41,920
Speaker 1: it's in your account at Schwab or whatever. Schwab might

560
00:29:42,000 --> 00:29:44,440
Speaker 1: lend that stock out. Even if you purchased that stock

561
00:29:44,480 --> 00:29:46,160
Speaker 1: from a short seller. They don't know where it came from,

562
00:29:46,160 --> 00:29:49,600
Speaker 1: so hypothecate that and it could be lent twice or

563
00:29:49,680 --> 00:29:52,560
Speaker 1: three times. It happens. There's no ceiling on the amount

564
00:29:52,560 --> 00:29:55,720
Speaker 1: of short interest other than hey, at two or three,

565
00:29:56,600 --> 00:30:01,400
Speaker 1: you know, it's financial suicide at a there's no room

566
00:30:01,440 --> 00:30:05,520
Speaker 1: for you know, and and and as we clearly saw. So,

567
00:30:05,520 --> 00:30:08,960
Speaker 1: so let's talk a little bit about short selling and

568
00:30:09,000 --> 00:30:12,240
Speaker 1: what's good and bad about it. But I gotta start

569
00:30:12,280 --> 00:30:18,400
Speaker 1: by asking about a story you tell about the history

570
00:30:18,480 --> 00:30:22,320
Speaker 1: of the paperwork crisis on Wall Street and how does

571
00:30:22,320 --> 00:30:25,760
Speaker 1: that relate to what's going on with uh, with Reddit

572
00:30:25,840 --> 00:30:28,520
Speaker 1: and game stop and the meme stocks tell us about

573
00:30:29,200 --> 00:30:33,200
Speaker 1: the paperwork crisis? Sure, well, there's a great book by

574
00:30:33,240 --> 00:30:35,360
Speaker 1: John Brooks called The Go Go Years where I think

575
00:30:35,400 --> 00:30:37,440
Speaker 1: I first heard about that. I've read about it other

576
00:30:37,480 --> 00:30:40,360
Speaker 1: places too, But the paperwork crisis was something that happened

577
00:30:40,600 --> 00:30:43,960
Speaker 1: during a previous speculative mania in the late nineties sixties,

578
00:30:43,960 --> 00:30:47,280
Speaker 1: when you had just an explosion in trading activity. And

579
00:30:47,320 --> 00:30:50,680
Speaker 1: this was before things were computerized. There was so much paperwork,

580
00:30:50,680 --> 00:30:52,360
Speaker 1: in fact, that the stock market had to be for

581
00:30:52,480 --> 00:30:55,240
Speaker 1: a long long time closed on Wednesdays just in order

582
00:30:55,280 --> 00:30:58,080
Speaker 1: to allow people to catch up, you know, settling all

583
00:30:58,080 --> 00:31:00,720
Speaker 1: the trades and making This was the nifty if the era,

584
00:31:00,920 --> 00:31:03,960
Speaker 1: and a lot of stocks, the postwar bull market was

585
00:31:03,960 --> 00:31:06,920
Speaker 1: still running from you know, the late forties right up

586
00:31:06,920 --> 00:31:10,880
Speaker 1: to the mid sixties. Wall Street was hot. Wall Street

587
00:31:10,920 --> 00:31:12,600
Speaker 1: was hot, and that was at a time that it

588
00:31:12,640 --> 00:31:15,600
Speaker 1: was really expensive to trade, which is the That's the

589
00:31:15,640 --> 00:31:18,040
Speaker 1: reason that I one reason that I brought it up

590
00:31:18,080 --> 00:31:23,600
Speaker 1: because it wasn't until five that commissions were deregulated. So

591
00:31:23,680 --> 00:31:25,680
Speaker 1: for years and years and years, this is a complaint

592
00:31:25,720 --> 00:31:28,040
Speaker 1: saying that like brokers could charge fixed commissions and it

593
00:31:28,040 --> 00:31:31,560
Speaker 1: was just really expensive for brokers to help themselves to

594
00:31:31,600 --> 00:31:35,160
Speaker 1: your money basically on Wall streets. So you know, all

595
00:31:35,160 --> 00:31:37,880
Speaker 1: these these people who were involved in this never could

596
00:31:37,880 --> 00:31:42,360
Speaker 1: have been involved because the hurdle financially to get into

597
00:31:42,600 --> 00:31:45,680
Speaker 1: trading was just too high. And then you couldn't be hyperactive.

598
00:31:45,720 --> 00:31:48,520
Speaker 1: And even then people were hyperactive. Then when you you

599
00:31:48,600 --> 00:31:50,920
Speaker 1: brought commissions down and down and down, you know, you

600
00:31:50,960 --> 00:31:53,320
Speaker 1: had the dot com and whatever, and then you know,

601
00:31:53,400 --> 00:31:56,520
Speaker 1: then now you had this which was tradings down to

602
00:31:56,840 --> 00:31:59,200
Speaker 1: now to free down to free. That that kind of

603
00:31:59,240 --> 00:32:00,680
Speaker 1: makes a little bit easy year for there to be

604
00:32:00,760 --> 00:32:03,760
Speaker 1: a specular domania. And so that that was just kind

605
00:32:03,760 --> 00:32:05,920
Speaker 1: of part of the kind of long arc of history

606
00:32:05,960 --> 00:32:07,960
Speaker 1: on Wall Street that I tell. And yeah, and so

607
00:32:08,200 --> 00:32:11,480
Speaker 1: making it free you really crossed a rubicon. But but

608
00:32:11,600 --> 00:32:14,440
Speaker 1: even making it cheaper made made things easier. Of course,

609
00:32:14,680 --> 00:32:16,120
Speaker 1: it may got made cheaper in the middle of the

610
00:32:16,160 --> 00:32:18,880
Speaker 1: worst decade ever really except the nineteen thirties from Wall Street.

611
00:32:18,920 --> 00:32:21,160
Speaker 1: Nineteen seventy five was a terrible time. You know, if

612
00:32:21,240 --> 00:32:23,560
Speaker 1: if you had gone to like, uh, these brokers with

613
00:32:23,600 --> 00:32:27,360
Speaker 1: like you know, sideburns and wide ties and polyesters suits

614
00:32:27,400 --> 00:32:30,120
Speaker 1: and stuff in nineteen seventy five were like having a

615
00:32:30,240 --> 00:32:32,600
Speaker 1: terrible time financially in nineteen seventy five, and you're like, oh,

616
00:32:32,600 --> 00:32:35,320
Speaker 1: this is the first step in you know, this kind

617
00:32:35,320 --> 00:32:37,360
Speaker 1: of revolution that's gonna make you guys really rich. You know,

618
00:32:37,400 --> 00:32:39,880
Speaker 1: you're gonna have this surge of people in the eighties

619
00:32:39,920 --> 00:32:41,760
Speaker 1: coming in four oh one. Ks are going to be

620
00:32:41,800 --> 00:32:43,720
Speaker 1: invented and all the stuff. They would have thought you

621
00:32:43,760 --> 00:32:45,760
Speaker 1: were crazy, like, you know, and then some guys gonna

622
00:32:46,000 --> 00:32:47,840
Speaker 1: you know, go on this thing called the Internet. His

623
00:32:47,920 --> 00:32:50,280
Speaker 1: name is Roaring Kitty, and he's gonna, you know, make

624
00:32:50,320 --> 00:32:53,080
Speaker 1: a video game store, you know, be the most traded

625
00:32:53,120 --> 00:32:55,960
Speaker 1: security on the planet from total obscurity. Like then they

626
00:32:56,040 --> 00:32:57,800
Speaker 1: really think you're crazy. But that's that's you know, that

627
00:32:57,880 --> 00:32:59,400
Speaker 1: was the beginning of it. That was a key step.

628
00:32:59,520 --> 00:33:02,120
Speaker 1: So so that's how we ended up eventually getting to

629
00:33:02,160 --> 00:33:08,000
Speaker 1: the point where um trading became free. The short squeeze

630
00:33:08,040 --> 00:33:12,840
Speaker 1: that that was orchestrated on Reddit has this underlying theme

631
00:33:13,600 --> 00:33:16,640
Speaker 1: that short sellers are evil, that this is all a

632
00:33:16,680 --> 00:33:20,880
Speaker 1: big conspiracy theory. Um. Even Elon Musk has weighed in

633
00:33:20,920 --> 00:33:26,239
Speaker 1: on this. Why the animus towards short sellers. Yeah, if

634
00:33:26,240 --> 00:33:28,320
Speaker 1: you look at the way that short sellers and I

635
00:33:28,360 --> 00:33:32,200
Speaker 1: just think encourage readers to go to Google right now

636
00:33:32,360 --> 00:33:34,600
Speaker 1: and type in short sellers are and tell me what

637
00:33:34,640 --> 00:33:37,240
Speaker 1: you see. And it's not going to be a nice word.

638
00:33:37,280 --> 00:33:39,440
Speaker 1: It's not going to be a nice description. So going

639
00:33:39,480 --> 00:33:41,920
Speaker 1: back to the history of of stock markets, back to

640
00:33:41,920 --> 00:33:46,600
Speaker 1: the sixteen thirties in the Netherlands, short sellers have been

641
00:33:46,600 --> 00:33:49,920
Speaker 1: reviled because whereas most of us buy stock and then

642
00:33:49,960 --> 00:33:52,240
Speaker 1: hope it will go up and keep paying us dividends,

643
00:33:52,640 --> 00:33:56,480
Speaker 1: they're making the opposite bet. Making that opposite bet, though,

644
00:33:57,720 --> 00:34:00,280
Speaker 1: is not predatory at all. As a matter of fact,

645
00:34:00,280 --> 00:34:07,000
Speaker 1: the existence of short selling is very beneficial to to

646
00:34:07,160 --> 00:34:09,760
Speaker 1: every one of the markets, but especially to a retail

647
00:34:09,800 --> 00:34:12,319
Speaker 1: investor that doesn't know a lot. And I'll explain why.

648
00:34:12,440 --> 00:34:15,120
Speaker 1: One reason is that short sellers provide a lot of

649
00:34:15,160 --> 00:34:19,719
Speaker 1: liquidity to the market that wouldn't otherwise shorts. But there

650
00:34:19,760 --> 00:34:21,600
Speaker 1: if there were no short selling, then there are only

651
00:34:21,640 --> 00:34:23,319
Speaker 1: two things you could do. You could say, I'm going

652
00:34:23,360 --> 00:34:24,959
Speaker 1: to buy the stocker. I'm not going to buy the stock.

653
00:34:25,000 --> 00:34:27,719
Speaker 1: You abstain or you vote. Yes you can't vote, and no,

654
00:34:28,040 --> 00:34:30,440
Speaker 1: you can't say, you know what, the stock is too expensive,

655
00:34:30,840 --> 00:34:33,880
Speaker 1: And so there's nobody to really to kind of correct

656
00:34:34,040 --> 00:34:36,239
Speaker 1: the value of a stock. It takes a much much

657
00:34:36,280 --> 00:34:38,279
Speaker 1: longer time for the kind of scales to fall from

658
00:34:38,320 --> 00:34:41,040
Speaker 1: our eyes, not just when there's a fraud like Enron,

659
00:34:41,120 --> 00:34:45,280
Speaker 1: which was explor Jim chanos a lot, and he's Enron

660
00:34:45,360 --> 00:34:49,000
Speaker 1: was but one of many frauds that he and other

661
00:34:49,080 --> 00:34:52,840
Speaker 1: short sellers have identified. And in fact, short sellers seem

662
00:34:52,880 --> 00:34:56,319
Speaker 1: to do a better job than the FTC or the

663
00:34:56,440 --> 00:35:02,120
Speaker 1: SEC or whatever organization is in charge of instigating corporate fraud.

664
00:35:02,440 --> 00:35:05,239
Speaker 1: Then you know they they've done a really good job

665
00:35:05,640 --> 00:35:09,040
Speaker 1: letting investors know this company is lying to you and

666
00:35:09,200 --> 00:35:11,040
Speaker 1: if you put money into this, you're gonna lose it.

667
00:35:11,680 --> 00:35:14,600
Speaker 1: As Jim says, you know, short sellers are financial detectives,

668
00:35:14,640 --> 00:35:17,480
Speaker 1: and regulators are financial archaeologists, you know, after the fact,

669
00:35:17,560 --> 00:35:20,439
Speaker 1: that come in and and do something hopefully good. Yeah,

670
00:35:20,520 --> 00:35:23,799
Speaker 1: so they I mean, I'm not holding short sellers up

671
00:35:23,800 --> 00:35:26,000
Speaker 1: as like a paragon of virtue there out there on

672
00:35:26,040 --> 00:35:28,640
Speaker 1: Wall Street. They're trying to make money. That's that's the

673
00:35:28,680 --> 00:35:31,960
Speaker 1: free market. They're out there, They're playing a very dangerous game.

674
00:35:32,000 --> 00:35:35,239
Speaker 1: They have to be really confident in selling something short because,

675
00:35:35,280 --> 00:35:39,480
Speaker 1: as I said, the losses are theoretically unlimited, the gains

676
00:35:39,560 --> 00:35:42,520
Speaker 1: are keppt. It's the it's the inverse of what you

677
00:35:42,640 --> 00:35:45,560
Speaker 1: face as a normal investor. By the way, I'm not

678
00:35:45,640 --> 00:35:47,839
Speaker 1: encouraging anyone out there to go and sell stock short.

679
00:35:47,920 --> 00:35:51,160
Speaker 1: It's a very dangerous and complicate anything. It's hard, and

680
00:35:51,280 --> 00:35:53,480
Speaker 1: I don't think that people need to do it, but

681
00:35:53,560 --> 00:35:56,120
Speaker 1: I think that that we're all better off if short

682
00:35:56,160 --> 00:35:58,880
Speaker 1: sellers are kind of unmolested. I guess in the market

683
00:35:58,960 --> 00:36:02,280
Speaker 1: that's you know, they're not. There have been times, especially

684
00:36:02,280 --> 00:36:04,600
Speaker 1: bad times in the market, and research you show this

685
00:36:04,640 --> 00:36:07,400
Speaker 1: again and again when you when you restrict short selling,

686
00:36:07,800 --> 00:36:11,719
Speaker 1: then you wind up kind of delaying the normalization of

687
00:36:11,760 --> 00:36:14,160
Speaker 1: the market. Like in two thousand and eight and around

688
00:36:14,200 --> 00:36:16,360
Speaker 1: the time of it was the first ones to step

689
00:36:16,400 --> 00:36:19,719
Speaker 1: in and buy in a crash because they're covering and saying,

690
00:36:19,760 --> 00:36:23,200
Speaker 1: all right, we've made enough money. And literally studies have

691
00:36:23,280 --> 00:36:26,640
Speaker 1: shown they're the first buyers than the value guys come

692
00:36:26,640 --> 00:36:28,880
Speaker 1: in and the technicals. There's like a whole arc of that.

693
00:36:29,120 --> 00:36:32,080
Speaker 1: You reference in the book a two thousand and four

694
00:36:32,239 --> 00:36:37,439
Speaker 1: Harvard study by Professor Orton Lamont that said, when when

695
00:36:37,440 --> 00:36:42,239
Speaker 1: you have companies complaining about short sellers in general, they

696
00:36:42,280 --> 00:36:45,960
Speaker 1: do much worse than the average stock and much more

697
00:36:46,000 --> 00:36:50,439
Speaker 1: frequently go bankrupt. So it's almost a red flag when

698
00:36:50,440 --> 00:36:54,080
Speaker 1: you hear management. Dick fald is a perfect example, got

699
00:36:54,120 --> 00:36:56,879
Speaker 1: handed a copy of that someone in the book, you say,

700
00:36:56,880 --> 00:36:59,480
Speaker 1: when he was complaining about it, someone literally handing him

701
00:36:59,480 --> 00:37:01,399
Speaker 1: handed him a copy of the study, and I guess

702
00:37:01,400 --> 00:37:04,600
Speaker 1: the implication was, Hey, Dick, maybe you should just not

703
00:37:04,800 --> 00:37:07,840
Speaker 1: not go there. Yeah, well he did not take that advice,

704
00:37:08,280 --> 00:37:12,120
Speaker 1: unfortunately went bankrupt. So they fit the study perfectly. So

705
00:37:12,120 --> 00:37:18,839
Speaker 1: so short selling isn't necessarily um inherently evil, And yet

706
00:37:19,280 --> 00:37:24,240
Speaker 1: that seems to be the guestult on on Wall Street bets.

707
00:37:24,560 --> 00:37:27,040
Speaker 1: And that's a really interesting point at which I kind

708
00:37:27,080 --> 00:37:30,719
Speaker 1: of understand where the people who mainly were involved in

709
00:37:30,760 --> 00:37:34,400
Speaker 1: this came from. So it's like young people between the

710
00:37:34,400 --> 00:37:37,000
Speaker 1: ages of eighteen and thirty five primarily who participated in this,

711
00:37:37,120 --> 00:37:40,000
Speaker 1: mostly male. As I said, but gender doesn't doesn't matter

712
00:37:40,000 --> 00:37:43,080
Speaker 1: in this case. But their former to financial experience before

713
00:37:43,120 --> 00:37:46,360
Speaker 1: they ever could invest, was the Global Financial Crisis, and

714
00:37:46,400 --> 00:37:48,719
Speaker 1: so and there's this lingering anger that like, we never

715
00:37:48,760 --> 00:37:51,440
Speaker 1: really got our pound of flesh. My parents lost their home,

716
00:37:51,600 --> 00:37:54,040
Speaker 1: my parents friends lost their house, or I have these

717
00:37:54,040 --> 00:37:56,440
Speaker 1: student loans that are really hard to pay back. I

718
00:37:56,480 --> 00:37:59,640
Speaker 1: can't earn enough and I can't buy a house, and

719
00:37:59,719 --> 00:38:02,680
Speaker 1: these guys are getting rich and and and the decades

720
00:38:02,719 --> 00:38:06,280
Speaker 1: since the GFC, you know, you've you've had a further

721
00:38:06,880 --> 00:38:08,600
Speaker 1: kind of spread. You know, the rich have gotten richer

722
00:38:08,640 --> 00:38:10,719
Speaker 1: and the poor have not gotten much wealthier. And so

723
00:38:11,160 --> 00:38:14,799
Speaker 1: you know, you you really do have polarization in terms

724
00:38:14,920 --> 00:38:18,080
Speaker 1: of wealth and income and access to all kinds of

725
00:38:18,080 --> 00:38:20,000
Speaker 1: things in this country. It see, it's not a you know,

726
00:38:20,239 --> 00:38:23,839
Speaker 1: a very egalitarian society that we live in, much less

727
00:38:23,880 --> 00:38:27,480
Speaker 1: so than the past. And so they focus that animus

728
00:38:27,600 --> 00:38:30,399
Speaker 1: on not on rich people, because they like Elon Musk

729
00:38:30,880 --> 00:38:33,239
Speaker 1: and they like other rich people. They like Silicon Valley

730
00:38:33,320 --> 00:38:40,080
Speaker 1: rich guys. The exactly he's cool, but they they if

731
00:38:40,120 --> 00:38:42,760
Speaker 1: you wear a suit and work on Wall Street, you're

732
00:38:42,960 --> 00:38:45,600
Speaker 1: like a cartoon villain to them. And then specifically if

733
00:38:45,640 --> 00:38:48,280
Speaker 1: you're a hedge phone manager, hedgehohn managers to them are

734
00:38:48,320 --> 00:38:51,239
Speaker 1: are evil personified. And then if your hedgehump manager who

735
00:38:51,320 --> 00:38:54,000
Speaker 1: sell stock short where there's already this bias against betting

736
00:38:54,080 --> 00:38:56,839
Speaker 1: against something, there's this kind of sense that like they

737
00:38:56,840 --> 00:38:58,799
Speaker 1: want to ruin a company, which is not what they

738
00:38:58,920 --> 00:39:00,960
Speaker 1: want to do, because that's not what happens when you

739
00:39:02,000 --> 00:39:04,600
Speaker 1: it's too hard to do that. So so there was

740
00:39:04,640 --> 00:39:07,840
Speaker 1: something you reference in the book off of Off of

741
00:39:07,960 --> 00:39:10,520
Speaker 1: Reddit that cracked me up. A lot of the memes,

742
00:39:10,719 --> 00:39:15,120
Speaker 1: you know, this was really amusing and entertaining. So so

743
00:39:15,160 --> 00:39:18,799
Speaker 1: the intersection of the social side of it, the political

744
00:39:19,400 --> 00:39:23,239
Speaker 1: economic warrior side of it, and the investing side. It's

745
00:39:23,280 --> 00:39:28,920
Speaker 1: a weird group. I love this bankrupting institutional investors for dummies,

746
00:39:28,960 --> 00:39:32,880
Speaker 1: Like they photoshopped the investing for dummies and we're gonna

747
00:39:32,920 --> 00:39:36,280
Speaker 1: go after the hedge funds, who, by the way, had

748
00:39:36,640 --> 00:39:40,520
Speaker 1: nothing whatsoever to do with a great financial crisis, but

749
00:39:40,680 --> 00:39:44,920
Speaker 1: seemed to have garnered a lot of criticism that they

750
00:39:44,960 --> 00:39:47,920
Speaker 1: were somehow involved when they of all the people to blame,

751
00:39:49,239 --> 00:39:51,920
Speaker 1: not them, right, they There's lots of stuff. If you

752
00:39:51,920 --> 00:39:54,919
Speaker 1: want to go someone like that, there's a million people

753
00:39:54,960 --> 00:39:57,680
Speaker 1: to blame. But of of all the folks, hedge funds

754
00:39:57,760 --> 00:40:00,600
Speaker 1: really were not involved in the financial crisis, so it

755
00:40:00,680 --> 00:40:07,200
Speaker 1: seems weird that there's this sort of undirected general smoldering

756
00:40:07,400 --> 00:40:11,080
Speaker 1: rage and it's just looking for an outlet. And then

757
00:40:11,120 --> 00:40:13,600
Speaker 1: they told them on the board, Hey, there's this hedgehow

758
00:40:13,640 --> 00:40:17,759
Speaker 1: manager who like could otherwise a low profile guy. His

759
00:40:18,000 --> 00:40:20,640
Speaker 1: firm is believe it or not, called Melvin Capital. What

760
00:40:20,719 --> 00:40:23,879
Speaker 1: did we and how did the name Melvin Capital come about?

761
00:40:24,160 --> 00:40:25,680
Speaker 1: Gabe Plotkin, who's one of the one of the big,

762
00:40:25,840 --> 00:40:27,600
Speaker 1: one of the few big loues, which is a dweed

763
00:40:27,600 --> 00:40:30,319
Speaker 1: be enough name to begin with. He's like, no, no,

764
00:40:30,480 --> 00:40:35,920
Speaker 1: Gabe Plotkin isn't nebishy enough. Let's call it Melvin. It

765
00:40:36,040 --> 00:40:38,879
Speaker 1: was his grandfather's name. His grandfather was a communist store

766
00:40:38,880 --> 00:40:41,200
Speaker 1: owner who we really admired, and so he named his

767
00:40:41,560 --> 00:40:44,400
Speaker 1: lovely sentiment. Well people people laughed at it like they

768
00:40:44,440 --> 00:40:46,000
Speaker 1: were like some of the commentary when he set up

769
00:40:46,000 --> 00:40:49,000
Speaker 1: the fund, because he came from S. A. C. H.

770
00:40:49,600 --> 00:40:55,759
Speaker 1: Which was Cohen's fund and point seventy two. But he

771
00:40:55,760 --> 00:40:59,040
Speaker 1: he was seated by Steve Cohen and he four years

772
00:40:59,160 --> 00:41:02,120
Speaker 1: had huge tess. He was a very good fun. People

773
00:41:02,160 --> 00:41:07,239
Speaker 1: were laughing. He personally double digit returns totally. He personally

774
00:41:07,719 --> 00:41:10,719
Speaker 1: this this is like the just incredible to me this number.

775
00:41:10,840 --> 00:41:13,040
Speaker 1: I've mentioned that. People said, now you must be you

776
00:41:13,120 --> 00:41:15,600
Speaker 1: must be, must be wrong about that. He you know,

777
00:41:15,640 --> 00:41:18,319
Speaker 1: people not not from Wall Street or like really like

778
00:41:18,560 --> 00:41:21,520
Speaker 1: he earned personally eight forty six million dollars the year

779
00:41:21,560 --> 00:41:24,520
Speaker 1: before this whole episode went down. He was a billionaire

780
00:41:24,960 --> 00:41:28,439
Speaker 1: multiple times, owner over not even counting what he still had,

781
00:41:28,719 --> 00:41:31,799
Speaker 1: like a big chunk of of UH. Melvin was his

782
00:41:31,840 --> 00:41:33,880
Speaker 1: own capital as well. At that point it was so

783
00:41:34,080 --> 00:41:36,720
Speaker 1: and and and seven billion dollars of it went poof

784
00:41:37,040 --> 00:41:39,680
Speaker 1: in a few days because of this. Yes, so, but

785
00:41:40,040 --> 00:41:43,279
Speaker 1: he was and and there are other hedge funds that

786
00:41:43,320 --> 00:41:46,360
Speaker 1: were short um game stop, but he was especially short

787
00:41:46,760 --> 00:41:50,120
Speaker 1: and because he had a fund that that specialized UH

788
00:41:50,280 --> 00:41:53,919
Speaker 1: in retailers and things like that and consumer discuss dead

789
00:41:54,000 --> 00:41:59,200
Speaker 1: center of his target of companies that either were overvalued

790
00:41:59,360 --> 00:42:02,560
Speaker 1: or over prias or should be bankrupt. And he testified

791
00:42:02,600 --> 00:42:04,640
Speaker 1: that in two thousand and fourteen when he set up

792
00:42:04,640 --> 00:42:06,320
Speaker 1: his fund. That was one of the first positions he

793
00:42:06,360 --> 00:42:08,640
Speaker 1: put on. It was a good good bet too. In

794
00:42:08,680 --> 00:42:11,719
Speaker 1: two thousand and fourteen because it went down a lot

795
00:42:11,760 --> 00:42:15,160
Speaker 1: between that. Where was he initially short from gee? I

796
00:42:15,239 --> 00:42:18,560
Speaker 1: think it was probably uhs at that time, So you

797
00:42:18,880 --> 00:42:22,400
Speaker 1: wrote it down to sixty I think, which the question really,

798
00:42:22,440 --> 00:42:24,839
Speaker 1: what are you hanging around for the last buck or two? Well?

799
00:42:25,040 --> 00:42:28,319
Speaker 1: And and it crowded short? You know that? Is it

800
00:42:28,400 --> 00:42:31,200
Speaker 1: just not wanting to pay the taxes? I don't. That

801
00:42:31,360 --> 00:42:33,239
Speaker 1: was one of the things that you don't answer in

802
00:42:33,239 --> 00:42:35,680
Speaker 1: the book, and I don't I have yet to read

803
00:42:35,719 --> 00:42:38,840
Speaker 1: that answer. But you short something at forty it drops

804
00:42:38,880 --> 00:42:42,520
Speaker 1: to a dollar or two? Who cares about that? Last book?

805
00:42:42,560 --> 00:42:45,800
Speaker 1: What are you waiting for? Yeah? And I mean obviously

806
00:42:46,040 --> 00:42:48,239
Speaker 1: you know in reporting a book, there people you speak

807
00:42:48,280 --> 00:42:50,080
Speaker 1: with who are on the record, people are off the record.

808
00:42:50,080 --> 00:42:52,840
Speaker 1: I did try to kind of suss that out and

809
00:42:52,920 --> 00:42:55,520
Speaker 1: never really to my satisfaction. Didn't. I just think it

810
00:42:55,560 --> 00:42:58,399
Speaker 1: was because it was still there was just nothing else

811
00:42:58,440 --> 00:43:00,680
Speaker 1: too short. I guess two dollars us to zero is

812
00:43:00,719 --> 00:43:05,440
Speaker 1: still another hundred so um. Yeah. And then the reason

813
00:43:05,480 --> 00:43:07,600
Speaker 1: that they became aware of him because the way that

814
00:43:07,640 --> 00:43:09,719
Speaker 1: short selling works is you can see how much short

815
00:43:09,760 --> 00:43:11,200
Speaker 1: interest there is in a stock, but you can't see

816
00:43:11,200 --> 00:43:14,480
Speaker 1: who is shorting it. But if you buy derivatives for

817
00:43:14,560 --> 00:43:17,239
Speaker 1: your fund that have the same effect, and he did,

818
00:43:17,320 --> 00:43:19,840
Speaker 1: and that was turned out to be a fatal mistake

819
00:43:20,320 --> 00:43:24,440
Speaker 1: because because these weren't coal options where you're deciding in

820
00:43:24,480 --> 00:43:28,920
Speaker 1: advance how much you're risking, when there are certain derivatives

821
00:43:29,000 --> 00:43:32,279
Speaker 1: where you have full exposure in both directions. There there are,

822
00:43:32,320 --> 00:43:34,600
Speaker 1: although he owned puts which are which do have a

823
00:43:34,600 --> 00:43:36,840
Speaker 1: limited loss, you can only lose the premium. But that

824
00:43:36,920 --> 00:43:39,000
Speaker 1: and that's what showed up. And then he and then

825
00:43:39,040 --> 00:43:42,640
Speaker 1: he was being talked about on this forum. Uh you

826
00:43:42,680 --> 00:43:45,640
Speaker 1: know when when Ryan the same time that Ryan Cohen

827
00:43:45,719 --> 00:43:49,560
Speaker 1: came in and then he opted and even when he

828
00:43:49,600 --> 00:43:53,439
Speaker 1: was being talked about and I mean there, I don't

829
00:43:53,440 --> 00:43:55,920
Speaker 1: want to kind of get into you let me say

830
00:43:56,000 --> 00:43:57,640
Speaker 1: things that you don't want to say, because I get

831
00:43:57,640 --> 00:44:00,120
Speaker 1: away with him where maybe you are uncomfortable saying that.

832
00:44:00,800 --> 00:44:05,440
Speaker 1: Here's a guy who's incredibly successful, he's a Wall Street professional,

833
00:44:05,600 --> 00:44:09,000
Speaker 1: he's a billionaire, and he sees a bunch of wise

834
00:44:09,040 --> 00:44:12,520
Speaker 1: asses and kids on a message board mocking him, and

835
00:44:12,560 --> 00:44:14,880
Speaker 1: he's like, really, let me show you how it's done,

836
00:44:15,320 --> 00:44:19,200
Speaker 1: because this pos is going to zero. Like it's easy

837
00:44:19,280 --> 00:44:22,560
Speaker 1: to see. Yeah, there's a lack of humility there. But

838
00:44:22,680 --> 00:44:28,520
Speaker 1: it's not you know, Foldy and Jubris, it's just show

839
00:44:28,560 --> 00:44:31,799
Speaker 1: the kids how it's done and didn't work out. That's

840
00:44:31,840 --> 00:44:34,720
Speaker 1: that's I think that's a pretty good guess at what happened.

841
00:44:34,719 --> 00:44:37,240
Speaker 1: I think it also it's a it's it's an organization

842
00:44:37,239 --> 00:44:39,200
Speaker 1: of thirty or forty people that may not have gotten

843
00:44:39,239 --> 00:44:41,279
Speaker 1: to his level yet. I think I was just the

844
00:44:41,360 --> 00:44:43,879
Speaker 1: person one or two levels below him just didn't take

845
00:44:43,880 --> 00:44:46,879
Speaker 1: it seriously. They were like, why would you? Why would

846
00:44:47,080 --> 00:44:50,880
Speaker 1: before this all happened, why would anyone take degenerates and

847
00:44:51,000 --> 00:44:54,799
Speaker 1: apes seriously? I mean the whole thing about Reddit, and

848
00:44:54,800 --> 00:44:58,840
Speaker 1: and I love Reddit. I've been playing on Reddit for years.

849
00:44:59,160 --> 00:45:02,960
Speaker 1: They're all these reddit you know, slash ours, all these

850
00:45:02,960 --> 00:45:06,560
Speaker 1: subcategories that their rabbit holes. And yeah, I read it

851
00:45:06,640 --> 00:45:10,640
Speaker 1: has issues with all sorts of of like every social media,

852
00:45:10,680 --> 00:45:14,319
Speaker 1: all sorts of problems. Um, that's a whole another conversation.

853
00:45:14,760 --> 00:45:18,279
Speaker 1: But if you want to do a deep dive into anything,

854
00:45:19,080 --> 00:45:22,759
Speaker 1: um there's a reddit for it, and some of them

855
00:45:22,840 --> 00:45:27,040
Speaker 1: are just mind blowingly astonishing. But if you're a professional

856
00:45:27,120 --> 00:45:31,320
Speaker 1: hedge fund manager, how seriously are you going to take people?

857
00:45:31,480 --> 00:45:35,520
Speaker 1: And it's not even in the main investing channel. It's

858
00:45:35,560 --> 00:45:39,640
Speaker 1: in like a sub sub channel that's a bunch of goofballs. Yeah,

859
00:45:39,760 --> 00:45:44,280
Speaker 1: and and and of what they post is just rude

860
00:45:44,360 --> 00:45:46,400
Speaker 1: jokes and memes and things like that, So there's not

861
00:45:46,440 --> 00:45:49,239
Speaker 1: a lot of the thing is that the memes were

862
00:45:49,680 --> 00:45:53,839
Speaker 1: the message. The memes, you know, they used like hieroglyphs

863
00:45:53,960 --> 00:45:57,080
Speaker 1: or that they used to to communicate. And so which

864
00:45:57,120 --> 00:46:00,000
Speaker 1: is why we call them meme stocks today. And uh,

865
00:46:00,000 --> 00:46:02,520
Speaker 1: I mean, they did not take it seriously. They do today.

866
00:46:02,520 --> 00:46:04,320
Speaker 1: As a matter of fact, there was a study done

867
00:46:04,680 --> 00:46:09,600
Speaker 1: that showed that today of hedge funds either themselves or

868
00:46:09,640 --> 00:46:12,760
Speaker 1: they pay a service to monitor social media for their positions.

869
00:46:12,800 --> 00:46:14,680
Speaker 1: So you know, they take it very seriously today, are

870
00:46:14,760 --> 00:46:18,480
Speaker 1: using AI to make sure that this doesn't happen again.

871
00:46:19,280 --> 00:46:21,360
Speaker 1: And there's a data point from the book that I

872
00:46:21,640 --> 00:46:25,920
Speaker 1: have to share. So Goldman Sachs keeps a basket of

873
00:46:26,120 --> 00:46:30,160
Speaker 1: unprofitable stocks, that's literally what the basket is called. And

874
00:46:30,480 --> 00:46:36,920
Speaker 1: in when the Dow was up about seven, this gained.

875
00:46:38,600 --> 00:46:42,880
Speaker 1: Stop and think about how insane that is the worst

876
00:46:42,960 --> 00:46:47,160
Speaker 1: of the worst are just destroying everything else. Yeah, I mean,

877
00:46:47,239 --> 00:46:52,200
Speaker 1: and that that tells you what why a quarter of

878
00:46:52,239 --> 00:46:56,040
Speaker 1: a trillion dollars almost was was lost by short sellers

879
00:46:56,480 --> 00:47:01,920
Speaker 1: in two thousand and twenty. It's because the dumber it was,

880
00:47:02,400 --> 00:47:05,960
Speaker 1: the better it did. And that's and that that really

881
00:47:06,000 --> 00:47:09,400
Speaker 1: formed the attitude of this. You know, there are people

882
00:47:09,960 --> 00:47:12,439
Speaker 1: who were participated in the seam stock because who had

883
00:47:12,719 --> 00:47:16,280
Speaker 1: three months, six months, nine months, maybe a year of

884
00:47:16,280 --> 00:47:19,080
Speaker 1: of investing experience, all of it in these crazy markets

885
00:47:19,560 --> 00:47:22,799
Speaker 1: everything that's some serious guy like Barry Ritholts, you know,

886
00:47:22,920 --> 00:47:25,680
Speaker 1: goes on TV and talks about and says this, I

887
00:47:25,680 --> 00:47:27,839
Speaker 1: would not touch this. Those are the things that went

888
00:47:27,920 --> 00:47:30,279
Speaker 1: up right. So, I mean I went up a lot

889
00:47:30,400 --> 00:47:32,960
Speaker 1: and went up a lot. So and you know, Warren Buffett,

890
00:47:33,000 --> 00:47:36,960
Speaker 1: the greatest investor of all time, got out of airline stocks,

891
00:47:36,960 --> 00:47:39,879
Speaker 1: which he he wasn't right, but he very well could

892
00:47:39,880 --> 00:47:41,600
Speaker 1: have been right. I mean, things looked pretty hairy. We

893
00:47:41,600 --> 00:47:43,279
Speaker 1: didn't know there's gonna be a vaccine. We didn't know

894
00:47:43,360 --> 00:47:46,080
Speaker 1: how bad the you know, COVID pandemic would be. It

895
00:47:46,160 --> 00:47:49,880
Speaker 1: certainly looked really bad in in March and April, and

896
00:47:49,880 --> 00:47:52,879
Speaker 1: he sold out of his airline stocks at a big loss. Uh.

897
00:47:53,000 --> 00:47:56,759
Speaker 1: Not typically Buffetty behavior, But you make the best decision

898
00:47:56,880 --> 00:47:58,960
Speaker 1: you can with the information you have at the hand

899
00:47:59,040 --> 00:48:02,480
Speaker 1: at the time, time, and as often as not, you're

900
00:48:02,560 --> 00:48:05,120
Speaker 1: right or wrong. And in that case, Buffett was wrong.

901
00:48:05,800 --> 00:48:08,560
Speaker 1: That doesn't seem to be what the redditors were doing.

902
00:48:08,960 --> 00:48:12,839
Speaker 1: These folks were just you know, we weren't democratizing finance.

903
00:48:13,239 --> 00:48:18,440
Speaker 1: We were democratizing risk taking and speculation. So throughout the

904
00:48:18,440 --> 00:48:24,720
Speaker 1: book we hear the phrase democratizing finance. Were we democratizing

905
00:48:24,760 --> 00:48:29,480
Speaker 1: finance or democratizing risk taking and speculation? You know, it's

906
00:48:29,520 --> 00:48:33,040
Speaker 1: it's a phrase that drives me crazy. Democratizing finance, you know,

907
00:48:33,080 --> 00:48:37,440
Speaker 1: to me is basically bringing uh investing to a level

908
00:48:37,880 --> 00:48:43,840
Speaker 1: that anyone can participate, and basically that has been accomplished

909
00:48:44,280 --> 00:48:48,200
Speaker 1: through years of competition and technological progress. You know, I

910
00:48:48,239 --> 00:48:52,400
Speaker 1: give the example, Uh we're talking earlier about the paperwork crisis.

911
00:48:52,520 --> 00:48:54,759
Speaker 1: It was very expensive to trade that if you had

912
00:48:54,800 --> 00:48:57,359
Speaker 1: a little bit of money that they wouldn't bother giving

913
00:48:57,400 --> 00:48:59,160
Speaker 1: the time of Dane Walster, you had to have a

914
00:48:59,160 --> 00:49:01,920
Speaker 1: lot and then and then you really got got fleeced,

915
00:49:01,920 --> 00:49:04,680
Speaker 1: you know, because of big charges. Even just to you know,

916
00:49:04,760 --> 00:49:08,279
Speaker 1: you look, people talk about these long term charts were like, oh,

917
00:49:08,320 --> 00:49:12,719
Speaker 1: if you had invested in there was no index fund then,

918
00:49:12,760 --> 00:49:14,840
Speaker 1: and it costs you money to reinvest your dividends. And

919
00:49:14,840 --> 00:49:16,520
Speaker 1: like if you had a little bit of money, if

920
00:49:16,520 --> 00:49:18,400
Speaker 1: you had invested a dollar where you couldn't invest a

921
00:49:18,440 --> 00:49:22,120
Speaker 1: dollar then, so it's totally there was no partial share purchases.

922
00:49:22,239 --> 00:49:24,879
Speaker 1: Well no, no, And so today you can you can

923
00:49:24,920 --> 00:49:26,759
Speaker 1: do that and rob at robin Hood and others. You

924
00:49:26,760 --> 00:49:29,240
Speaker 1: can buy a fractional share, You can buy an exchange

925
00:49:29,239 --> 00:49:31,759
Speaker 1: traded fund that cost zero points zero three percent a year.

926
00:49:32,080 --> 00:49:35,239
Speaker 1: You can do all these things. So the door is

927
00:49:35,640 --> 00:49:38,880
Speaker 1: open for people with very little money today, and it

928
00:49:39,040 --> 00:49:41,040
Speaker 1: was you know, prior to robin Hood a though the

929
00:49:41,120 --> 00:49:45,120
Speaker 1: robin Hood in fact did kind of accelerate things very

930
00:49:45,239 --> 00:49:48,080
Speaker 1: very cheaply, very easily to get on that ladder, which

931
00:49:48,239 --> 00:49:52,440
Speaker 1: I urge anyone especially in their like their teens or twenties,

932
00:49:52,680 --> 00:49:55,560
Speaker 1: getting started out with lots of decades to compound their wealth,

933
00:49:55,640 --> 00:49:57,719
Speaker 1: to do it is a smart thing to do to

934
00:49:57,760 --> 00:50:00,120
Speaker 1: get on the ladder, but not in an active crazy way,

935
00:50:00,400 --> 00:50:02,920
Speaker 1: in a kind of you know, put your money and

936
00:50:03,000 --> 00:50:04,640
Speaker 1: let it grow and don't check it a lot way,

937
00:50:04,719 --> 00:50:06,840
Speaker 1: and and and save as much as you can weigh

938
00:50:06,920 --> 00:50:09,640
Speaker 1: and that that really has been democratized. But then when

939
00:50:09,680 --> 00:50:12,839
Speaker 1: you talk to Robin Hood and say, hey, you guys

940
00:50:12,840 --> 00:50:16,120
Speaker 1: are just encouraging you're you've gamified this thing and you're

941
00:50:16,120 --> 00:50:18,879
Speaker 1: inducing fomo. You know, you open up your app and

942
00:50:18,960 --> 00:50:22,000
Speaker 1: you're the first thing you show is what everyone else

943
00:50:22,080 --> 00:50:24,319
Speaker 1: is doing and buying. What's up? What that, what's down?

944
00:50:24,560 --> 00:50:26,919
Speaker 1: That's not useful information. That's information that makes you feel

945
00:50:26,920 --> 00:50:28,440
Speaker 1: like you're missing out, makes you feel like you need

946
00:50:28,480 --> 00:50:31,719
Speaker 1: to be active. And they're active customers, the people who

947
00:50:31,800 --> 00:50:34,520
Speaker 1: use the app. We're using it in two thousand and twenty,

948
00:50:34,600 --> 00:50:37,320
Speaker 1: on average over seven times a day, opening it seven

949
00:50:37,320 --> 00:50:40,320
Speaker 1: times a day. They have customers who were trading eleven

950
00:50:40,360 --> 00:50:43,920
Speaker 1: thousand times over a six month period. There's just absolutely

951
00:50:43,920 --> 00:50:47,520
Speaker 1: no reason for anybody to trade eleven thousand times, or

952
00:50:47,520 --> 00:50:50,000
Speaker 1: even a thousand times, or even a hundred times, you know,

953
00:50:50,120 --> 00:50:52,880
Speaker 1: a time span like that. It's it's study after study,

954
00:50:52,920 --> 00:50:56,200
Speaker 1: by the way has shown that that is uh inversely

955
00:50:56,239 --> 00:50:58,919
Speaker 1: correlated with your performance. The more you trade, the worst

956
00:50:58,960 --> 00:51:01,160
Speaker 1: you do. That's it's a very very well understood effect.

957
00:51:02,640 --> 00:51:05,360
Speaker 1: And even just checking your account frequently, it's called myopic

958
00:51:05,400 --> 00:51:09,000
Speaker 1: loss of version. It's well understood that if you look

959
00:51:09,040 --> 00:51:11,200
Speaker 1: at your account. Least you'll do better because you're less

960
00:51:11,239 --> 00:51:13,480
Speaker 1: likely to see a loss which pains you more than

961
00:51:13,560 --> 00:51:17,120
Speaker 1: again pleases you. And so you know that that is

962
00:51:17,120 --> 00:51:19,719
Speaker 1: not the formula for success. They understood that. And you

963
00:51:20,080 --> 00:51:24,520
Speaker 1: note in the book the average Schwab account trades forty

964
00:51:24,600 --> 00:51:27,560
Speaker 1: five times less than the average robin Hood account. Those

965
00:51:27,640 --> 00:51:30,880
Speaker 1: numbers per per dollar in the account. It's just mind

966
00:51:30,880 --> 00:51:35,200
Speaker 1: blod and and options are trading even more. And only

967
00:51:35,920 --> 00:51:39,320
Speaker 1: of robin Hood's customers traded options, but options were the

968
00:51:39,360 --> 00:51:41,600
Speaker 1: most lucrative product for them because and that's you know,

969
00:51:41,640 --> 00:51:43,399
Speaker 1: you've heard a lot about payment for order flow. Paying

970
00:51:43,400 --> 00:51:46,000
Speaker 1: for order flow. I don't think it's it's just a

971
00:51:46,000 --> 00:51:48,719
Speaker 1: mechanical way of paying for trades. I don't have such

972
00:51:48,760 --> 00:51:52,759
Speaker 1: a big problem with it. But it is uh a

973
00:51:52,840 --> 00:51:55,920
Speaker 1: practice where you basically you sell your orders to a

974
00:51:55,960 --> 00:51:58,279
Speaker 1: market maker that's off a stock exchange, that pays you

975
00:51:58,320 --> 00:52:00,400
Speaker 1: to execute it, and then keep a little bit of

976
00:52:00,440 --> 00:52:02,279
Speaker 1: the money. Basically, he was very efficient at matching it

977
00:52:02,360 --> 00:52:04,640
Speaker 1: up payment for order flow. The only problem I have

978
00:52:04,719 --> 00:52:06,800
Speaker 1: with it is that it enables this behavior by making

979
00:52:06,800 --> 00:52:09,640
Speaker 1: trading free. Otherwise, I don't think there's anything really insidious

980
00:52:09,640 --> 00:52:11,400
Speaker 1: about it. Which is a controversial view now, I know.

981
00:52:11,520 --> 00:52:15,440
Speaker 1: But so so let's look at the aftermath of this. So,

982
00:52:15,440 --> 00:52:19,560
Speaker 1: so Keith gil took fifty three thousand dollars buys deep

983
00:52:19,560 --> 00:52:23,400
Speaker 1: out of the money calls, and by the time the

984
00:52:23,560 --> 00:52:28,720
Speaker 1: calls peak a year and change later, it's what forty

985
00:52:28,760 --> 00:52:31,920
Speaker 1: seven million dollars. Yeah, I think intra day he probably

986
00:52:31,920 --> 00:52:35,399
Speaker 1: had sixty or seventy million dollars. But yeah, but I think,

987
00:52:35,520 --> 00:52:38,480
Speaker 1: uh about forty nine or fifty uh like at the

988
00:52:38,640 --> 00:52:41,200
Speaker 1: end of day at he would have had more had

989
00:52:41,239 --> 00:52:43,040
Speaker 1: he not, because he cashed in somebody he had He

990
00:52:43,080 --> 00:52:47,280
Speaker 1: had perfect timing almost he cashed them in during the week.

991
00:52:47,360 --> 00:52:49,799
Speaker 1: That was the real menia. So what did he end

992
00:52:49,880 --> 00:52:52,359
Speaker 1: up netting when everything was said and done, because I

993
00:52:52,400 --> 00:52:56,520
Speaker 1: was kind of surprised that he bought more stock. So

994
00:52:56,520 --> 00:53:00,400
Speaker 1: so from what I recall in the book, he cashes

995
00:53:00,400 --> 00:53:03,640
Speaker 1: out about three million dollars worth of options and then

996
00:53:03,800 --> 00:53:07,759
Speaker 1: later sells a bunch of the options and exercises them

997
00:53:07,760 --> 00:53:11,280
Speaker 1: and ends up with thirty million dollars worth of stock

998
00:53:11,360 --> 00:53:14,160
Speaker 1: something crazy game stop, Yeah, which is a pretty even

999
00:53:14,200 --> 00:53:16,839
Speaker 1: then you know, he's real money. He was because he

1000
00:53:17,040 --> 00:53:19,040
Speaker 1: was called to this congressional hearing. That's the only time

1001
00:53:19,080 --> 00:53:20,799
Speaker 1: we've ever heard his voice or seeing him. I mean,

1002
00:53:20,920 --> 00:53:25,799
Speaker 1: he was interviewed by two YouTube exactly. Sorry yeah, but

1003
00:53:26,040 --> 00:53:28,280
Speaker 1: um yeah, but he was like not a total unknown

1004
00:53:28,320 --> 00:53:31,280
Speaker 1: then and he stopped doing those videos and uh yeah exactly.

1005
00:53:31,320 --> 00:53:32,920
Speaker 1: So people were very curious. It was probably one of

1006
00:53:32,920 --> 00:53:36,279
Speaker 1: the more watched regressional hearings, you know, because because of him,

1007
00:53:36,400 --> 00:53:39,359
Speaker 1: really and he got asked the fewest questions. Um, we're

1008
00:53:39,360 --> 00:53:41,000
Speaker 1: almost the fewest questions, but I mean, you know, it

1009
00:53:41,080 --> 00:53:43,640
Speaker 1: was what were they gonna They didn't want to antagonize him,

1010
00:53:43,640 --> 00:53:45,800
Speaker 1: and you know, and he was you know, it's strange

1011
00:53:45,800 --> 00:53:47,759
Speaker 1: because he was the only retail investor there and it

1012
00:53:47,840 --> 00:53:49,839
Speaker 1: was really all about retail investors. They kind of asked

1013
00:53:49,920 --> 00:53:52,880
Speaker 1: him some some pretty good juicy questions. Had they been

1014
00:53:52,880 --> 00:53:55,359
Speaker 1: curious about it, but I think they were. They were

1015
00:53:55,360 --> 00:53:58,200
Speaker 1: outraged that trading was halted and that that's a key

1016
00:53:58,320 --> 00:54:00,040
Speaker 1: part of it. So let's talk about that. But we

1017
00:54:00,320 --> 00:54:03,479
Speaker 1: will circle back to gil So right in the height

1018
00:54:03,520 --> 00:54:06,880
Speaker 1: of this where the short squeeze is having maximum effect,

1019
00:54:07,640 --> 00:54:12,319
Speaker 1: um Robin Hood is adding incredible numbers of new accounts,

1020
00:54:13,120 --> 00:54:17,960
Speaker 1: offering incredible amount of margin to these new account holders

1021
00:54:18,440 --> 00:54:22,240
Speaker 1: and a lot of option trading. Why did they halt

1022
00:54:22,680 --> 00:54:27,359
Speaker 1: the most shorted squeeze stocks. They did because they did

1023
00:54:27,400 --> 00:54:29,600
Speaker 1: too good of a job. That's basically that's they didn't

1024
00:54:29,640 --> 00:54:33,399
Speaker 1: have the capital to meet their custodial agreements. They got

1025
00:54:33,400 --> 00:54:35,720
Speaker 1: a call. And now we have more detail. By the ways,

1026
00:54:35,719 --> 00:54:38,360
Speaker 1: the recently a report came out from this Congressional committee

1027
00:54:38,400 --> 00:54:41,040
Speaker 1: very recently, very recently, good and a good report worth

1028
00:54:41,080 --> 00:54:43,640
Speaker 1: reading that has a lot of detail that it was

1029
00:54:43,880 --> 00:54:46,960
Speaker 1: actually much worse than than what we knew. They were

1030
00:54:47,080 --> 00:54:49,799
Speaker 1: very close to going under. Not only that we knew

1031
00:54:49,880 --> 00:54:52,040
Speaker 1: they were very close to going under, we didn't know

1032
00:54:52,200 --> 00:54:54,359
Speaker 1: was how close they got to taking other people under.

1033
00:54:54,560 --> 00:54:57,439
Speaker 1: Oh really, yes, who were they going to drag with them? Well,

1034
00:54:57,560 --> 00:55:00,080
Speaker 1: Apex Clearing, you know, got into Trum, which was the

1035
00:55:00,120 --> 00:55:03,560
Speaker 1: clear the clearing broker for lots of brokers and the

1036
00:55:03,960 --> 00:55:06,759
Speaker 1: market makers who were processing the trades, and we're not gonna,

1037
00:55:06,800 --> 00:55:10,000
Speaker 1: we're gonna stop processing these trades because you're gonna you're

1038
00:55:10,040 --> 00:55:12,520
Speaker 1: going to create a problem for us. A Citadel which

1039
00:55:12,560 --> 00:55:14,719
Speaker 1: was the biggest processor of their trades, and they got

1040
00:55:14,800 --> 00:55:19,040
Speaker 1: they got into a conflict with Citadel Riff Shop in Chicago.

1041
00:55:19,160 --> 00:55:22,200
Speaker 1: Now Miami. Yeah, Ken Griffin is a Hetgelow manager who

1042
00:55:22,239 --> 00:55:25,680
Speaker 1: all his his holding company plays a role in this

1043
00:55:25,719 --> 00:55:30,600
Speaker 1: because it it injected money into Cape Plotkin's fund after

1044
00:55:30,680 --> 00:55:32,920
Speaker 1: he lost a bunch of money. But it also plays

1045
00:55:33,000 --> 00:55:35,839
Speaker 1: a role in this because he is the major shareholder

1046
00:55:35,880 --> 00:55:39,080
Speaker 1: in the securities from also called Citadel. That caused lots

1047
00:55:39,080 --> 00:55:41,719
Speaker 1: of confusion and lots of conspiracy thinking that was a

1048
00:55:41,840 --> 00:55:45,240
Speaker 1: really big beneficiary of this. But what people don't understand

1049
00:55:45,280 --> 00:55:47,160
Speaker 1: is that this was a burden to them too, because

1050
00:55:47,160 --> 00:55:49,920
Speaker 1: this this was a dangerous level of speculation in a

1051
00:55:50,160 --> 00:55:53,400
Speaker 1: very narrow set of stocks. And you open a new

1052
00:55:53,440 --> 00:55:56,880
Speaker 1: account on robin Hood, you put a thousand dollars in,

1053
00:55:57,000 --> 00:55:59,799
Speaker 1: you buy two thousand dollars worth of stock, and if

1054
00:55:59,800 --> 00:56:03,479
Speaker 1: it drops in half, somebody's gonna come up with that money.

1055
00:56:03,520 --> 00:56:06,080
Speaker 1: And if you don't, someone else is on the hook.

1056
00:56:06,120 --> 00:56:08,839
Speaker 1: Now they're adding like half a million accounts a week,

1057
00:56:08,960 --> 00:56:11,160
Speaker 1: some crazy number. They added almost a million in a

1058
00:56:11,239 --> 00:56:14,600
Speaker 1: day during this that's unbelievable. And yet all this is

1059
00:56:14,680 --> 00:56:18,640
Speaker 1: algo driven, All this is automated. There is no real

1060
00:56:18,840 --> 00:56:23,239
Speaker 1: adults saying we don't have the capital to extend. They

1061
00:56:23,320 --> 00:56:27,080
Speaker 1: basically just it wasn't until they got the uh, the

1062
00:56:27,120 --> 00:56:31,480
Speaker 1: founder of robin Hood what's name to rev ten of

1063
00:56:32,800 --> 00:56:34,680
Speaker 1: its three in the morning, he gets a phone call,

1064
00:56:35,120 --> 00:56:37,960
Speaker 1: we need three billion dollars in three hours or you're

1065
00:56:38,000 --> 00:56:40,440
Speaker 1: out of business. Right three in the morning, West coast time,

1066
00:56:40,480 --> 00:56:44,439
Speaker 1: West coast West Market's gonna open three hours. You need

1067
00:56:44,480 --> 00:56:48,279
Speaker 1: three billion dollars or you're done. Yeah, even as hot

1068
00:56:48,320 --> 00:56:51,160
Speaker 1: as things were in early one, you don't people don't

1069
00:56:51,239 --> 00:56:53,359
Speaker 1: drop three billion dollars on you in three hours when

1070
00:56:53,400 --> 00:56:56,600
Speaker 1: they're all asleep. Right, but he managed to actually get

1071
00:56:56,960 --> 00:56:59,880
Speaker 1: just this, get this done between lines of credit and

1072
00:57:00,040 --> 00:57:04,440
Speaker 1: in cash and then restricting all these meme stocks. Right,

1073
00:57:04,440 --> 00:57:06,480
Speaker 1: they had about a seven million dollar line of credit

1074
00:57:06,520 --> 00:57:09,400
Speaker 1: they drew down. They had already had seven million on

1075
00:57:09,560 --> 00:57:13,919
Speaker 1: deposit at dt c C and then they said, how

1076
00:57:13,960 --> 00:57:16,920
Speaker 1: about if we don't allow our customers to buy anymore,

1077
00:57:17,000 --> 00:57:19,560
Speaker 1: these will only let them sell. And even then they

1078
00:57:19,680 --> 00:57:22,200
Speaker 1: really bent the rules to keep them in business. And

1079
00:57:22,400 --> 00:57:25,800
Speaker 1: so what people these if they blew up this Most

1080
00:57:25,840 --> 00:57:28,920
Speaker 1: of this stuff wasn't systemic. But at that point, if

1081
00:57:29,000 --> 00:57:33,200
Speaker 1: Robin blows up, maybe it's not the Great financial crisis,

1082
00:57:33,360 --> 00:57:35,800
Speaker 1: but there are waves that are gonna gonna really have

1083
00:57:35,920 --> 00:57:39,200
Speaker 1: negative effect, and their their customers were so angry at

1084
00:57:39,240 --> 00:57:40,760
Speaker 1: not being able to buy these stocks. And what they

1085
00:57:40,760 --> 00:57:43,600
Speaker 1: don't realize is had they been allowed to buy them,

1086
00:57:43,760 --> 00:57:46,320
Speaker 1: not only they would have got not only were they

1087
00:57:46,360 --> 00:57:48,080
Speaker 1: got lost a lot of money, because they would have

1088
00:57:48,120 --> 00:57:49,720
Speaker 1: their money would have been locked up for weeks, by

1089
00:57:49,720 --> 00:57:55,360
Speaker 1: which point it would have lost its value. But you

1090
00:57:55,840 --> 00:57:58,480
Speaker 1: everything would have been frozen, you know, for weeks or

1091
00:57:58,480 --> 00:58:01,439
Speaker 1: even months in robin hood, right, So they they would

1092
00:58:01,440 --> 00:58:03,919
Speaker 1: have been wiped out, their vast majority. So let's bring

1093
00:58:03,920 --> 00:58:07,840
Speaker 1: this back to Keith gil who when I are you're

1094
00:58:07,880 --> 00:58:10,200
Speaker 1: going through the book and when you when you look

1095
00:58:10,240 --> 00:58:15,000
Speaker 1: at the boards, he is described at separate times the

1096
00:58:15,000 --> 00:58:19,920
Speaker 1: Reddit boards as he's a genius visionary. He's just a

1097
00:58:19,960 --> 00:58:24,240
Speaker 1: guy who got lucky. He's an idiot who left generational

1098
00:58:24,360 --> 00:58:30,040
Speaker 1: wealth changing amounts of money um on the table. What

1099
00:58:30,080 --> 00:58:33,840
Speaker 1: was he really? So he was a very unusual person

1100
00:58:33,880 --> 00:58:36,760
Speaker 1: to be in this group at all, Right, But the

1101
00:58:36,800 --> 00:58:40,160
Speaker 1: fact that so people when they started getting excited about

1102
00:58:40,200 --> 00:58:42,080
Speaker 1: game stop in the postile his short squeeze. Then he

1103
00:58:42,120 --> 00:58:45,120
Speaker 1: was discovered. Then he became he went from being this

1104
00:58:45,200 --> 00:58:47,520
Speaker 1: kind of laughing stock to being a celebrity. And his

1105
00:58:47,600 --> 00:58:51,760
Speaker 1: post changed then to his posts were they were built

1106
00:58:51,760 --> 00:58:54,280
Speaker 1: posts of memes and things like that. He was talking

1107
00:58:54,280 --> 00:58:58,000
Speaker 1: about Ryan Cohen on his on his YouTube channel. People

1108
00:58:58,040 --> 00:58:59,800
Speaker 1: still didn't know his identity, they didn't know his that

1109
00:58:59,840 --> 00:59:04,120
Speaker 1: dead until um to Wall Street. Yeah, I know other

1110
00:59:04,120 --> 00:59:06,320
Speaker 1: people could figure it out, I mean, like but until

1111
00:59:06,400 --> 00:59:10,120
Speaker 1: two Wall Street. UH. Journal reporters interviewed him and published

1112
00:59:10,320 --> 00:59:12,240
Speaker 1: the interview on the twenty nine, which is the day

1113
00:59:12,240 --> 00:59:15,480
Speaker 1: after trading was was halted, twenty nine January, and it

1114
00:59:15,560 --> 00:59:18,600
Speaker 1: was a great interview with him, iconic picture pictures of

1115
00:59:18,640 --> 00:59:22,160
Speaker 1: my book, uh, the headband, the whole thing, and and

1116
00:59:22,400 --> 00:59:26,160
Speaker 1: literally in the basement. In the basement, I spoke with

1117
00:59:26,200 --> 00:59:28,640
Speaker 1: the photographer who was there taking the shots of him,

1118
00:59:28,640 --> 00:59:30,680
Speaker 1: and I spoke with them of course, and there's a

1119
00:59:30,720 --> 00:59:32,160
Speaker 1: lot of you know, things that fell to the cutting

1120
00:59:32,200 --> 00:59:34,640
Speaker 1: room floor. So really fascinating story, all the kind of

1121
00:59:35,000 --> 00:59:37,160
Speaker 1: this is the layer where he operated that you saw

1122
00:59:37,160 --> 00:59:40,600
Speaker 1: on the YouTube videos and he became a hero. And

1123
00:59:40,600 --> 00:59:43,320
Speaker 1: basically what he did, what was at that point, what

1124
00:59:43,400 --> 00:59:45,479
Speaker 1: he was doing every day was just once a day

1125
00:59:45,560 --> 00:59:49,720
Speaker 1: after the market closed, he posted a screenshot of his

1126
00:59:49,800 --> 00:59:51,720
Speaker 1: v trade account, obviously not with his account number or

1127
00:59:51,760 --> 00:59:54,760
Speaker 1: his name. UH and just the value of the options

1128
00:59:54,800 --> 00:59:56,400
Speaker 1: he had in game stuff, and just the fact that

1129
00:59:56,440 --> 00:59:58,320
Speaker 1: he hadn't sold. And people are like, if he's not selling,

1130
00:59:58,360 --> 01:00:00,040
Speaker 1: I'm not selling. If he's in it, if he's and

1131
01:00:00,160 --> 01:00:02,640
Speaker 1: I'm still in And when this this went from fifty

1132
01:00:02,680 --> 01:00:05,960
Speaker 1: to a hundred back to sixty, people gave him grief.

1133
01:00:06,280 --> 01:00:08,360
Speaker 1: And then it went to a million, and then down

1134
01:00:08,400 --> 01:00:10,520
Speaker 1: to five hundred, and people gave him and then it

1135
01:00:10,560 --> 01:00:14,800
Speaker 1: went to two four million, and suddenly we were off

1136
01:00:14,800 --> 01:00:17,280
Speaker 1: to the races. Yeah, and it's called that's a concept

1137
01:00:17,280 --> 01:00:20,200
Speaker 1: called social proof. You know, someone is making money doing something,

1138
01:00:20,480 --> 01:00:21,920
Speaker 1: and you know, unfortunately they are like a lot of

1139
01:00:21,920 --> 01:00:24,800
Speaker 1: people on the internet who have claimed to have or

1140
01:00:24,920 --> 01:00:29,120
Speaker 1: actually have made money doing something, uh because they got lucky,

1141
01:00:29,240 --> 01:00:31,320
Speaker 1: you know. But the fact that someone you know, it's

1142
01:00:31,320 --> 01:00:33,280
Speaker 1: like when you turn on if you ever can't sleep,

1143
01:00:33,320 --> 01:00:35,400
Speaker 1: and you turn on an infomercial and you see some

1144
01:00:35,480 --> 01:00:37,720
Speaker 1: guy with like two blondes under each other in front

1145
01:00:37,720 --> 01:00:39,400
Speaker 1: of an audience, in front of an audience, and a

1146
01:00:39,480 --> 01:00:42,080
Speaker 1: bentley and his big house and it's probably not really

1147
01:00:42,080 --> 01:00:45,439
Speaker 1: his bentley or his house, but whatever, right or right,

1148
01:00:45,920 --> 01:00:48,280
Speaker 1: you know, but but that's you know that that is

1149
01:00:48,320 --> 01:00:51,240
Speaker 1: a very well understood concept like somebody and someone just

1150
01:00:51,320 --> 01:00:53,720
Speaker 1: like you, by the way, someone he an ordinary guy

1151
01:00:54,120 --> 01:00:56,320
Speaker 1: who now doesn't have to work, and gee, we used

1152
01:00:56,360 --> 01:00:58,960
Speaker 1: to have to worry about bills, Bob. But tell him

1153
01:00:59,000 --> 01:01:03,120
Speaker 1: we bought Joe's system and now you know, flip real

1154
01:01:03,200 --> 01:01:06,360
Speaker 1: estate and you got we're making fifty a week, you know,

1155
01:01:06,800 --> 01:01:09,120
Speaker 1: and you know. And so that's that's what really hooks people,

1156
01:01:09,200 --> 01:01:11,000
Speaker 1: is this sort of if they did it, that I

1157
01:01:11,000 --> 01:01:13,880
Speaker 1: can do it too. The logic of that always annoys

1158
01:01:13,920 --> 01:01:16,680
Speaker 1: me because I always want to say to the people,

1159
01:01:17,120 --> 01:01:19,440
Speaker 1: if this was so lucrative, why aren't you doing it?

1160
01:01:19,480 --> 01:01:22,040
Speaker 1: And why are you selling the how to? You know,

1161
01:01:22,400 --> 01:01:25,440
Speaker 1: I get those when newsletters, Hey, why don't you just

1162
01:01:25,520 --> 01:01:28,720
Speaker 1: raise some capital from friends and family and and manage

1163
01:01:28,720 --> 01:01:31,400
Speaker 1: money this way if it's so lucrative. But it turns

1164
01:01:31,440 --> 01:01:35,040
Speaker 1: out the value is in selling it to suckers, not

1165
01:01:35,160 --> 01:01:40,280
Speaker 1: actually the underlying Although that said, Gil ended up three

1166
01:01:40,320 --> 01:01:44,560
Speaker 1: million dollars ain't nothing. It's a reasonable amount of money

1167
01:01:44,600 --> 01:01:48,320
Speaker 1: even before taxes. And he still has what's the latest

1168
01:01:48,360 --> 01:01:52,560
Speaker 1: filing um in terms of games stop stock? What does

1169
01:01:52,600 --> 01:01:55,520
Speaker 1: he own? It's around a hundred plus boxes. We're recording

1170
01:01:55,560 --> 01:01:59,120
Speaker 1: this down from four sixty, but still he's got five

1171
01:01:59,200 --> 01:02:01,480
Speaker 1: or ten million dollars worth the stock, maybe more than that. No,

1172
01:02:01,760 --> 01:02:03,640
Speaker 1: really in the tens, in the tens of millions, I think,

1173
01:02:03,680 --> 01:02:06,320
Speaker 1: you know, because it was thirty million as of April

1174
01:02:07,320 --> 01:02:09,560
Speaker 1: one when it had fallen quite a bit, so I'd

1175
01:02:09,560 --> 01:02:10,880
Speaker 1: have to look it up, but I mean it's it's

1176
01:02:10,880 --> 01:02:13,120
Speaker 1: in the tens of millions. So he's he's a rich man.

1177
01:02:13,240 --> 01:02:15,760
Speaker 1: I don't know if he sold or not, you know

1178
01:02:15,840 --> 01:02:17,800
Speaker 1: he And by the way, just to say, like you know,

1179
01:02:17,800 --> 01:02:19,919
Speaker 1: they're there are people who sort of are out there.

1180
01:02:19,920 --> 01:02:22,440
Speaker 1: You're using social proof for manipulation. I don't think that

1181
01:02:22,480 --> 01:02:26,160
Speaker 1: he ever manipulated anyone. You know, he was actually investigated personally,

1182
01:02:26,600 --> 01:02:30,680
Speaker 1: the only people investigated in this whole thing, and totally cleared.

1183
01:02:30,720 --> 01:02:32,960
Speaker 1: And and did you know he's not only a c

1184
01:02:33,160 --> 01:02:35,680
Speaker 1: f A. He worked for a brokerage firm and insurance

1185
01:02:35,720 --> 01:02:39,760
Speaker 1: company in his career, I think so. So he understood compliance,

1186
01:02:39,760 --> 01:02:42,760
Speaker 1: he understood what he could and couldn't say. If you

1187
01:02:42,800 --> 01:02:46,360
Speaker 1: look at all of his postings, he just showed his hey,

1188
01:02:46,400 --> 01:02:49,919
Speaker 1: here's where this is today. There was no let's stick

1189
01:02:49,960 --> 01:02:52,720
Speaker 1: it to the man, let's execute a squeeze, let's do.

1190
01:02:53,120 --> 01:02:56,840
Speaker 1: It was just basically I love the phrase, I like

1191
01:02:56,960 --> 01:02:59,920
Speaker 1: the stock. And you know, if he had wanted so,

1192
01:03:00,120 --> 01:03:02,360
Speaker 1: you you had Elon Musk come into this, and and

1193
01:03:02,480 --> 01:03:04,520
Speaker 1: other people and a lot of opportunitists come into this.

1194
01:03:05,000 --> 01:03:07,680
Speaker 1: If he had said on that Monday or Tuesday or

1195
01:03:07,760 --> 01:03:10,840
Speaker 1: Wednesday or any point thereafter, shown up and had a

1196
01:03:10,880 --> 01:03:13,400
Speaker 1: screenshot of his trade account and said now I own

1197
01:03:14,000 --> 01:03:17,120
Speaker 1: deep out of the money options in x y Z company,

1198
01:03:17,240 --> 01:03:19,080
Speaker 1: everyone would have jumped into x y Z company and

1199
01:03:19,120 --> 01:03:20,960
Speaker 1: he would have made a hundred times his money. He

1200
01:03:21,560 --> 01:03:23,960
Speaker 1: although that would have been investigated. Maybe that would have

1201
01:03:24,000 --> 01:03:26,000
Speaker 1: been investigated, but it probably would have been okay because

1202
01:03:26,000 --> 01:03:28,640
Speaker 1: he's not saying hey boy, he's just he's just legitimately

1203
01:03:28,640 --> 01:03:30,440
Speaker 1: showing said, oh yeah, I actually did own it. All

1204
01:03:30,480 --> 01:03:33,200
Speaker 1: I did was tell people that I owned it, and

1205
01:03:33,200 --> 01:03:35,320
Speaker 1: and he would have been able, which we see on

1206
01:03:35,360 --> 01:03:38,120
Speaker 1: TV every day. People go on Bloomberg and CNBC and

1207
01:03:38,160 --> 01:03:40,720
Speaker 1: they say, this is why we own the stock. There's

1208
01:03:40,760 --> 01:03:42,760
Speaker 1: nothing illegal about that. Nope. And I don't think it

1209
01:03:42,760 --> 01:03:44,280
Speaker 1: would have been illegal in his case either. Maybe he

1210
01:03:44,280 --> 01:03:46,360
Speaker 1: would have faced some slap on the wrist, but he

1211
01:03:46,360 --> 01:03:48,560
Speaker 1: could have made hundreds of millions dollars he could have made.

1212
01:03:48,880 --> 01:03:50,840
Speaker 1: He could have been one of the you know, maybe

1213
01:03:50,880 --> 01:03:52,760
Speaker 1: not the wealthiest people in America, but he could have been,

1214
01:03:53,160 --> 01:03:57,160
Speaker 1: you know, close to a billionaire. I think just by

1215
01:03:57,200 --> 01:03:59,440
Speaker 1: doing it a few times, just think about it, right,

1216
01:03:59,480 --> 01:04:01,600
Speaker 1: I mean, just think to pick some option in some

1217
01:04:01,680 --> 01:04:05,400
Speaker 1: obscure company and what X of your money? He already

1218
01:04:05,400 --> 01:04:09,120
Speaker 1: had fifty million dollars in you know, in value. You know,

1219
01:04:09,200 --> 01:04:16,000
Speaker 1: if if you had made multiply that get too hard, right, right,

1220
01:04:16,040 --> 01:04:18,840
Speaker 1: even twenty x gets to a billion. The only issue

1221
01:04:18,880 --> 01:04:21,200
Speaker 1: would be does the SEC step in and halt the

1222
01:04:21,240 --> 01:04:24,440
Speaker 1: stock and prevent this from But it wouldn't. It just

1223
01:04:24,440 --> 01:04:26,040
Speaker 1: would have been the truth I own the stock and

1224
01:04:26,080 --> 01:04:29,840
Speaker 1: then just just the reaction alone. And you know that's

1225
01:04:29,880 --> 01:04:33,080
Speaker 1: the you know, it's the less successfully is that what

1226
01:04:33,120 --> 01:04:35,680
Speaker 1: people are doing every day on on TikTok, you know,

1227
01:04:35,840 --> 01:04:37,920
Speaker 1: is that I bought the stock. And I think they're

1228
01:04:37,920 --> 01:04:39,640
Speaker 1: still doing it on TikTok. I kind of got the

1229
01:04:39,720 --> 01:04:44,280
Speaker 1: sense that the finance influencers on TikTok I love the

1230
01:04:44,320 --> 01:04:47,800
Speaker 1: couple we only buy stocks that go up. If you know,

1231
01:04:47,840 --> 01:04:50,160
Speaker 1: it's the old Will Rogers joke. If they don't go up,

1232
01:04:50,560 --> 01:04:52,880
Speaker 1: don't buy them. That's that's how we support a lifestyle.

1233
01:04:53,280 --> 01:04:56,440
Speaker 1: I kind of have got given the sense that here

1234
01:04:56,520 --> 01:04:59,800
Speaker 1: at the end of the first half of two, with

1235
01:05:00,000 --> 01:05:04,240
Speaker 1: the market down twenty plus percent, Uh, those influencers aren't

1236
01:05:04,280 --> 01:05:07,680
Speaker 1: quite as influential as they previously were. Yeah, I think

1237
01:05:07,680 --> 01:05:10,440
Speaker 1: the shine has come off a little bit, uh from

1238
01:05:10,480 --> 01:05:12,280
Speaker 1: the bad financial advice, but you know, it just never

1239
01:05:12,320 --> 01:05:14,320
Speaker 1: goes out of style and it comes back again and again.

1240
01:05:14,360 --> 01:05:18,560
Speaker 1: But yeah, they definitely have um have become less influential,

1241
01:05:18,600 --> 01:05:21,640
Speaker 1: of course, like anytime like I put something even if

1242
01:05:21,680 --> 01:05:23,440
Speaker 1: it has nothing to do with crypto, and if you

1243
01:05:23,520 --> 01:05:24,920
Speaker 1: have this, like you put something on Twitter and then

1244
01:05:24,920 --> 01:05:28,480
Speaker 1: like somebody replies to you. It says, oh, I'm investing

1245
01:05:28,600 --> 01:05:31,760
Speaker 1: with it just looks some normal looking person's picture. I'm

1246
01:05:31,800 --> 01:05:34,280
Speaker 1: investing with so and so, my crypto coach. Like, you know,

1247
01:05:34,320 --> 01:05:38,240
Speaker 1: there's just so much spot spam, right, and I you

1248
01:05:38,280 --> 01:05:41,400
Speaker 1: know you should if you don't report and block those

1249
01:05:41,440 --> 01:05:45,160
Speaker 1: you're you're doing. I do every time. I constantly do that.

1250
01:05:45,600 --> 01:05:48,720
Speaker 1: Before we get to our favorite questions, my last question,

1251
01:05:49,400 --> 01:05:54,320
Speaker 1: so the meme stocks, they're down about fifty six since

1252
01:05:54,480 --> 01:05:58,439
Speaker 1: the peak, some even worse. Are we done with meme

1253
01:05:58,480 --> 01:06:01,560
Speaker 1: stocks or is this just gonna be yet another one

1254
01:06:01,560 --> 01:06:03,520
Speaker 1: of those things that sort of cycle in and out

1255
01:06:03,520 --> 01:06:07,040
Speaker 1: of favor. So I think the meme stocks have chewed

1256
01:06:07,120 --> 01:06:09,840
Speaker 1: up a lot of people's wealth and enthusiasm for the market,

1257
01:06:09,880 --> 01:06:12,240
Speaker 1: So I think it's just gonna be you're having kind of,

1258
01:06:13,080 --> 01:06:15,160
Speaker 1: you know, echoes of what you had originally. I don't

1259
01:06:15,160 --> 01:06:17,360
Speaker 1: think that you could have what you had originally, but

1260
01:06:17,400 --> 01:06:19,640
Speaker 1: you've had You've had some really dumb stuff go up,

1261
01:06:19,680 --> 01:06:25,440
Speaker 1: Like you had red Box Entertainment that people who have those, right,

1262
01:06:25,560 --> 01:06:28,080
Speaker 1: it was being bought for the equivalent of sixty four

1263
01:06:28,120 --> 01:06:30,680
Speaker 1: cents and it went up to fifteen dollars just because

1264
01:06:30,800 --> 01:06:32,560
Speaker 1: I don't know why, you know, right, I mean, and

1265
01:06:32,600 --> 01:06:36,000
Speaker 1: stuff like that, Well they someone else would come along

1266
01:06:36,040 --> 01:06:38,680
Speaker 1: and pay more, right, right, It's the greater full theory

1267
01:06:38,720 --> 01:06:40,440
Speaker 1: to some extent. But it's also like L O L

1268
01:06:40,800 --> 01:06:43,160
Speaker 1: this thing is going up. I'm gonna buy it, and

1269
01:06:43,240 --> 01:06:45,240
Speaker 1: this serious person on TV said I shouldn't buy it

1270
01:06:45,240 --> 01:06:47,640
Speaker 1: because it's worth a fraction of it, So I'm gonna

1271
01:06:47,640 --> 01:06:50,960
Speaker 1: show him. I'm gonna buy more. And and another one

1272
01:06:50,960 --> 01:06:52,880
Speaker 1: you mentioned, Revel, and that's a kind of crazy story

1273
01:06:52,880 --> 01:06:56,720
Speaker 1: because they were was this before or after they filed

1274
01:06:56,760 --> 01:07:01,200
Speaker 1: for back after after like like Hurts. That's oh, so

1275
01:07:02,000 --> 01:07:04,280
Speaker 1: all the equity holders are known as zero? How do

1276
01:07:04,320 --> 01:07:06,960
Speaker 1: I get me some of that? Right? I mean, it

1277
01:07:07,120 --> 01:07:10,120
Speaker 1: just it just boggles the mind. Right, So you know,

1278
01:07:10,160 --> 01:07:12,800
Speaker 1: there's no I mean, I think the only way to

1279
01:07:12,880 --> 01:07:16,880
Speaker 1: explain it. I mean, obviously are people are not well informed.

1280
01:07:17,360 --> 01:07:19,160
Speaker 1: But I think there are people who are just nihilistic

1281
01:07:19,200 --> 01:07:20,880
Speaker 1: who are like, ha ha, look what I'm doing. I'm

1282
01:07:20,880 --> 01:07:23,000
Speaker 1: burning up my money or I'm doing this thing where

1283
01:07:23,000 --> 01:07:25,560
Speaker 1: I should I think so, I think psychologically that's like

1284
01:07:25,600 --> 01:07:28,560
Speaker 1: that's also one outgrowth of the pandemic because people are

1285
01:07:28,600 --> 01:07:31,960
Speaker 1: just saying, look at me, I'm doing this totally dangerous thing,

1286
01:07:32,240 --> 01:07:34,280
Speaker 1: and maybe some of them are getting out. So a

1287
01:07:34,320 --> 01:07:36,280
Speaker 1: lot of the people I spoke with who were involved

1288
01:07:36,320 --> 01:07:40,120
Speaker 1: in this were more sort of the savvy playing the

1289
01:07:40,160 --> 01:07:42,280
Speaker 1: greater fool. I see this thing going up, and I

1290
01:07:42,280 --> 01:07:44,000
Speaker 1: think I'm gonna be able to hop and they mainly

1291
01:07:44,040 --> 01:07:48,400
Speaker 1: just succeed. So I was looking at this entire reddit

1292
01:07:48,440 --> 01:07:52,720
Speaker 1: wool Street bats Saga from from Game Stop to AMC two,

1293
01:07:52,760 --> 01:07:57,919
Speaker 1: Hurts and now Revlon as just a massive combination of

1294
01:07:58,800 --> 01:08:02,920
Speaker 1: board millennials suck at home with free trading and a

1295
01:08:03,080 --> 01:08:07,560
Speaker 1: giant Dunning Krueger overlay. Meaning people are unaware of their

1296
01:08:07,560 --> 01:08:11,600
Speaker 1: own lack of skills. And what you're suggesting is there's

1297
01:08:11,640 --> 01:08:15,920
Speaker 1: a different dimension to this that burn the whole thing down.

1298
01:08:15,960 --> 01:08:20,000
Speaker 1: What the hell this this isn't working, This experiment isn't

1299
01:08:20,000 --> 01:08:22,960
Speaker 1: working out here in America. Just let it all burn.

1300
01:08:23,320 --> 01:08:25,519
Speaker 1: Is that what you're suggesting that is part of it?

1301
01:08:25,600 --> 01:08:27,160
Speaker 1: That definitely is part of it for some of the

1302
01:08:27,200 --> 01:08:32,360
Speaker 1: people involved, for sure, and they they don't mind making

1303
01:08:32,400 --> 01:08:35,680
Speaker 1: money in the process. It's like the George Costanza like,

1304
01:08:35,720 --> 01:08:37,760
Speaker 1: just do the opposite of what right I mean? And

1305
01:08:37,800 --> 01:08:40,519
Speaker 1: that's what like, oh, the smart person on TV, the

1306
01:08:40,880 --> 01:08:43,160
Speaker 1: Spencer Jacob at the Wall Street Journal said, don't do that.

1307
01:08:43,439 --> 01:08:45,840
Speaker 1: I mean, I'll write an article like pointing out for example,

1308
01:08:45,840 --> 01:08:49,200
Speaker 1: I wrote an article about crypto and memestock saying like,

1309
01:08:49,240 --> 01:08:52,920
Speaker 1: there's some people have a five thousand dollar price target

1310
01:08:53,000 --> 01:08:54,840
Speaker 1: for a m C or I don't know how like

1311
01:08:54,840 --> 01:08:59,160
Speaker 1: a million dollar price start for a bitcoin, and I

1312
01:08:59,240 --> 01:09:04,840
Speaker 1: wrote about it's right there, it's not unthinkable. Well yeah,

1313
01:09:05,000 --> 01:09:09,760
Speaker 1: and that's harder from is from twenty but still yeah, um.

1314
01:09:10,120 --> 01:09:13,759
Speaker 1: But the thing that you have to realize that Victor

1315
01:09:13,880 --> 01:09:16,760
Speaker 1: are going to give credit to uh Victor Hagani of

1316
01:09:16,840 --> 01:09:19,960
Speaker 1: ELM Wealth who pointed this out. I mean it's kind

1317
01:09:19,960 --> 01:09:22,920
Speaker 1: of common sense, but he actually studied, you know, and

1318
01:09:23,080 --> 01:09:26,040
Speaker 1: kind of ran the numbers and and did scenarios, and

1319
01:09:26,040 --> 01:09:28,679
Speaker 1: he said, if you are really sure, like you really

1320
01:09:28,720 --> 01:09:31,640
Speaker 1: have a high degree of confidence. Uh, Like I just

1321
01:09:31,680 --> 01:09:34,560
Speaker 1: went back to the Kelly betting criteria. That's something a

1322
01:09:34,640 --> 01:09:37,160
Speaker 1: sports betting right exactly, it's study. I love this part

1323
01:09:37,160 --> 01:09:39,880
Speaker 1: of the book. Yeah. And so if you if you

1324
01:09:40,080 --> 01:09:43,120
Speaker 1: really really pretty confident in something happening, like you know,

1325
01:09:43,280 --> 01:09:45,439
Speaker 1: you might be wrong, but let's say you really are confident,

1326
01:09:45,479 --> 01:09:49,280
Speaker 1: you have reason to think you're confident, you don't bet

1327
01:09:49,320 --> 01:09:51,639
Speaker 1: all your wealth. These people are going all in. People

1328
01:09:51,680 --> 01:09:54,200
Speaker 1: are like I mortgage my house, I'm out on the street,

1329
01:09:54,240 --> 01:09:56,320
Speaker 1: but I still am keeping my AMC because it's going

1330
01:09:56,360 --> 01:09:59,000
Speaker 1: to five k. Like, if it's going to five hundred k,

1331
01:09:59,160 --> 01:10:02,639
Speaker 1: how many what do you need? Two shares? Two shares

1332
01:10:02,680 --> 01:10:05,920
Speaker 1: of AMC for twenty six bucks. And then if you're right,

1333
01:10:06,400 --> 01:10:09,400
Speaker 1: then you're rich. And if you're wrong and there's not

1334
01:10:09,400 --> 01:10:13,559
Speaker 1: a chance that you're right, then you know you didn't

1335
01:10:13,600 --> 01:10:15,960
Speaker 1: lose a lot of money, and so it's like it's

1336
01:10:17,960 --> 01:10:22,120
Speaker 1: bet uh. People end up going even knowing it's a

1337
01:10:22,160 --> 01:10:24,920
Speaker 1: loaded coin, and I don't know if this is the

1338
01:10:24,960 --> 01:10:28,280
Speaker 1: same STA. So even though it's a loaded coin, I

1339
01:10:28,320 --> 01:10:32,800
Speaker 1: think if I don't lose money, my college math recollection

1340
01:10:32,960 --> 01:10:36,080
Speaker 1: is that you should never bet more than like four

1341
01:10:36,240 --> 01:10:39,840
Speaker 1: percent of your steak because you could have a run

1342
01:10:40,160 --> 01:10:43,360
Speaker 1: of even with weighted coin of like eight ten in

1343
01:10:43,360 --> 01:10:46,439
Speaker 1: a row, and then you're busted. Even with a sixty

1344
01:10:46,520 --> 01:10:48,800
Speaker 1: forty coin, you would think, how can I lose money?

1345
01:10:49,160 --> 01:10:53,280
Speaker 1: The vast majority of people completely go broke with that. Yeah,

1346
01:10:53,400 --> 01:10:55,280
Speaker 1: it's which is crazy. Yeah, and there's been a lot

1347
01:10:55,280 --> 01:10:57,760
Speaker 1: of studies showing that. But and this specifically, that's why

1348
01:10:57,760 --> 01:10:59,360
Speaker 1: I wrote that, you know, which I thought was like

1349
01:10:59,360 --> 01:11:01,120
Speaker 1: a kind of a smart thing to point out to

1350
01:11:01,280 --> 01:11:03,639
Speaker 1: two readers is a common common sense. Then you get

1351
01:11:03,640 --> 01:11:06,240
Speaker 1: the hate I get that, get the hate mail, screw you.

1352
01:11:06,320 --> 01:11:09,519
Speaker 1: I'm still holding. I'm all in, like, Okay, I just

1353
01:11:09,560 --> 01:11:11,519
Speaker 1: gave you I love. You don't have to. But by

1354
01:11:11,520 --> 01:11:14,760
Speaker 1: the way, over the years, I have learned that the

1355
01:11:14,880 --> 01:11:20,160
Speaker 1: more vociferous the hate mail, the more correct I am,

1356
01:11:20,240 --> 01:11:25,839
Speaker 1: because the reason people are so upset is you're challenging

1357
01:11:25,880 --> 01:11:30,200
Speaker 1: a fundamental belief system that they haven't thought through. And

1358
01:11:30,920 --> 01:11:33,639
Speaker 1: you're essentially, I don't want to say, challenging their manhood,

1359
01:11:34,000 --> 01:11:37,640
Speaker 1: but you're putting a fundamental principle that they adhere to

1360
01:11:38,600 --> 01:11:43,160
Speaker 1: um at risk and it's confusing and their own cognitive

1361
01:11:43,200 --> 01:11:46,640
Speaker 1: dissonance causes them to lash out. Maybe cognitive dissonance is

1362
01:11:46,640 --> 01:11:49,719
Speaker 1: the wrong word, but the anger they get it means

1363
01:11:49,760 --> 01:11:53,320
Speaker 1: you're you're getting closer and closer to totally identifying a

1364
01:11:53,360 --> 01:11:55,559
Speaker 1: truth that is very uncomfortable to them. And I get

1365
01:11:55,600 --> 01:11:57,360
Speaker 1: these like and you're a shill. Well, you know what,

1366
01:11:57,479 --> 01:12:00,720
Speaker 1: I gave up a very lucrative job on Wall We

1367
01:12:02,320 --> 01:12:04,920
Speaker 1: started out at Credit Swiss. You're an analyst. At one

1368
01:12:04,960 --> 01:12:07,960
Speaker 1: point you were ahead of em research, right, So for

1369
01:12:08,000 --> 01:12:10,080
Speaker 1: you to do be a reporter at the walls Ree Journal,

1370
01:12:10,280 --> 01:12:13,400
Speaker 1: you're taking a pay cut. Yeah, that's try not to

1371
01:12:13,400 --> 01:12:16,400
Speaker 1: think about that whenever, Like the kids need braces, and

1372
01:12:16,680 --> 01:12:19,200
Speaker 1: it's not just it's not just that your chill. You're

1373
01:12:19,240 --> 01:12:21,920
Speaker 1: just a bad chill, right, Exactly what kind of what

1374
01:12:22,000 --> 01:12:24,040
Speaker 1: kind of a dummy makes a financial decision like that?

1375
01:12:24,080 --> 01:12:28,040
Speaker 1: You're not gonna So let's let's um before we jump

1376
01:12:28,080 --> 01:12:30,479
Speaker 1: to our favorite questions. It was one other study you

1377
01:12:30,520 --> 01:12:32,840
Speaker 1: mentioned that I have to talk about because I just

1378
01:12:32,920 --> 01:12:38,880
Speaker 1: love this. So this sports gambling. When people tweet their

1379
01:12:39,080 --> 01:12:43,960
Speaker 1: sports forecasts about what's going to happen, the more specific

1380
01:12:44,080 --> 01:12:47,880
Speaker 1: they are, and the more wrong they are, the more

1381
01:12:48,040 --> 01:12:51,840
Speaker 1: followers they seem to get. The more specific, even if

1382
01:12:51,840 --> 01:12:55,639
Speaker 1: they're wrong, they generate more Twitter followers. But people who

1383
01:12:55,720 --> 01:13:01,000
Speaker 1: put out these thoughtful, nuanced forecasts that turn out to

1384
01:13:01,040 --> 01:13:05,920
Speaker 1: be right, it doesn't generate that buzz that that the

1385
01:13:06,080 --> 01:13:09,559
Speaker 1: certitude generates even if we're wrong. And that's a really

1386
01:13:09,560 --> 01:13:12,840
Speaker 1: important thing to understand about finance and life general and

1387
01:13:12,880 --> 01:13:15,360
Speaker 1: social media and social media. And then I'll just go

1388
01:13:15,439 --> 01:13:18,599
Speaker 1: one step further on that because um, yeah, So basically

1389
01:13:18,760 --> 01:13:21,320
Speaker 1: the study shows that people who are less accurate but

1390
01:13:21,360 --> 01:13:25,000
Speaker 1: more confident, uh just a lot of certitude, get a

1391
01:13:25,000 --> 01:13:27,240
Speaker 1: lot more followers than the people who wound up being right.

1392
01:13:27,640 --> 01:13:32,839
Speaker 1: But in this algorithmically charge social media, you're not seeing

1393
01:13:32,880 --> 01:13:36,200
Speaker 1: both of those posts anymore. Right, So you go on

1394
01:13:36,200 --> 01:13:38,760
Speaker 1: on Reddit, which has a human algorithm, people upboat and

1395
01:13:38,760 --> 01:13:42,519
Speaker 1: downboad things. Okay, so let's say Barry that you go

1396
01:13:42,880 --> 01:13:49,120
Speaker 1: on on Wall Street bets and you have a very measured, long,

1397
01:13:49,400 --> 01:13:54,360
Speaker 1: cerebral post about something with some good information and inside.

1398
01:13:54,760 --> 01:13:56,720
Speaker 1: And then I go on there and you say, and

1399
01:13:56,760 --> 01:13:58,599
Speaker 1: I put five percent of my portfolio into the stock.

1400
01:13:58,880 --> 01:14:01,000
Speaker 1: And I go on there and I say, I put

1401
01:14:01,040 --> 01:14:03,599
Speaker 1: a percent of my portfolio into the stock, all into

1402
01:14:03,600 --> 01:14:06,320
Speaker 1: out of the money, call options, mortgage, my house, did

1403
01:14:06,320 --> 01:14:09,559
Speaker 1: all this crazy stuff to the moon, you know, rocket ships,

1404
01:14:09,880 --> 01:14:11,680
Speaker 1: I'm gonna get a lot more at tension. So now

1405
01:14:11,720 --> 01:14:13,920
Speaker 1: a third person goes onto there and says, well, I'm

1406
01:14:13,960 --> 01:14:16,200
Speaker 1: a young person who just to open up their first

1407
01:14:16,240 --> 01:14:18,040
Speaker 1: brokerage kind of hear Wall Street pets is a place

1408
01:14:18,080 --> 01:14:20,240
Speaker 1: to go for advice. Not only they It's not like

1409
01:14:20,240 --> 01:14:21,960
Speaker 1: they're going to see your advice and my advice. They're

1410
01:14:21,960 --> 01:14:24,360
Speaker 1: only going to see my advice. They're not going to

1411
01:14:24,400 --> 01:14:27,200
Speaker 1: see your advice because yours is not going to get uploted.

1412
01:14:27,200 --> 01:14:29,800
Speaker 1: Yours is boring and mine is exciting, And so mine

1413
01:14:29,840 --> 01:14:33,120
Speaker 1: gets upvoted. Mine is funny and gets uploded in Yours

1414
01:14:33,320 --> 01:14:37,679
Speaker 1: is invisible. And so this that that is different about

1415
01:14:37,800 --> 01:14:40,040
Speaker 1: social media today. That's what you know people compared to yeah,

1416
01:14:40,040 --> 01:14:42,240
Speaker 1: who finance message bar was usually did and this is

1417
01:14:42,280 --> 01:14:45,800
Speaker 1: different that You're absolutely right, it's it's not just that

1418
01:14:45,800 --> 01:14:50,479
Speaker 1: we're manipulated by algorithms. The algorithms are manipulating our own

1419
01:14:50,520 --> 01:14:54,519
Speaker 1: biology and psychology, and so we were built for a

1420
01:14:54,560 --> 01:14:58,200
Speaker 1: different era, not not this era. So on that cheerful note,

1421
01:14:58,640 --> 01:15:01,280
Speaker 1: let's jump to our fine favor read questions that we

1422
01:15:01,320 --> 01:15:04,040
Speaker 1: ask all of our guests, starting with tell us, what

1423
01:15:04,080 --> 01:15:07,599
Speaker 1: you've been streaming these days? What's keeping you entertained? So

1424
01:15:07,720 --> 01:15:10,160
Speaker 1: I have never been a big TV watcher, and then

1425
01:15:10,240 --> 01:15:12,160
Speaker 1: during the pandemic, I guess I started more kind of

1426
01:15:12,200 --> 01:15:15,160
Speaker 1: became more of like a family. Yeah, family social activity.

1427
01:15:15,200 --> 01:15:17,640
Speaker 1: But I'll only except for I'll watch a football game

1428
01:15:17,640 --> 01:15:20,040
Speaker 1: by myself. But I don't really watch things about myself.

1429
01:15:20,080 --> 01:15:21,920
Speaker 1: So I always trying to, like, if I can get

1430
01:15:22,320 --> 01:15:24,519
Speaker 1: three sons, if I can get at least one of

1431
01:15:24,560 --> 01:15:26,200
Speaker 1: my sons and my wife to watch something with me,

1432
01:15:26,240 --> 01:15:28,160
Speaker 1: then I'll watch it. It's like a matter of negotiations.

1433
01:15:28,200 --> 01:15:31,840
Speaker 1: So the thing we just finished watching was Inventing Anna Um,

1434
01:15:32,479 --> 01:15:36,360
Speaker 1: which I really liked and I'm I'm always just fascinated

1435
01:15:36,400 --> 01:15:40,559
Speaker 1: by She's kind of the high in grifter, the socialite. Yeah,

1436
01:15:40,600 --> 01:15:43,120
Speaker 1: she's the Anna delvi As was her name, and she

1437
01:15:43,640 --> 01:15:46,559
Speaker 1: is her name. She's still alive, and she basically convinced

1438
01:15:46,600 --> 01:15:50,640
Speaker 1: all these wealthy people to sort of finance her luxurious lifestyle,

1439
01:15:50,720 --> 01:15:53,519
Speaker 1: and you know, and and she just she was a

1440
01:15:53,520 --> 01:15:56,160
Speaker 1: fake heiress, you know. And and she almost got a

1441
01:15:56,160 --> 01:15:59,080
Speaker 1: bunch of money from some investment firms to buy a

1442
01:15:59,120 --> 01:16:01,680
Speaker 1: building and start foundation and all this crazy stuff. And

1443
01:16:01,680 --> 01:16:03,920
Speaker 1: it's just it's just the kind of I'm really always

1444
01:16:03,920 --> 01:16:06,960
Speaker 1: been interested in common. I want to watch UM, I

1445
01:16:07,000 --> 01:16:09,719
Speaker 1: want to watch Super Pumped. I want to watch We Crashed.

1446
01:16:09,760 --> 01:16:14,400
Speaker 1: I'm trying started. It's fascinating and I love the book

1447
01:16:14,439 --> 01:16:18,320
Speaker 1: Super Pumped by your colleague, So that's definitely on my

1448
01:16:18,360 --> 01:16:21,200
Speaker 1: list to see. And then on the podcast, I'm more

1449
01:16:21,200 --> 01:16:22,960
Speaker 1: of a pod go for a walk, listen to podcast.

1450
01:16:22,960 --> 01:16:25,080
Speaker 1: I listen to your podcast a lot. You're You're. I'm

1451
01:16:25,080 --> 01:16:28,120
Speaker 1: a big fan of of yours. UM. I like Shane Parrish,

1452
01:16:28,240 --> 01:16:32,200
Speaker 1: Dmitri Cofinis, Tim Ferris. UM. There's a guy actually I

1453
01:16:32,200 --> 01:16:34,000
Speaker 1: heard on maybe just a few months back on Tim

1454
01:16:34,040 --> 01:16:37,000
Speaker 1: Ferris who I'm really into listening town Rich Role who's

1455
01:16:37,200 --> 01:16:41,519
Speaker 1: into like doing ultra endurance sports. I've just read his

1456
01:16:41,560 --> 01:16:45,160
Speaker 1: book after I heard the podcast UM called Finding Ultra

1457
01:16:45,360 --> 01:16:48,320
Speaker 1: was just this fascinating story about how he uh you know,

1458
01:16:48,400 --> 01:16:51,320
Speaker 1: went from being uh in alcohol we still is an alcoholic,

1459
01:16:51,360 --> 01:16:54,519
Speaker 1: but recover in culture marathon or is that who? Yeah,

1460
01:16:54,560 --> 01:16:57,880
Speaker 1: like he did he did five iron Man's in seven days,

1461
01:16:57,960 --> 01:17:01,000
Speaker 1: you know, yeah, in his forties. So he's one of

1462
01:17:01,040 --> 01:17:03,680
Speaker 1: the fittest men in America. And so I listened to

1463
01:17:03,680 --> 01:17:05,880
Speaker 1: a bunch of his podcasts. Now, so yeah, that's that's

1464
01:17:05,880 --> 01:17:07,720
Speaker 1: the kind of thing that I listened to. And then

1465
01:17:08,040 --> 01:17:11,040
Speaker 1: I like hardcore history a lot. Dan Carlin, that's an

1466
01:17:11,040 --> 01:17:14,280
Speaker 1: interesting definitely an interesting pot. Let's talk about some of

1467
01:17:14,320 --> 01:17:18,080
Speaker 1: your mentors who helped to shape your career. I feel

1468
01:17:18,080 --> 01:17:21,519
Speaker 1: like I should mention, uh, somebody at the Financial Times

1469
01:17:21,520 --> 01:17:23,120
Speaker 1: of the Wall Street Journal. And I've had a lot

1470
01:17:23,120 --> 01:17:26,200
Speaker 1: of great editors. I have a great editor now great boss,

1471
01:17:26,240 --> 01:17:28,880
Speaker 1: I should say, who runs the money in investing section.

1472
01:17:28,960 --> 01:17:31,760
Speaker 1: But I'm gonna mention somebody who at the when I

1473
01:17:31,880 --> 01:17:35,479
Speaker 1: spent a decade in finance and my boss for the

1474
01:17:35,600 --> 01:17:39,160
Speaker 1: longest period of that time. Um, there's a guy who

1475
01:17:39,240 --> 01:17:42,280
Speaker 1: really influenced me, taught me a lot. I think I've

1476
01:17:42,320 --> 01:17:45,400
Speaker 1: worked harder for him. His name is John Conlin then

1477
01:17:46,280 --> 01:17:49,600
Speaker 1: anyone I've ever worked for so hard. Yeah, he was

1478
01:17:49,840 --> 01:17:53,559
Speaker 1: he became CEO of Robertson Stevens later, and uh yeah,

1479
01:17:53,600 --> 01:17:56,479
Speaker 1: and he's just a really good guy. And just because

1480
01:17:56,520 --> 01:17:59,000
Speaker 1: now I manage people, I manage a global team of

1481
01:17:59,000 --> 01:18:01,559
Speaker 1: of columnists that hurt on the street, and you know,

1482
01:18:01,600 --> 01:18:05,840
Speaker 1: I think, I think about the good bosses that I've had,

1483
01:18:05,880 --> 01:18:09,120
Speaker 1: and then you know very much about him, about like

1484
01:18:09,520 --> 01:18:12,680
Speaker 1: what they were like with me, and how to be

1485
01:18:12,800 --> 01:18:15,880
Speaker 1: how to be decent to people, how to get people excited,

1486
01:18:16,160 --> 01:18:19,040
Speaker 1: how to get make people really love coming into work.

1487
01:18:19,080 --> 01:18:21,559
Speaker 1: I mean I loved working for him, and you know,

1488
01:18:21,600 --> 01:18:23,880
Speaker 1: I just always felt like he had my back and

1489
01:18:23,960 --> 01:18:26,600
Speaker 1: I learned a lot from him. But I mean, you know,

1490
01:18:26,840 --> 01:18:29,240
Speaker 1: they're not that He's not smart. They were smarter people

1491
01:18:29,280 --> 01:18:32,600
Speaker 1: I I encountered in my time in finance. But I

1492
01:18:32,720 --> 01:18:36,600
Speaker 1: just just loved, you know, kind of being you know,

1493
01:18:37,000 --> 01:18:38,880
Speaker 1: under under his wing. I was really sad, you know,

1494
01:18:38,880 --> 01:18:40,280
Speaker 1: when he left and then he went to go work

1495
01:18:40,320 --> 01:18:43,519
Speaker 1: for you know, Ron Roberts and Stevens, and was tempted

1496
01:18:43,560 --> 01:18:46,439
Speaker 1: to go there really just because of him. So uh so,

1497
01:18:46,520 --> 01:18:49,320
Speaker 1: he he had a big influence on me, really really interesting.

1498
01:18:49,960 --> 01:18:53,559
Speaker 1: Everybody's favorite question, tell us what some of your favorite

1499
01:18:53,600 --> 01:18:56,960
Speaker 1: books are and what are you reading right now? So

1500
01:18:57,320 --> 01:19:02,599
Speaker 1: I just recently finished Bill Routers book, the second second book,

1501
01:19:03,640 --> 01:19:07,200
Speaker 1: Freezing Freezing Order and the Red Notice was his first book. Um.

1502
01:19:07,240 --> 01:19:09,320
Speaker 1: And actually because I was I worked in emerging markets,

1503
01:19:09,320 --> 01:19:12,120
Speaker 1: I knew Bill a very little bit when he was

1504
01:19:12,360 --> 01:19:14,040
Speaker 1: he's a little older than me, but so he got

1505
01:19:14,040 --> 01:19:17,000
Speaker 1: started a few years before me. And this wild east

1506
01:19:17,280 --> 01:19:19,400
Speaker 1: of eastern Europe. He was this before he founded his

1507
01:19:19,439 --> 01:19:24,559
Speaker 1: firm A Mertage. But he his book is very important

1508
01:19:24,600 --> 01:19:27,479
Speaker 1: book to read now, very entertaining book, both of those books,

1509
01:19:27,520 --> 01:19:29,280
Speaker 1: but especially Freezing Order. You don't have to read the

1510
01:19:29,280 --> 01:19:32,080
Speaker 1: first one if you read the second one about the

1511
01:19:32,520 --> 01:19:36,360
Speaker 1: torture and murder of his lawyer, uh second Magnitsky, the

1512
01:19:36,400 --> 01:19:39,280
Speaker 1: Mcgnitsky laws that he's passed, just sort of sees you'll

1513
01:19:39,360 --> 01:19:42,439
Speaker 1: gotten gains from human rights abusers around the world, not

1514
01:19:42,560 --> 01:19:45,639
Speaker 1: just in Russia. And this guy is he is such

1515
01:19:45,680 --> 01:19:48,879
Speaker 1: a brave man. Um. You know, people have been been

1516
01:19:49,000 --> 01:19:52,680
Speaker 1: murdered by Vladimir Putin for lesson. He's an outspoken advocate

1517
01:19:53,000 --> 01:19:56,599
Speaker 1: for for justice in in Russia. And basically he just

1518
01:19:56,720 --> 01:20:00,360
Speaker 1: shows you what Vladimir Putin's Russia is, which is a

1519
01:20:00,840 --> 01:20:04,960
Speaker 1: it's a mafia state at the thugocracy with nuclear weapons

1520
01:20:05,000 --> 01:20:07,760
Speaker 1: and poison and acts with impunity around the world. I

1521
01:20:07,840 --> 01:20:12,080
Speaker 1: highly recommend that if Red Notice wasn't a nonfiction book,

1522
01:20:12,200 --> 01:20:15,600
Speaker 1: it wouldn't get published as just too, if it was

1523
01:20:15,600 --> 01:20:18,360
Speaker 1: a novel, would be this is too ridiculous. Yeah, I

1524
01:20:18,400 --> 01:20:21,320
Speaker 1: don't think you've had him on She's coming up. We haven't. Okay,

1525
01:20:22,800 --> 01:20:26,080
Speaker 1: I'm plowing through the new book, which is you know, horrifying.

1526
01:20:26,520 --> 01:20:29,080
Speaker 1: It is. It is horrifying. It's he is. He is

1527
01:20:29,120 --> 01:20:31,960
Speaker 1: a brave, brave guy to say, say the least, and

1528
01:20:32,040 --> 01:20:35,080
Speaker 1: any other books you want to mention. Um, So I

1529
01:20:35,160 --> 01:20:38,840
Speaker 1: read Blood well, bad Blood is great, great book. I

1530
01:20:38,840 --> 01:20:41,519
Speaker 1: mean another book that I read a I read a book,

1531
01:20:41,640 --> 01:20:45,240
Speaker 1: um recently one of your recent guests about Peter Teal

1532
01:20:45,560 --> 01:20:51,240
Speaker 1: The Contrarian by Max Chaff enjoyed that. Also highly recommend

1533
01:20:51,280 --> 01:20:55,559
Speaker 1: that book. Um, you know, interesting character, totally uh and

1534
01:20:55,560 --> 01:20:59,360
Speaker 1: and such a complicated character. Yeah yeah, um, so yeah,

1535
01:20:59,400 --> 01:21:00,880
Speaker 1: I read a lot of the I have a lot

1536
01:21:00,920 --> 01:21:04,000
Speaker 1: of you know, friends and colleagues that that that write books,

1537
01:21:04,000 --> 01:21:06,320
Speaker 1: and so I wounded up reading you know, I feel

1538
01:21:06,320 --> 01:21:07,559
Speaker 1: like I have to read them, and so I read

1539
01:21:07,600 --> 01:21:08,600
Speaker 1: a lot of those. But I read a lot of

1540
01:21:08,640 --> 01:21:12,439
Speaker 1: history and biography to you know that that sounds really interesting. Um.

1541
01:21:12,520 --> 01:21:14,360
Speaker 1: What sort of advice would you give to a recent

1542
01:21:14,439 --> 01:21:21,080
Speaker 1: college grad interested in a career in either finance or journalism. Well,

1543
01:21:21,120 --> 01:21:24,880
Speaker 1: I'll give you finance. Um. The way that I got

1544
01:21:24,920 --> 01:21:27,760
Speaker 1: into finance was totally by accident. I was gonna, um,

1545
01:21:27,920 --> 01:21:33,040
Speaker 1: you know, my I got an application to a program

1546
01:21:33,040 --> 01:21:36,160
Speaker 1: at Columbia University that was not a finance program. Um,

1547
01:21:36,280 --> 01:21:38,040
Speaker 1: and I got it by accident. Mentioned it to my

1548
01:21:38,120 --> 01:21:41,120
Speaker 1: undergraduate advisory was still she's she's still she teaches Carol Savits,

1549
01:21:41,160 --> 01:21:43,440
Speaker 1: she's still is on faculty at M I T. And

1550
01:21:43,479 --> 01:21:45,680
Speaker 1: she told me like, oh, yeah, I went there and

1551
01:21:45,920 --> 01:21:47,519
Speaker 1: you should do that. She kind of saw that I

1552
01:21:47,560 --> 01:21:49,760
Speaker 1: probably shouldn't be an academic because I was planning on

1553
01:21:49,800 --> 01:21:51,840
Speaker 1: being I didn't really have any the kind of temperament

1554
01:21:51,880 --> 01:21:54,800
Speaker 1: for it. And uh, first or second day at this

1555
01:21:54,840 --> 01:21:58,280
Speaker 1: program at Columbia University, UM, I met a kid who's

1556
01:21:58,320 --> 01:22:00,680
Speaker 1: now fifty six year old kid who told me he

1557
01:22:00,680 --> 01:22:02,519
Speaker 1: had been an investment banker. And I was like, you know,

1558
01:22:02,560 --> 01:22:05,040
Speaker 1: I just didn't. My parents were immigrants here and there

1559
01:22:05,040 --> 01:22:08,360
Speaker 1: their twenties. Nobody we knew was on Roall Street, and

1560
01:22:08,479 --> 01:22:11,000
Speaker 1: I was like, excuse my ignorance, what's an investment bank? Like,

1561
01:22:11,040 --> 01:22:12,720
Speaker 1: you know, I have heard the word, but I just

1562
01:22:12,760 --> 01:22:14,439
Speaker 1: can you just explain to me, like a dummy what

1563
01:22:14,479 --> 01:22:19,280
Speaker 1: it is? And but I was also very anxious about money.

1564
01:22:19,320 --> 01:22:22,519
Speaker 1: You know, if you if your parents come here with nothing,

1565
01:22:22,560 --> 01:22:27,080
Speaker 1: you that tends to be the case. And he's the

1566
01:22:27,080 --> 01:22:28,479
Speaker 1: first thing he told me is how much he made,

1567
01:22:28,800 --> 01:22:31,400
Speaker 1: which was all that got me right away. Yeah, I

1568
01:22:31,560 --> 01:22:34,000
Speaker 1: popping in the eighties, you know, if working for bankers trust.

1569
01:22:34,439 --> 01:22:37,639
Speaker 1: And I said, how do I do that? And he said, well,

1570
01:22:38,200 --> 01:22:41,600
Speaker 1: you know you're I was bilingual and Hungarian and I

1571
01:22:41,600 --> 01:22:43,280
Speaker 1: had studied German and Russia. And he said, they're going

1572
01:22:43,320 --> 01:22:45,880
Speaker 1: to privatize everything. You Eastern Europe. The Iron curtain has fallen.

1573
01:22:46,439 --> 01:22:49,720
Speaker 1: You know, you're you're there, they'll hire you. They're gonna

1574
01:22:49,720 --> 01:22:52,640
Speaker 1: privatize everything. So just take as many finance classes as

1575
01:22:52,640 --> 01:22:55,480
Speaker 1: you can at Columbia Business School you're allowed to in accounting,

1576
01:22:55,760 --> 01:22:57,800
Speaker 1: and then you'll get hired. And he was right. And

1577
01:22:57,920 --> 01:23:00,880
Speaker 1: I liked the finance classes. I like finance. I find

1578
01:23:00,880 --> 01:23:03,200
Speaker 1: finance interesting. I never thought that I would, and I

1579
01:23:03,680 --> 01:23:06,640
Speaker 1: really was. I'm fast. I'm still fascinated by it. I

1580
01:23:06,640 --> 01:23:08,720
Speaker 1: think it's the most fascinating thing. It's it's like a

1581
01:23:09,320 --> 01:23:11,519
Speaker 1: it's like my sports, you know, like just watching what

1582
01:23:11,640 --> 01:23:16,799
Speaker 1: happens all these people sort of day a year struggle

1583
01:23:16,920 --> 01:23:20,680
Speaker 1: over money and and people computing power and brains and

1584
01:23:20,680 --> 01:23:23,000
Speaker 1: all this stuff. And so I liked it. But the

1585
01:23:23,160 --> 01:23:25,400
Speaker 1: entire time that I worked in investment bank and I

1586
01:23:25,400 --> 01:23:27,280
Speaker 1: was I think I was the youngest managing director and

1587
01:23:27,320 --> 01:23:29,880
Speaker 1: the equity department in my my bank, Eventually, you know,

1588
01:23:30,600 --> 01:23:33,720
Speaker 1: I felt like I'm just pinching myself. This can't this

1589
01:23:33,840 --> 01:23:35,400
Speaker 1: is the amount of money that they're paying. They're paying

1590
01:23:35,439 --> 01:23:38,120
Speaker 1: me like four or five times what my professors, you know,

1591
01:23:38,120 --> 01:23:40,479
Speaker 1: who are much smarter than me. We're earning like this.

1592
01:23:41,640 --> 01:23:44,559
Speaker 1: And I always like like, okay, I'll be maybe one

1593
01:23:44,560 --> 01:23:46,599
Speaker 1: more year and so and then I in the end,

1594
01:23:46,640 --> 01:23:51,200
Speaker 1: I I quit to become a writer. And you know

1595
01:23:51,520 --> 01:23:53,360
Speaker 1: which is I'm glad that I that I did it

1596
01:23:53,360 --> 01:23:55,719
Speaker 1: that way, because I think people, here's the lesson. Okay,

1597
01:23:55,800 --> 01:23:59,240
Speaker 1: So that's that's the attitude you should have, is like

1598
01:23:59,280 --> 01:24:02,040
Speaker 1: this is just totally unrealistic the amount the money you're

1599
01:24:02,040 --> 01:24:03,760
Speaker 1: being paid. If you're a young person in finance, if

1600
01:24:03,800 --> 01:24:05,720
Speaker 1: you want to need to make money or want to

1601
01:24:05,720 --> 01:24:07,320
Speaker 1: make money, or want to have that cushion treated like

1602
01:24:07,360 --> 01:24:09,719
Speaker 1: a cushion, don't go out and you know, bee frugal

1603
01:24:10,160 --> 01:24:12,720
Speaker 1: treated like a stupid, stupid thing that you're being paid

1604
01:24:12,760 --> 01:24:14,760
Speaker 1: so much, because it is stupid you're being paid so much.

1605
01:24:15,120 --> 01:24:17,479
Speaker 1: And and don't get your ego wrapped up in it,

1606
01:24:17,479 --> 01:24:19,160
Speaker 1: because I saw so many people I used to work

1607
01:24:19,200 --> 01:24:23,120
Speaker 1: with eventually, you know, just have to go to a

1608
01:24:23,160 --> 01:24:26,759
Speaker 1: less proceigious, less lucrative job, and it kind of really

1609
01:24:26,840 --> 01:24:29,760
Speaker 1: really hurt them their egos. And don't ever think that

1610
01:24:29,800 --> 01:24:32,559
Speaker 1: you deserve that amount of of money, you know, and

1611
01:24:32,640 --> 01:24:35,000
Speaker 1: little humility goes a long way. And and just and

1612
01:24:35,040 --> 01:24:37,360
Speaker 1: that that money gives you freedom, you know, so so

1613
01:24:37,560 --> 01:24:40,479
Speaker 1: use it. I use the freedom to do this dumb

1614
01:24:41,520 --> 01:24:43,280
Speaker 1: which I've been doing for almost twenty years now. And

1615
01:24:43,320 --> 01:24:45,439
Speaker 1: I'm glad I did it worked out. I'm glad it

1616
01:24:45,479 --> 01:24:47,040
Speaker 1: was in that order, you know what I mean. And

1617
01:24:47,080 --> 01:24:50,120
Speaker 1: our final question, what do you know about the world

1618
01:24:50,320 --> 01:24:53,559
Speaker 1: of finance and investing today? You wish you knew thirty

1619
01:24:53,640 --> 01:24:55,839
Speaker 1: years or so ago when you were first getting started.

1620
01:24:56,479 --> 01:24:58,880
Speaker 1: You know, I wish that I had just agonized over

1621
01:24:58,960 --> 01:25:00,680
Speaker 1: things a bit less in term to invest in my

1622
01:25:00,720 --> 01:25:03,680
Speaker 1: own money. Um, you have a colleague, but Julie, who

1623
01:25:03,680 --> 01:25:06,400
Speaker 1: wrote a great book, Just keep buying, Just keep buying,

1624
01:25:06,439 --> 01:25:09,240
Speaker 1: and that that is really the mantra, especially when you're

1625
01:25:09,320 --> 01:25:11,400
Speaker 1: in your twenties and thirties and stuff like that. It's

1626
01:25:12,240 --> 01:25:14,240
Speaker 1: when you're that age. And by the way, Nick is

1627
01:25:14,280 --> 01:25:16,639
Speaker 1: barely thirty. I don't even think he's thirty yet, which

1628
01:25:16,680 --> 01:25:22,000
Speaker 1: is astonishing how how much wisdom that book has for

1629
01:25:22,040 --> 01:25:24,120
Speaker 1: someone as young as him. I wish that I had

1630
01:25:24,120 --> 01:25:26,599
Speaker 1: had that wisdom at you know, because I've done fine.

1631
01:25:26,640 --> 01:25:30,240
Speaker 1: But if I had just basically just done like literally

1632
01:25:30,240 --> 01:25:32,360
Speaker 1: those three or it's just keep buying, don't worry about it,

1633
01:25:32,400 --> 01:25:34,479
Speaker 1: don't keep checking, don't worry. You know, there have been

1634
01:25:34,520 --> 01:25:38,439
Speaker 1: what forebear markets since I've been in like old enough

1635
01:25:38,479 --> 01:25:42,800
Speaker 1: to have any money to invest. And if if you're counting,

1636
01:25:42,840 --> 01:25:45,040
Speaker 1: this is the fourth one. Yeah, absolutely, two thousand oh

1637
01:25:45,040 --> 01:25:50,599
Speaker 1: w O nine and yeah, and then the yeah. And

1638
01:25:51,080 --> 01:25:53,040
Speaker 1: they had a couple of pullbacks in the nineties, but

1639
01:25:53,120 --> 01:25:55,040
Speaker 1: nothing to I mean, I was always like, you know,

1640
01:25:55,120 --> 01:25:57,160
Speaker 1: trying to handicap things and worry about things I just

1641
01:25:57,240 --> 01:26:02,799
Speaker 1: really shouldn't have, you know, I mean that's take decades totally.

1642
01:26:02,880 --> 01:26:06,360
Speaker 1: So that's that's very good advice, h really really good stuff.

1643
01:26:06,880 --> 01:26:10,000
Speaker 1: We have been speaking with Spencer Jacob Wall Street Journal

1644
01:26:10,040 --> 01:26:13,439
Speaker 1: reporter and editor and author of the book Which I

1645
01:26:13,479 --> 01:26:17,040
Speaker 1: Have To Get Signs, The Revolution that Wasn't GameStop, Reddit,

1646
01:26:17,120 --> 01:26:21,800
Speaker 1: and the fleecing of small investors. If you enjoy this conversation, well,

1647
01:26:21,840 --> 01:26:24,679
Speaker 1: you can check out any of the previous four hundred

1648
01:26:24,760 --> 01:26:27,000
Speaker 1: or so we've done over the past eight years. You

1649
01:26:27,040 --> 01:26:30,400
Speaker 1: can find those at iTunes, Spotify, or wherever you get

1650
01:26:30,479 --> 01:26:34,800
Speaker 1: your favorite podcasts. We love your comments, feedback and suggestions

1651
01:26:34,960 --> 01:26:38,679
Speaker 1: right to us at m IB podcast at Bloomberg dot net.

1652
01:26:39,280 --> 01:26:42,280
Speaker 1: Sign up from my daily reading list at rid Halts

1653
01:26:42,360 --> 01:26:45,360
Speaker 1: dot com. Follow me on Twitter at rid Halts. I

1654
01:26:45,439 --> 01:26:48,280
Speaker 1: would be remiss if I did not thank the crack

1655
01:26:48,400 --> 01:26:52,240
Speaker 1: staff that helps put these conversations together each week. Sarah

1656
01:26:52,320 --> 01:26:56,200
Speaker 1: Livney is my audio engineer, Attica val Bron is my

1657
01:26:56,320 --> 01:27:00,560
Speaker 1: project manager. Sean Russo is my head of research. Riswald

1658
01:27:00,680 --> 01:27:04,880
Speaker 1: is my producer. I'm Batty Hults. You've been listening to

1659
01:27:04,880 --> 01:27:07,719
Speaker 1: a Masters and Business on a Bloomboat Radio