VALUE: After Hours (S02 E38): Cicadas, Parasites And Prime Numbers, Value Cabbage, And French Cashflows

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In this episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle chat about:

  • Investing Cicadas, Parasites And Prime Numbers
  • French Cashflows
  • Value Cabbage
  • Optimum Time In Research To Introduce Price
  • Value Bucket Has Never Looked Higher Quality
  • Berkshire’s Portfolio With Zero Tax Implications
  • $NKLA Vaporized
  • Increasing SaaS Margins
  • $FB, TikTok Antitrust
  • The Unabomber Manifesto
  • CalPERS Can’t Stop Buying
  • Weaponized Gamma
  • 2040 Top

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

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Full Transcript

Tobias: Hello, folks. It’s Tuesday. It’s 10:30 AM on the West Coast, 1:30 PM on the East Coast. Good afternoon, morning, evening, wherever you are. If you want to listen to this live, go to The Acquirers Podcast YouTube channel, click the notification and it’ll send you an email when we go live, or you can just find us at this site. How are you, gentlemen?

Bill: I’m doing okay.

Jake: Smoke has cleared a little bit, so my spirits are up.

Tobias: [laughs] From the portfolio?

Jake: [chuckles] No comment there.

Tobias: But mine is still on fire.

Jake: Literal air-breathing.

Tobias: We got some good– Omaha, Chapel Hill, London, Toronto, Cincinnati, Rio, Tulsa. We’re worldwide, baby.

Bill: I’m just looking at my portfolio, which is exactly what I assume it would do.

Tobias: Sweden. Yeah, don’t do that.

Jake: Stay away from the light, Bill.

Tobias: Georgia, Stockholm.

Bill: It’s all right.

Jake: I think it’s my turn to do the intro this week. I haven’t done it in like four months or something.

Bill: Indeed.

Tobias: [laughs]

Jake: Welcome to Value After Hours with my esteemed cohosts, Toby Carlisle and Bill Brewster. Toby, what’ve you got for us today?

Tobias: Yeah, I’ve been updating some charts. The French data is always a little bit of lagged, but I got the July data. So, I’ve ran the free cash flow deciles against each other and so I just got some interesting little findings there that I’ll be talking about.

Jake: Parlez-vous Francais? Oh, Fama-French. Okay. Bill, what do you got?

Bill: I’m going to talk about how valuation cobbles the mind.

Tobias: What is cobbling?

Jake: Can’t wait for that.

Bill: It means it makes you stupid.

Jake: Cabbages.

Tobias: Hobbles.

Bill: Whatever.

Tobias: Cabbages. Yeah, it’s clearly that the valuation is cobbling our minds.

Bill: I don’t know what it’s doing. It’s clobbering my mind.

Tobias: What are you talking about, JT?

Jake: I am going to be talking about investment cicadas.

Tobias: Cicadas.

Bill: Yeah, you’re right. This definitely doesn’t cobble the mind. [crosstalk] put it together, destroys people’s minds.

Jake: The clogged toilet of Bill Brewster’s mind. [laughs]

Bill: That’s right. Yeah. I need to plunge it bad.

Jake: All right, back after this.

Tobias: Right back, yeah. Bill, do you want to do yours because then I can shit all over it straight after you do it?

Bill: Okay, that sounds good. First of all, shout out to Qurate for abiding by the valuation rules that I’m about to disparage. So, here’s the thing, people, I think, and I’m just going to talk about me. First, I’m going to turn my mic down just a little. Hey, how’s it going folks?

Value Cabbage

Bill: For me, when I look at some of these highly valued companies, I sometimes impute some of my hatred of evaluation into the analysis of what the company does. And I think that it would be more beneficial if you suffer from my disease, to not focus so much on where something is trading and try to figure out why it’s trading where it is.

Whether or not you think that it makes any sense is sort of a different issue. But there’s a reasonable shot that if it’s valued highly today, there’s probably going to be a time in the future that you may want to buy it if other people find it a little less appealing than they do today. And doing the work today, when you may think that nothing’s going to bear fruit, could present you with a really good opportunity for return on time down the road.

I guess that the example that I’ve seen today, and some of this is just me imputing silliness into people’s tweets and some of it’s people not really thinking, and some of it’s whatever but, like Peloton, I think is a pretty good example of a company that– Personally, I would not pay $27 billion to own this company. I think that’s kind of insane. But it’s a product that I use, and I understand what the bulls see.

Amazon entering the fray is easy if you hate Peloton to say, “Oh, Amazon’s coming, Peloton is going to die,” or something like that. The way that I see it, which obviously is the correct way and everybody else is wrong, but I think that Amazon entering definitively would reduce of your TAM, but I don’t know that you can argue that a bike that’s priced like Peloton is, and that subscription is this large market share anyway. That’s by definition niche. Just because a Ford Fiesta enters the market, does not mean that people are going to stop buying Cadillacs. [crosstalk]

What, Bezos? Come on, like Amazon is some lifestyle brand. It’s just like Walmart, it’s just bigger and on the internet. And their prices aren’t even that good, Jeff, you want to get back to something, fix your pricing. Anyway, I understand that they got center aisle stuff and whatnot. But I think it would be more beneficial for myself to not look at some of these valuations. Maybe it’s a good like hunting round, you screen on returns on capital, and then just start researching. I’m sure almost all of it is going to be outside what I’m willing to pay, but it would probably reduce some of what I’m mad at.

Optimum Time In Research To Introduce Price

Jake: A good hypothetical question to ask is, when would be the optimum time in a research process to introduce price?

Bill: Probably at the very end.

Jake: I think that’s probably right to and yet, what percentage of people do you think look at the price at the very end? They come up with an independent valuation and then go look, see does the market agree with me or not?

Tobias: Well, part of the reason for that is that it’s a lot of effort to go through and do a full valuation. And by the time you get to the end of a full valuation, and then you find, “I’m prepared to pay $20 for this thing.” Where’s it trading? Holy shit, $350!

Jake: Whoops.

Tobias: Now, it’s useless. It’s not necessarily useless, but I understand why people do it the other way around.

Jake: Just the friends you made along the way.


Bill: Well, look, I think that there’s two answers to that. One, you may not be looking at the world right. So, there is some reasonable argument to be made that maybe you’re undervaluing something. Two, yeah, a lot of stuff– it’s like the old Buffett-ism. You find things wildly overvalued in the market often.

Tobias: But the reverse is also true.

Bill: You [crosstalk] understand that’s the game.

Tobias: The reverse is also true. You find stuff that’s just– it doesn’t make sense while it’s trading, where it is. And sometimes if you follow the reasons why, then you go out and explore the reasons why, that’s not helpful at all. That’s just cabbages your mind.

Bill: It doesn’t cobble it, I’ll tell you that.

Tobias: [laughs] Isn’t that fixing shoes?

Bill: No, it’s putting together. So, yeah, I guess you would cobble a shoe.

Jake: Sounds like we need to be a little bit more thoughtful in general about when we introduce price in our processes.

Bill: Yeah, and I think the same is also true. A lot of people–I don’t know, like Markel was a compounder until its stock price went down into the right, now you don’t see it mentioned at all. Like, shut up. Stop looking at a stock price and telling me what the company does and how great the narrative is. It’s ridiculous.

Jake: Dude, you just went against 2020 so hard.

Bill: No, I know. But that’s the truth. It’s like– A. O. Smith, that was just this fantastic company that just compounded and compounded and compounded, all over Twitter while it was going up into the right rather, and then down into the right. Who needs water heaters?


Value Bucket Has Never Looked Higher Quality

Tobias: Yeah, [crosstalk] I think that we’re at a funny point in the market. I think that the value bucket has never looked higher quality. I’m just astonished at the stuff that’s in there that looks to me like, if it was trading 10 times higher than where it is, then people would say, “Well, now it’s a compounder,” and the fact that it’s not trading 10 times higher, it’s trading cheaply because that stocks fall off a cliff–

Jake: It’s dog shit.

Tobias: Yeah, not going to buy it. It’s just sold because it’s been sold.

Bill: Well, I think it’s the old– I think how Munger said the Buffett is. He said, “You’ve often said to me that it’s not what floor you’re on, it’s the direction that the elevator is going that people care about.” It’s like this Qurate thing– [crosstalk]

Tobias: He’s talking about the fundamentals, right?

Bill: No, people are like, “What’s the terminal value?” I don’t know what the fucking terminal value is. You tell me, but I’ll tell you what, the equity is too cheap today. You’re worried about 15 years away. We get to 15 years from now, my money’s out. I think that people are more concerned with certainty of where the trajectory or the perceived trajectory of a business is going and that is obviously why you get a higher multiple. That makes sense. People pay you for their perception of certainty. But there’s also another way to look at things that says like, people were asking Buffett like– I don’t know, what five years ago should you sell Geico? Imagine Berkshire this year without Geico. No, you should not sell Geico. Change takes a long time to happen a lot of the times

Tobias: Should Buffett sell Apple because it’s run up so much?

Bill: I don’t know, he should probably consider a collar or something? What do I know? I sold it at like $1.2 trillion. I’m an idiot.

Jake: [laughs] He left the whole trillion on the table.

Bill: I know, so why do I deserve to have an opinion?

Tobias: My view is that he shouldn’t ever sell. He said that it’s one of his three big companies, three big businesses he’s never going to sell.

Jake: He could maybe trim a little. [laughs] It’s a pretty big part of the portfolio.

Tobias: Well, sell some options against it. I know he doesn’t really play that game but do that.

Bill: That’s right. Yeah, or a convertible/exchangeable debenture or something. It’s– [crosstalk]

Tobias: The problem is, you sell the options at one and a half trillion, and then it runs to two and a half trillion, and you’re out of the money.

Bill: Well, you just deliver the stock.

Tobias: But he doesn’t want to do that. Doesn’t want to incur the tax. He’s not a trader.

Bill: Yeah. I think he’s a trader.


Berkshire’s Portfolio With Zero Tax Implications

Jake: That’s an interesting question. What would Berkshire’s portfolio look like today if there were zero capital gains taxes? Would he turn things over more? Would there be– the names would not sit there like they have. Would he have sold Coke in ’98? I’d be very curious what it would look like if there wasn’t that other component that keeps him welded to the cockpit.

Bill: I don’t know the taxes matter as much as other people may think that– [crosstalk]

Tobias: To Buffett? He writes about it a lot.

Bill: No. Okay. First of all, thank you for cutting me off, asses. Secondly, my comment more had to do with, I think that Buffett would probably turn over stuff more in a limited partnership. I don’t know, he might perceive that there are benefits to Berkshire that outweigh the tax consequences of holding a stock too long because it creates a perception of forever ownership, that he thinks outweighs the cost of the taxes. That’s the most accurate way to say what I mean. But, yes, he hates paying tax as much as John Malone does.

Tobias: Do you think Malone’s got a more clever way of dealing with it?

Bill: No, I just think Malone is way more– He just boasts about it more. I think Buffett’s as shrewd as anyone at avoiding taxes. I just don’t think he goes out there and tells everybody about it.

Tobias: But he doesn’t have a whole lot of tracking stocks. That’s just a way of avoiding tax, right? It’s a way of getting it out of the portfolio.

Bill: But he’s doing all kinds of– like shares, swaps, they approve like that preferred share in case people wanted to sell on a tax advantage. But I mean, Buffett hates taxes.

Jake: Yeah, the energy company is just a huge tax shield, right?

Bill: Dude, Buffett– [crosstalk]

Jake: All those regulatory credits.

Bill: Yeah. He loves not paying tax. Everything he does defers taxes.

Jake: Hey, you know who else is really good about not paying taxes? Elon. No profits, no–

Tobias: [laughs]

Jake: He’s getting money back from the government.

Tobias: Smart.

Bill: I’ll tell you what, man, that’s an argument for SaaS. If you think that tax rates are going up, they’re not going to pay taxes for a while.

Jake: Because there’s no cash flow?

Bill: Well, look, they’re investing through sales, whether or not how much of that’s growth and sustainable, I don’t know. But I mean, it is definitively true, that growth companies pay less taxes.


$NKLA Vaporized

Tobias: Speaking of Tesla. Tesla’s little brother Nikola has vaporized itself, or Trevor Milton has.

Jake: What happened?

Tobias: Trevor Milton is out and there’s some nasty allegations swirling around. I don’t know how real they are, so I won’t comment here, but there’s some nasty allegations out there about him too.

Bill: Do you know a nasty allegation that I heard on the audio interweb recently? I heard that you had to– that you went at Masa and that his Twitter alter-ego came at you to demand a retraction.

Tobias: He’s on me today as well because the option trade– I haven’t fully read the option trade stuff that came through. I’m busy this morning doing other stuff, but I’ll take a look at it.

Bill: I told you I didn’t want to mess with that dude. That dude will come at people on Twitter with a vengeance. I don’t know if it’s Masa–

Tobias: That’s good. I’m here to learn.

Bill: It’s Masa’s cousin. I don’t know if it’s some dude sitting in New York. All I know is he tweeted out that we made an enemy, and I was terrified. Then, I was cracking up. That was a very funny day on the Twitter machine. Thank you, Masa Son Capital.

Tobias: Yeah. It was an interesting trade. They bought the options, bought $4 billion in premium across seven high-quality tech companies and then they sold some further up out of the money. I don’t know much more than that. I haven’t had enough time to read through them. It could be a very shrewd trade to protect those positions. So, I don’t know. I’m going to take a close look.

Bill: Tangentially, if you’re not on Twitter, get on Twitter. I’m about to make another Twitter comment. The funny thing about that account is how much he loves Masa and how much he hates Netflix, and I see a lot of things that rhyme in those two things, but that is neither here nor there. And I am about to get blown up.

Tobias: Corey Hoffstein’s got a nice comment up on the screen. Do you think that Trevor’s undoing was the HTML5 supercomputer?

Bill: I’m not sure that I fully understand any of this. I don’t even know what’s going on. Here’s my problem with Nikola. I don’t think it was a fraud. I know that they had a truck that rolled. It was never anything. It was just vaporware being packaged and sold to everybody. And if you didn’t see it, they had zero revenue. So, is it really a fraud?

Tobias: It’s the sort of shenanigans– [crosstalk]

Bill: My beef is Ubben. Come on, Jeff. That’s who I’m mad at. I don’t care about all the fraud stuff. I thought it was all bullshit anyway.

Tobias: Yeah.

Bill: I didn’t know it was like blatant fraud. But I don’t know, the line is thin.

Tobias: You just expect a little bit more from a $30 billion company, don’t you? If it’s a $300 million micro-cap, then all of that stuff is just hustle. And it’s great. If it’s a $30 billion company, it needs to be a little less securities fraudsy.

Extraordinary Popular Delusions and the Madness of Crowds

Bill: Dud, people need to reread, what is it? Extraordinary Delusion– or what is it, the Madness of Crowds? What the heck’s the title?

Tobias: Extraordinary Delusions and the Madness of Crowds.

Jake: Yeah. Charles Mackay.

Bill: Yeah. I don’t expect anything when I look at evaluation, other than people are going nuts.

Tobias: JT, do you want to give us some veggies or you want me to do mine?

Jake: Why don’t you do yours? I want to hear what’s going on with the–

Tobias: Along the same lines.

Jake: –price to cash flow. Yeah.


French Cashflows

Tobias: I have some presentations coming up. And I had to just go back and look at the data again for price to cash flow. This is the French data, it’s available free online. They divided up into terciles, quintiles, deciles. So, you can have a look at the low cash flow yielders versus the high cash flow yielders, which are the value stocks, the low cash flow yielders or the growth, glamour, expensive, whatever you want to call them. Data runs from July 1951, and it now goes through July 2020. So, we get to see what happened in March at the bottom and then the recovery through July. The data is always a little bit lagged, takes a while for them to collate it.

Speaking of the deciles, the value decile, which is the 10% that are the cheapest versus the 10% that are the most expensive, it got 62% behind from the drawdown, which started 2014, 2016. It really started in 2014, but there was a catch-up to 2016, where it just kissed the growth line and fell back away. So, if you’re a value guy, and you’re investing in that value, the high yield cash flow portfolio, you’re 62% behind the guys who are in the low cash flow yielding decile, which is a big margin.

Bill: Hard to keep assets doing.

Tobias: Very hard. It’s the biggest drawdown in the data by a longshot. The other ones are in the order of like 24%, like 2000 gets down to about 24% behind. And then from the bottom in 2000, through to about 2014, say, value goes up five times relative to relative to growth. So, you did much better being in value through that period of time. The value portfolio has now run from 62% behind to 56% behind. So, it’s made up a little bit of ground over those four months.

Bill: Back in the game.

Tobias: Yeah. Well, it’s not much.

Jake: So, you’re telling me there’s a chance.

Tobias: It’s not much but it’s not going in the other direction, which is a good thing.


Increasing SaaS Margins

Bill: I tell you what’s interesting, that I’ve been thinking about usually in the shower, so my good thoughts. A lot of this SaaS revenue growth, and this is a huge generalization, but a lot of the value proposition seems to me to be some sort of shared infrastructure of software or some sort of efficiency that is being created in the system or whatever. Well, there’s a lot of these slow growth companies that people think are just dogshit, you can get a lot of below the line growth if these SaaS companies are half of what people promise that they are. The efficiency that could be taken out of the SG&A line item. And, yes, even redirected to some of these SaaS companies. It does not have to be between the two companies who probably would lose in the scenario that I’m thinking about is labor, that’s a whole another issue.

But I don’t know why a lot of this technology doesn’t continue to help margins increase over the long term. And there’s a couple ways to grow. I don’t necessarily think that bottom-line growth should be valued the same way that top-line growth should. Nygein, if you’re listening, holler at me, I’d like to debate you on that topic.

I think people could be really surprised five years out where some of these companies that they sort of are like, “We’ll see what the cash flows do.” I think margins have increased and stayed higher than people thought. And I think that this is part of the reason, I don’t know that it’s got a stop. It’s not the whole reason, but it’s part of it.

Tobias: Margins are high because SaaS pulls out some of your cost in the SG&A line.

Bill: Just think about how much more efficient the cloud is, as shared services, and something that you can flick on and off. And yes, there can be margin there. But you’re also removing a lot of inefficiency from the on-prem equipment that you may need, or the guy in the software room– or I don’t know what the IT rooms look like in these big companies or whatever. But those guys can be somewhat offloaded to a company that specializes and can monitor. CrowdStrike, for instance.

My understanding of one of the benefits of their product is they can look across the cloud and implement a solution. You don’t have to hire a bunch of guys that are looking for some random thing that they don’t know what they’re looking for. There’s efficiencies that can be put into the entire system that can benefit both companies. Again, I don’t know that the labor wins in this scenario. But it’ll be interesting to see.

Tobias: As a consumer of it, does it benefit your competitors as much as it benefits you?

Bill: Yeah, I don’t know. That’s the million-dollar question.

Tobias: And if it does, then, aren’t you all just standing on tippytoes at the parade?

Bill: You may. I don’t know. This is part of what Munger says Buffett’s a genius for right, figuring out when that technological advance benefits the owner versus the user.

Jake: Right. And the prices today say it’s all the owner and not the user as much, right?

Bill: [crosstalk] –certainly apply a lot of growth for a long time. The thing that gets me uncomfortable about the implication, and it’s obvious– I don’t know what I’m talking about here, obviously. But when you’re growing from a small base, you should by definition be able to grow fast. Some of these valuations imply a lot of growth for a long time. And that becomes a different treadmill speed.

Tobias: There are a couple of good threads about that recently, and it’s similar to the stuff that JT had earlier. Just looking at the base rate for growth, for growth rates. When you get bigger, it becomes increasingly hard to virtually impossible to compound it, 35% or 25% a year, once you get even to $200 million in sales. The number of companies that can do it, you can count them on one hand. If you grew up around Chernobyl, it’s like seven.


Jake: I thought you would get more fingers in that situation.

Bill: He did. That’s what he said, seven. Sick joke. Anyway, but it did crack me up. If I were pushing back on it, I’d say you’ve got to apply at a global scale. So, I guess that in theory, some of the first movers, if they can truly get over borders, should be able to grow for a little bit longer than maybe the data would suggest backwards looking. But I don’t know.


$FB, TikTok Antitrust

Tobias: It’s going to be interesting seeing how you do cloud over borders?

Bill: Yeah, well, you start to get into like sovereign issues. And I mean, it’s not–

Tobias: GDPR, privacy.


Jake: Look at this TikTok thing and how gross that’s turned out to be. What a mess.

Bill: Well, look at Facebook, forget about TikTok, because that’s become [crosstalk] politically– or political.

Jake: And that’s just for some stupid consumer app that no one cares about in two years.

Bill: Is Facebook a US company? Or is it a global company?

Tobias: Well, it’s literally a resident in the States, so it’s US.

Bill: I don’t know, I would argue that some of their policies are actually much more globalist or free speech, we’re not going to say who’s right and who’s wrong. You start to get into elections, it’s already hairy. I don’t think it’s going to get any less so.

Tobias: Whose jurisdiction are they’re in? they’re in the US jurisdiction, so it’s a US company.

Bill: I understand what you’re saying. I don’t think investors are looking at it as a US company. I certainly don’t. I look at it as a global company.

Tobias: I understand that. Where the sales come from, where the businesses are, in terms of like where your legal risk is, that’s where you–

Jake: [crosstalk] –all the EU issues, right?

Tobias: That’s true. I’m sort of riffing on the TikTok topic. If American politicians get upset with them for an antitrust thing, which is a uniquely US term, then they’re going to be subject to antitrust in the US, right? That might be a different– the EU has a different monopoly–

Jake: We don’t have that anymore anyway.

Tobias: It’s just not enforced.

Jake: Yeah.

Bill: Well, I guess I’m not even trying to– I think we can all agree, maybe not, that Facebook is being weaponized for some propaganda from all parties, like everywhere. We can probably agree that some foreign actors were using it to spread COVID misinformation, maybe we can agree on that. If we can’t, then I got to have a different discussion with people. But if you are using a technology company that is a resident of the United States to spread misinformation about a virus in the United States, that seems like it’s a hairy issue to me, I have no idea how all this stuff settles, but…

Tobias: Some mother of two in Kansas is– [laughs]

Bill: It’s above my paygrade.

Tobias: –posting this information on Facebook to her 23 followers.

Bill: Dude, it’s easy to make fun of, but I think that it’s where information warfare takes place. I think being blind to that is kind of–

Tobias: I just don’t login. That’s how I avoid it.

Bill: Dude, I’ll tell you what, I don’t login anymore, and I don’t miss it at all. I would miss Twitter a lot. Facebook, nothing is removed from my life from leaving that. And it’s not even like I’m deleting Facebook, I could care less. I just think it sucks.

The Unabomber Manifesto

Jake: I think Ted Kaczynski might have been right. We’ve got to roll back some of this technology.

Tobias: You like the theory, not the myth of that, right?

Jake: Yeah, that’s true. Maybe a little overboard with the method.

Bill: I’ll tell you what brings me to Facebook is WhatsApp. I wonder if I’m probably even counted as a daily active user. That would be a joke if they roll my usership into their metrics.

Jake: Oh, they do.

Bill: Yeah, that would be silly.

Tobias: I’ve put a few of those things to Marcelo Lima when he was on a podcast. And he said, “No, they split all that out.” It’s not rolled up.

Bill: I think they rolled it in now.

Tobias: Do they? Okay.

Bill: I thought they collapsed it, but I haven’t looked in a little bit.

Tobias: None of us know. We’re just making shit up as we’re going along.

Bill: I think they collapsed it. I’m like 65% sure.

Tobias: The Ted Kaczynski manifesto is a good read. Yeah, I had a look at it a long time ago.

Bill: Oh my God. Now, we’re demonetized, guys.

Tobias: I downloaded it from the internet.

Bill: That’s $3! I said COVID. You said Kaczynski.

Tobias: This one’s gone.

Bill: I’m sure the word manifesto got us demonetized somehow.

Jake: Oh, yeah. Game over.

Tobias: All right. [crosstalk] JT.

Bill: It was fun having a podcast with you guys. I appreciated every moment.

Tobias: Podcast?

Jake: Well, we had a good run.


Investing Cicadas, Parasites And Prime Numbers

Jake: All right. Let’s talk about investment cicadas. I’m going to start off with a little quote that I found that I really liked it. It’s from John Wheeler, who was a theoretical physicist around the same time as Feynman. They work together on the Manhattan Project. He said, “Time is nature’s way of keeping everything from happening at once.”

Tobias: That’s a good line.

Jake: It is really nice, isn’t it? A cicada is this little insect, if you don’t know. And there’s a species of cicada that has the longest lifespan of any insect. And most of its life, it lives underground as a nymph, and it sucks the juices out of tree roots for 16 years, not doing much. And every 17 years, it will emerge as an adult cicada. These vast numbers, it’ll mate, it’ll lay eggs, and then it’ll die. And curiously, there’s another species of cicada that emerges every 13 years. So, what do the number 13 and the number 17 have in common?

Tobias: They’re both prime?

Jake: Good job, Toby.

Bill: Bang. Nicely done, dude.

Jake: We didn’t give him that answer beforehand either, by the way. [laughs] Yes, they’re both prime numbers. What’s interesting about that is that one theory is that this has to do with actually parasite avoidance. A parasite on the cicada. Why that maybe makes some sense is, if you imagined a parasite that had a life cycle that was every two to three years, there’d be a lot more potential for overlap because of the way the numbers divide together. So, nothing divides into the number 13 or the number 17. That’s what a prime number is. Only divide it by one.

If a parasite had a two-year lifecycle, it would only meet its host every 34 years on average, and it gets really hard for that parasite to evolve because it would require it to sit there for 16 years with no host. The cicadas’ really long lifecycle and being a prime number protects it from parasites potentially. And what’s interesting is that they’ve never actually found a parasite on the cicada. So, it’s almost like the dog that didn’t bark. The guess is, is that it’s because of that. All right, what does this have to do with investing tenuously?

The idea is really that, that nothing works all of the time in the investment world. If it did, there would be someone who would start copying you, or even maybe being a parasite on you. So, you need these long periods where it’s hard, and you’re underground just sucking on the tree roots, and you’re just a little nymph.

Bill: Dude, I’m not sure that you’re handling this whole thing okay.


Jake: I know, I’m not. But let’s think about like–


Jake: Let’s think about–

Bill: He’s a tree root!

Jake: Well, let’s think about Charlie Munger. He is an investment cicada, the way that he’s run Daily Journal’s portfolio. He sat there in T-bills, sucking tree roots for a long time. And then it got to be time to push the chips in and he bought Wells Fargo and Bank of America in like 2010, 2011, paid really good prices for it, and had terrific returns over that whole time period because of a couple of little moves during a very unique window. And he had the patience to do that.

Bill: I will tell you what, to the young kids who listen to this, that strategy requires massive balls. Very, very few people [crosstalk] to do that.

Tobias: You need to be a little bit older, I think, to put that one in. You need to be a little bit older. You need to have seen a few cycles.

Bill: They do it though. The way that they run concentrated portfolios, one of the things that I think is somewhat dangerous about what people hear Buffett say when he says, I’d have 50% of my portfolio in my favorite securities, that’s Buffett. Just be very honest with yourself if you’re as smart as Buffett.

Jake: Yeah, you’re not. However, I think the three of us need to start a SPAC with the express–

Bill: The VOS SPAC.

Jake: –mandate of investing the money one time per decade. And otherwise, we just sit in T-bills waiting for the opportunity. Who is in– [crosstalk]

Bill: Can I just propose an alternative solution to invest the money in after-hours activities?

Jake: Sure.

Bill: To go along with the name.

Jake: That’s what the management fee is for.

Bill: Okay, that’s fair.

Jake: But we wait, once a decade we’ll deploy in peak pessimism.

Bill: Do we charge a 6-0-20?

Tobias: 0-6-20?

Bill: No. 6-0-20.

Tobias: 6-0-20, that’s good. People will just be like, “Oh, that’s a 0-6-20.”

Bill: [laughs]

Jake: I misread the document– [crosstalk]

Bill: [crosstalk] –SPAC.

Jake: Yeah. 6-0-20.

Tobias: Can we just go back to the– The 13 year and the 17 year, if you’re the 17-year cicada, are they all coming out at the same time, or there are this one species, they could come at any given year, but it’s the same species on a 17-year cycle.

Jake: The same species is synced up together [crosstalk] 17.

Tobias: They’re all synced up together.

Jake: Yeah, they come out in this cloud of bugs, and they do their business, and then they die. And then, their kids go back underground for another 17 years basically.

Tobias: I lived in an area that had cicadas come out, cicadas as we call them. They come out– I think it was on like a seven-year cycle, which I think that’s also a prime. Yeah, so I saw a few. They come out like a cloud. They’re pretty big, like they’re an inch or two long, and then they leave their husks all over the place because they’re growing so fast and splitting and disappearing. So, as a kid, you run around and collect these one- or two-inch cicada husks. Pretty fun.

Jake: What do you do with those?

Bill: Australian stuff.

Jake: Yeah, just do Australian– [crosstalk]

Tobias: It’s a cool-looking thing. It’s a pretty big insect shell.

Bill: How far inland were you growing up?

Tobias: Probably–

Jake: All the way. [laughs]

Bill: [chuckles] Right in the middle of the desert.

Tobias: 300 or 400 miles.

Bill: It’s like value is the only book at the library. [laughs]

Tobias: There were no books in the library.


Jake: Yeah, what library? [laughs] How cool is it though that nature found prime numbers on its own?

Bill: Dude, it’s wild. The Fibonacci sequences are everywhere too.

Tobias: Well, they would have been cicadas that were 1, 2, 3 and so on. And those ones, they got full of the parasites. It’s almost like a reverse black swan. It’s the good thing that happens– I guess it’s a little bit more predictable than a black swan, but it’s– 17 years is a long time. You don’t see many of those in your life.

Jake: [crosstalk] –the 16-year parasite. That’s an overlap of every 272 years, it’s 16 times 17. So, dude, there’s no way that parasite’s going to make it that long, that many generations to get to you. I mean, it’s genius, really. I love nature. So amazing.

Tobias: Yeah, that’s astonishing. The parasite thing is interesting too, because there are– the 13F filings that hedge fund managers or big institutional investors have to file, they create parasites, they create hangers-on. I’d be guessing that there aren’t many value parasites left because the performance has been so bad. We were talking about–

Jake: Bill says it’s the first inning, I don’t know.

Tobias: Well, maybe.

Bill: The melt-up.

Jake: The value parasites though, do you think that those have been sloughed off yet?

Bill: Well, I look at the WhaleWisdom 13F holdings, so you can see who are the most popular ones in there. Baupost continues one of the most popular in there, which I found– I was a little bit surprised by that because it’s not– that’s not a particularly popular name.

Jake: There’s some weird often too. Yeah. That is surprising.

Tobias: And you don’t see the whole portfolio because they’ve got such a big private equity debt portfolio there as well. You just see–

Jake: Real estate.

Tobias: Still pretty big though. And it’s very, very concentrated. They have 17%, 20% swings and stuff when it comes in there. But I was surprised by that because I would have thought you got to be a little bit inside baseball, as a value guy. To be a value guy, you’re a little bit inside baseball, to be a Baupost Seth Klarman value guy, you’re a long way inside baseball, I would have thought. Do you think the average Robinhood trader knows who Baupost is?

Bill: No.

Tobias: Do you think they’re going through those 13F filings? I’m going to load up on eBay, whatever their biggest holding is?

Jake: No.

Bill: I don’t think so.

Jake: It’s a chart of a price. And if that looks like it’s just going to keep going up in a straight line, you buy it.

Tobias: Yeah. That actually makes more sense to me than value investing.

Jake: Full analysis right there. Full analysis done.

Bill: I need to be careful with what I say about this company.

Tobias: Which one?

Bill: Robinhood.

Tobias: Oh, yeah.

Jake: Yeah.

Tobias: All right, folks, throw any questions. Let us know what–

Jake: Where we’re wrong.


Tobias: Yeah.


Bill: The other thing about being a cicada, man. That Munger strategy, one, you got to swing when you swing. And two, you got to be comfortable with cash drag. And emotionally those two things are not the easiest thing to handle.

Tobias: You couldn’t do it in an open-ended fund. You just couldn’t.

Bill: Yeah, I’m just saying even if you’re just like somebody that’s listening to this and you’re interested in investing and you think like, “Oh, I think I might be able to pull that off.” I’m telling you as somebody that ran with cash drag for a while, it’s not the easiest thing to deal with. Now, that could be a market cycle talking and I get that but it’s tough.

Jake: It’s a permanent capital appropriate move. Doing that with other people’s money in a normal world is, I would say very, very difficult to execute.

Bill: That was one of my beefs with that manager that I left. I gave them money to allocate an equity portfolio and then we’re 30% in cash and then our positions would go down a little bit and I’d be like, “Yo, if you’re wrong, sell this thing, but if you’re right, I got 30% in cash sitting there that you should come over the top with.” And they just wouldn’t do it, for portfolio construction reasons, like, dude, fuck that.

Best Investing Books

Tobias: First question, best investing books you’ve read?

Bill: Oh, Deep Value. I’m not even bullshitting. I’m not. I love Deep Value. Then, stuff by the Marathon guys, Capital Returns and Capital Account, Returns is much more easy to get. I love those guys. [crosstalk]

Jake: I always felt Nick Gogerty’s Nature of Value was underappreciated, just a lot of really smart things in there that you don’t see other places. A lot of the stuff is regurgitated everywhere else but this one was I thought fairly unique.

Tobias: I haven’t read it.

Bill: [unintelligible [00:40:10] Investing is a good book.

Tobias: White Sharks of Wall Street, Diana B. Henriques, just about the 1950s Corporate Raiders. It’s a great book because it talks about how some guys got their start buying up bankrupt bonds on cents on the dollar, perhaps launching SPACs.

Bill: I like Lowenstein’s book. My boyfriend at Cisco says Snowball is much better. I haven’t read Snowball. I guess I need to.

Tobias: It’s more comprehensive. You haven’t read Snowball?

Bill: I’m not kidding, fellas.

Jake: You haven’t read Snowball? 

Bill: For real, spend the money on Deep Value. That is a legit book.

Jake: What’s the name of your–

Bill: The youngest Warren Graham. That’s my homie.

Jake: And you haven’t read Snowball? [laughs]

Bill: No, man, I know enough. I’m going to read it. I’ve got other stuff I got to read. [crosstalk] The other thing I think you have to have, if you are into this way of thought, I think you got to read Cialdini, Influence: The Psychology of Persuasion. Qurate, for me is entirely a psychology bet. I couldn’t put a lot of the stuff that I have together without studying a lot of psychology.

Jake: I’d give a shoutout to James Montier’s, The Little Book of Behavioral Investing. That gives you a really nice overview of all the biases and how we fall prey to them. There’s a lot of information packed into a really nice dense little package.

Bill: I’m smirking right now because I feel like Hansel, I’m about to say this, but Big Money Thinks Small. I haven’t read it all, but I think it’s probably pretty good. The chapters that I have read., I’m like, “Oh, that’s a pretty good book.” Anyway, that’s enough.

GMO 7-Year Asset Class Forecast

Tobias: A little segue with Montier here. GMO’s seven-year forecast shows everything is losing money over the next period, except for emerging market value.

Bill: Please. [crosstalk] Emerging market value in potassium or some BS, get out of here, and salmon farming.


Tobias: Is that what he’s saying? [laughs]

Bill: Come on. It’s like what he loves. He loves fish. He does. He legitimately loves fish because he thinks it’s a sustainable protein source. I watched him give a whole talk on it. And he loves fertilizer. He likes potassium or phosphate and potash or whatever, I get it.

Jake: Timber, that one disappeared quietly, didn’t it from the– [crosstalk]

Bill: Yeah. I don’t know, I’m about to get my face ripped off going at those guys. But they have been saying this for a long, long, long, long, long, long time.

CalPERS Can’t Stop Buying

Jake: That has to be troubling though. If you’re CalPERS and you look at that, and you go, “I got to come up with 8% returns per year, these are the ingredients I have to mix together to get that.”

Tobias: You just keep on writing into your book that you’re going to do that, you keep on writing it into your report.

Jake: You’ve got to load up on private equity and VC so that they can tell you the numbers that you want to hear, right?

Bill: Yeah, until you’ve got to sell.

Jake: “We’re reporting it’ll be an 8% return.”

Bill: Look, it is very possible that we enter a world where all the incentive structure is to take a 1% free cash flow yield to a 0.5% free cash flow yield and that to 0.2% free cash flow yield. The prices can go up like crazy when your denominator is that low.

Jake: Who’s buying it?

Bill: I don’t– yeah. People that have to, man. CalPERS. They can’t just stop buying. Like they can’t. What are you going to do? You’re going to raise taxes enough to fund yourself on a current basis? They can’t. It’s a game that we cannot get off of. So, the question is, when does it collapse and are you smart enough to make that bet? If you are, you’d be really rich.

Tobias: Whoever gets that right, it’s going to get that bet right once in a row.

Bill: That’s exactly right. And they’ll be the next Buffett. People will write books about them.


Jake: [crosstalk] –waiting to happen.

Weaponized Gamma

Tobias: Good question from Corey, might be a little bit too much for me, but you two guys can have a shot at it. Has all the “weaponized gamma” options tail wagging underlying dog in tech names in July and August change the way you think about markets and investing?

Bill: Repeat that real quick. I was talking about how smart he was, and I wasn’t listening to the first part.

Tobias: Has the weaponized gamma, so option tail wagging the underlying dog in tech names in July and August, whether that’s true. So, has it changed the way I think about markets? I don’t know whether so– I’m a little confused though because I don’t know where it’s being driven from. I saw Robinhood, there’s a lot of punting going on in options, and there are some younger people in my family who I’ve spoken to, they’re all doing the same thing. I was telling them some of the stuff that I like, just got laughed at. And then they wanted to know which options. So, clearly there’s a lot of punting going on in the options market, but I don’t know what kind of impact that’s having. I’ve seen several different–

Jake: That’s Australian for gambling, by the way.

Tobias: Yeah, gambling. That’s it, punting.

Bill: I talked to somebody who I have a lot of respect for. And he said that right now reminded him a lot of ’87, not in the way that he thought that we would necessarily crash. This was following March, but it was right around when I was dealing with the Robinhood stuff. He had a lot of concern about the amount of options trading going on. And he’s not somebody that I just not pay attention to. This guy knows markets.

Tobias: The problem that I have with analogs of markets, for ones that people have lived through, is that there are so few of these, the N is so small. To say that this is like ’87, I mean 87 was in a reasonably undervalued market. Come up at ’82 low through ’87, maybe it reached CAPE on an average basis sold off, finished the high. It was a technical market–

Jake: Structural hiccup.

Tobias: Yeah, exactly, that recovered. Whereas I think this is a different type of market. One thing, interest rates are in a totally different place, potentially going in a different direction although it seems to be still going in the same direction. Valuations are totally different.

Jake: Does anybody have a good Mr. Market analogy for this style of punting? I don’t know if it’s– [chuckles]

Bill: But Corey, the direct answer to your question is, what changed or what I was able to sort of observe, and I don’t know if it’s the gamma thing that you referenced or not, but how quickly people’s time horizons compressed to tomorrow in March. And now, how quickly everybody’s talking about like, “Oh, well,–” [crosstalk] this thing’s cheap. Like, of course, it’s expensive on today’s revenue, but five years out, it’s going to grow by this much. And then it’s cheap.

So, whatever. Last I checked, we were six months away from you crying. It’s this old thing and it’s not so old because it’s just been shown. When everything is panicking, everybody’s time horizon shrinks to tomorrow. And, boy, when everything’s up into the right, I just think 10 years out, you’d be good. Yeah, because nothing bad can happen over the next 10 years.

Tobias: There is a great Twitter account. I forget who that came from. But at the top, everybody’s time– [crosstalk] Was it SkeleCap? At the top everybody’s time horizon is infinite. And at the bottom, everybody’s time horizon is zero.

Bill: Yeah, that was him. He said that to me and that’s–[crosstalk]

Tobias: It’s true. It’s absolutely true. We’re closer to infinity here than zero.

Bill: It was his PM that said it to be fair, but that was a good saying. Thank you to that PM.

Jake: There’s a good like gamma Hulk joke to be made about Mr. Market. He’s all hulked up on gamma rays or something.

Tobias: [laughs]

Jake: It’s the best I can do. Sorry, Corey. Tip your waitress.

Bill: Corey, if you want to hop back in. I know the gamma is the amount of delta in your next move. Is it just that the options, the embedded leverage in the market is so much higher that you have a lot more gamma risk now? Is that what’s going on? Because I don’t fully understand once you get into the all the Greeks. I know delta, I sort of know gamma, I get beta, I don’t get the rest.

Tobias: Isn’t it just the delta hedging to keep it– The fact that they can put a big position on way out of the money that you have to now delta hedge has–

Bill: When they’re delta hedged, they leave themselves gamma open or something like that, right? Because as the next move goes, then they have to hedge more delta, but they’re exposed to the gamma.

Tobias: Ben [unintelligible [00:48:53] described a little bit in a tweet series that I’m going to slightly mangle here, but basically a $1500 premium option bet which lots of people can punt at that level, can create $230,000 in buying. As the delta hedge is put on, the option moves up, stock moves up, need to hedge again, and eventually we end up with $230,000 exposure, which is massive leverage to that.

Bill: I don’t know. I can’t see what would possibly go wrong with a company who has figured out how to gamify investing and drive people towards options and margin. I can’t see why that would create distortions, especially when we can all agree that tech is not effective at getting us addicted. I don’t see how any of this is worth discussing.

Jake: Well, doesn’t the short-term nature of these being out of the money call options mean that this can go on and the price can keep up with it because they’re forced to hedge. But eventually, you’ll reach a point where it’s all those options are zero, and now the game is just over in one round. Is that right? Is that the right way to think about it?

Bill: I don’t know that the options expiring worthless would matter because somebody makes money in that scenario.

Tobias: Whoever sells options, but not necessarily because if you’ve had to hedge into it, if you had to hedge your option sales, you may still be down on a position.

Bill: It seems to me you’ve got a tightly pulled rubber band. Everybody better be doing what they need to do quickly, in order to avoid it.

Tobias: Is this unique? Is this new?

Bill: Probably not.

Tobias: All of these theories floating around for passive flows and options and all this stuff. There’s always an analog for this stuff. It’s all happened before. It’s not the first time we’ve seen this. When the market gets like bubbly, bullish booming like this, it runs up in parabolic way. And then it turns around, and it goes the other direction. Happened so many times in the past, I don’t know how we can look at this and say, “Oh, this is all brand new.”

Bill: The ETF flow thing scares me.

Tobias: Why?

Bill: It just does because I don’t know enough to disprove it with data.

Tobias: It’s [crosstalk] is underlying.

Bill: I just need to [crosstalk] do the work. Yeah.

Tobias: If the underlying is illiquid, then it hasn’t changed anything. Maybe there’s more money in it. But I think that all the boogeymen, we’ve seen it all before. This thing will turn when it turns, it’ll break down when it breaks down. Don’t worry about it until that happens.

Bill: Eight more innings, folks. Hop on.

2040 Top

Tobias: It may very well be, I don’t know. It might be a 2040 top.

Jake: Oh, my God.

Tobias: It could happen tomorrow. It might have happened at September 2nd. We don’t know. You don’t know until the year after that.

Bill: You think it already happened? In the bottom of the first?

Tobias: It’s possible, in September.

Bill: Come on. That’s a sure game.

Tobias: It’s possible, September 2nd was the top, possible.

Jake: Wow.

Tobias: I don’t know. It’s possible also, that was not and that was just the end of the first inning. We’ve got eight innings to come.

Bill: That right.

Jake: No one knows.

Bill: Held up. [crosstalk] I don’t know, that’s what I’ve been saying for a year.

Jake: It’s not any dumber than everything else.

Tobias: I talked to Chris Cole in 2012. We were talking about– Greenspan just tapped the accelerator in the late 1990s, and that created the tech bubble. He just reduced the interest rate. For a long time, he’d been trying to keep gold price pretty stable. It looked like there was a little recession. So, he dropped interest rates and you get the dotcom bubble. So then, for the last decade, we’ve had the accelerator firmly to the floor, rocket fuel in the tank. What does that do? It could easily be the mother of all stock market bubbles.

Jake: Hey, we’ve gotten like, what is it, 25 cents worth of GDP for every dollar spent there? [laughs] That’s a little bit flaccid stimulus.

Tobias: The money multiplier, it’s fallen off a cliff. It does not look healthy. But who knows?

Jake: Ride or die Keynesian.

Tobias: Well, MMT is the new– You don’t need to pay taxes or anything anymore. You just print it. It seems to work. [laughs]

Bill: Yeah, well, it creates massive distortions in society, in my opinion.

Tobias: It doesn’t work in theory, but it seems to be working in practice.

Bill: I don’t know if you can look at politics around the globe and think it’s working. But I agree in financial markets, it does. I was playing around with a beloved tech company today and building a model to figure out the valuation, and I determined that I cannot get my brain there. And then, I pulled up, I was like, “I wonder what the [unintelligible [00:53:44] look like, and it’s just people selling like gushers. Some of the people that are selling today we’re buying in March. It’s like an actual fund that bought and is now selling. So, it’s not so easy to just be like, “Oh, that’s just like normal options exercising.” I find it interesting when Twitter is buying from insiders. It’s not necessarily a sign but it’s interesting.

Tobias: The problem is that insiders sell all the time.

Bill: And there’s a lot of reasons people sell. That’s exactly right.

Tobias: So, it’s hard to tell. Whereas they only buy for one reason.

Bill: Yeah, that’s fair.

Jake: That’s something I’ve been asking myself a little bit lately is, Twitter Mr. Market now?

Bill: Yeah, a little bit.

Jake: Is it or is it enough of a little FinTwit isolated thing where it’s– you know everything earlier than like 95% of the rest of the market participants. I don’t know.

Tobias: Is WallStreetBets Mr. Market? [unintelligible [00:54:47] Twitter handle tweets out WallStreetBets every afternoon, it’s hilarious. I do kind of like those dudes.

Jake: [crosstalk] TikTok investors is a good follow too.

Tobias: TikTok investors, yeah, classic.

Jake: That’s pretty good.

Bill: Generally, I think Twitter made me much smarter. There are times it makes me dumber but thank you all to anyone that’s listening– [crosstalk]

Jake: Is there an echo chamber and other people’s voices that you’re putting into your head too much.

Bill: Bro, I tweet out about Wells Fargo and fucking Qurate. You think that I’m part of the echo chamber? I get shat on like crazy when I come out with my ideas. Why would you own a bank, you dumbass? My inbox is filled with people telling me why I’m wrong. I’m like, “I get it. You guys don’t like this stuff.” Selling stuff to 50-year-old women and a bank. Yes. Let’s talk about tech now.

Jake: Why are you inviting that abuse?

Bill: I don’t know because I think it’s good for me. [crosstalk]

Tobias: It’s not, it’s definitely not. As long as you can be, as long as you can separate it from yourself, and you can get the ideas and not internalize them, then–

Bill: I did get a little triggered last week or something. I did. I sort of responded to somebody a little bit more angrily than they deserved and I had to subsequently apologize for my behavior, but I was like, “Man, I’ve been getting trolled for a week. I’m sorry.”

Tobias: Yeah, that must be tough.

Bill: I know you know.


Bill: The difference is, they do it to you publicly.

Tobias: Yeah, I literally don’t care anymore so. Go hard– the mute button is my friend quietly pedal over, press mute, bye.

Bill: That’s right. Maybe one day if I can write a book half as good as yours, I’ll get the haters for real. In due time.

Tobias: The time to do it is right at the end of your strategy working. When the book comes out, it’s just misery for the six years that comes after.


Jake: Yeah, you top-tick that one.

Tobias: I wish I’d known.

Bill: When did Deep Value come out?

Tobias: 2014.

Bill: What did you do? You did Quantitative Value

Tobias: 2012.

Bill: Okay, and then when did Concentrated Investing come out?

Tobias: 2016.

Bill: Huh. I didn’t realize that that was after Deep Value. All right. Well, there you go, folks. Now, you know Toby’s timeline. At least most of it.

Tobias: That was a good project. It was a fun project, Concentrated Investing.

Bill: How many guys did you study that blew up?

Tobias: Well, none. It’s a little bit–

Jake: [crosstalk] –survivorship bias, sir.

Tobias: It was interesting because it’s Glenn Greenwald from Brave Warrior, formerly Chieftain. And part of the reason for the separation, reading between the lines of that interview was that the other folks who stayed with Chieftain, preferred a deeper value style. And Glenn Greenwald more of prefers better quality fast-growing stocks and has probably been the better bet since that came out, since 2016. Then, there’s guys in there like Christian Siem who is the Nordic Warren Buffett. I hesitate to say it but he’s an oil and gas guy. He’s got great stocks, SEMUF pink sheets traded in the States, trades by appointment only. And I think he buys most of them, but you can tag along there.

Bill: That’s gangster, you trade by appointment only. I don’t even know what that means.

Tobias: It just means he never trades. He just doesn’t trade.

Bill: Okay. All right. Well, I like that.

Tobias: I have owned it in the past.

Bill: Still, he’s got to sell it.

Tobias: Yeah. I’ve owned it but I just– current projects excluded–


Bill: Anyone on Twitter, [crosstalk] –for sale. [laughter]

Tobias: There’s definitely some selection bias in it. I was pushing hard for the investor– I just can’t think what his name is, but he’s got a 25-year track record. Atlantic Capital, Alexander Roepers. I was trying to get Roepers in because he’s got a very long track record of outperforming. And he hasn’t done so well since that book came out. So, the coauthors were right on that one.

Jake: Do we have any more questions we need to address?

Tobias: I think we’re coming up on time.

Bill: I’ll tell you what, some of you all ask how concentrated we are. My IRA, which I do not treat like my PA that I actually care about, is very concentrated and it’s running right now and that is not easy to handle.

Tobias: You get the bends, mate. If you’re a value guy and nothing’s worked for a long time, when stuff starts working, you get the bends. You know what the bends is? Deep-sea divers who get the– [crosstalk]

Bill: Yeah, when you come up too quick.

Tobias: Come up too fast. That’s it.

Bill: [crosstalk] –in the fetal position.

Tobias: [laughs]

Bill: Yeah, put me back down, let me lose money.

Tobias: You get this is the problem for value investors, and I’ve had a lot of time to think about it. It hasn’t ever happened to me but when the portfolio works or some stock works, you want to sell out of it as fast as you can because you’ve got to crystallize those winners. You’ve got to pull your flowers, water your weeds. I don’t do that, it’s the other way around.

Bill: That’s sort of what’s going on.

Tobias: All right, folks.

Bill: Have a good one, folks.

Tobias: That’s time. Thank you.

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