In this episode of the VALUE: After Hours Podcast, Jake Taylor, Bill Brewster, and Tobias Carlisle chat about:
- Munger And Jack Ma
- GMO’s Value Reversals
- Mise en place Investing
- How Much To Pay For The Best Companies
- 52-Week High And Low Starting Points
- S&P Global and IHS Markit Merger
- What Can We Learn From Robinhood’s S1
- Munger Investing In China
- Home Service Businesses
- Fear & Greed Index
- Invest In Quality Businesses
- The God Portfolio
- WHY ALL CAPS ARE BAD
- Investing In Chinese Companies
- It’ll Take Black To Get To Green
- Fibonacci Sequences
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:
Bill: That apparently, we are suffering.
Tobias: Well, it’s 10:30 AM on the West Coast, 1:30 PM on the East Coast, no idea what it is UTC. Sorry, amigos.
Tobias: We are back.
Bill: Back indeed. The trio.
Jake: I missed you guys over the last two weeks.
Tobias: Yeah. Likewise, missed everybody.
Bill: I also missed you guys. I’m happy to be back and in the swing of things. It was a long month of raging.
Bill: Yeah, I did. But I don’t know. Somebody, I think it was Churchill. I’m not quite certain who it was, but he said that the reason that they were able to work very hard is that they worked 11 months a year, and I like that. I like extended breaks. I think it was a good [crosstalk] right head speed space. I don’t know. What the fuck do I know? I’m just throwing out random stuff-[laughter]
Bill: -that I agree with and attributing it to the wrong people.
Tobias: Put that on a picture of a sunrise and put it on the internet. [crosstalk]
Bill: That’s right, man. Yeah, that’s right. Philosophizer.
Jake: Yeah, that should be on a coffee cup already, even if it’s wrong. [laughs]
Bill: I do. Well, I mean–
Jake: Especially if it’s wrong.
Bill: Yeah, that’s right. Yeah, and then you just attributed to somebody famous, and then we can sell it. I think that’s how it works.
Tobias: He’s got that quote about being able to find any quote on the internet. That was one of the Churchill’s.
Jake: [chuckles] In the internet. Wow.
Bill: [Laughs] Yeah, that’s a good one. I like the– [crosstalk]
Jake: Way ahead of his time.
Bill: He was a visionary, sir. Much like many growth investors.
Jake: Ooh, yeah.
Jake: What do we have on topics, today?
Bill: I’m going to defend Charlie and the CCP. We’ll see how that goes.
Bill: We’ve officially already been demonetized.
Jake: Automatic demonetization? Check.
Tobias: This might just get duck. This whole podcast might get a duck.
Bill: [laughs] Yeah, [crosstalk] shut us down. Yeah, I like it.
Tobias: Value guys have to crawl through the desert for the requisite biblical period of time, and then a little bit longer. Had this brief two-day rally-
Tobias: -and then back into the desert.
Bill: Just like their sex life. Oh.
Tobias: I’ve got-
Jake: How dare you?
Tobias: -a cool drink of water just to confirm the priors to keep everybody going, a little mirage so you can keep on crawling through the desert. Maybe there’s some lagoon up ahead. I don’t know. What do you got, JT?
Jake: I’m going to ease us back into the veggies. Not too hard– hardcore science with– Actually a little segment on cooking, French cooking to be more specific. We’ll see if I can torture some analogies out of that.
Bill: You know what I like? Shoutout, we’ve got a listener in the house that goes by the handle, the Buff Dogg, much appreciated. I wish that you were actually the real guy.
Tobias: In Chai Town.
Jake: Maybe, it is.
Bill: That’s true. Yeah, maybe he took NetJets over there.
Munger And Jack Ma
Bill: Can I start by defending Charlie?
Tobias: Yeah, let’s go, then.
Bill: I think that’s the best way to [crosstalk]
Jake: Just in case we get shut down. Yeah. It’ll free up the rest of my hour. [laughs]
Bill: [laughs] There you go. I think fundamentally, Charlie has said stuff about China that makes me uncomfortable as someone that prefers liberal democracies. I don’t mean liberal, our political leaning. But–
Jake: Capital L.
Bill: That’s right. However, when he was asked about Jack Ma and when he said that China did the right thing, I think what Charlie man is, within the confines of the system that they play in, the way that they handled it made sense, because their rule structure is not one that you can expect to speak out about and be okay. But I don’t think he’s advocating that– That’s not his preferred rule structure. I just think the way his mind works is, those are the rules of the game. So, of course, you implement– that’s how you play the game once those are the rules that are established.
Tobias: What did he say?
Bill: He basically said, locking Jack Ma up was fine. Then, he said–
Tobias: Isn’t he locked up?
Bill: Well, he disappeared for a while. I don’t know what the hell happened. You tell me.
Tobias: Getting treatment for an addiction. [laughs]
Bill: Yeah, he had a secret coke addiction and he went to rehab for a month. I don’t think that’s the case.
Jake: He’s getting reprogramming like Clockwork Orange style.
Bill: No, he did go on to say, “I wish that our system could do something like that in certain financial matters.” [crosstalk] Yeah, probably Charlie wouldn’t be too down with that. I’m just saying, I do think he’s obviously got a soft spot for authoritarianism when the end–
Tobias: It is very effective.
Bill: Yeah, well.
Tobias: It gets shit done.
Bill: That’s right.
Tobias: The trains in Nazi Germany ran on time.
Bill: Yeah, well, I think what Charlie would argue is that China has lifted so many people out of poverty that in that instance, he’s comfortable with the means to get to the end. I’m not going to defend that, but that is what I interpret him to say when he speaks about China. Then, given that you can’t speak out about it, if you’re the guy that was allowed to have Alibaba thrive, you can’t get to the point where you think that you’re above the government and all of a sudden start criticizing them. That’s just not the rules of the game.
Tobias: What happened? What did it spring from? I thought that–
Bill: Yeah, Ant Financial.
Tobias: Yeah. I don’t know anything at all. This is totally peripheral, something that I read a long time ago. I thought– [crosstalk]
Bill: We’re so getting deplatformed.
Tobias: Yeah, maybe.
Tobias: I thought there was some issue that Ant Financial was spun out of Alibaba, and there was some insiders who collected a big shareholding in it on the way out. Then, when they went to listed, the regulator said too much. That’s one version. The other version is that the internal– The financials weren’t sufficiently tight. They weren’t tracking it well enough.
Bill: I think Jack Ma said, “I know how to do this better than the government,” and then, he disappeared for a while. Because he went on vacation for a minute after he spoke out. What that vacation looks like? I don’t know. That’s what Becky Quick asked. She was like, “Do you think they handled Jack Ma correctly?” Charlie basically said, “Yes.”
Tobias: There was some sort of the —
Bill: Wait, hang on, can we agree that that’s what happened? Jake, is that your understanding of what happened?
Jake: The conversation or what happened to Jack Ma?
Bill: Between Becky Quick and Charlie?
Jake: I’ve watched it a few times, and I still am not quite exactly sure what Charlie was saying that he was okay with or not okay with. But I think in general, we can probably safely zoom out a little bit and say that, well, let me back up a little bit. So, if you’ve been studying human folly your whole life, you recognize errors pretty quickly, and maybe you’re even little bias towards error recognition. I think that can set you up to be more open to a nudge-style approach to how governments and humans interact. I look at his praise of Lee Kuan Yew in Singapore, and there’s a fair amount of nudging that happens there, and how they run things. It’s probably for the better in a lot of cases, and how people behave, and saving for their retirements automatically. There’s just a lot of things that they do there that don’t fit with our western individual don’t tell me what to do ever kind of mentality. But you could see, Charlie, I think maybe recognizes where that can produce errors like it does, and that maybe he’s okay with more nudging than other people might be.
So, preface of all that is the prepackage of I think that he’s okay with the Chinese government being a little more heavy handed than other governments, because of the system that they’re running and that trying to maybe do what they think is best for the majority of the people. I don’t know. These are really quite complicated, and difficult questions to untangle.
Bill: I’m a Becky Quick fan, but I think–
Jake: I think she’s terrific. She handles them better than anybody.
Bill: Yeah. But he deserved a follow-up there. A really precise one, because I think she walked him into a trap, and then didn’t open the door for him to speak his way out of it.
Jake: You say that as someone who got smoked by Charlie at the [laughs] meeting that didn’t let him off the hook easily. [laughs]
Bill: Well, I had already sat down with you, sir and-
Jake: I know.
Bill: -sitting in board shorts was not exactly the best way to push back on Charlie. But yes, I know how a question to Charlie can turn around on you, and I wish that I had followed up,
Tobias: I got a comment here which is interesting. Michael Burry is open on Twitter, and he gets a visit from the SEC, and then he disappears from Twitter for a little while. What’s the difference?
Bill: That’s Twitter?
Tobias: We don’t know. We don’t really know what happened to Jack Ma. He might have just been at home not tweeting for a little bit.
Bill: Yeah, that’s possible.
Tobias: Not commenting.
Bill: Maybe, he just went to the Turks and Caicos. I’m sure it was a nice vacation.
Jake: He could afford it.
Bill: Yeah. There may not be a difference. I don’t know. But I think that one of the things that could have been structured a little bit better about that discussion is maybe they could have framed in what happened to Jack Ma. How did China deal with Jack Ma? And had a follow-up to the question. Because I do think Charlie was led to a place, gave an answer, and probably deserved the follow-up or two.
Munger Investing In China
Tobias: But more broadly, just investing in China, Munger, he found Li Lu however, long ago, 10 or 20 years ago, gave him a billion dollars, Li Lu as a result is now a billionaire. But he’s not just a billionaire and that’s it, that’s not the end of the story. He’s turned the billion that Munger gave him into whatever it is, six or seven or more. So, Munger has got some interest in seeing- probably he either thinks it’s the next little period of time, decade, or so is China’s. So, he’s set up the Munger family for a period of time by getting a great deal of exposure to China. What do you think about that as a strategy?
Bill: Is it really a great deal of exposure? It’s like one position in Daily Journal, and the majority of his net worth in Costco and Berkshire. I think it’s important to contextualize that. To me, I always think about what’s the real bet here, how does it really impact them, and what does it really matter? If Daily Journal is eviscerated from the earth, I’m sure Munger would rather that not happen, but that’s not the entity that’s going to– the Mungers are not dependent upon the Daily Journal. I think that if you’re Charlie, one, I think Alibaba could make some sense to you. Two, Li Lu’s his advisor. That’s way smarter than me on this particular topic, and almost all other than maybe life happiness. But I don’t know. Li Lu, he’s probably a happy guy. What’s up, Li? Thanks for listening.
Bill: Then, I just think, if you’re Charlie, the teacher, it’s an important signal to send that your last bet is on something like Ali Baba.
Jake: Last bet? Come on. He’s got lots of time.
Jake: Don’t say that kind of– [crosstalk]
Bill: He’s a man that thinks in statistics. It’s not like that far out to say he doesn’t have more than four or five more years left.
Tobias: That’s been the case for a little while now. That hasn’t stopped him from investing are– [crosstalk]
Bill: Yeah, I hope he continues to be the outlier.
Tobias: He’s got to going to day trade because he’s got to close out those positions.
Bill: Yeah, well– [crosstalk]
Tobias: We’re going to close that before the close every day. [crosstalk]
Bill: I think it’s a reasonable conclusion that maybe this is one of his last larger bets. Maybe not. I hope not.
Investing In Chinese Companies
Tobias: What about for the rest of us, China as an investment destination?
Bill: I don’t mind it as part of the portfolio. I’m not going to go through 30% of my net worth in it. I don’t know, 3%, 5%, it seems a reasonable way to get some exposure to, but I don’t have a strong opinion either way. I don’t think China can just fuck over outside investors and end up in the place that China wants to be over the long term. It seems like you’re cutting off your nose to spite your face.
Tobias: There’s been some incredible returns out of China. These companies have popped up in a very short period of time, that are stupendously huge.
Bill: Yeah. Dude, I don’t know how to underwrite it, I don’t know that I trust the accounting, I don’t know any of that shit. But if 3% goes to 0, that’s not going to kill me. If you actually can own a compounder that can compound for years, and years, and years, I don’t think it’s a patently stupid move. It just depends on what you’re comfortable with.
Tobias: We’ve all got home country bias where we just allocate way too much to our own country, and we’re in a position where– I like that slide that Buffett put up at the Berkshire meeting where he said, “30 years ago, Japan was dominant,” and there are a handful of American companies in there. Now, America’s dominant. There’s a handful of Chinese companies in there. I don’t know whether this was his implication or whether this is a possibility, but there’s got to be a reasonably good chance the next 30 years, it’s full of Chinese companies, and there are a handful of American companies in there.
Bill: Yeah. I think India, too. I don’t know anything about India. There’s people who have told me, there’s a lot of corruption over there. Okay, well, I don’t know how to invest there, but if people want to invest there, I’m sure, A, there are people that know how to. Shoutout to homie, Ramik. Then, two, I don’t know, if you want to put something in it, I get it.
Jake: I will say that I’ve heard, and I don’t know exactly how to verify this, but in China specifically, that 70% to 80% of the equity holdings are held by mom-and-pop retail type of investors. Perhaps in the game that we’re playing in the US where there’s an incredible amount of skill that has surfaced and been attracted to this, where you get this paradox of skill where returns start to get closer together, because everyone is so good. If you could find a– To use the fishing analogy that Munger’s used in the past on this exact topic, go where the fish are, but also where the fishermen might not be particularly adept, your other competitive fishermen. Yeah, I think there’s some interesting arguments to be made about China as a place to explore.
Bill: I think Charlie should but weed stocks.[chuckles]
Jake: Also, the person that said 3% to 5% stupid, that’s fine. You can have different risk parameters than I do. You’re stupid. Next.
What Can We Learn From Robinhood’s S1
Tobias: There’s been an increase in the retail participation in the states over the last two years or so, probably by virtue of Robinhood. So, they got their S1 out. I know Bill’s taking a look at the S1. You got any– I think I said I wouldn’t talk about this. Sorry, mate-
Bill: No. it’s okay.
Tobias: It just came to mind.
Bill: Yeah, I’m sure it just popped into your head.
Jake: Ooh, bear trap.
Bill: Yeah. Let’s see. They settled with my family, which is preface one, and within the context of a horrible, horrible situation, I think that they made it less horrible by doing so. So, I’m going to be somewhat reserved in what I say. On the other hand, I think if you look through that company’s- how many people participate in options in crypto on that platform versus the other platforms, and the growth in those people’s participation over the last year, one, I remain unconvinced that anything that I’ve said is incorrect about the platform, especially when they cite monetizable daily active users like “Get the fuck out of here on a financial product.”
Secondly, I think there’s a lot of risk on that book. I don’t know how you’d underwrite it. That’s a fun thing that I was thinking about, is how do you figure out what is actually sustainable and what they’re probably going to grow off of when you have that a ramp over the last year? I’m trying to pull up the numbers real quick.
Tobias: One of the things that really stood out to me is the average revenue per user, the ARPU, has been growing pretty significantly in the five years or so that they posted. It’s more than doubled. I don’t know if that’s a cyclical thing, that’s what happens as markets go up people trade more, and they’re much more speculative than they would be otherwise, or if that’s they’re just getting better at extracting money out of the clients.
Bill: I think it’s both. But isn’t a little offensive to see a financial firm talk about monetizable daily active users and ARPU? I know but this isn’t a fucking advertising firm. I just wish that people would be more honest about what it is. That’s [crosstalk]
Tobias: But I think they are now being very honest, aren’t they?
Tobias: They are being very explicit about what they’re doing.
Bill: Yeah. That’s fair.
Jake: They are who we thought they were.
Bill: That’s right. Yeah, no, that’s fair.
Tobias: Yes, somebody pointed out a surprising chunk of where it was trading Doge money.
Bill: Yeah, 5%.
Tobias: What have we come to?
Jake: Markets are capable of very, very silly behavior.
Bill: It is an interesting time and one that is hard to argue is still inning three.
Jake: What inning are we in? [laughs] Let’s hear it.
Bill: Dude, I don’t know. But on the other hand–
Tobias: Doge money didn’t jump the shark, Doge money not enough for you?
Bill: Well, [crosstalk] that’s plenty. I guess what I’d just say is I’m not sure– we’re very financial markets focused in the profession. The underlying economy– I’ve done a fair amount of traveling in the past month, and New York was popping, Chicago was popping, and Middle Tennessee was popping. So, fundamentally, things feel much better to me than I thought that they would. But [crosstalk]
Jake: Couple of Manhattans will do that for you. [laughs]
Bill: No, man. Tennessee, I didn’t drink at all, and– well, that’s a lie, one night I did, but they were packed in like sardines. Now, we can have a discussion about vaccination rates and what that leads to, but it was very, very, very busy.
Tobias: We just got demonetized again.
Bill: Yeah, [crosstalk].
Jake: Yeah, it looks the trifecta of demonetization. [laughs]
Bill: I’m looking at ARPU. Yeah, ARPU from 2017 to 2020 has grown from $37 bucks a user to $109 user. That’s a lot of growth.
Jake: That’s a lot of call options.
Bill: But then, dude, this is what’s tough, right?
Tobias: For a free platform? Costed nothing to trade?
Jake: It’s free.
Bill: So fucking offensive.[laughter]
Bill: Anyway, 2018, $66-$50 per user, 2019, $65- $70 per user, and then 2020’s $108. Trailing three months is 137 bucks.
Tobias: Yeah, that was the number that I saw.
Bill: I don’t know how you underwrite that. From a financial perspective, that’s the fun part of this all.
Tobias: Do they give you enough to unpack how they’re driving it? Is that people trading more and more, or then getting more money from what they’re doing? It must be people trading more, right?
Tobias: The true trading is blowing up on that platform.
Bill: To be fair, their assets under custody have exploded a lot, and I haven’t done assets per user, because honestly, I can only look at this for so long before I get too angry.
Jake: [laughs] Yeah, there we are.
Bill: [laughs] Yeah, well, it’s true. I don’t know. It’s an interesting S1 to read.
Tobias: Let me do a little segue into my bit, and then we can chew on Jake’s veggies.
WHY ALL CAPS ARE BAD
Bill: Real quick. Did you notice that the risk section in that is yellow?
Tobias: I didn’t know. What does that indicate?
Bill: I think it says here’s risk. Just maybe tap the brakes or just pump on the gas, either way get through before we say stop.
Jake: The yellow probably strains your eyes to read it. So, you move through faster, and then don’t even bother reading it.
Tobias: That’s the trick with the all caps–
Jake: Next level.
Tobias: It’s all caps, so it’s looks like you’ve got to really pay attention to this part, and then you try and read it, and you can’t read it.
Jake: Is that why lawyers do that? They make the terms of service in all caps. So, you’re like, “Fuck it. I’m just going to the bottom.”
Bill: Most people don’t read all caps–
Tobias: Because it’s hard to read.
Bill: Yeah, and it’s easy to tell people like, “No, look at how it’s capitalized.”
Tobias: You made it stand out.
Bill: Yeah, that’s right.
Tobias: Bolded it and put it in Italics as well.[laughter]
Bill: Toby be knowing the game.
Jake: Oh, my God. We should treat each other better than this.
Tobias: Yeah, but it’s hard though, as a lawyer. You’re just like, “How do I get people to pay attention this part? I’ll put it in all caps.” Then, the sales guy looks at it and he’s like, “That’s really hard to read. Keep it an all caps.”
Jake: Yeah. Let’s turn these brains right off.
GMO’s Value Reversals
Tobias: Speaking of turning your brain off, let’s just do my little contribution. GMO, noted value shop, has been crying about how expensive the market is almost as long as probably longer than I have at the same period of time. There are no winners here. They point out that we’ve had this value guys really long period of time where nothing really worked, had this brief rally I don’t know when that started, the reopening trade like September last year, ran through to about March. Six months is a long time in this game. That’s fruit fly value. But then more recently since March, for the last quarter, we’ve backed off quite a lot and they say 742 basis points, which is 7.5%. That’s quite a lot of– a long way to fall back and they say, “We will be–” [crosstalk]
Jake: Was that just flat though and the other things went back up? Do you happen to know, is that matters a little bit, too?
Tobias: Yeah, I can talk to ARKK, because that’s what I tracked pretty closely, the A-R-K-K. That bottomed under 100 bucks and I think it was back– it might have got back to $130, and I don’t think that value backed off much through there. I think it was just flat. So, probably you are right. It’s probably more a bounce in the growthier names than it was and that was on the back of the growthier names getting– Yeah, they are [crosstalk] 50%.
Bill: But they had to pull back.
Bill: Stuff like Snow’s up, I think I saw 40%, and Spotify ripped and–
Tobias: From a sort of recent base. Yeah.
Bill: Bottomed. My beloved Twitter’s ripped.
Tobias: GMO’s got this piece out, Value Versus Growth Reversals, and the headline is basically The Best Three-Year Period For Value Versus Growth, which was February 2000 through to February 2003. Value suffered some of its worst drawdown through that period, and they’ve got this nice chart where they show 4 of the worst 10 occurred during that three-year period. What the message that they’re saying is just when it turns around and this is volatility, is volatility in both directions up and down, so you shouldn’t necessarily get discouraged. But I think that the much, much broader takeaway from that is in the short term, markets are just completely unpredictable. You’re going to see a lot of moves up and down that make no sense whatsoever, because they don’t mean anything. It’s because they’re just completely noise. Ultimately, ultimately, ultimately-
Tobias: -and I don’t know when that ultimately comes in, kingdom come, the heat death of the universe, value starts outperforming again, but I think ultimately, it does track along with fundamentals, and I feel the fundamentals I think for value portfolios still look really good.
Jake: So, you’re telling me there’s a chance.
Tobias: There’s a chance. There’s a chance, baby.
Jake: I read you.
Tobias: I think we’ve turned around at the end of June. I think we’ve been doing a little bit better the last two weeks.
Bill: I don’t know.
Jake: Do you think just for your mental health, and I’m saying–
Tobias: I should take a step back? Is that what you’re saying?
Jake: Well, I was going to say, your mental health, the more broader you but also you, Tobias Carlisle, [laughs] that maybe following every single one of these ups and downs might be just a good way– [crosstalk]
Tobias: It’s a fool’s errand.
Jake: To wear a fella out.
Tobias: Yeah, 100%.
Bill: But what are you going to do if you’re Toby? It’s his job. He’s got two value ETFs. So, what else you can follow? You should write a book about the invincible investor. That’s what you should do.
Tobias: What I have noticed–
Jake: Is Churchill in it?
Bill: He is now.
Jake: Okay. [laughs]
The God Portfolio
Tobias: The Churchill quote would be something like, “If you’re going through hell, keep going,” which is a great quote. That’s a good thing to bear in mind. One thing that I have observed, if you have– there’s lots of different variations of this, but if you have a strategy that works over a very long period of time, it’s just astonishing the number of very long drawdowns that you go through in that. Wesley Gray Alpha Architects got a version where says, “When God runs a portfolio, God has perfect foresight, and there’s still periods of time where God’s down 90% and trailing 90% of his peers and gets fired over a three-year period.” So, it’s a tough game. There’s a lot of randomness in it.
Bill: God should have been a trader and not an investor in that little thing.
Tobias: God should have known better.
Bill: Yeah, that’s right.
Tobias: Having the perfect foresight.
Bill: Yeah, He’d know that He’s going to get fired. I’m going to take this up with Wes. I got some problems with how he framed this.
Tobias: What’s the problem?
Bill: God should have been a trader in his example. I actually do like how he framed that quite a bit. I’m just being a smartass. ARKK, I didn’t realize that the drawdown was $130 to $30. That’s not small.
Tobias: I think the drawdown was $156 to $190, wasn’t it? I mean under $100.
Bill: Yeah, I’m trying to see if I can get a some hocus pocus Fibonacci sequence on this thing real quick. Really bring the value analysis to peak analysis here.
Jake: [crosstalk] call.
Bill: [chuckles] No, come on. It occurs in nature. Jake. You should like it.
Jake: I know.
Tobias: The Fibonacci sequences?
Tobias: Is that the golden ratio? What’s Fibonacci?
Bill: No, Fibonacci, you’ve never seen Fibonacci, like certain drawdowns. Here, boom. I just drew one. Yeah, there’s about a 50% drawdown from peak to trough from the very bottom in April. You’ve got to get up on your technicals, Toby. That’s what you should do. Spend your time with technical analysis. I’m kidding.
Tobias: There’s so many to choose from. Especially, I’m using all of the different value ratios. [crosstalk] from the screen.
Bill: The value ratios–
Tobias: That’s where you went wrong right there.
Bill: Hear me out. Value ratios plus dojis and candlesticks.
Tobias: I don’t know how to use them, though.
Bill: We’ve got time. We’ll teach you.
Tobias: Let’s get some veggies.
Jake: All right. Let’s move on before this devolves to even worse.
Tobias: People are just switching off intros.
Bill: I’m enjoying this. This is fun. I missed you guys.
Tobias: Probably when we start talking Fibonacci, people were just like, “Oh, hang on. Now, it’s interesting.”
Bill: Burry used technicals for his entries.
Tobias: I mean, big value guy through 2000- 2007. It doesn’t matter what you use- [crosstalk]
Jake: It doesn’t matter. Yeah.
Tobias: How did you choose what to go into? I pick the letters of the alphabet, [unintelligible 00:30:31] the book and the letters of the alphabet.
Jake: That’d be a winning strategy. All right, so a shoutout to Otto Forester, who had DMed me this little idea as a veggie segment. Much appreciated, sir.
Mise en place Investing
Jake: What we’re going to be talking about is this French culinary concept called mise en place, and what it means in effectively an English is put in place or everything in its place. Really, it’s a mindset, and a practice, and a process to allow a chef to be super-efficient, and even perhaps achieve a bit of a flow state while they’re cooking.
Let’s walk through what the steps are to achieve mise en place, and step one is you read the entire recipe. Okay, that’s fairly straightforward. Step two, you prepare your workspace, and you clean it as much as you can, organize it so you know where every one of your tools are. Step three is you prepare all of your equipment. You clean it, and make sure it’s all functional. Step four is you gather all your ingredients and you put them into prep cups. Step five is you prep the ingredients such– you’ve chopped all your vegetables, you put all of the you know, let’s say we’re making omelet. You put all your cheese into a little measured it out into a bowl, and then you place everything at hand right where you know where it is, and maybe even in the same place regularly.
Then, the final step is really concentrating on the cooking process, because you know that you have all of the little details sorted out ahead of time before the rush of actually cooking, when there’s a timing element to all cooking. The amount of energy that the food absorbs over a given time period, the amount of work done on it really can have big impact on how does the final food output look like. So, the whole point is to make this process smooth, more consistent results, save time, actually, at the end, less surprises, save space, because you’re well organized on your table, and then achieve that flow state and actually make your cooking more enjoyable.
Well, shit. If that doesn’t sound like what you would want your investment process to look like as well, I think this is actually something profound here. Imagine having your bowl of chopped veggies right where it is, since we’re doing a veggie segment. Yeah, your cheese, your diced meats, your eggs already scrambled, and you have it all ready to go on the table. Then, the order comes in that says, “Hey, we need 10 omelets.” Okay, well, I’m ready to bang those out right now, because I have them all at hand. I know where everything is, and I can really focus on the process. Whereas, if I’m standing there, and then that orders come in, and then, I have to go do all those little things, and maybe I’m trying to chop up the veggies, while I’m also scrambling eggs and it just can turn into a mess. You can see how you’re creating interconnectedness within the system like we’ve talked about, how errors propagate.
If you think about it, isn’t this exactly what Buffett does? He is reading all the time about different businesses, their 10Ks, industrial publications. How does a company fit into its competitive landscape, its ecosystem? What are its advantages? He’s got a list in his head of companies I think that he would be pretty happy to own, and he’s got a pretty good idea of what he would pay where he would generate an adequate return over the time period of his ownership. Is that much different than having your bowl of eggs already pre-scrambled, your cheese ready to throw in? So, then when the order comes in, when someone approaches him, when Mr. Market offers him a price for that company, this is why he can say in 15 minutes whether he’s interested in buying the company, and have a deal, and a handshake done in that short amount of time. It’s because he’s had a mise en place approach to being ready for when the opportunity shows up. Having all that cash is not much different than a bunch of cheese sitting in a bowl ready to go.
I think there’s something profound there for us as investors to think about doing a lot of the work ahead of time rather than waiting, and then scrambling to try to get caught up. Pardon the pun there. So, yeah, I don’t know. What do you guys think about that? I mean, is this–
Tobias: What’s your desk look like, JT? You’ve got a tidy desk? Tidy desk, tidy mind?
Jake: Yeah, it’s relatively tidy. I’ve got a little bit of– It’s not OCD, but I’m a little bit anally retentive.
Tobias: That’s your mise en place?
Tobias: Desktop of your computer tidy as well? Know everything is?
Jake: Pretty much. Yeah, there’s portions of where some things go–
Tobias: Got some junk, some miscellaneous folders.
Jake: Yeah, for sure. There’s miscellaneous. But for the most part, things have a place where they go.
Tobias: Do you keep a list of– I have an idea of the most profitable companies in the market by just in absolute terms like gross profitability, and then on various ratios like gross margins and gross profitability on total assets and things like that. So, I have a rough idea where the profit in the entire economy is going and then– [crosstalk]
Jake: It’s all ads. [laughs]
Tobias: It’s a lot of ads. Yeah, Walmart is up in there too. Facebook, of course, is up there. Then, you can run a simple cut on that– and is one of the things that I struggle with, where’s the appropriate place to cut?
Tobias: Because the valuation– what is too much to pay for these things? The answer over the last decade has been–
Jake: There’s no price.
Tobias: Anytime you try and put a cut in there. I think that’s a great approach. I 100% agree with that, and I like it a lot.
Jake: Bill, what do you think?
Invest In Quality Businesses
Bill: I think this is the reason that studying quality businesses is defined as those that don’t have as much operating volatility makes a lot of sense, because you can actually build a model that’s reliably bankable, and then with a lot of them, I don’t really expect them to trade as deep of a discount as some of the more inherently fluctuating businesses, because they are somewhat more predictable. That’s within a context of you can say, “Well, the world is inherently unpredictable,” and that’s fine. But I think COVID pretty much showed– I was in airlines because they were relatively cheaper, and I thought that it was a good bet. Well, they didn’t exactly protect me from that particular downturn.
Now, something that Jeremy Raper said to me, which I think is worth pondering. Shoutout to Ross Gerber for your great airline take out there. But it could have been a internet based virus that shut down everything. There’s nothing in the world that says, it must have been a physical virus, and had it been an electrical one. All this narrative about SAS is so-
Tobias: Robust, yeah.
Bill: -robust. Maybe we’re resulting a little bit too much on that.
Jake: You could make an argument that, if the universe was just, it would have been an electrical one and not– based on who was hurt and who had the capacity to suffer the most, it probably would have been more fair to have the average person.
Bill: You’d have more human toll. But regardless, I understand what you’re saying.
Tobias: You mean it would have been more human toll from an online virus?
Bill: Yeah, well, okay. [crosstalk] Yeah, okay. Oh, no, I don’t mean that. Yes, I was confused. I was going by the intersection of two things, a pandemic plus an electric virus as opposed to one or the other.
Tobias: Yeah, that could have been one or the other.
Bill: Yeah, that would have not been good. [crosstalk] You’re welcome. Come to hear for the best takes.[laughter]
Tobias: It’s amazing really that– I just feel it’s a pretty fragile system. It’s amazing that we haven’t had it like– Don’t we just like– one electromagnetic pulse from the sun and we’re all in little bit of trouble, aren’t we?
Bill: I have no idea, but I do think that that’s a reasonable thing to– [crosstalk]
Tobias: Yeah, well, thanks for considering it. [laughs]
Bill: You are welcome. [laughs]. I don’t fucking know. Just trying to figure out what I can now, but– [crosstalk]
Jake: Well, they do shut down, especially in northern latitudes, that they will be greater impacted from sunburst like that, and there are some measurements that we have. So, they’ll shut down power grid sometimes in preparation for that so that it doesn’t fry the electrical system. Canada has some protocols for that. But anyway–
Tobias: Not the US.
Bill: It’s long story short. I like what you’re saying. I just think it’s easier to be prepared when you’re underwriting some of these higher quality businesses where the underlying business doesn’t fluctuate as much. But that may be resulting.
Tobias: Yeah, if you had asked, what’s the biggest threat–?
S&P Global and IHS Markit Merger
Bill: I don’t mean to cut you off, Toby. I know I just did, but what I’m thinking about right now is, you said when SPGI and IHS were merging, you were like, “This as cheap.”
Tobias: SPGI, yeah.
Bill: Maybe not absolutely cheap, but you were like, “Look at where this is trading, look at where it normally trades, look at what companies like this trade. This is cheap,” and you were dead right. I think that on those companies, you can do stuff like that with a little bit more conviction, because you have more confidence in where it’s going.
Tobias: The only thing about SPGI and there’s a few in fact said that– something else in there, at the moment just escapes me. I think they all trade at a slight discount to the market, and I don’t know why. I think it’s possibly that everybody knows that they’re going to be cyclical, if we go down the other side of a crash, these things are going to pull back a little bit. That’s certainly what SPGI did in 2008, 2009. It does come off in line with the market. But it’s a great business. The returns on equity are just monstrous and it’s Standard and Poor’s. The index has been around since 1850. It’s got pretty good longevity. I like it as a business. I think that the issue was that they tried to pay an absolute monster price for IHS. So, they paid a full price for I don’t know if it was too much, but there was a very full price for it. I think that a lot of people will just like, “Well, if we’re going to spend money like that amount–”
Jake: Yeah, that’s a fair– You have to probably discount intrinsic value if the cash that this amazing business is producing perhaps does not end up back in your pocket as the owner. That’s the important equation. If it’s going to be frittered away, I’m not saying that this deal necessarily was that because I don’t really know well enough to say.
Tobias: Neither do I.
Jake: But if that is the case, then yeah. The intrinsic value is pinched because of that.
Tobias: [laughs] Mike Mitchell is in our comment section.
Bill: Dude, I don’t know you got debt maturities that are way out there. They don’t come due until 2025, and some are 2051 plus.
Bill: Yeah. I think you start to get stuff like that, you can pay a stiff multiple because–
Tobias: I think it’s [crosstalk]
Bill: It’s the [crosstalk] not that unencumbered for a while.
Tobias: I don’t think you are paying a stiff multiple for it. I think you’re paying whatever the opposite is there [laughs].
Bill: A real limp one. Yeah, some of your return probably depends on how much they can roll the debt versus paid down. But I don’t think right now, rolling debt is the biggest concern on anyone’s mind.
Jake: No one ever thinks that until it is. [chuckles]
Bill: Oh, it’s been a while. Just flip it to the Fed.
Jake: Yeah, it’s fair.
Tobias: I’ve been tracking fear and greed.
Jake: And you want to get mad at the CCP.
Bill: I’m just playing the game that I see as the rules are. I’m not saying it’s the game as it should be divined.
Jake: By the way, I was thinking, what if Charlie was Rudy Havenstein this whole time?
Tobias: That would be funny.
Jake: Shoutout to Rudy.
Tobias: Yeah, I love that guy.
Bill: I’ll tell you what, man, in a different way, I need a burner.
Bill: I’ve been hopping on Spaces, and I’m getting called up too quick. Yesterday, I got into Matt Ball’s space, and he called me up immediately, and I didn’t know what was going on, and he and I are communicating in the back channels of the Twitter machine. So, I got on and I’m like, “Dude, I’ve got nothing to say to you. You are a legend, whatever.” Then, I got off, and I felt like a complete idiot. So, I’m going to burner.
Jake: I don’t even know what that means?
Bill: [crosstalk] be lurking.
Jake: I don’t know these mechanisms that you’re discussing.
Bill: You’ve got to get on Spaces, man. We’ve got to do a Space. We’ll bring the fans on. They can ask questions. It’ll be fun.
Tobias: But just like doing a YouTube live.
Jake: And it will be like just [laughs] this one.
Bill: But it’s different. You get people to talk. It’s fun. I bet you guys like it.
Jake: All right, we’ll try it.
Bill: I’d like it.
Fear & Greed Index
Tobias: Fear and greed. I had a look at fear and greed. I’ve just been tracking it just because I’m interested to know, It’s amazing how much fear is in the market at the moment.
Jake: Yeah. You’ve misspelled greed. [laughs]
Tobias: The strangest thing. It’s obviously because– it’s breaking the algorithm a little bit, because we’ve been up so much in over the last 12 months, and we’re just pulling back a tiny little bit. So, every single one of those ratios, which looks back about 12 months is, “Ah, this is extreme fear.” But the one thing that really just does not break is the S&P 500 floating above its 200-day moving average, like that sucker just does not go down.
Jake: I did see– I think it’s TD Ameritrade has an investor sentiment index. I don’t know if you guys ever seen that before.
Tobias: No. Same idea.
Jake: Well, they take their– They aggregate all their trade data to see just buys versus sells, and where’s the general sentiment, and it tracks perfectly with the market.
Jake: S&P is up, sentiments up. It’s down, it’s down.
Bill: That makes sense, doesn’t it? Isn’t that how these things work?
Jake: Of course.
Bill: I mean a leading indicator. Tell me when it’s all going to roll over.
Jake: Yeah. It’s not [crosstalk] I don’t know how to [crosstalk]
Bill: No, I don’t need one that’s going exactly at the time.
Tobias: Well, that’s why I like fear and greed, because it’s a contra. When there’s extreme greed in the market, you’re probably going to get a better chance, another bite of the cherry, and when there’s extreme fear in the market, it might be a good time to go shopping. But it does break down– and I’ve noticed that if you go back to 2013 and you’ll get it in 2013. I think you’ve got to use the Wayback Machine to do it, but 2013 was one of those years where the market was just up 30% of the course of the year, and it did it at a 45-degree angle. It just went straight up. But there was still a time to buy in the middle of the year, where it just wobbled briefly. And by the definition of this little metric, that was extreme fear for the year. So, it wasn’t the best time to buy in the year, but it wasn’t a bad time to buy either. It just kept on rocketing up, maybe we’re just in one of those times right now.
Jake: Area value man says buy the dips. [laughs]
How Much To Pay For The Best Companies
Tobias: [laughs] I get another metric too. Just as we were talking before, my list of the best stuff in the market where I’ve got the cutoff, and this is the thing I struggled with, what’s an appropriate amount of money to pay for those because basically the more you prepared to pay, the better you’ve done for a very long period of time here. Whatever sensible margin of safety you think you’re using, you’re probably making a mistake with that. I don’t know if that’s just the way it’s going to be for forever and ever, or it’s just– [crosstalk]
Jake: Disciplined buyer? I see where you went wrong.
Tobias: That’s your mistake. You should have paid up for it. It’s worth paying for these good stocks. Of course, in retrospect, that’s the case. But I’ve just noticed that there are an unusually large number of these companies available at a pretty good price on just about whatever portfolio. If you put a cutoff at any given level, say one times the 10-year, three times the 10-year, whatever you’re, so the yield on the 10-year being equivalent to some free cash flow yield on the company that you’re buying, if you’re thinking about it in those terms, I don’t know where the appropriate point is to draw that line. In either case, you can look back over the last 20 years and see, when there are more companies available, you tend to do better. When there are more companies available above one of those thresholds, you do better. When there are fewer companies available at one of those thresholds, you do worse, probably as you’d expect. That indicates that the markets more or less expensive than it would otherwise be. We’re currently at a point where it’s saying where we’re in 10% or 15% best opportunities to buy.
Bill: Dang. Wow.
Tobias: Which makes no sense to me. That’s the thing that’s breaking my head the most at the moment. I don’t really–
Bill: There’s a lot of value out there, man. I’m going to say something that’s underresearched and do not fucking listen to me.
Home Service Businesses
Bill: But if you want to do the work and write me, I would greatly appreciate it. CVS looks pretty interesting. I was checking that out today, I read a pitch on United Healthcare that I thought was very good. IAC, that’s tough for me to really get behind Angie’s because I think there’s an adverse selection problem there, but—
Tobias: What’s that?
Bill: I just think that fundamentally, the really good trades people operate on word of mouth, and so when I was in flooring, Angie’s List was the gold standard of leads. You would get an Angie’s List lead, and you could walk in, and it would be a non-competitive bid, it would be a nice customer, they already prequaled you, and you could just say it wasn’t competitive.
The other business was ServiceMaster, which was a lead gen biz, which you would get three leads immediately. You’d have to get on the phone, I’d be calling people that fucking midnight, trying to book-, because you get charged 50 bucks a lead. I’d be sleeping and it would ding my phone and I’d wake up and call, because I know that they were thinking about the product at the time.
Tobias: So, someone had literally entered it into the system, and it sent you the lead at midnight.
Bill: Oh yeah, dude, I was a rabid dog with leads, because that stuff costs money. But then your close rates are really shitty, and the customers on average are super cost centric, and my perception of what the business has moved to much closer to my negative perception of the lead gen service than it is what Angie’s List used to be. On the other hand, if they actually can automate what a kitchen remodel should cost, and they actually can quote you the material cost pretty well, and you can get a fixed product with some execution certainty, that is a really, really hard problem to solve. They could get 5% to 10% of the market, that’s going to be worth a lot of money, if nothing else, just from the certainty because it’s going to be a very, very hard marketplace to displace very hard. I just don’t know that I think they can get there.
Tobias: If you need a handyman or anything like that, it’s always they just come and go, because that’s the nature of the business. If you have a relationship with something like one of those places, of course, you’re just going to keep on going back to that. It should be a pretty business to run.
Bill: Yeah, I think so the question is, are the good handyman coming there to fill their day? Maybe a handyman can but, would a plumber? I don’t know. Good plumbers are like gold. You don’t just hand them off. Painters too. I don’t know. That’s the hard part for me on that particular idea.
Tobias: So, getting the good guys into the marketplace is the difficult thing.
Bill: That’s right.
Jake: They work as much as they want already.
Bill: Because they can do what it could be worth of shit ton.
Tobias: It’s very hard to know whether anybody is any good at anything, when you’re just desperate to find somebody. Maybe that does solve that problem, and it gets some rating system in there. I don’t know. I haven’t used it.
Bill: Yeah, well, that’s how it used to be. Back in the day, you’d have members and they’d give you reviews, and the reviews were gold like they weren’t gamed at all, and that’s why I use– [crosstalk]
Tobias: Is it a game, now?
Bill: I think it’s closer to a game.
Bill: [crosstalk] IAC long. So, I’m not trying to take shots at you.
52-Week High Or Low Starting Points
Tobias: You want to take some questions from the crowd? I saw one from Samson, is the 52-week low list a good place to go shopping? It’s typically not probabilistically, because things with low momentum, definitionally, the lowest momentum in the market. If that’s one of the things that you care about, you’re batting against that average which momentum has a 12-month, 15-month follow-on period. So, 52-week low would be like there’s probably three months of pain in buying a 52-week low list, you might be better off buying. If you can find something cheap on the 52-week highs list, that might be a better place. But then you can probably safely ignore momentum in there too if you’re thinking about holding for a long period of time, and you’re looking at the fundamentals. But I wouldn’t necessarily shop on the 52-week lows list either, just stuff that’s down all over the last 52 weeks. It’s not necessarily cheap.
Jake: I think the game is a little more complex than that. I’d look everywhere.
Tobias: But you’ve got a finite number of places in your mise en place, right? You’ve got a fixed amount of room. What are you using to drive? Do you want the stuff that’s cheap or do you want stuff that’s– [laughs]
Jake: Sorry, I don’t do cheap stuffs.
Tobias: Do you want stuff that’s down a lot over the last year or do you want stuff that’s cheap? Because they’re not the same thing.
Bill: Yeah. Dude, arguably they should be, but that doesn’t mean they are, right? Gayner has said in the past that he started off on a 52-week low list, and now he likes to start on the 52-week high list. I think that’s not the craziest thing. [crosstalk]
Tobias: I don’t think you should worry about it at all.
Bill: Yeah, I think it depends on your strategy.
Tobias: Highs is better than lows.
Tobias: Highs better than lows, but highs are not any more helpful necessarily if you’re a value guy. You should be looking at the cheapest stuff, looking at this stuff that you think as the best.
Bill: Well, as someone who hasn’t had a direct conversation with Tom in a very long time, and the only one that I had was in a room full of people, I will say that I think the reason that he likes the 52-week high list is it enables clues to study businesses that are starting to fire on all cylinders or are firing on all cylinders. Given the strategy I think he runs, that will help him wait for the right time to buy. Because he’s looking for companies to study, not things to buy today.
Tobias: Yeah, fair enough. But it’s also that’s what does the rest of the market think about what this thing is doing.
Tobias: If you’re a good enough investor, you go in and have a look at the fundamentals itself and see what’s this thing done over a series of 10Qs in case.
Bill: Well, it’s all just where to start. It’s not. Looking at a list is not due diligence. I think we can all agree on that.
Tobias: But that’s my point. Why would you start on that list? You start on something that makes more sense for your own investment strategy.
Tobias: You could start with the As, that would be just as helpful as starting on the 52-week highs list, wouldn’t it?
Bill: I suppose.
It’ll Take Black To Get To Green
Tobias: Any good oil? Oil ideas?
Bill: No. Why would you come to hear for that? We’ve demonstrated no confidence on that.
Tobias: I don’t think anybody’s got any confidence in that. What about the pipelines?
Bill: I don’t know. I have no ideas worth sharing.
Jake: I think it will take black to get to green.
Tobias: You need energy up before it starts working.
Jake: As a species to get to all this green energy, I think it will require black petrochemical energy to get us there.
Bill: Yeah, concur.
Tobias: Do you guys know anything about Naspers-Prosus? I have a podcast on it with Adrian Saville, who is a South African value investor who’s quite knowledgeable about it and has a good discussion of it, if you want to see that, I don’t know that we necessarily have anything.
Bill: I do. Hit up @PandaValue on the Twitter machine. He is the OG of HoldCos. He loves them. If you know of good HoldCos, talk to him. Talk to him about them. He will be the one who you’d need to talk to.
Jake: Hmm. I didn’t know that.
Bill: Yeah, he loves HoldCos, and he’s pretty sharp.
Tobias: Got a question here. I tried to profit from potential hackers’ attack against gridlock companies? You guys remember the ETF hack got it start when the Sony hack– That blew up an $800 million ETF when Sony got hacked. I think that the assets are pretty sticky and then it’s had this sordid history where it got stolen by some of the guys running it and eventually the guy– [crosstalk]
Jake: Who hacked.
Tobias: It did-
Bill: That’s fine.
Tobias: -in a manner of speaking. I don’t know, man. I don’t know about that stuff. If stuff gets hacked, if it’s important enough and the whole market goes down, then you just get long the VIX or get short the market. What are you going to play specifically, you could go and play and hack, but I look at the contents of those things, the contents of any of these thematic ETFs, there’s always stuff like– Why is Caterpillar in ARKK Space ETF? I got no idea.
Tobias: They’ve got satellite or something? I don’t know.
Jake: You’re going to need — If you’re going to terraform Mars, you’re going to need some heavy equipment.
Bill: Good point.
Jake: I don’t know.
Bill: [unintelligible [00:57:36] sound. Math checks out.
Jake: Yeah, that’s just math.[laughter]
Bill: I’d say on hack, the only strong opinion that I have is cybersecurity doesn’t matter how effective it is. It just matters whether or not they can sell the market on believing that it’s useful.
Jake: Apparently, you can’t hardly get cyber insurance for any reasonable price, I’ve read. I don’t know if that’s true or not, but–
Bill: It’s because my buddy in cybersecurity tells me that it doesn’t do anything except for his fishing business, which you could argue he’s got some motivated reasoning there. But look at the results of all these cybersecurity firms. They don’t stop anything.
Jake: Do you think this will be a potential listed reason for why the government could crack down on cryptocurrencies? We can’t have these outlets for hostage basically situations, cyber hostage?
Tobias: What could they do to crack down on it?
Jake: I don’t know. Just try to police more of the on and off ramps, I guess.
Tobias: Was it a hack of the Texas grid? Is that what happened? The recent one where it was a quite a big ransom payment, and then they were able to track the [unintelligible 00:58:56], and they got half of the money, and the guys who did it.
Bill: Oh, was that the East Coast Pipeline?
Tobias: Was that East Coast?
Jake: Yeah. It was East Coast.
Bill: Yeah, that was recently. I don’t know. I don’t know that’s what happened. I’ve been on vacation.
Jake: You’ve been hacking your liver. [laughs]
Bill: That’s over now, but it was fun.
Tobias: When one of the satellites was going to fall out of space, when I was a kid, when I was in middle school I think, one of the guys at middle school sold an insurance that he would pay– I can’t remember the amount of money. It might have been $1,000, but it was just an astronomically large amount of money at that time. If you got hit by the satellite when it came out of space, but in addition, you had to be wearing this paper hat that he made on your head.
Bill: Hey, I have respect for him.
Jake: This guy’s a genius.
Tobias: Isn’t that brilliant? People were marketing his little insurance venture.
Jake: Is that Lemonade’s business model? No, I’m just kidding.
Bill: Ooh. That’s hurtful.
Tobias: I will sell cybersecurity insurance, but you’ve got to be wearing the paper hat, when it happens.
Jake: A tinfoil hat.
Tobias: A tinfoil hat, yes. Yeah. I’ll ship the tinfoil hat.
Tobias: On that note, folks, that’s it. It’s been fun.
Bill: It’s a good one to end on.
Jake: Yeah, we grind to a halt. Just end it now, mercifully. [laughs]
Bill: Yes, exactly.
Tobias: Thanks, folks. We’ll be back.
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