VALUE: After Hours (S03 E42): Pzena Value And Quality; $TSLA, And NFT Bubble; And Cynefin Framework

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

  • Pzena Value And Quality
  • Cynefin: Four Frameworks Of Portfolio Management
  • Bessembinder’s Lessons For Finding Outliers
  • Value Investors Should Look In Niche/Private Corners
  • The Roaming Bubble
  • $TSLA Up 56% In A Month
  • What’s Driving The NFT Bubble?
  • Crypto Arbitrage
  • Zillow Caught Holding The Bag As 93% Of Phoenix ‘Flipping’ Portfolio Listed At Loss
  • ‘Style-Drifting’ In Investing
  • Liquidations Spec Sits Up 24%
  • Cyclicals & Commodities

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: Preparing to live stream. We’re doing it. We are live. Back at the regularly scheduled time. 10:30 AM on the West Coast, 1:30 PM on the East Coast, daylight savings changing everywhere. So, I have no idea where we are. We will be an hour earlier next week because it’s daylight savings ends here for backwards to get a little bit of a sleeping. That’s always good. If you want to listen to this live, it’s The Acquirers Podcast channel on YouTube. Just click some links. How are you, fellas?

Jake: Smash that subscribe button.

Tobias: Smash that subscribe button. [laughs]

Bill: Smash it. I’m all right.

Jake: I’m well.

Tobias: It’s this little rally from growth value whatever the opposite of a rally is affecting anybody’s positive mental attitude?

Bill: Never.

Jake: The value nap.

Tobias: There’s somebody sending us a note from Belgium in 1832.

Jake: Oh, time machine.

Bill: Hey, thanks. Thank you.

Tobias: [crosstalk] We’ve got the Hoffstein and Value Stock Geek. Everybody’s in the house. Brown Marubozu, I never know how to say that, brother. You have to tell me how to say that.

Jake: Heavy hitters.

Bill: That’s what’s up?

Tobias: South Carolina, nice. What topics have we got today, gents? JT, what do you got?

Jake: I’ve got a little decision-making framework that I recently stumbled across that might be interesting. So, we’ll get into that.

Tobias: Interesante.

Jake: Yeah.

Tobias: BB–

Bill: Toby, what you got?

Tobias: Rich Pzena’s Q3 note came out. A couple of nice things about very cheap stocks being very good right now. Well, good. But now, so, I’m going to be talking about that a bit. I got two quotes. Two pull quotes we can chew on.

Bill: I don’t know where I’m going.

Jake: [laughs]

Jake: I’m following, Toby. We’ll see where it goes.

Jake: Okay. Get so much in this brain.

Jake: Special announcement though. I did a little math and I believe that the 23rd of November will be if we continue our current pace, the 100th Value: After Hours episode.

Tobias: We’ve to do them.

Jake: So, we’ve to do something special, the 23rd. Mark your calendars.

Tobias: It was Halloween. We forgot to dress up for Halloween. We missed it.

Jake: Oh, yeah.

Tobias: Because I had to do it early. So, I was worried about that one.

Jake: Did you go as Hugh Henry, again? [laughs]

Tobias: No. Always a nightmare this year.

Jake: What was it? A chart of the value drawdown?

Tobias: Literally, nobody else would have got it but right now, it’s a unicorn with colored black with like a unicorn horns pretty funny. My kids loved it. Big jumpsuit that I can use year after year after year. Perfect.

Jake: All right.

Tobias: What’d you do, JT?

Jake: I didn’t do anything. I just want–

Bill: Womp, womp.

Jake: I watched the World Series instead.

Tobias: You guys didn’t go out?

Jake: Well, though, kids did. Yeah. But I didn’t dress up.

Bill: I was Darth Vader.

Jake: My older one, he went to a real party. He just was off doing his own thing now. It’s a different world.

Tobias: To world, yeah. My daughter was out front with the– well, they didn’t want to be anywhere near us. What would you do, BB?

Bill: I was Darth Vader. We went trick or treating. Kids had a good time. That was nice.

Tobias: It was all about the same vintage as mine, right? So, they’re still into it. My little, Philip, my three-year-old discovered that if you go up to the door and knock and say trick or treat or give you candy. So, he was unstoppable [crosstalk].

Bill: Super amped.

Tobias: Every single house, trick or treat, thank you. That’s all he was trying to say.

Jake: And you just add sugar to that, and it’s just spirals even deeper in the madness.

Tobias: [crosstalk] pieces but mom and dad have to inspect the candies. No homemade stuff. [chuckles] No big chocolate bars. They get confiscated. Got to teach them all about what the government does tax.

Bill: I like it.

Tobias: Tax real protection.

Bill: I’ve been trying to avoid some of the candy but I’m not very good at it. It’s unfortunate, because it makes me fat, and then I feel bad about myself, and then I eat more.

Tobias: [laughs]

Jake: It doesn’t even taste that good in the moment. But for some reason, it’s really hard to stop eating it, huh?

Bill: Yeah.

Tobias: It’s made that way.

Jake: Oh.

Tobias: Shall I kick it off?

Bill: Sure.

Pzena Value And Quality

Tobias: So, Rich Pzena, for folks who don’t know, he was one of the coauthors of one of Greenblatt’s early papers, and he runs a multibillion-dollar firm. They’re very quantitative value approach similar to mine. I just managed to just lose my tweet. Hold on. So. two interesting things that they pointed out. The first is that, the cheapest quintiles, that’s the cheapest 20%, 1/5th of US and non-US stocks have a 10-year average revenue growth rate of 6% and 8% which is pretty healthy growth. That’s faster than inflation. Maybe, it’s faster than official inflation.

10-year average returns on equity of 17%, that’s the US stocks, and 13%, that’s the non-US stocks. So, the S&P 500 average return on equity is 13.26%, if you want to be exact. So, 70% is a premium. We’re finally at the point where the value stocks are better than the rest of the market. It’s interesting.

Jake: That’s over, what was the timeframe of this measurement?

Tobias: This is now. This is Q3? This is Q3– [crosstalk]

Jake: Well, no, but the ROE measurement of what timeframe?

Tobias: 10-year average returns on equity.

Jake: Wow. All right. That rhymes with 1999 a little bit, right?

Tobias: It is starting to get there. The other one is the forward looking. So, there’s backwards looking, this is the forward looking one. Analyst project value stocks to grow earnings at more than 20% CAGR through 2023 compound annual growth rate [crosstalk] 2023.

Jake: Those guys will never miss.

Tobias: They don’t. If anything, they’re too pessimistic.

Jake: [laughs]

Tobias: No, they’re probably shooting to the outside there. A higher rate than projected for growth stocks, that’s the most important part.

Jake: Okay.

Tobias: And we can buy these growing high quality value businesses for prices at 60% or more discounted growth. That’s a pretty good setup if you’re a value guy. Of course, on the back of that, I saw Tesla’s rocketed to new all-time highs. It’s about a double from its for this year. So, this is an easy game.

Jake: It’s obviously, easy.

$TSLA Up 56% In A Month

Tobias: Why did Tesla come back to life?

Bill: I don’t fucking know. We talked about this. We’ve been wrong on this thing forever. We obviously, don’t know anything about it and we continue to speculate.

Tobias: That’s a nice summary.

Jake: Why would [crosstalk] we were actually saying anything important about it. We’re just observing and curious.

Tobias: I have no view anymore. I saw that. Chris Bloomstran had another tweet thread on it. I don’t disagree with anything he says. He’s exactly right. I just think it’s futile at this point.

Bill: Well, to be fair, it’s been futile for like a year.

Tobias: It topped up in February 12th, and had been falling pretty consistently. The funny thing is that Ark hasn’t participated as much along with Tesla this time. She has been lightening up on Tesla a little bit, but I don’t know why.

Bill: I got nothing.

Jake: Yeah, if you got a 3,000-price target and it’s easy money. Why would you ever unload?

Tobias: Well, she has been. I don’t know. I don’t know how that works. It could be flows, it could be anything. John Battle, they sold 100,000 cars. They didn’t though. Musk came out today and said, they haven’t signed the deal.

Bill: I just don’t understand what we’re doing. I don’t understand why people are talking about it. There’s obviously people are valuing this thing on what they think it’s going to be 10 years from now. It clearly [crosstalk]

Tobias: Do you think they are [crosstalk]?

Bill: I think some people are doing it. I think value investors that are just like, “Hey, it’s just a car company, this is stupid,” aren’t open to the other arguments that people that have made a fuck ton of money have made, and I think a lot of people that think they’re doing fundamental analysis have gotten blown up shorting it. I don’t know. It’s either one of the biggest bubbles in history or people are missing it, and it’s just one of those things today [crosstalk] people nuts.

Tobias: Which way do you lean?

Bill: I don’t even care. I lean that I would never short it and I wouldn’t waste brainpower on it. I was looking at a model, why? I thought the lines on it sucked. The actual assembly on it, I thought it was pretty bad, and then I thought, “Yeah, no one cares. So, why would I?”

Jake: No one cares.

Bill: My grandma got one in 2012. I thought it was the most amazing thing I’ve ever driven. She’s got a model three now. I find it ironic that she totaled it driving out of the garage and they just couldn’t fix it. I don’t understand it. I don’t understand how they’re going to become a power company without being basically what Berkshire is today. It doesn’t matter. Elon’s a genius, he shoots people to the moon, and people want to put a value on it, and it’s worth what people are paying. That’s my whole take.

Tobias: It is worth what people are paying?

Bill: Sure. What do I care? Buy it. Everyone that thinks, you know, whatever. Go place your bets, otherwise, it’s all talk.

Tobias: You can think it’s overvalued without shorting it. It’s lunacy to short it because it can clearly, it’s completely unhinged from fundamentals. So, it can go anywhere from here, but it doesn’t mean it’s not unhinged from fundamentals. I did a little valuation the other day. Just For Laughs.

Jake: There’s your first error.

Tobias: Yeah. So, I get to $35 per share which I’ll give you 20 bucks for.

Jake: [laughs] Over the margin of safety?

Tobias: That’s my margin of safety.

Bill: Yeah.

Jake: 20 bucks.

Tobias: I don’t think it’s necessarily guaranteed at 35 bucks either and paying 20. I think, there’s still some risk in it. Anyway, my two cents.

Jake: Is that pre-split?

Tobias: [laughs] That’s right now.

Jake: Okay.

Tobias: That’s what it’s like a few weeks ago.

Bill: Anyone that is looking at the current business and thinks that they can value that, I think they’re doing it wrong. I think that if you’re looking at what you think it’s going to be in 20 years, and then you place high certainty on that, I think you’re doing it wrong, too. So, there’s somewhere in the gray area that– [crosstalk]

Tobias: I was very generous with my valuation. I had some pretty optimistic assumptions in there.

Bill: Yeah, dude. I don’t know. I don’t spend time on it, I don’t care about it, and I’m not [crosstalk] fine to start.

Tobias: But it does have to fund itself. It does have to fund itself. I did make it so that it did have to find the capital to do, it’s going to do that might have depressed– [crosstalk]

Bill: Capital is unlimited.

Tobias: Still going to sell our shares.

Jake: You could sell shares, man.

Tobias: There’s an effect when you sell the shares. It dilutes you a little bit. You got to [crosstalk] that in.

Bill: I don’t actually think that’s true. I think that if he sold shares here, it’s basically a negative cost of capital.

Tobias: Yeah, I understand the point, but you are still getting diluted.

Bill: Yeah, I guess, but I would argue that you’re probably underweighting the growth

Tobias: Put in some pretty optimistic assumptions.

Bill: Well, we’ll see, man. I like to be a lot of people that lose a lot of money. It won’t be me and I won’t care.

Tobias: Yeah, I’m not touching it. I don’t have any position long or short. I’m out of it completely.

Bill: Yeah, dude, I don’t know. We’ll see. The world’s changing.

Tobias: What’s interesting? Is it really, though?

Bill: I don’t know.

Tobias: So, anybody catch Raoul. How do you say, Raoul Paul? His tweet thread?

Bill: No.

Tobias: Basically, that NFT’s and all these things that–

Bill: Oh, Toby’s gone.

Jake: Oh, no. He was just about to unveil the–

Bill: I know how the world is changing. Oh, there you go. Okay. NFTs and then you broke up.

What’s Driving The NFT Bubble?

Tobias: Yeah, the real power thread is essentially that we’ve all missed it, and there’s a new world, and my internet connection is unstable. Sorry, guys. Evidently, it’s a brand-new world. It feels that way, but I don’t think so.

Jake: Wait. What is he saying? He’s saying that we all missed it, and it’s a brand-new world. What does that mean?

Tobias: JT, what does that mean? Get along NFTs.

Bill: I believe in NFT’s. I think people that laugh at NFT’s are closed minded.

Tobias: Yeah. Somebody said the summary of Raoul’s thread was YOLO. I think, that’s right.

Bill: Yeah. but I guess, I need to know more, because I actually I do think that the he could be pretty right about certain things. I also think he’s– [crosstalk]

Tobias: It’s a very long tweet thread.

Bill: Yeah, well–

Jake: I think. my takeaway from it was that boomers aren’t going to get this and that young people because they’ve been put so far behind the eight ball with student debt and kind of crap jobs potentially, that they are not looking to make a 2x on anything like that’s a waste of their time, and 2x is too small for that small of a starting base. So, they need 100x stuff. So, that’s what they’re going to be looking for, and that’s what they’re going to participate in, and that’s what their quotationally going to move. So, that’s where you don’t want to miss it.

Bill: Yeah, well–

Tobias: They just [crosstalk] pick those 100x’s.

Bill: It’s not lately. You just buy shitcoins.

Tobias: Yeah. I don’t know if that’s a sustainable investment strategy, though. I like the idea of blockchain, I like the idea of bitcoin, and I can see utility for NFT’s. I still don’t want to go and speculate on that stuff. I don’t speculate on other currencies and we’re going to jump into that stuff.

Bill: Yeah. I don’t know, man. I’m pretty lukewarm on all this. I think that it is 100% inevitable that virtual reality takes up a lot of our time, and I think, it’s reasonably probable that some of these early NFT projects will be in like virtual museums like current artists, and I think that the owners of it may get paid.

Tobias: All 10,000 owners of the– [crosstalk]

Bill: I mean, I just what I think.

Tobias: All 10,000 owners of the crypto punks are going to get paid.

Bill: I think some may get paid more than other.

Tobias: How many you need in the museum?

Bill: I don’t know. I don’t know how to do art but I think that people that are laughing at it and don’t understand that digital art– [crosstalk] I understand what you’re doing.

Tobias: I’m not laughing at the price action.

Bill: Well, dude, people are fucking punting like who cares?

Tobias: Well, it’s a podcast. Where else we’re going to talk about?

Jake: [laughs] Yeah.

Bill: I don’t know, but I guess the thing that frustrates me is, I just think that a lot of people are so convinced that– People have to have an opinion on a lot of stuff. It’s like, if people want to do shit on NFT’s, I just hope that if it all blows up, it doesn’t take everything down with it, and same with Tesla, and same with a lot of the speculation. But I also think that the three of us do have to acknowledge that we’ve missed a lot of huge fucking trends focusing on current profitability. I mean, that’s objectively true. I think value investors in general would have been a lot better off not– [crosstalk]

Tobias: I miss beanie babies too much. I missed that completely. The software stuff.

Jake: Okay. But software is not a beanie baby, right?

Tobias: Well, the product of it might be. It’s just the fact that it’s wrapped up in technology. It’s got a art on the blockchain like who cares? I can get a ledger, stick some moon property on the or stick stars on the ledger and sell stars. You now, you get a little note from me that says that you own a star, you can hand it off to your kids. [crosstalk] make it valuable.

Bill: I think that a lot of crypto and NFT stuff is similar to 1999 right now, but there was a lot in 1999 that changed the world.

Tobias: I think you’re right on the time.

Bill: I think this could change the change the world. And if people want to bet that it will, they’re free too.

Tobias: What we’re all trying to do here? At least what I’m trying to do here is value stuff. I’m not going to speculate on it. All of this stuff we’ll have a run up and it’ll run back down, and then maybe some useful applications that may generate money, and then I’ll go and have a look at them then.

Bill: Yeah. Well, that’s a totally rational way to approach investing your money.

Tobias: JT–

Bill: I just think a lot of people are playing. Forget about the NFT thing and put Tesla to the side. I think that in general, the value community has got to look itself in the mirror, and if they’re not going to do it over the last 10 years, I don’t know when they’re going to do it, and say like, looking at current economics and not thinking about what something may become in the future, it’s like the best reminder paper that you sent, JT, right?

Revenue growth, asset growth, that stuff is driving returns. Maybe we are in the end of a bubble, and maybe that’s the wrong lesson. But I also think learning a little from it goes a long way. Part of why maybe I’m on edge is like, I see the all this shit that the Bloomstran episode pulled up and people are just yelling at each other at this point. They’re not even listening to each other. It’s a shame because I think both camps could learn from each other.

Jake: I didn’t enjoy that episode, by the way.

Bill: Thank you.

Tobias: What is it in NFTs? This is my perspective on this stuff is, growth is incredibly hard to forecast. It’s virtually impossible to do. You can get lucky getting positions and stuff that take off. But it’s just really, really hard to do. You use backward looking metrics, you can look at the lay of the land, the economic incentives of everybody in it, and figure out where the growth is going to go, and you still be wrong. You do it most of the time, you’re going to be wrong. Picking up these things and saying, I’ve seen the future and participate– To me, it’s a little bit emperor’s new clothes, honestly.

Bill: Yeah, that’s fine.

Tobias: The reason I’m doing this because I don’t understand it. Give me a break. It’s not like there’s the technology in this price section of the other thing.

Bill: Yeah. Well–

Tobias: The price section of the thing is ridiculous. The technology’s interesting.

Bill: That’s fine. I don’t care about NFT’s specifically. I think that you could make the same argument for a lot of companies that have grown into really big things.

Tobias: Yeah, 100%, I agree with you there.

Bill: I think that people would be served well, thinking about how big things can be in the future. For far too long, I focused on I can’t know the future and I got myself into these soaps like slow growth death traps. It was because I said, you can’t know the future. I’m just like radically done with that part of my life.

Tobias: See, I think a lot of this stuff is cyclical.

Bill: It may be.

‘Style-Drifting’ In Investing

Tobias: That’s hottest] thing about this, everybody’s looking in the wrong place, because they’ve seen what’s worked, and you need to be looking in the places that haven’t worked, because they’re the places that are– Coal has run a mile this year. There are reasons to not like coal for the amount of carbon dioxide that it produces. But as an investment proposition, it was pretty interesting at the start of the year.

Bill: I don’t know. I understand why you run the strategy run. I think, it’s a sound strategy for you to run. I also think that David Gardner’s strategy is sound, and there are different ways of looking at the world, and what I see at least it appears lately, because I’m in a lot of these conversations that are tagged. This is just like two tribes just screaming at each other acting as if their religions correct. No religion is correct in my view and I don’t think this is all that different.

Jake: I think maybe to abstract it a little bit, it is an interesting question to pose. How does one advance, and learn, and incorporate new things and new understandings without drifting from principles of that you would be well served to hold fast to? What’s the answer? [laughs]

Bill: I don’t know. You tell me. You’re the philosophizer.

Jake: Well, actually, I don’t really know the perfect answer to that. It’s very difficult, because it’s such a slippery slope of thinking that you have some new insight. But maybe you’re learning the exact wrong lesson at the wrong time or about to fight the last war. The cycle has turned again.

Bill: Yeah, maybe.

Jake: So, are you better off staying where you were originally and then therefore, at least, one out of every four times you have a shot at being right? Yeah. [chuckles]

Bill: I don’t know. I don’t know the answer. I don’t think anyone that I admire has kept a fixed frame set like mindset. I don’t know any of them. Buffett drifted, I think Munger drifted. I don’t know. like I tweeted today. I think young Buffett would be in crypto, a 100%. People laugh at that, but the arb opportunities in that are crazy. I think that if you listen to him–

I think what’s interesting is that, he says, “If I were young, I would play in these nooks and crannies of markets. Then God forbid, I suggest that crypto is a nook and cranny that somebody might see arb opportunities in, and it’s like, people’s brains explode.

Crypto Arbitrage

Jake: How do you arb crypto? What do you do? One coin versus another?

Bill: You can sell a future on coins and you got different exchanges that have spreads on it. I’m not the one that’s competent to do it, but I am interested in finding a manager that is.

Jake: You think there are people who are just mopping that up right now. This is like poker in 2003, when everyone got sucked into it, and it was just the golden age for sharks to come and feast.

Bill: Yes. I think, people are making a shit ton of money in those markets, because they’re applying advanced principles to a really inefficient market. Then, I think, a bunch of value guys are like, “It’s all a bubble. Don’t even look.” It’s like, “Okay, but I think people are making a lot of money there.”

Tobias: People made a lot of money in tulips.

Bill: If you could sell tulip futures, and you could collect on the counterparty risk, and the underlying crash to zero, you still made money. That’s what arb is, right? You got to be comfortable with counterparty risk on your financial contract, but that doesn’t make it a bad trade.

Tobias: Nobody is in those NFT things, because or the very vast majority like 99, like five sigma nines in there, because it’s they go up a hundred times. [crosstalk] Because there’s arb opportunity in there. Maybe, Hoffstein’s in there arbing stuff [crosstalk].

Bill: Yes.

Jake: Yeah.

Bill: That’s the whole point. Isn’t that the kind of market that you want to exploit inefficiency in?

Tobias: Absolutely. But I just don’t think that’s what most people were doing. Most people are in there, buying them and hoping that they go up a hundred times.

Bill: But I don’t care what most people are doing. I’m pissed off at myself because I’m not the one exploiting them. How can I look at what’s going on there and I can’t even articulate how to do arb. That’s I’m like, disappointed in me for that.

Tobias: Isn’t just lending to somebody else so they can speculate on it, and they just very hard right, since you’re lending it?

Bill: I don’t know. If that’s all it is, then why the fuck haven’t I figured out how to do it? High rates in lending and a collection is a pretty good business last time I checked.

Tobias: I can direct you some people who know about that stuff.

Bill: I would like to talk to them.

Jake: There’s more noble ways to think conduct your affairs, Bill. Don’t worry about missing something like this.

Bill: Yeah, I don’t care about noble. I’m here to make money.

Jake: [laughs]

Tobias: Nobility is the only thing, mate.

Bill: Yeah, well, I mean, look, people will tell you that, making money in energy stocks isn’t noble, people will tell you that making cigarette money isn’t noble. I smoke weed, some would say that’s not noble. So, I don’t mind taking advantage of those that are punting.

Jake: I don’t know. Zero sum games. Find positive in some games to play.

Bill: Yeah, I don’t know. Some of this Bloomstran stuff has gotten under my skin, and that’s a lot of what’s coming out, I think. It’s annoying to see people talk directly past each other and be so convinced that both sides are right.

Jake: Yeah. Well, such as human nature.

Bill: Yeah.

Tobias: If you’re not an NFT, you don’t have some very specialized knowledge about either market making all the technology underneath and you’re speculating, there’s nothing wrong with that. You just got to recognize what you’re doing, and you might want to allocate a smaller portion of your portfolio to it if you’re investing.

Bill: Yeah, to be clear, I have none of my portfolio investing that stuff.

Tobias: There are a few other people listening to the podcast who I’m talking to when I’m talking about stuff.

Bill: Yeah. That’s fair.,

Jake: Group therapy session here.

Tobias: [laughs] JT, you want to do your topic?

Cynefin: Four Frameworks Of Portfolio Management

Jake: Sure. Do some veggies. So, I recently came across this decision-making framework, that’s called Cynefin and its spelled C-Y-N-E-F-I-N. So, nothing like what you would say, reading it and say Cynefin. That is because it is a Welsh word for habitat or maybe familiar. So, a lot of this is a was created by this guy named Dave Snowden, who worked at IBM in the 1990s, and he was looking for ways to help categorize their IP.

They had like almost a university-ish arm at IBM at that time. Anyway, and he wrote it up in a Harvard Business Review 2007 article that was called a Leaders Framework for Decision-making. What it is, is basically like trying to understand the environment that you’re in before choosing your leadership style, and decision-making style. So, he categorizes it into five different domains. Simple, complicated, complex, chaotic, and disorder. So, I thought we might work through some of these to see like, what are the differences and what might be applicable.

The first environment is what he would call like simple, obvious, or clear, or maybe what Rumsfeld would have called Known Knowns. So, in this place like rules and best practices are what are called for. It’s gets clear cause and effect. It’s mechanical in nature, often how things are connected. You can reduce things to their constituent parts, and then put them back together, and that will then allow you to understand– There’s not a lot of slot of slack and slop in the system. So, in that they call it like sense, categorize, and respond.

What you have to be careful there is like be careful about complacency. So, I think, when you look at where 3G has done well, it has been in businesses that I think that are a little bit more like this, where it’s more simple and obvious beer brewing, and maybe some food. But as things have moved into these other domains, perhaps their style doesn’t maybe match as well. So, this is all about efficiencies and zero-based budgeting makes perfect sense in this kind of world. There’s a really good book actually, that’s why it’s probably 10 years old now, but off the beaten path. But it’s called Work the System. It is basically like, anytime a problem comes up, like you write a procedure to figure out how to solve it so that you don’t spend time like reinventing the wheel and you can create a very efficient organization, I think, it works well in that environment.

Okay, the next one is called complicated, and this is what Rumsfeld might call Known Unknowns. So, here’s where expertise is useful. Engineers, surgeons, lawyers, like you hear the knocking in the engine, but you don’t really know exactly which part is wrong, like you need a mechanic to figure that out and fix it for you, it’s complicated. Where you can fall into problems, there is analysis paralysis, and in this, they say to like sense, analyze, and then respond. So, it’s not so much categorizing, but is really digging in and analyzing, making it the complicated, less complicated.

Then the next one is complex, which we’ve talked about this a lot before, right? Complexity and different environments, and these would be the Unknown Unknowns, and it’s impervious to reductionism. Like you can’t take the parts. You can’t take all of the parts, and separate them, and look at them, and then put it back together, and think that you understand it. There’s an emergence to it. Complicated would be a Ferrari and complex would be like a rainforest. Or, as Tlaib has said like, “That’s the difference between a cat and a washing machine.”

A lot of times maybe our financial overlords view things more as a washing machine when it might be more like a cat and you can’t really take it apart the way that they do. This would describe things like battlefields in markets and ecosystems, and cause and effect are really only deducible in retrospect. So, I think, this is probably where you want to look more to bet on optionality, and maybe this gets back to what you were talking about Bill with having–

I think maybe like a more staunch sort of maybe even academic value lens of the world. It makes you a little bit blind to optionality of what things could turn into. So, if you’re operating in a very simple, obvious, clear environment, then yeah, buy something that’s cheap. That’s the only answer. It’s very proceduralisable, and it makes some sense. Even if complicated like, “Oh, I could take this business apart, and I could see that it’s, you know, I’m going to count the cash that’s going to be available, and now I can put it back together, and maybe a bankruptcy or something.”

But when you start getting into complex environments, it gets really hard to take it apart. Therefore, you might be better off sometimes betting on optionality. So, in this, they would say to probe, sense, and then respond. So, you really have to look at it and make little adjustments along the way, and just try to baby step your way through it, because there’s no clear path through a complex environment.

The fourth one is called chaotic, and this is like cause and effect are completely unclear. You basically need to take action first and then find stability somewhere like find a sense of stability, and then respond to the chaos, and try to turn that chaos into maybe back towards complexity or maybe complicated. So, this was like one of the examples they use is like, Rudy Giuliani at 9/11 was obviously a hugely chaotic event. New York turn into like a crazy place for a short period of time, and Giuliani’s top down command and control approach actually worked well. It was just like, “We got to do something now.”

But then later, as it was putting the pieces back together, and more elections, and trying to find back to some semblance of running New York, his command and control of a complex system didn’t really work very well, and he was viewed as a dictator, and draconian, and got kicked out basically. So, the leadership style didn’t match what was called for at that time period. What’s ironic maybe is the in that chaotic place that it’s actually the ripest for innovation, because there’s the most sort of degrees of freedom to try new things.

Then the last place is called disorder, which is, that’s basically if you just not even sure which of the four categories that you’re in, you’re in this no man’s land of like who knows what the hell’s going on here. I don’t even know where we are on the map, more or less, which domain so. You’re trying to get out of that and find which domain you’re into. So, I thought it was an interesting breakdown of different decision-making environments and maybe just keeping that in the back of your head, whatever you’re navigating like what’s one of these might be called for based on the environment that I’m in?

Tobias: Can you just run through them, again? Yeah, sorry. There are four and then the fifth one is you don’t know which one you’re in?

Jake: Yeah. fifth one is kind of like the empty set. We don’t even know what are the four we’re in but it’s simple. complicated, complex and chaotic, and then disorder.

Tobias: Your first step is to try and figure out which one you’re in, and if it’s obvious, then you’re in whichever one you’re in. If you can’t figure it out, you’re in disorder, and you’re probably going to treat it like it’s chaotic until you figure it out. You use that same process maybe to figure out where you are.

Jake: Right. Yeah, and then figuring out which one you’re in will dictate what style like how you should approach trying to wrap your mind around it, and what’s the smart thing to do at that juncture.

Tobias: When you encounter a chaotic in an investment context? NFTs.

Jake: [laughs] Yeah. Well, I would probably say like a market meltdown, probably would fall into the chaotic. You almost need to take some action to just stabilize yourself a little bit and figure out where you are and what your game plan is. Ideally, you’ve already thought about that, and your pre-planning, at least like some kind of a game plan will allow you to shift what would be chaotic, maybe more towards complex or complicated as opposed to just fully like, I don’t even know where the next punch is coming from.

But it can be difficult. Like especially, if you’re trying to be opportunistic, you don’t know what’s going to go on sale or why, and how convincing is the reason behind it, and it’s a lot easier always in retrospect to think that, “Oh, yeah, I saw those prices at that time, of course, I would have been a buyer.”

Tobias: Yeah.

Jake: How many people nailed March of last year very well and just tip talk or–

Tobias and Jake: Bottom ticked.

Jake: March of 2020. Not? Probably less than who say they did, right? [laughs]

Tobias: Yeah, I need to audit that one. Yeah, I feel like value’s probably somewhere between simple and complicated, and I think if you’re looking at growth stuff, it’s probably more at the complex end of it, where you’re better off taking little positions and letting them grow on themselves. It’s that self-iteration or the self-reinforcement is the thing that creates the really good growth stories.

Jake: Yeah, that’s right, and that’s a big takeaway is because it complex requires iterative thinking, because it’s always changing on you, and you don’t know exactly how the pieces are going to interact as the story unfolds.

Tobias: But you want that optionality, right? You want to buy that optionality. So, you got to come up with some way of like working out what the opportunities there. Like what’s the upside, what’s the cost of playing here, what’s the likelihood of success?

Jake: Yeah, and especially, if you can figure out like, if that optionality is being discounted, I think, you could probably make the argument that 2015, there’s a fair amount of optionality in some growthier companies that was not being appropriately priced.

Tobias: Right. Yes, as we’ve pointed out-

Jake: In hindsight.

Tobias: -in awful times, ironic at that one.

Jake: Nailed it.

Tobias: What’s the book called?

Jake: This is not a book. This was just an article in some Wikipedia, [chuckles] googling that I did.

Tobias: What’s the word that we use? Can you just spell that word, again?

Jake: Yeah, it’s C-Y-N-E-F-I-N, Cynefin. Actually, where I saw, there was a woman from the CIA, who had been working there for 30 years, who did a presentation, that was like a pet-ish talk, but she talked about this, and it was the first I’d heard of it. So, it’s like, “Oh, okay, I’ll go kick the tires on that a little bit,” and it turned out it was interesting.

Tobias: Yeah, that’s very interesting. Look for a hedge fund with that name.

Jake: Oh, yeah. Except, it’s so hard to say. [laughs] No one’s going to get it right. Well, that doesn’t stop them.

Tobias: I was going to say throw you jokes in, three questions in.

Jake: Jokes were even better.

Bessembinder’s Lessons For Finding Outliers

Bill: Hey, real quick. This is from the lessons from Bessembinder that Baillie Gifford had. So, the four big ones that you want to look for is strong crash accumulation, rapid organic growth, larger draw downs in the prior decade, I think, it’s kind of interesting. Then higher R&D spending. I assume that’s relative to peers. But that’s what you’re looking for on average, if you want to pick the outliers.

Jake: These would be the 4% or whatever the Bessembinder identifies as carrying the entire weight of the indexes returns, right?

Bill: Yeah, that’s right. Yeah.

Jake: These are the four hallmarks of those 4%.

Bill: Yeah, I think they came up with 22 things, but those are the big four.

Jake: Okay.

Bill: I sometimes wonder if strong cash accumulation like, they don’t offset that with share base comp. So, I wonder how they would adjust for that or if they would.

Tobias: I wondered about that research a little bit how backwards looking that is like, if you look at the current winners in the market, and you know, one of them is strong cash accumulation, and the other of the big four was like an extra or large volatility in the preceding decade.

Bill: Yeah. Big drawdown. Yeah.

Tobias: Big drawdown.

Bill: Yeah, not exactly the case of a lot of these, yet.

Jake: [laughs]

Tobias: But that was true, I mean, it was true of Google, or Amazon, or Apple.

Bill: Oh, yeah. But I’m just saying like, I’m going to use the wrong stock, but like Zoom, I don’t know that Zoom’s had– I know, it’s drawn down 50% now, but that was in the prior decade, and these drawdowns that they cite are really big. I don’t even know that 50% would count.

Jake: What does that draw down like why it would be– [crosstalk]

Bill: Bank of America. Bank of America drew down 69%, Oracle drew down 77%, Apple 80% drawdown, Netflix 80% drawdown like those are drawdowns. [crosstalk] Amazon–

Jake: What’s the causal mechanism for why a big drawdown in the decade before would have any reason for us to say like, “Well, yeah, that’s going to be a mega winner.”

Bill: I wonder if it’s a little bit like the NFT thing that we were talking about before, where it’s like a technology that people think could be really, really big, but then it gets punched in the face with some reality, and then people puke it, but then the thing that the first people actually saw starts to materialize. I have no idea that it’s true.

Jake: So, like, Carlota Perez’s technological innovations like– [crosstalk]

Tobias: Is it the hype cycle? Is it the Gartner Hype Cycle.

Jake: It’s close.

Tobias: Same idea.

Jake: Yeah.

Tobias: It’s get ahead of itself and– [crosstalk]

Jake: But there’s like and euphoric phase, and then, usually a washout, and then an installation phase when like, “Oh, this actually does something valuable.” It becomes the norm, and then it becomes boring.

Bill: Yeah, I think we’re in the euphoria phase in a lot of NFT projects. I agree with you that the trading is probably closer to gambling than anyone actually valuing it. But I do think there’s something there, there.

Tobias: I do, too. I can’t separate it out from the– I think the technology is interesting. I’ve seen people using it for conferences and things like that buy your NFT now you have that access to a conference. So, it’s like a ticket like that makes sense. There’s clearly there–

Jake: Why does that have to be on a distributed ledger?

Tobias: But what if it’s a rock concert and there’s like you don’t want the scalpers getting the tickets and then reselling them to somebody else?” So, you just like, you’ve got to be the person who bought the ticket directly. Maybe they get rids of the [crosstalk]

Jake: Yes, on that. Can that just live on ticket masters in journal– [crosstalk]

Bill: Don’t be such an older man.

Jake: [laughs]

Tobias: Don’t be such an old man.

Jake: It doesn’t need to be.

Bill: What if you go into your VR world, and you want to go into the Bored Ape Yacht Club, but in order to enter that club, and it’s like this virtual world that they’ve built out that’s like super kick ass because they’ve been working on it for a while. But in order to get there, you got to own an avatar. That may not matter to many people, but people pay tons of money to get into a real golf course. So, I don’t know. Is this definitely going to be that much different? I don’t think so. But it’s a long ways off that I will agree with.

Jake: That’s a pretty big bet to be making today that there will be this future like ended that picture of a 12-bit picture of a monkey. It’s going to be the golden ticket to-

Bill: Yeah. No doubt.

Jake: -[laughs] to the world that that you want to enter.

Bill: I agree. I just happen to think that those monkey tickets may be evidence of one of the first online communities that believed in this stuff. I know they weren’t the first. I know they were like crypto kitties before that and stuff, but I think what the apes are doing is different.

Cyclicals & Commodities

Tobias: Very specific question here. ​Thoughts on the iron ore giants like BHP, Vale or RIO? Down about 50% off the highs. Massive dividends even after the price of iron ore crashed. Chinese steel to ramp back up post-Olympics.

Jake: I haven’t really looked at that.

Bill: I don’t do cyclicals in commodities.

Tobias: Yeah. I think you need some specialized knowledge that I’ve lost some money playing the other side of that tail end of cyclical down cycle.

Jake: Were you weren’t be Australian if you didn’t speculate in raw materials?

Tobias: I wouldn’t call that speculation of the time sort of investing, but-

Jake: Oh, sorry. [laughs]

Tobias: -it didn’t help. Evidently the iron ore price cut, that’s why I lend less than that there is no bottom for some commodity prices.

Bill: Yeah. I’ve got a small lumber position on and I happen to talk everyday with somebody who’s intimately involved on it, and it’s terrifying. I would not know anything about commodities outside of the ones they own, and I barely know anything about those.

The Roaming Bubble

Tobias: Do you think there’s any connection between the Tesla running back up or the NFTs, like I feel like there’s been this moving bubble, and I don’t want to say, bubble sort of pejorative, but I want to call it a bubble like this moving-

Jake: Enthusiasm.

Tobias: -speculation. Enthusiasm, it might be better. Yeah. It went from probably, Tesla, and then it shifted into, I don’t know, AMC, or GameStop, or something like that. Then, it shifted into the– It’s been in the cyptos NFTs.

Jake: [crosstalk] now apparently. Rental car companies?

Jake: Is it Avis? Yeah.

Jake: I guess, it’s car.

Tobias: Is that CIR?

Jake: I spent running today, I guess.

Tobias: Yeah. Any thoughts? Is there anything that you might solve it together?

Jake: How come nobody ever it takes tries to pump mine like that? I don’t get it.

Bill: Yeah. I think Qurate should be pumped.

Jake: Qurate needs to get round rammed up word, huh?

Bill: It seems as though it could be a meme stock. I’m not above selling to the meemers. Though, some people have expressed that they’re disappointed, I said that once and somebody was like, “I’m disappointed in you for saying that.” I said, “Yo, man, I’m just playing the markets that exist.”

Tobias: Disappointed me for saying what?

Bill: That I wouldn’t mind if Qurate got meme, then that I flipped it for $20 billion or something like that.

Jake: [laughs]

Tobias: Well, you’re on only human, mate.

Jake: I know.

Tobias: If someone wants to pay me a silly price with my stuff, too, they can have it.

Bill: Yeah, it’s a liquid market, man. It could be.

Tobias: I’m not saying to get die with it.

Jake: [laughs]

Tobias: Dave C, Do you guys have a particular filter screener, when searching for companies, and which filters do you use i.e. ROIC, PE? Yeah, I use EB to EV as my first cut, and then I look for some quality.

Jake: I’ve screened less now than I used to.

Tobias: That’s because any sort of rationality has left the market, what you got to do is not screen for stuff? Look at what’s trending on Twitter. That’s where you find it.

Jake: Yeah, that is a good joke.

Tobias: [laughs]

Jake: I don’t know. There’s sort of a serendipity to just kicking the tires on anything that comes in however it gets there, screening or otherwise, that I think can be worthwhile. If you’re screening only, it’s likely to have been so picked over at this point that it’s really difficult to use that as your only input. To have that as your only part of the top of the funnel, I think is probably suboptimal.

Tobias: Yeah. You get this issue that everything comes in and out of favor. So, when it’s in favor, it’s picked over and when it’s out of favor, it’s not working. So, you definitionally need to change as often as you possibly can for whatever is working that’s how you outperform.

Jake: [laughs]

Bill: I like that plan. That’s a good plan.

Jake: Oh, come on. No.

Tobias: First order thinking. None of that stuff going on.

Jake: Area man goes full momentum. [laughs]

Tobias: It worked for Ark last year. That was just a heavy concentration of the NASDAQ highest momentum NASDAQ stocks.

Bill: I don’t mind momentum allocations. That makes sense to me.

Tobias: I think even momentums had not a great year this year. I don’t know what has worked this year, but maybe it’s only growth, again.

Bill: Yeah. I don’t know. I don’t think so. A lot of growth names have gotten hurt this year.

Tobias: Yeah. Corey– [crosstalk]

Jake: Especially, since like March.

Tobias: I haven’t looked at screen for a little while, but you tell us what’s been working for the last 12 months?

Jake: [laughs]

Tobias: He left to go do something more important.

Tobias: He did. [laughs]

Bill: That’s right.

Tobias: He came into throw some emojis and disappeared.

Jake: Yeah. He went back to the beach.

Bill: I was at the beach earlier watching tarpon whale on a school of baitfish. It was dope. It came right out of the water. Yeah, it was cool.

Tobias: What’s a tarpon on big fish?

Jake: One way [crosstalk]

Jake: Yeah, man. I’m outside a fair amount now which is nice. Did Burry win in spades, hiss Tesla short? No, he did not, Samson. Good point.

Tobias: Samson earns a little bit of Tesla. He likes to come in and remind us every now and again.

Bill: Now, a lot of it, I guess.

Tobias: Yeah.

Jake: Fair play to him.

Tobias: Bank of America is up 60% this year. Financials are working.

Jake: Really? That’s how much, huh? That’s interesting. Yeah, what would rates– that’s just people expecting the NIM to blow out with rates going up or something.

Bill: No, low base. You’re coming off a big credit loss fears. It does makes sense to me.

Tobias: The question from Corey. Corey is back. The question is, which of these strategies is working this year on your little dashboard?

Jake: Factors, I guess, right? Is that what–

Tobias: Is it factors? Yeah, I guess, it’s a factor. I think it’s either ETFs or underlying names.

Bill: Yeah, [crosstalk] America, I think you got yourself a story of rates and credit losses. I think if you sum it up, that’s what it is.

Tobias: Samson wants to know, ​Who’s right Ark or Bloomstran?

Bill: I don’t know. This is [crosstalk] what got me so heated not too long ago like, why don’t we just not do this?

Jake: [laughs] Yeah. Who’s right? Protestants or Catholics?

Bill: Yeah.

Jake: Go.

Value Investors Should Look In Niche/Private Corners

Tobias: Corey’s got to question, [laughs] Yeah. Corey’s got a question. ​Here’s my open question: is value in public markets a “dead play” after it was financialized (ETFs, etc)? Is it better for value investors to look in niche, private corners?

Bill: Yes.

Tobias: That’s the idea. Look niche, it doesn’t have to be private, but yet, the more niche the better.

Bill: My answer is yes.

Jake: It’s contrarian take. Is price to book niche at this point?

Tobias: Possibly, yeah.

Bill: Ah, price to book sucks.

Jake: [laughs] Exactly. That’s why it’s niche now.

Bill: Yeah, but it’s also– [crosstalk]

Tobias: Core says nothing worked this year. Nothing’s worked this year.

Jake: Oh, good. [laughs]

Bill: Anti- factor year.

Tobias: Anti- factor year.

Bill: Interesting.

Tobias: There we go. There’s the title field year and paper, Corey.

Jake: We might call that disorder in the-

Tobias: Disorder, yeah.

Jake: Cynefin world.

Tobias: Interesting,

Jake: Full circle callback.

Tobias: Value Stock Geek ​says, QVAL up 30% for the year, SLYV up 30%, QQQ is only up 23%.

Jake: Yeah, I have occasionally update the RZV which is small cap value versus NASDAQ, and then also as players Shopify versus Bed Bath & Beyond. Sometimes, I will update those on my Twitter and in the last, I don’t know. You can go look, but it’s the value side of things is crushed those two. RZV is crushed QQQ and Bed Bath & Beyond is crush Shopify.

Tobias: Corey says, ​Value and size both sort of fell apart after an early lead. Low vol getting crushed. Junk ripping over quality. I had an interview with real vision February 2020, I thought that low volatility was going to get smashed. So, probably, the only person who remembers that, sir. There you go.

Jake: [laughs] Yeah. No one watched it.

Tobias: That’s a niche take. That’s a niche take, too. Oh, we haven’t had an inning update. Bill, what are you doing?

Jake: Oh, inning update. What are you doing?

Bill: I don’t know. [crosstalk]

Tobias: I guess, I questioned it.

Bill: I said you guys that there’s been a lot– I think we might be past at all. But I think it may have reset. I don’t know that doesn’t mean that we’re going to crash, but the melt up probably happened. I spent a lot a lot of carnage. I’ve been saying that for a little while now.

Jake: It’s not showing up in the index.

Bill: Yeah, but that’s because the big businesses are crushing.

Jake: Hiding a lot of decay underneath them.

Tobias: Yeah, it’s narrow end.

Bill: Yeah.

Tobias: Small Value has gone sideways for like 6+ months now.

Jake: Do you think breadth is useless now then as a thing to keep your eye on?

Bill: I don’t know. If everything implodes, it’s hard to argue Google’s going to have like a ton of E on– The E would suffer but like still, man, you say what do you want to own for five or 10 years? I don’t know. Coming up with a better argument the big tech here is pretty fucking hard for me. I mean, fine, Berkshire you want to go like older economy, I get it. But I don’t know. I think big tech is a good place to hide.

Liquidations Spec Sits Up 24%

Tobias: Liquidations spec sits up +24% in 2020 & 33% 2021 year to date. Thanks, Wabuffo.

Bill: Yeah, liquidations would be something that I would be interested in. I actually talked to Wabuffo about that not that long ago.

Tobias: That’s a good approach in a market like this. It’s a bubbly market if you can and has a spectacular returns to things that should be pretty uncorrelated to the market at least.

Jake: Hopefully.

Tobias: What are you laughing at, JT?

Jake: Nothing, just that correlation tend to see to– [crosstalk]

Tobias: Liquidation, you should know what you’re getting back out. There could be some mark to market in the before the liquidation comes around. Yeah, then, I guess, you got to know what they’re holding too. Oh, yeah, that was fairly interesting.

Zillow Caught Holding The Bag As 93% Of Phoenix ‘Flipping’ Portfolio Listed At Loss

Tobias: So, Zillow got caught holding the bag in flipping houses. They said in some regions, that’s like 93% of the houses are on the market below what they paid for them.

Bill: Yeah. It’s a labor issue, right?

Tobias: But it was foreseeable. Perhaps, that was not a great business. But it was not as good a business to be in as business that they had.

Bill: Yeah. I don’t know that– Look, the bulls have said to me, they didn’t lose that much, and it’s still worth shooting the shot. So, in any big idea, losing a couple of million bucks doesn’t actually matter. We’ll see where it all settles out. But even if it’s a billion dollars, I just don’t know that people are going to care.

Tobias: On house prices at like all-time highs?

Bill: Yeah, I mean, I think they’re going to go higher.

Jake: So, they want to hold that inventory and don’t turn it over, because it’s just getting more valuable all the time?

Tobias: Yeah. [laughs]

Bill: Well, they turn it quickly, and they may– Look, I understand it. I’m not going to say like, “Go along Zillow.” I’m just saying that the people that believe in the vision, I don’t think that this particular issue of how we’re characterizing holding the bag, I think those people look at this as a normal risk of growth. I think that the people that are invested are still for pursuing the long-term plan. So, what they would say is, you’re drawing an incorrect conclusion from a data point that was unique due to a labor issue. Whether or not that’s a flawed assumption, like we can argue that, but I’ve talked to some bulls about it, and they’re not particularly concerned about this issue.

Tobias: Has it always been the case that there’s always like every single cycle, someone says, “Look at how the house prices are going? Let’s go and buy a whole lot at house prices and foot them up, like let’s do it at scale rather than letting all these individual or small businesses that we’re going to see how big we can run this thing up, and then inevitably, every single time?” This happens.

Bill: I don’t know enough history just to say yes or no. It would make some sense. But I don’t know. They’re not planning on holding. I don’t have no fucking clue. They’re just the big house flipper in my view. But they think they have a data advantage and they charge huge fee according to my real estate guy. They charge like 7%. So, they’re getting another percent and then they’re going to probably jam people on the loan, because it’s easy in one stop shop. I don’t know. It could work.

Jake: What’s the 7% fee? They charge like a commission, 7%?

Bill: Yeah. Well, I think the total– I think, I was having a conversation with my buddy who’s in real estate. I said, “Do you use Zillow for anything?” He was like, “No, not anymore.” What he said is, he was like, “Their fees are pretty high.” He’s a compass. So, he’s betting on a different model. I actually like compasses model a fair amount.

Tobias: Amigos, it’s time.

Bill: All right.

Jake: This fast? Barely got over the finish line. [laughs]

Tobias: We’ll be back next week, because we got to get that 100th episode in the bag.

Bill: Is it going to be hundred?

Tobias: No, not next week, but–

Tobias and Jake: 23rd.

Tobias: November.

Jake: 23rd.

Bill: That’s exciting.

Tobias: Yeah. All right, folks. That was fun.

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One Comment on “VALUE: After Hours (S03 E42): Pzena Value And Quality; $TSLA, And NFT Bubble; And Cynefin Framework”

  1. Enjoyed the episode as always. I’m curious about your opinions regarding “superinvestors” and whether they write down their investment thesis or not. Do you believe that Buffett wrote down his investment thesis for GEICO or do you think he read about it enough until he developed an investment thesis in his head?


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