VALUE: After Hours (S03 E47): Value Rises, Growth Falls; Monster Winners; and Lasers

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

  • Holding For Very Long Periods Provides Monster Winners
  • Warren Buffett vs Terry Smith
  • Favorite Non-Buffett Investor
  • This Is How A Laser Works
  • Value Rises, Growth Falls
  • Great Investors Survive Rough Periods & Thrive In Good Periods
  • 486 S&P 500 Stocks Down 25% Last 30 Days
  • Value Investing – Cult Or Religion?
  • Caffeine Responsible For The Industrial Revolution
  • Which Stock Do Cathie Wood & Warren Buffett Both Own?
  • Accuracy Of The Fear & Greed Index
  • Is Now The Time To Investing In British American Tobacco?
  • Munger Says Markets Crazier Than Dot-Com Era
  • Crypto, NFT’s, And Bored Apes
  • Phil Fisher vs Howard Marks
  • Jim Simons vs Bill Miller
  • Jeremy Grantham vs Stanley Druckenmiller
  • Paul Singer vs Bill Ackman

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: I’ll let you know. It looks like we’re going live. That is the little alert. I’d say, we’re live now. So, it’s 10:30 AM. I forgot to send out the warning. We didn’t know what time we were going live. So, we’ve got lots of things going on. JT is in his gigantic personal library, and Bill’s going to dial in from the moon.

Jake: Jesus. What a mess. Yeah– [crosstalk]

Bill: I’m really under a bridge scratching myself, fiending for days that things go well.

Tobias: I’m rolling.

Jake: I’m calling in from the Palm Springs Public Library. So, that’s where I’m at today.

Tobias: There has been some wild things going on in this market, fellas. I think, we’re going to have to talk about some of those things.

Jake and Bill: Yeah.

Bill: I said that, this reminds me– I said this on the Twitter machine. It reminds me that when I was a freshman, there was this girl, Juliet.

Jake: [laughs]

Bill: She was so hot, so hot. Once upon a time, in Mr. Gavilat’s English class, she talked to me, and I was like, “Cool. I got a chance,” and then just totally shattered my will the next week, and I expect that’s what the market will do.

Jake: What happened? How’d she broke your heart?

Bill: She hooked up with an older guy that drove a pretty cool GMC Typhoon and I knew I had no shot after that.

Jake: [laughs]

Tobias: You got that Typhoon yet mate. What are you driving, now?

Bill: A purple Chrysler minivan. What you know about the flexing, dog?

Tobias: [laughs] The Cadillac of minivans.

Jake: Purple, though. That’s bold.

Bill: Yeah, this is a true treasure, this car.

Tobias: We get some good names in here. We get Saskatchewan, Scotland, Toronto, Seattle, two Seattle’s, Netherlands. Someone in British Columbia, I’m not going to have a go with that name. Sunny Coast from Queensland and Norway. What’s up Sunny Coast?

Bill: I think, I owe a couple y’all some information, if I do ping me. I’m sorry. I think, one of my Canadian friends is tuning in, and I promised to send him something and it didn’t. If so, hit me up.

Tobias: I think, BB, you want to take it away?

Bill: Yeah. First of all, let’s talk about how Value: After Hours, indirectly helped kids in need get gift cards because a fan of the show pinged me and we got some pressure on Kroger and they contacted her and sent the cards out. So, shoutout to the community for helping pressure them a bit. Anyway, now that I patted us on the back. Comments in last week was like, “Why doesn’t Bill take any shots at growth investors? Why is he so angry at value?”

Jake: Because he is one– No, I’m just kidding.

Tobias: [laughs]

Is Now The Time To Investing In British American Tobacco?

Bill: Hey, now, the answer is that, I hate myself. So, I like to yell at myself. That’s just a general thing. But secondly, I just think that if people are coming to this show on average, we’re not talking about valuation agnostic investing. I think that we all agree that valuation agnostic investing is not really what we do. So, that’s why I don’t even really mention them. I will tell you people that ask like, “How has David Gardner impacted Bill’s thinking?” David, if you ever hear this, I’m sorry, because I know you care about conscious capitalism.

But the idea that I’m toying around with is British-American tobacco, and that’s how I’m implementing what he has taught me, and that may sound silly. But I think the backend with these nicotine pouches has the potential to really surprise to the upside. I have a theory that society’s big problem isn’t nicotine, it’s cancer. I think that these pouches are a real platform that could turn these things into growth companies, again, down the road. I think, you got to think five to 10 years out to get your head around that and maybe that’s wrong, but that has been how I have implemented the teachings.

Tobias: So, the thesis would be that there’s going to be a transition from the darts, the coffin nails to the pouches.

Bill: Yeah, which are just straight nicotine to the dome. It’s no, you don’t have any tobacco staining your teeth or any of that stuff. I look at our world and we’re hooked on opioids or a lot of people are. We objectively a lot of us are like abusing caffeine to get through the day. Opening our minds to marijuana and psychedelics like, I don’t see why nicotine is not perceived as a performance enhancer if you can get the cancer stink off it.

Caffeine Responsible For The Industrial Revolution

Tobias: I forget where I heard this, but I think it’s a pretty- it’s an interesting statistic that basically caffeine is responsible for the Industrial Revolution. Have you heard this theory? Sorry, I can’t remember where I heard it, but it’s only in the last like year or so that I heard it. So, basically, you know, what used to happen was people got up and work their farms or whatever, and to get going through the day, and it’s pretty boring. Possibly, even JT, did you tell me this dude? Am I telling you a story?

Jake: No, I don’t know this one.

Tobias: So, this is like, people used to wake up and they’d be bored, pushing the plough whatever. So, they just start drinking, because you can get your calories drinking as we all know. And they just keep on going through the day, three sheets to the wind, because it’s boring work, and it’s more fun if you’re drunk. Then, they discovered caffeine, the UK discovered, not discovered– rather they just kind of [crosstalk] imported the beans from somewhere else and it became a little bit more fashionable to drink coffee. So, people started drinking coffee and rather than being drunk in the morning. They got this like caffeine boost, and you start thinking a little bit clearer, and all of a sudden, you’re like, “What we need to do is mechanize all this stuff and stop putting this bloody plough.”

Bill: [laughs]

Tobias: And so, that was the start of the Industrial Revolution. They point to the fact that Middle East discovered caffeine first, and there was that early algebra and at one point, that was where all of the intellectual [unintelligible [00:06:40] in the world, where it was all going on. Anyway, just an interesting factoid. No idea if it’s right or not, can’t remember where I heard it, but it’s from the internet. So, it’s probably true.

Jake: Must be true.
Bill: Well, it’s from the internet, and people heard it on a podcast now. So, it’s definitely true.

Tobias: Now, it’s real. You can cite this podcast.

Bill: That’s right.

Jake: David, he buys Amazon at 80 cents, and your equivalent of that is buying British tobacco? [laughs]

Bill: I have the– Dude, the value disease is deep in me. I can’t just like completely shut it.

Jake: Fair enough. I’m teaching.

Holding For Very Long Periods Provides Monster Winners

Bill: I mean, look, what he taught me is how to think years and years out. That’s my big take away from him. And I understand that, like, that’s very, very hard to do. But I always would either write it off or assume it had to be the downside. I never allow myself to imagine an upside scenario. So, that idea to me is something that currently appears inexpensive to me in decent value with potential upside optionality years out. That’s how I internalize his teaching.

Tobias: I think, one of the things that he’s almost certainly right about is that, just holding for very, very long periods of time, gets the business working for you, and you’re going to have some monster winners. I don’t know of any investor who gets older and more experienced. He says, “What I really need to do is trade more often.” They all go exactly the opposite way. They all say fewer trades– fewer better trades, like when I say trades, investing like buying something and just letting it roll. Then, the only time they sell is when it’s just [unintelligible [00:08:18] unless they’re Buffett in which case he just doesn’t even bother then just let it go.

Jake and Bill: Yeah.

Bill: Probably, Terry Smith even better at that.

Tobias: Not selling, even when it’s overvalued?

Jake: Yeah.

Warren Buffett vs Terry Smith

Tobias: Is Terry Smith been around long enough that you can say?

Bill: Oh, boy, Toby. Oh, boy, what are you about to say? You’re about to get us in trouble.

Tobias: I get that he’s an older gentleman. I don’t think, he’s old yet but he is older– How long has he been running Fundsmith?

Jake: I don’t know.

Bill: I don’t know this answer off the top of my head. But I think, he’s got a long track record.

Tobias: Let’s see it full cycle.

Jake: I think Fundsmith-

Bill: Oh, man. Oh.

Jake: -if I remember right, it might actually be a little bit of a newer- [crosstalk]

Bill: He did it to us.

Jake: -relative to Buffett’s track record.

Tobias: Say it again.

Jake: I think it might be a little bit of a newer thing relative to-

Tobias: Relative to Buffett’s track record, yeah.

Jake: Maybe, in the last 10 years or something.

Tobias: That’s what I would have said. I think that until you’ve seen a growth cycle and a value cycle, you can’t really draw any conclusions and I throw that one at them.

Jake: November 2010.

Bill: Right. Okay. Good luck. Send your comments to Toby.

Tobias: 2010. 2010, that’s the entire growth cycle but see how it runs from 2000 to 2010.

Jake: You mean 2020 to 2030?

Tobias: 2020 to 2030, yeah.

Jake: [laughs]

Tobias: September 2020 to whenever it comes to an end.

Government Intervention Favors Larger Companies

Bill: Yeah. I pulled up on Koyfin like growth risk value all the way back to the– I think to 2000. I was talking to Rob. Rob actually pulled it up, I looked at it. It is wild to see how wide the dispersion was, and then it how it collapsed, and then how wide it got again.

Jake: It’s like two different worlds, huh?

Bill: Yeah.

Jake: Like 2000 to 2010 and then–

Bill: Yeah. If you just simply break it into factors, we really are right back in 2000, at least visually.

Jake: Mm-hmm. So, is it a new world or that was just a phase like everything?

Bill: I don’t know, man. We’ll see.

Tobias: It’s too early to say it, but in 10 years’ time, I’ll let you know if it– [crosstalk]

Jake: It’ll be obvious.


Bill: That’s right. I do think that there’s a lot of consolidation and a lot of like, I hate to be this guy, but I don’t because I actually think it’s true. It just seems to me that more government intervention favors the bigger and bigger guys. It’s just one anecdote, but I was talking to a small business guy around town the other day, and I live in a really small town, so, it doesn’t– This is not a sufficient sample or anything but just the pain that he’s going through and how hard it is for… capital, and then I looked at like, start… like they’re just eating his lunch, poor guy.

Tobias: Yeah, it’s tough out there for the little fellas. Bill, you got anymore on your topic?

Bill: I don’t think so. I think that’s all I had.

Jake: Anyone left to offend?

Bill: Yeah. Hunter said, he’s not sure if I like investing anymore. I’m not sure if I do. So, you got that going for you…

Tobias: Is that a comment?

Bill: Yeah.

Jake: Ah.

Tobias: I got a couple of– [crosstalk]

Bill: Oh, here’s one. I just said the commonality between Buffett and Gardner’s, they both have streams of income and people got offended. I’m not comparing Garden to Buffett folks. Leave it alone. That’s the last comment I have. Now, I listen.

Munger Says Markets Crazier Than Dot-Com Era

Tobias: [laughs] There’s a few things that happened while we were away. One of them was the Munger. Munger did a podcast. Everybody knows Munger did a podcast and one of the comments that he had on the podcast was, he thinks that this current round is crazier than the dotcom bubble.

Jake: That’s interesting, huh?

Tobias: How do you feel about that?

Jake: Terrified?

Tobias: [laughs]

Jake: I don’t know. [laughs] I’m trying to imagine what has been his data flow in which to make that proclamation because if I had to guess, I would say, he’s more disconnected than he probably was in the 90s.

Tobias: Yeah.

Jake: I feel like he was probably doing a little bit more work around headquarters in the 90s than he is today.

Tobias: Yeah.

Jake: Because he was a spry, you know, 80-year-old back then. [laughs] So, I don’t know. You have any intuition around that?

Tobias: What he’s seeing or whether the– [crosstalk]

Jake: Oh, yeah why would he– what would it be that he’s saying that’s making him make that statement?

Tobias: Potentially, like the crypto, the NFTs, that’s pretty crazy. NFTs that might work, but that stuff’s crazy. Let’s run NFTs back in a year or so and let’s see how cool it all looks then. Yeah, what about the Munger? That was another thing that was– Munger had a margin loan against the Alibaba. Did you see that?

Jake: Yeah. He’s– [crosstalk]

Bill: That degenerate.

Tobias: He looked like he was down like 90 plus percent on that margin loan, on that position.

Bill: Is that bad?


Tobias: You can come back. I mean you can’t turn back from here. Given that– If I could put that position on right now, yeah, I’ll do it, like $2.7 million of the margin loan against $2.7, whatever it is, $3 million of Baba.

Jake: Yeah. [crosstalk]

Tobias: Jump on it, JT. You’re more of an expert on this stuff.

Jake: I don’t know what’s the most recent developments of that. The margin loan that they had in Daily Journal before was for, I believe the funds went towards actually investing in JTI, their software, little startup that they have inside of Daily Journal. So, I don’t know about if there was more margin added with Baba, to buy Baba, or if there’s still cash available. He was getting cheap leverage probably in his Schwab account or whatever the hell it is right. [laughs]

Tobias: His Robinhood account?

Jake: Yeah, basically. Yeah, maybe it was IB even where they have the lowest margin. [laughs]. So, anyway, I’m not sure what the specifics are now, but obviously, he’s more leveraged than he was when the equity component of it just shrinks a little bit.

Tobias: Appleseed says, “The margin loan is from 2014.”

Jake: Yeah, as put into JTI. I think, so.

Tobias: Michael Mauboussin has a good thing at the moment where he says that, “You got this problem as an investor where it doesn’t really matter how smart you are, you got the same hardware installed. So, you still going to react the same way to, we’re all going to panic, we’re all going to do other things.” Any views on that?

Jake: Is that a new statement?

Tobias: We’ve known that for a while but I just think, it’s an interesting– It’s just a handy thing to remember that no matter how smart you are you still got all the same caveman stuff running through.

Bill: So, I think that this ties in perfectly to my comment about Gardner and Buffett and the commonality. I think that the answer here is you want to be conservatively enough positioned, Gardner happens to have subscription revenue that pays his income, Buffett happens to have an incredible insurance organization. I need to figure out whether or not it’s cigarette dividends. I don’t know what the answer is for me. But you got to have a personal financial balance sheet that enables you to not panic and not fore sell. I think that’s the key to all of this.

Jake: It’s not money from the podcast. I know that. [laughs]

Bill: Hell no. It isn’t.

486 S&P 500 Stocks Down 25% Last 30 Days

Tobias: Moving on. Frank Zorilla, who’s ZorTrades on Twitter, I saw somebody criticize this as being not true. So, take this with a grain of salt but I didn’t think it was kind of an interesting– It’s an interesting data point and it seems to have been backed up by, whose Atreides Asset Management? You guys know Atreides? No?

Jake: Oh, yeah. Give me a second. Of Gavin Baker.

Tobias: Gavin, Gavin Baker.

Jake: Yeah.

Tobias: So, these are the two tweets. So, Frank Cirillo says that, this is five days ago, so, it’s all moved around a bunch since then. But the point is basically that Spy was down a measly 4% from all-time highs, but at the same time, we’ve got 486 stocks out of the 500. However, many there aren’t Spy, down 25% more in the last 30 days. So, we’ve been talking about that a little bit that there has been this. I’ve been seeing it mostly in the growth stocks, there’s a big crash, but that’s clearly like that’s everything if it’s 496, everything’s been really beaten up. You still there, Bill?

Bill: Oh, I’m here. I’m crying.


Bill: I’m crying as you are saying this. I don’t know all of them.

Tobias: Gavin Baker added that in 2000 or in the run up for the dotcom, the whole market– the index was held up by two stocks, and so, he’s like the fact that it’s four stocks, he says, it’s pretty [laughs] basis.

Jake: Robust now.

Tobias: At the moment, it’s four stocks that are keeping others like responsible for 70% of the performance over the last, whatever, six months, 12 months, something like that.

Jake: That’s crazy.

Bill: It’s twice as much.

Tobias: It’s not narrowed down yet. What is it finally narrowed down to Google and Microsoft, last who is standing?

Bill: Tesla.

Jake: Apple.

Tobias: Tesla. [laughs] I mean, why not? It is funny that through that whole sell off Tesla didn’t really get binged up that much until like maybe Friday.

Jake: That’s an enigma to me. I don’t– No idea what’s going on there. Makes [crosstalk]

Tobias: What else can you do? You just kind of observe at this point like, it’s absolutely baffling to me.

Jake: It is. Wish everyone luck.

Tobias: Yeah. I got nothing else to say but I don’t know.

Accuracy Of The Fear & Greed Index

Jake: I did look at the TD Ameritrade has this kind of Fear & Greed index sort of indicator thing that they use that’s got a bunch of their own proprietary sort of like our retail people buying basically inside of TD Ameritrade. It’s only been around for a couple years, but when you look at it, it’s like, it’s a Total counter indicator for the most part it seems like. Lowest reading came in March of 2020 and the highest was like this summer, and now it’s like– It’s back up pretty close to where it was the summer.

Tobias: In terms of bullishness, in terms of like people feeling bullish for it at a time.

Jake: Right. You can use that however you want into your thinking. But it’s probably doesn’t bode particularly well. I don’t know.

Tobias: Well, Fear & Greed was kind of interesting, like Fear & Greed, the one that’s on the, I think it’s CNN’s or something like that. Fear & Greed got down to, it was just a hair over 20 which is typically been a time that you– This is clearly, this is not part of my process. This is not something that anybody– I just all watch it for fun. Like just to watch it. But Fear & Greed, it was down to 20, which is like, if you want to swing at it, you got to swing it at theirs. So, it’s no surprise.

Jake: It was so fear then in the last–

Tobias: It’s fear. Yeah.

Jake: Right now?

Tobias: Yeah. Well, who knows where it is now? It’s pretty–

Jake: [crosstalk] It’s been a hundred years. [laughs]

Tobias: Yeah, it’s volatile. It does move around a fair bit. As you’re saying, it was greedy in summer, it was like, “Super greedy in summer.”

Jake: Yeah.

Tobias: But it was only a very short spike like the trend. I’m not doing moving averages on the fear for greed– [laughs]

Jake: Oh, Jesus Christ.

Tobias: That’s the part of the cycle we are in.

Jake: Yeah. [laughs] grasping at straws. [crosstalk]

Tobias: It was trending down. It was crashing down. I was like, “This is interesting.” The only problem with the Fear & Greed index and I’ve used the Wayback Machine to go all the way back and look. It starts in like 2010, so, you can’t get a really good look. Like, I want to know, what happens in 2007, 2008, 2009 scenario where like people are terrified, and then you get the big sell off. At the end, where does it go? Like does it go down to zero. [crosstalk]

Jake: Yeah. It may not be for calibrated for real market cycle.

Tobias: That’s it. Yeah. But then March 2020 was–

Jake: Or, something.

Tobias: In terms of like, very short-term fear, that was impressive.

Jake: Yeah.

Tobias: JT, do you want to do your veggies and then, we’ll take some questions, because we haven’t done that for a few weeks?

Jake: Yeah, for sure. So, I have a piece on lasers. I’m going to try to teach you how a laser works.

Tobias: Laser beams?

This Is How A Laser Works

Jake: Yeah, so, this may be, I’ve tried to learn this multiple times in my life. And it’s like really hard to– [crosstalk] Yes, it just comes in one ear, and it stays there for a minute, and then, it just exits, and then, I can’t explain it again. But I read an analogy from Steven Strogatz, who’s a math professor. I like his writing a lot. He has a lot of really good science that he– He’s a pretty good storyteller. So, he has this analogy that I’ll share with you that maybe will help you understand it.

The idea behind a laser is that, it’s trillions of atoms that are emitting these light waves, they’re like perfectly in sync. So, it’s called a Light Amplification by Stimulated Emission of Radiation. So, that’s what L-A-S-E-R is an acronym for. So, here’s the analogy that Strogatz uses. Picture that you go and you are finding yourself on an alien planet, and in front of you curiously enough is a watermelon and a stepstool. You take the watermelon, and you set it on the stepstool, and you observe it, and it starts like gyrating and pulsating, and then, it falls off the stepstool. As it falls off, it shoots a seed out. You’re like, “Huh, that’s weird, okay.” Then, you keep walking along, and then you see millions of watermelons and millions of stepstools, and you’re watching them, and you go around, and you start putting them up on top of the stepstools like providing some activation energy to this.

The strange thing is that when one of the seeds shoots out of one of the watermelons, if it hits one of the watermelons that’s already on the stool, it basically passes straight through it and it duplicates itself, and you have two of these seeds flying, and they’re like perfectly in sync with each other. So, you can imagine that the watermelons want to get back to their ground state is what it’s called like that’s where they’re sort of the happiest.

But if you do something to agitate them, if you pry enough energy to get them up onto the stool, they will emit something which ends up being like a light wave. This is how everything works actually. So, if you picture a toaster, and the reason why it’s red when it heats up is because the electron passing through that wire, and the heat created is boosting up the metal inside of there, just like that activation, and then a red photon is shooting off of there and into your eyeball, and that’s why you see red light coming out of your toaster.

Every time it gives up its excess energy to get back to the ground state, it emits a photon. So, how a laser works is, you basically picture like elevating a bunch of these watermelons effectively inside of there, and then, they’re shooting off and hitting other watermelons, then the seeds come out, but the problem is, they’re going in all kinds of random directions and stuff. What the laser does is, it has like a cavity, almost picture like a sound, like a pipe for– like an organ, how it would like capture the sound and get it all lined up and directing it. This is effectively what the cavity of the laser does.

Then, it’s basically like a bunch of mirrors inside of it that it kind of like gets it all going, and then one of the mirrors is slightly imperfect, so that some of that gets released, and that’s what a laser is shooting out of there. So, they’re all the same color, and phase, and direction, like all perfectly synced up. That’s what allows them to– It’s almost like an echo chamber inside of there. So, what’s amazing about this then is, think about like a surgical laser. You would normally have a scalpel, which has a certain thickness but, because you can get it down to this tiny amount of electrons or photons basically, you can make it so, so, so small that you can be so accurate with it and it also cauterizes at the same time. So, it’s super cool.

Well, and of course, there’s all these different applications for it, CD players, laser printers, barcode scanners, fiberoptics, photolithography, which is like one way of making chips for computers, cutting and welding, speed traps, your golf rangefinder, all this stuff is using lasers in cool ways. So, let’s rewind a little bit and back out of this. By the way, so, the printing press like 1440s, and then, it’s like 170 years until we kind of get to the next cool thing, which is the telescope 1610. Another 90 years to get to the next cool thing like a steam engine.

Then 60 more years to get to the telegraph. And then, another 40 years to get to lightbulbs, and telephones is another 40 years. And then, cars is another 20 years after that. So, things start to speed up. We’re getting more and more stuff. As we get radios, airplanes, the 1950s had Sputnik. We had, the 1970s we get microprocessors, and then digital cell phones in the 90s, and the internet, and the International Space Station. 2000s, we get the human genome project, the iPhone, the Large Hadron Collider, and then the last 10 years, we get like CRISPR and 3D printing, and then maybe crypto.

Einstein Predicted Laser Technology In 1917

Jake: Here’s something interesting about lasers is that, Einstein posited that lasers were a thing that could happen all the way back in 1917 and it wasn’t until 1960 that we had the first working laser. So, and in 1969, there was the first retinal detachment surgery that used laser with an argon laser. So, all of which is to say like, 52 years between when it was first conceived, and then an actual working example of something useful?

Well, I know that I just went through and showed all those things that are getting, like– that we’re speeding up technology. But I have to wonder if, it took almost a whole century or half a century to get lasers being useful. I cannot wonder about crypto in that way of like, “Yeah, it’s like, there’s some cool stuff, but maybe it’s going to be quite a while until we have anything that’s actually, truly useful in a way that like really changes the world.”

All of which is to say to go back to what Bill was talking about and having long timeline, it’s like, you may need to be in this for a long time before you ever really get to that magical place where this changes the world like you think it does. And I would just say that, the patience may be extremely required in this situation because everything has taken quite a long time and I think we have to give ourselves a little bit more expectations of how long technologies take to go from the idea to the actual useful application of it.

Tobias: Have you seen the Bitcoin price? So, it’s up a lot.

Jake: Right now?

Tobias: So is Ethereum. I don’t know I like the idea of the decentralized internet Web 3.0, that looks cool. Yeah, but to your point that might be 52 years away.

Jake: It’s not going to be probably 52 years, but even if it was 10 years is like, “Are people really willing to be stuck in this grasping, looking for an application that really changes the world place for 10 years? You really like have that time horizon?” I really hope you do because that may be what’s required of you.

Tobias: Well, we’ll see as long as the price keeps on going up, I’m sure– [crosstalk]

Jake: As long as the price keeps going down, yeah, then, that’s fine.

Crypto, NFT’s, And Bored Apes

Tobias: [laughs] Crypto is interesting to me because it ticks a lot of boxes in terms of it being decentralized and being digital cash.

Jake: It ticks a lot of your biases.

Tobias: It ticks a lot of my biases, yeah. But I don’t know how to value it. The only argument– it’s like an asset allocation question. If you believe it’s real and have some exposure to it as like a portion of your portfolio. But it’s just not a topic for a value guy. It’s like talking about the relative attractiveness of the Euro over, I don’t know, [crosstalk] the dollar or something like that. Yeah.

Jake: Yeah.

Tobias: Still there, Bill?

Bill: Yeah. I just want the Bored Apes to crash and so, I can buy one.

Jake: [laughs]

Tobias: Why don’t you just write quickly on– [crosstalk]

Bill: That’s my only strong opinion.

Tobias: Why do you want to own it?

Bill: I don’t know, dude. I just do. I don’t know. I’m not going to be able to use logic to tell you this answer. I want a Bored Ape.

Tobias: That’s true. It’s also true like the timeline, Web 2.0 was interesting. As this Web 2.0– Web 1.0 was interesting but those websites now look kind of– comical how simple they were, how rudimentary they were. They were like some early species before it evolved into something. Now, it’s pretty impressive. It is everything. My TV has internet, I would just about stream everything.

Bill: I like the idea of owning an Ape and then, getting into a club in the metaverse. That only people that own the Ape can get into, like Ready Player One type stuff. I like that. I think that’s cool and I think that may come.

Tobias: What do you do once you get in there?

Bill: To anything… want, dude. Because I’m sick and you’re Apeless.

Tobias: [laughs]

Jake: So, yeah. Bunch of– [crosstalk]

Tobias: You are Apeless too.

Jake: Bunch of bros that–

Tobias: Talking about their Bored Apes. I don’t know.

Bill: Now that would be disappointing. But Kylie Jenner will be there. So, huh.

Tobias: I’m eager to hear what she thinks about crypto.

Bill: Yeah, I’m not. I could do without that.

Value Rises, Growth Falls

Tobias: Dudes, we’re going to be doing– We’ve half an hour. Throw your questions and we’re going to keep on talking. Well, throw out some good questions. In an interesting few days, just where you guys are throwing questions, it’s been an interesting week or so where value seems to have done pretty well, and the sassy stuff’s being beaten up a little bit although, not today. Today, it all seems to be every child player wins a prize.

Jake: [laughs] Yeah, some bigger moves too, like up and down for both, for everything, a little bit like wobbly wheeled.

Tobias: Yeah, typically that volatility–

Jake: Turbulence and the airplanes with the wings about to fall off. [laughs]

Tobias: DBX converts– [crosstalk]

Bill: I have a comment. Here’s a comment. Sometimes people will ping me and ask me for my opinion on somebody. I encourage you to call those people directly yourself and form your own opinion. I am an idiot.

Tobias: [laughs]

Jake: On people, they want to know your opinion?

Bill: Yeah. Like if it’s somebody that I interviewed or something. Do your own damn work. That’s what do your own work means. You need to have an opinion on [crosstalk] somebody, call them.

Jake: Yeah. [laughs]

Bill: Prudence outside of my area of expertise.

Favorite Non-Buffett Investor

Tobias: This is a good question. Let me throw some questions out. Who’s your favorite non-Buffett investor?

Jake: Buffett.

Tobias: [laughs]

Bill: Charlie Munger.


Bill: I don’t know. I think, I guess a guy that has pushed me a little bit when I read him is Bill Miller. I kind of think he’s done some interesting things. He had a blow up in there which isn’t great.

Jake: I’m going to say, Walter Schloss, because I find him very inspiring because he just did his thing, didn’t care what else was going on, returned money anytime he had too much that he felt like he couldn’t put to work and just the duration of his track record is very impressive. I know it’s– [crosstalk]

Tobias: It’s 50 years.

Jake: Something like that.

Tobias: It’s extraordinary?

Jake: Yeah. To just be in the game for that long even is its own hallmark. And to do it your own way, I think, that’s pretty impressive.

Tobias: There’s a little bit– [crosstalk]

Bill: Also, we’re not talking about CEOs, people. I don’t want people jumping out of their hats saying, “Well, Nick Haley is a great investor.” Yes, he is. I get it. I get it. It’s different question.

Tobias: The thing is Buffet is the point at which everybody else redirects themselves, so that everybody refers back to Buffett. If they’re not, then they need a bloody good reason because it’s hard to achieve what he has achieved. I, second your thoughts on Schloss, I love that 50-year track record at 20% a year borrowing your copy of value loan and walking home at 4:30 every day like, he knew how to live. He had that part, right? There’s little interview with Peter Lynch today. I think, it was in the Wall Street Journal.

Jake: Oh, yeah?

Tobias: And he only ran that thing for 13 years. But he ran– the mutual fund was like $14 million in AUM when he started and $18 billion when he left. It’s a pretty good run over 13 years.

Jake: It’s good marketing.

Bill: I mean Greenblatt’s super dope, but I don’t think I could actually do what he does for real. I don’t think I have the stomach for it.

Tobias: You mean, which part? The magic formula stuff or the special situations?

Bill: No, like, special situations highly concentrated. I got mad respect for when he did but he is way smarter than I am.

Tobias: Peter Lynch is 77 years old, and the only two interesting parts of that article to me was, he’s 77 years old and they said, “He’s not at all worried about anybody else getting a better track record than he is. He doesn’t watch that stuff at all.” He’s most proud of the fact that he’s just had his 10th grandkid so. I think, he’s probably got to figure it out.

Jake: You know also as like Templeton had it pretty figured out too. He went international before anyone did.

Tobias: Yeah.

Jake: He lived in the Bahamas, out away from the noise before anybody, and he lived his life also totally on his own terms, and that seemed like a pretty legit goal of it.

Bill: Got a shoutout some love for Jim Simons. Dude just figured out a computer algorithm to take all our money. Good for him.

Tobias: Yeah.

Jake: Took a lot of day trading Dennis’ money.

Bill: Yeah.

Tobias: I got a question here, Bill. Can we get a recap of the BTN meeting?

Bill: Oh, just take me, take me private. But I think it was good, I liked what they’re doing there, I don’t want to talk about really illiquid micro caps publicly. But I’m happy to hop on the phone and tell somebody. I am very happy for Mike and I think Mike was a very, very good hire for them, and I look forward to what they have to come, but I don’t want to speak much more than that.

Jake: Speaking of good hires, you know what I saw recently that I had missed? Guess who’s a board member at Markel now?

Bill: Morgan Housel.

Jake: Morgan Housel.

Tobias: Yeah, I saw that one. That’s an interesting choice.

Bill: I’ve been knowing that shit since like February or May, I think. I saw him at the annual meeting and he said that he was up for nomination.

Jake: Okay.

Bill: Tom said he liked the book and I was like, “It’s going to happen.”

Jake: That’s pretty– [laughs] I think that’s a good pick.

Bill: Yeah, for sure. I like the way Markel thinks.

Tobias: Yeah. Me too.

Bill: I like the people they put in the room with them. I think that that says something about you.

Phil Fisher vs Howard Marks

Tobias: Phil Fisher or Howard Marks? Phil Fisher.

Jake: To do what?

Tobias: I don’t know. That’s the question.

Jake: Manage my money?

Tobias: Red or white?

Jake: [laughs] Yeah.

Tobias: Does Bill close his mind to commodities or is it a considered– [crosstalk]

Jake: [laughs]

Bill: I’ve fucking lumber exposure. I’m not close to it. It’s just a horrible game to play.

Jake: [laughs] It’s closes but.

Tobias: Here’s a good one. Matt Hansen: With PPI significantly greater than CPI, how can earnings not go down in aggregate? Good question, sir. I’m going to pass that to Jake. [laughs]

Jake: I stop looking around the library hoping there was someone in here could answer that. Boy, I don’t know. I’d have to think about that.

Tobias: [crosstalk] very, very stretched. Unusually stretched.

Jake: Strong, you mean.

Tobias: Strong.

Jake: Yes.

Tobias: Strong. Yeah. I think that probably mean reversion down is reasonable bit through some here. But I don’t know what drives margins anymore. I don’t know how they’ve got to where they’ve got to.

Jake: Yeah, I think part of it is and I might be totally talking out of my ass here, but I think some of it is the labor component is smaller now than it used to be. So, that is even if wages were to ratchet up from here because of relative strength of employees asking for things,… it’s even going to hurt that bad, I don’t know. Man, these are really big, hard questions. But good to know the answers but they’re really hard to answer.

Tobias: Is value– [crosstalk]

Bill: Look, I want to circle back to something here. If you listen to my podcast catalog in the last two months, I interviewed a shipping expert and a lumber trader. I’m not close to commodities. I just don’t feel like getting destroyed going into something that I don’t know anything about. That’s why I don’t do it.

Tobias: That was the nature of the question. I consider it pass, if that’s the case.

Bill: I just think it’s a very hard game.

Tobias: Yeah, no doubt. I agree with you. You don’t want to be a generalist for the most part. Maybe not. That’s at my end, sorry, guys to say I think they’re trying to chop down my wall with a– Can you hear that? Can you hear that noise in the background?

Jake: No, it’s fine.

Tobias: There’s weed wacker like a yard from my wall. Is value investing a religion? No. Religion is a– [crosstalk]

Bill: [crosstalk] a wacker? [chuckles]

Tobias: Weed eaters, like what do you call–?

Jake: Either is fine.

Value Investing – Cult Or Religion?

Bill: No. I was just doing a Beavis and Butthead wacker. [chuckles] Anyway, is value investing a religion? Probably, not.

Tobias: A religion requires a God. Otherwise, not a religion.

Bill: Well, Buffett’s the God, my man.

Jake: [laughs]

Tobias: But I don’t think that he possesses any of the qualities of God or something but he’s a man.

Jake: Well, there is a man adherence [crosstalk]

Bill: I think there is a [crosstalk] around it.

Tobias: That would have been a better way of framing it up. It’s definitely a cult, it might be a cult.

Bill: Yeah. I think there’s pockets of growth. That’s a cult too. That’s why my mission is to get two cults to talk to each other rather than remain stupid in their own ways.

Tobias: If you’re interested in the definition of a religion, you go and look at the IRS versus Scientology because they lay out what the IRS considers a religion for tax purposes and that’ll answer your question about value investing as a religion.

Bill: Value investors don’t pay taxes. [laughs]

Jake: [laughs]

Bill: I’m kidding. I’m internalizing all my pain.

Jake: Yeah.

Tobias: [crosstalk] does. Because there are losses. [laughs]

Jake: Losses. Yeah.

Tobias: I got pretty short-term gains and lots of long-term losses. That’s how you do it, right?

Bill: [laughs]

Jake: Yeah.

Bill: I’m tax cognizant. I try to run my gains up in the short term.

Tobias: Yes. I think their commentary kind of dealt with evidence-based value investing or all investing is value investing.

Jim Simons vs Bill Miller

Jim Simons or Bill Miller?

Bill: Bill Miller. He’s more qualitative and create– [crosstalk]

Jake: In a kid’s fight?

Tobias: [laughs]

Bill: Jim Simon’s record destroys it. He crushes everyone, doesn’t he? But I can’t get down with that. That’s just the computers winning. Fuck that. I hate terminator.

Tobias: It’s a little bit Blackbox– Yeah. It’s a little bit Blackbox. Who knows what’s really going on? Bill Miller is a real thing. Bill Miller has been doing it in public for so long that you can study is what he’s done. He’s clearly one of the greats and you got to pay the big Bitcoin investment to Bitcoin, Amazon, all those things.

Bill: Yeah, that’s what I’m saying, He’s won in a lot of different ways.

Jake: I’m just like going back to our bullfighting many moons ago, until you’ve been gored, and the crowd wants to see how you respond before they will crown you as a true bullfighter, and he’s definitely been gored.

Tobias: Well, that’s one of the things I point out about Peter Lynch, not to detract from what Peter Lynch did, but it was 13 years, and it was one cycle, and it was like– I forget the numbers exactly, but it might have been like 1983 to 1996, very, very benign period for his style. The challenge is to run a– [crosstalk]

Jake: But not a man like [unintelligible [00:45:00].

Tobias: Yeah, well, good for his stuff.

Jake: Yeah, ripping.

Great Investors Survive Rough Periods & Thrive In Good Periods

Tobias: But then you got to run that same style through the dotcom boom and bust, and then, maybe go through value, and then go through this other period. It’s the people who can sustain through different periods, survive in rough periods, and thrive in the good, you know, whatever is beneficial to this style. Those are the people who I have the greatest respect for. So, that’s Schloss, that’s Bill Miller, that’s Buffett, of course, Munger, those guys. It’s not so much– it’s not so much a game of like winning in the short term. It’s a game of just surviving over the long term. That’s how you find out who really knows what they’re doing.

Jake: Truth.

Tobias: I can’t take some of those questions for compliance reasons, fellows. I can’t discuss any public pooled investment vehicles or anything like that.

Jake: That you run?

Tobias: That I run. Yeah. I can [unintelligible [00:46:00] for us.

Jake: [laughs]

Jeremy Grantham vs Stanley Druckenmiller

Tobias: Jeremy Grantham, Stan Druckenmiller. Ah, the Druck. Easy one. But both of them have that quality of having been around for a very long period of time, surviving for a very long period of time.

Bill: I take shots at GMO. I don’t mean to but I’m going to fade my shots here. So, the one thing that I really respect about them is like, they’re very data driven and very principled in how they look at the world and I respect that. I’ve gotten to listen to Jeremy Grantham talk a couple of times and I’ve never been upset that I did. So, I’m going to say Grantham on this. Just to fade, Toby, but I do like some Druck. I like anyone that can say something and then trade the opposite three hours later. I respect that, too.

Tobias: Yeah. I would say that anytime I hear Jeremy Grantham speak, I agree with just about everything that he says.

Jake: Sell everything.

Tobias: I just say the Druck, because I just like the Druck, I just like the man. [crosstalk] And I like Jeremy Grantham, too.

Jake: I think they’re both a good in a way where they can– I think they do say exactly whatever they’re actually thinking which is, you don’t always get that. They don’t especially, I guess, maybe especially, Druck. Like if something is on his mind and bothering him, he’ll say it as plain as day about it. He won’t pussyfoot around it.

Tobias: The nice thing about Druck, too, is that as Bill points out, like if he changes his mind he just goes and puts the other trade on. That’s get a reputation for doing that then you’re never going to be held to anything you do. It’s great. The facts changed between lunchtime and the closing, I just sold it all and got super short. Druckenmiller, yeah. What about?–

Tobias: Who are the best operators? Bezos?

Jake: Oh, Bezos.

Bill: [crosstalk] Bezos wins all. I like the guys from [unintelligible [00:48:12] a lot. I really like reading their calls. Brag about how they stay at their in laws house to save costs like, I like that.

Tobias: Ah, it’s too much. Too far.

Bill: Maybe [crosstalk]

Tobias: There’s a way to be– you can be frugal without being silly about it right. I’m not going to expect– you wouldn’t expect an employee–

Bill: That’s how they promote their stock, Toby. You got to let them promote their stock indirectly.

Jake: True.

Bill: I respect the game they play.

Tobias: Jeff Immelt felt the same way. He used to have a– he used to have a plane, like he just needs to fly around the plane, and he had another plane follow him just in case the first one broke down, everywhere, two planes.

Jake: Is that true?

Tobias: Yeah.

Jake: Jesus. No human on earth that’s not important.

Tobias: Oh, my God. Yeah. You can’t just like scramble a plane from somewhere else. In the unlikely event the first one doesn’t work. Now, you got to have two flying right behind because you never know.

Bill:… different way of promoting. Yeah, man… G5 and I think everywhere that they go. God forbid… somewhere.

Paul Singer vs Bill Ackman

Tobias: Paul Singer vs Ackman. Oh, that’s a good one. Paul Singer, I wouldn’t cross that man.

Bill: Singer is a G. No, Singer is a G.

Jake: You have your own navy? Because I don’t. [laughs]

Tobias: Yeah. You need to be a tough guy to go and take over another ship.

Bill: You know what I found out about them. Their PMs are all generalists. I thought that was kind of interesting.

Tobias: That’s very cool.

Jake: I’ve never seen any numbers out of there, though.

Bill: Well, I’ve somebody be like there’s 1 PM that’s not a generalist. Guess what, 90% of them are.

Jake: Actually.

Tobias: Yeah, that’s a good question.

Jake: I’ll tell you what. What was your take on the Ray Dalio answer? Sorry to Bridgewater listener. That was [crosstalk] sounds quite a fumble. I don’t know. I’m going to quote it but it made its rounds. It was interesting. He wrote a LinkedIn apology piece. I felt like maybe it was an apology, maybe… my mind, where all the news breaks.

Tobias: I think this is kind of interesting question. Soros vs Druck. Master versus apprentice. That’s a really good question.

Bill: I don’t know enough about these guys.

Tobias: Well, Druck’s idea was to short the British pound to break the bank of England. He famously takes it to Soros, and Soros just like, “This is one of those once in a lifetime trades. You got to put it on a gigantic size.” That was Soros’ contribution. So, that’s a good question.

Bill: Could have been contribution.

Tobias: Oh, yeah. I’m not disputing that. But the question is, which is more important in that scenario?

Bill: Well, out of that specific scenario, Soros, a hundred times more important.

Tobias: Well, might not [crosstalk]

Bill: It’s not how much– [crosstalk]

Tobias: Without him.

Bill: [crosstalk] That’s right. Yeah. And also, when you’re right, make money.

Tobias: Yeah, the other side of that, though is when you’re wrong, you blow up.

Bill: Guess what? They weren’t wrong.

Tobias: Not in that instance. And they both are still going so.

Bill: Yeah.

Which Stock Do Cathie Wood & Warren Buffett Own?

Tobias: Got to respect that. Oh, hang on. I got a good question here. Guess which stock both Cathie wood and Buffett own? Tell us Samson. Let us know. Is it Stone?

Jake: Snowflake. That’s my guess.

Bill: What up Samson? You’re a nice man. I like you. At least your comments appear nice.

Tobias: Yeah. Samson is real, I’ve met him in real life. He’s a good dude.

Bill: He’s a real human? He seems like a good dude.

Tobias: Snowflake. I’m going to say, he’s a snowflake. Snowflake. Is that you answer, JT? Snowflake?

Jake: [crosstalk] That was my guess.

Bill: Yeah, that would be my guess, too. He’s holding up pretty strong.

Tobias: Yes. I got a question. Am I writing book? Yes, sir. I am writing the book.

Jake: How’s that going?

Tobias: Yeah. I’m writing all the time and I’m much, much busier than I had been at the other times, so that I wrote the other book. So, I just have less time to write. I also have three kids. So, it makes like, this weekend, you know, so, I can’t do it through the working week, and then, I’ve got the weekend to work on it, and then this weekend, we had soccer from 9:30 in the morning, and it ended with a parade at 9:30 at night, and Sunday back to soccer, and then I just don’t have any time. But I’m trying to– I’m writing every chance that I get, but it’s hard to write without extended periods of time.

I think the idea is interesting and I find lots of really interesting stuff. It’s just going to take a long time to get this thing done. All my other books I’ve written in like three to six months. This one’s going to be nothing like that, it’s going to be three to six years, I would guess. But thank you for the kind question.

Jake: Ah, world can wait– World can wait for your magnum opus. It’s fine.

Tobias: You never want to let those innermost thoughts out too. That’s the other thing.

Jake: Your kids [crosstalk] can sit down wait. So, that– [crosstalk]

Tobias: Samson says, Stone.

Bill: Oh, there you have it. Strapped like a rock, maybe one to look at.

Tobias: Yeah, I was shorter for a little while there. No longer worked out. That was a good one. Yeah, shorting in the face of Buffett and Cathie, I forgot about that one.

Jake: Ooh, spicy counters there.

Tobias: But that is gone soon. How Buffett didn’t buy Stone. Yeah. Berkshire did. Good point.

Bill: Don’t let facts get in the way of good narrative.

Tobias: Yeah, you got to put the person on the top. Otherwise, Berkshire Hathaway is a meaningless thing but Buffett is– [crosstalk]

Jake: If it’s under like [crosstalk] purchase, it wasn’t Buffett.

Bill: [crosstalk] Next 10 years, sure you’ve got Fairfax or Berkshire.

Jake: Ooh, next 10 years?

Bill: Yeah, maybe–

Tobias: [crosstalk] not be a long enough timeframe.

Tobias: Bill, you’re breaking up a little bit.

Jake: I’ll answer while Bill’s stuttering– [crosstalk]

Tobias: In the Matrix.

Jake: Yeah, the Matrix. I will and this is not investment advice. It just–


Jake: There is a new Matrix movie coming out. Maybe, that’s what’s– So, I will say, five years, I’ll give the nod to Fairfax, mostly due to valuation differences. 10 years, I will go Berkshire and that’s more due to ROE quality of business taking over and valuations spreading out.

Tobias: Yeah. I don’t know enough to comment. I think that Berkshire’s the much bigger entity and so, it’s tougher for Berkshire, but Berkshire is also rock solid. Like it is going to be bigger in that period of time. Markel and Fairfax are both smaller and similar entities. So, much easier for them to find acquisitions that really would move the needle if we go through a big bust which we may. It has happened before, not in recent memory, but they do happen.

Jake: I don’t believe you.

Tobias: I got one here. What’s the largest holding of your portfolio? What’s the story behind it? You want to discuss portfolio positions?

Jake: No.

Tobias: Yeah, neither do I. I think usually we try on this podcast not to discuss stuff we hold because potentially, it gets us in trouble. I think we’re running out of time a little bit here, folks. Thanks to Bill and Jake. You both had to dial in from miles away.

Jake: [laughs]

Tobias: Bill’s dropped. Next week will be our last one of the year, but it is something special for our holiday episode. But we’ll be back same time, same channel.

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