In this episode of the VALUE: After Hours Podcast, Jake Taylor, Bill Brewster, and Tobias Carlisle chat about:
- AMC Spaces & The Short Squeeze
- Elon Musk – Time Person of the Year Indicator
- How To Measure Hard Work In Investing
- Carnage Underneath The FAANGs
- Alibaba – Today’s Price Is The Wrong Price
- Berkshire’s Business Model Without Buffett
- Can An Oura Ring Make You A Better Investor?
- U.S Market Flat Since ’09 If You Factor In Money Printing
- Value Set For A Good Ride
- Read The Proxy Statements
- Is LinkedIn A Waste Of Time?
- Twitter ‘Super Followers’ Review
- @RudyHavenstein Is The GOAT On Twitter
- Book Recommendation – Fallen Leaves
- Happy Holidays Everyone!!
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
Jake: I’m the predator.
Tobias: And we are preparing to livestream.
Jake: Ho, ho, ho.
Tobias: I think with it. The weather outside is frightful. It’s 10:30 AM on the west coast, 1:30 PM on the east coast. It’s like 6:30 UTC something like that, I always get it wrong. Might be like 5:30 AM in AEST in Australia. What’s happening, fellas?
Jake: No one could know these things.
Jake: Not much, man. How you doing?
Tobias: Pretty excited. This is the Holiday Special Value: After Hours, hot on our heels of our 100th. They’re all just specials these days. We don’t put out any that aren’t.
Jake: They’re all special in their own way.
Bill: Oh, Jake. I like your background. It’s nice.
Jake: I’m feeling very [crosstalk] festive.
Tobias: You mean, the background? That’s his office.
Jake: Yeah.
Tobias: Oh, that’s fair. That’s fair.
Jake: And I got my T-Rex [crosstalk] shirt.
Bill: Oh, I can see through you.
Jake: I know.
Bill: That is bizarre.
Jake: It’s getting weird here. Like I got to hide behind this.
Bill: Oh, my God. It’s scary.
Tobias: That is Good. You might need that.
Jake: Yeah. Let’s see your outfit, Bill. You’ve got quite the setup going on there.
[laughter]Bill: Oh, nip slip.
Bill: Hey, oh.
Tobias: It’s like a halftime show at the Superbowl.
Bill: That’s right, like Janet. A little less attractive than her but not by much.
Jake: Different JT here, too.
Tobias: Yeah.
Bill: One that is equally as hot and bothered, though.
Tobias: This is our last show for the year, gents. We’ll do a little retrospective. Maybe what we’ve got coming up next year, and there’re a few interesting tweets floating around that I want to talk about. How about you, JT? What do you got on the boil?
Jake: I’ve got a little piece prepared on ‘measuring hard work in the investment game.’
Tobias: Ah, that’s hard work.
Bill: That is hard work.
Jake: [crosstalk] kind of hard work putting it together?
Tobias: About you, BB?
Bill: I don’t know, man.
AMC Spaces & The Short Squeeze
Tobias: AMC?
Bill: Yeah, well, I’ve been popping into some of these AMC Spaces. My talk about that a little. Want to give a shout out to the absolute moron that called lumber a pump and dump over and over as lumbers mooning again tune out now, idiot. Anyway, and then we’ll see how– [crosstalk]
Jake: That’s not the Christmas spirit.
Bill: Well, you know, it’s not quite Christmas yet. But I am feeling good.
Tobias: Let’s talk about those AMC Spaces because I jumped into one, Friday, I think. Yeah, I think.
Bill: I know. I was in it because of you apparently, because Dan Stringer, SEC Pimp went in. That’s his Twitter handle for those that aren’t aware. And then, I was like, “I’m mad at whoever got me in here,” and then he said, “I’m in here because Toby was in here.”
Tobias: [laughs]
Jake: Can we just save some time and just smash ourselves in the head with a ball-peen hammer instead?
Bill: No.
Tobias: I get a slightly different take away from it. So, you’re on the Twitter Space. I haven’t done a lot of them, but they’re pretty– I really like that format. You’re right. It’s a great format.
Bill: I told you, we should do it. [crosstalk]
Tobias: Yeah, we should. But they’re really fun because we can get a little bit more interactive. The one that I was in, so, it’s AMC, which is crashing, it was a meme stock.
Bill: I’m very sad I wasn’t shorted. I feel like Friday, I should have–
Tobias: Hard to short though. Short that kind of [crosstalk] stuff.
Jake: [laughs]
Bill: No, the sentiment cracked, man. When the woman went off on Cohodes, I thought that was like a pretty good– [crosstalk]
Tobias: What happened? Do you want to give everybody the background?
Bill: I don’t know all the background and I’m not willing to speak on anything that involves Cohodes. I do know that a woman got very upset with him-
Tobias: What was that?
Bill: -and accused him of like hijacking the Spaces or something. I heard the back end of it. I don’t know all of it. I’m not trying to be on Marc’s bedside.
Tobias: She was treating him like a dog. Training him like a dog.
Bill: Yeah.
Tobias: I thought that was extreme for–
Bill: It was not kind.
Tobias: Yeah. But I don’t have any context.
Bill: Yeah. I don’t either. But I think, he was trying to encourage. I don’t know. My sense just knowing his holdings as he was trying to encourage AMC to issue some sort of token using tZero and overstock because that’s where his bet is laid. [crosstalk] Yeah without further detail, I won’t opine anymore. However, I felt like between that and the CEO and the CFO being completely out of the stocks.
Tobias: What was the signal?
Bill: It was probably decent time to short.
Tobias: What was the signal?
[laughter]Bill: I don’t know, right? But it’s kind of sad, man. I feel like, I don’t know. What do I know? Maybe, they’ll pull off some epic short squeeze, and it’ll be great, and everybody can go have fun together. But it feels to me like a bunch of people that are really mad and they’re expressing it with money that is meaningful to them. My gut says the base rates aren’t great on this kind of thing.
Jake: I think, usually, you don’t want to have spite be one of your investment theses.
Bill: Yeah. I think–
Tobias: [crosstalk] squeezes a tough thesis, too.
Bill: Yeah. Like all convinced. It’s going to happen. It’s just kind of like, “What are you guys doing?” There’s got to be some better thing to do with your money.
—
AMC Popcorn Thesis
Tobias: The one that I was in, I had this idea and I don’t know where it came from, but there are a few guys on the call, who were kind of, I think, he had got in on the joke, and there are a few other guys, I don’t think they realize that how silly the idea was, but they were talking about sending AMC popcorn like making a new line of business for AMC, which would be selling popcorn.
Jake: Like at the grocery store?
Tobias: Yeah. Popcorn is a tough business because those are big bags and they don’t sell for very much, because they’re cheap to make.
Jake: [laughs]
Tobias: And then, they said, what’s a revenue comp for this thing? Someone said, 4 million bucks. Annually, I’m guessing. And then, they asked, what kind of multiple would you stick on the popcorn business? Someone said, 200 times, which I thought was modest for popcorn, which is obviously, you know, that should trail the big premium.
Bill: Sales, you say in sales.
Tobias: 200 times sales, yeah.
Bill: That’s growthy.
Tobias: It’s a modest multiple in this market. But in the fullness of time that might prove to be a high multiple. But even taking that as gospel, 4 million bucks in revenues on a 200 multiple gets you to 800 million bucks on a $15 billion market cap.
Bill: I don’t think that’s how that works.
Tobias: I don’t think it’s going to work.
Jake: That’s a little– [crosstalk]
Bill: No, aren’t we at $8 billion?
Tobias: Is it at $8 billion now or was it $15 when I looked up [crosstalk]
Bill: Well, didn’t you say 4– I don’t know.
Tobias: $4 million on 200 times. That only gets me $800 million. I’m no mathmagician. I’m not mathlete. But that’s what I think, it it.
Bill: Yeah. Okay.
Tobias: I didn’t spreadsheet it out before I came on. I’m just sort of breaking it off on top of my head.
Bill: Yeah. No, you’re right.
Jake: There’s a little bit of a gap to fill in between those two.
Bill: Yeah.
Tobias: I did some market research and asked [crosstalk] my wife-
Bill: Yeah, it doesn’t seem to work.
Tobias: -who’s a big popcorn consumer, she had eaten it and she said, “No, it’s too buttery.” It’s over, the health popcorns what everybody’s eating these days.
Bill: Yeah. That’s right.
Jake: It is pretty good, though, when you’re in the movie theater, and you get a nice super buttery popcorn.
Bill: Big Diet Coke.
Jake: I could get down with that.
Bill: You want to make sure to get the Diet Coke, so that you don’t have the calories of the Coke.
Jake: Smart.
Tobias: Do you think it’s hard to recreate that experience when you stick it on a shelf like this, does that butter?
Jake: Well, you know, it’s– [laughs]
Tobias: Still as nice as that?
Jake: I don’t know. It kind of gets a little congealed, doesn’t it?
Tobias: [laughs]
Bill: I think we can agree. It’s a flawed investment thesis.
Tobias: Yeah, not going to make it.
Bill: [crosstalk] Plus you got to think you probably going to have more working capital on that one.
Tobias: Yeah. That’s a tough one, old AMC. I don’t think it’s got quite the same chops as GME with the Chewy bloke in there.
Bill: Yeah. I don’t know, man. I wonder how often this kind of stuff has gone on in the past.
Jake: Always.
Bill: I don’t know. I put up a tweet about to just somebody that may read it and change their mind of being an idiot. And I don’t know this person started to follow me and I was like, “Man, you guys start following people that tweet about” Like, it was clearly one of these apes or whatever. It’s fucking bizarre, man. It’s like a cult.
Jake: I thought, you want to be in that.
Bill: Not like a Berkshire cult, though, the bad kind of cult.
Tobias: Berkshire is the good kind of cult.
Bill: That’s right. It’s the cult I belong to, damn it.
Tobias: Well, I chose the cult because I like the principles of the cult rather than any other reason.
Bill: They may, too, to be fair.
Tobias: Yeah, fair enough. Short squeezes and popcorn.
Bill: Sticking it to the man and craziest Citadel theories, but I don’t know. It’s kind of sad, man.
Tobias: Yeah, I agree. I had to get out of there. It was a little bit upsetting.
Bill: Yeah.
Tobias: And it’s often, I think– [crosstalk]
Bill: I don’t know. Part of me is like, “Well, just let the markets be the markets, and people have to learn.” and then part of me is like, you know, I don’t know. I don’t think the government should intervene but it’s weird. You see the people they get in the rooms and they mock them, and I totally get that, and I think half the people are really funny. But then, it’s really sad too, right? Like one of these women, her profile picture is like her and her kid. I don’t really give a shit about her, but her kid doesn’t deserve to have mom that dumb.
Jake: [laughs] Oh, man.
Bill: It’s real talk [crosstalk]
Tobias: You need to do a little bit of–
Bill: Kid didn’t do anything to deserve that. His mom’s going to flush it all down the tubes on like some dumbass short squeeze theory. Now, watch it go to the moon and me be wrong. That would be probably [crosstalk] this.
Tobias: That’s way [crosstalk] shorts?
Bill: Yeah. Well, so, I would sell a covered call if I did go short, sir. Define my exposure.
—
Elon Musk – Time Person of the Year Indicator
Tobias: Speaking of cults, so, I saw this tweet this morning. It’s from April 2017 from a gentleman by the name of Jawad S. Mian. “Pretty good call here. We believe Tesla is the quintessential American brand and Elon Musk embodies the cult of personality that investors are attracted to in the final stages of the bull market. The Tesla bears club will only grow more frustrated, despite their arguably irrational arguments. Sell Tesla only when Elon Musk is crowned as Time Magazine’s Person of the Year.”
Bill: Ooh, ooh. Well done, sir.
Tobias: It’s a pretty good cult.
Bill: Yeah. Was that on the Twitter machine?
Tobias: Yeah, I tweeted it out. It’s on my stream.
Bill: Dang.
Jake: That’s pretty impressive really.
Tobias and Bill: Yeah.
Bill: Get that man some money.
Tobias: I mean, I guess like an infinite number of monkeys bashing out an infinite number of tweets. There’s something that’s going to be right on the money.
Bill: Nah, that one’s right.
Jake: [laughs]
Bill: That one’s right.
Tobias: I agree. He foresaw it. He knew exactly what was going to happen but you know, pay that man, his money.
Bill: Yeah, that’s right. I hope you had calls, the whole way up.
Jake: I thought I saw Bezos on a time cover, it looked like he was still relatively young. So, it must have been kind of post dotcom blow up, but pre-Amazon full dominance.
Tobias: Yeah.
Jake: So, man. Yeah, who knows? Maybe, it’s [crosstalk] curse.
Tobias: Someone responded with the Zuck Time magazine cover, and they know that was years ago. So, Zuck’s Facebook’s run a mile since then. But the thesis is a little bit different for Tesla because he said, there’s some other discussion around it. His argument was basically, it is meme stock, and he’s anti-establishment is the idea. I cut out some of the quote for brevity. But the idea is that he needed anti-establishment.
Bill: Oh, he needed [crosstalk] of the year, and then, he becomes the establishment then the meme drops.
Tobias: His establishment is the meme. Right.
Jake: Aha, I got it.
Bill: I don’t know. I think he can overcome that. Interesting parts of Tesla, if you open up their 10k, you will see what their marketing is immaterial.
Tobias: Yeah. We’ll do the marketing for them.
Bill: Yeah.
Tobias: The drivers did the marketing- [crosstalk].
Bill: Yeah, I got to tell you something.
Tobias: -that’s a good business,
Bill: Well, that’s why, I mean, he’s very adaptive at the game he plays. He’s very, very smart with it.
Tobias: I guess, the point that they’re making wasn’t really that, he can continue to be anti-establishment. It’s just that it’s not kind of reached saturation where everybody’s going to know who you are for you to appear on Time magazine cover and there’s a lot of Tesla’s up where I live.
Bill: But I’m not sure that knowing who somebody is makes you anti-establishment. I think creating the perception of telling the SEC to go fuck itself, keeps you anti-establishment.
Tobias: Somebody put together all of his conflicts for the SEC. It’s an impressive rap sheet, I got to say.
Bill: Yeah. I think that, that keeps his brand anti-establishment more than the amount of people that know him.
Tobias: But it’s more mainstream now. I guess, he’s pretty well known. He’s been well known for a long time.
Bill: Yeah. I enjoy talking to Jen Ross about him because she’s really upset with the way that he’s treated his responsibilities in Tesla, and I think, the SEC and investors in general. But then on the other hand, she has a deep appreciation for what he’s done for the space program. As somebody that works in the space industry, it’s kind of fun to talk to her about those tensions. So, yeah, he’s a complicated character. I think a lot of what he does publicly, obviously, is for perception. I think, he plays game very well.
—
Tobias: No doubt. JT, you want to do your veggies?
Bill: Oh, hang on. Wait, I got stuff to riff on here, dude.
Jake: Oh, okay.
Bill: There’s more riffing to come.
New Hummer EV 0-60mph In 3.0 Seconds
Bill: Yes. So, I was watching some of these EV things that are coming down the pike. Do you see the new Hummer is going to be 9,000lbs and do 0-60 in three seconds.
Jake: [laughs] That’s a cruise missile. Jesus Christ.
Tobias: That’s what you need in little neighborhood.
Jake: Yeah.
Bill: So, in a tweet, I said like, it’ll be interesting to see what happens to Formula E and whether or not like their performance matters versus Formula 1, and my buddy, Francisco was like, “That’s the stupidest tweet I’ve ever read.” I was like, “Dude, I’m not saying that Formula E is Formula 1. I get that it’s clearly more than just the product on the track.” But if you start to really invest behind these EVs, like, they do behind Formula 1, I wonder, the only thing that seems to me to be the limiting factor is, what the tires can do. How does a £9,000 Hummer, do 0-60 and not just like burn the tires off?
Tobias: [laughs] Rip out its tires.
Bill: Yeah. Like, it’s crazy. It’s got to do traction control and all that.
Jake: They’re capable of instantaneous full output of torque.
Bill: Yeah.
Bill: They don’t have to rev up like a gas engine.
Bill: Yeah, I know. It’s crazy and the torque from 0-60 is the same as 60-100. It’s very, very cool, and there’s a lot of cool stuff that’s about to come on the market. Kind of makes me wonder–
Tobias: Are they doing it on the Formula 1?
Bill: Oh, they’re crushing it.
Tobias: How do the tires work? They’re not full of air? They’re just rubber all the way around?
Bill: Oh, I don’t know. I’m unfamiliar with that. But I just think that they don’t– I guess, what I was thinking is just the amount of acceleration that you can get in an EV. Right now, there’s limiting factors. But if bunch of money pours into EVs because these things are like cults now. You look at like what the public market valuation is. I, 100% think it’s a bubble. But I think, even if we don’t agree on the bubble term, even the bulls will have to concede that they’re optimistic and enthusiastic valuations. So, if that much enthusiasm is chasing electric technology in general, I just kind of be interested to see what happens with car tech and if Formula E can actually turn into this type of thing where they do all the testing. It just kind of be-
Tobias: Would be cool.
Bill: -interesting [crosstalk] what those cars could do.
Tobias: I like those Rivians. Those Rivians are cool, like this little compartment where you can stick a dead body too, just one of the things I’m always looking for. You just couldn’t find that.
Bill: Well, yeah, no, but she can now because the F-150s got the frunk.
Tobias: Oh, they got that as well, the frunk?
Bill: Yeah. So, all these things are coming out, they’re going to be pretty sweet.
Jake: I do welcome the consumer surplus at some point. It’s going to be really nice.
Tobias and Bill: Yeah.
Bill: I don’t know. This is interesting.
Tobias: I agree.
Bill: I’m also studying car hacks a little bit. A lot of these guys are talking about exotics and these, I don’t know. I’m spending all this money on an internal combustion engine. I’m not sure these things aren’t all zeros over a long enough time horizon. Okay, I hate being that guy because I love the sound of a V8 and like that grumble.
Tobias: You just get the ringtone.
Jake: [laughs]
Bill: What do you mean?
Tobias: Your car gets a dial tone. The car gets a rev tone.
Bill: That just sucks, man. There’s something about those loud engines. So, when a car sounds like a boat, it gets me all like, that’s a man car, you know?
Tobias: [laughs]
Jake: A little testosterone bump.
Bill: Yeah, that’s right. All right. That’s all I got. That’s my riffing.
Tobias: I like it. Do you want to do some veggies, JT?
Jake: Sure.
Bill: I think, the sativa is hitting.
—
How To Measure Hard Work In Investing
Jake: [laughs] Woke perfect. This is kind of inspired by, I regularly have dreams where I am working in the supermarket again, like I did back in high school and college. And they used to really bother me because I would think like, “God, I thought I had moved on from this. But I’m still here, bagging groceries and checking out groceries.” The last time I had this dream, I had the realization upon waking up that I actually love this dream because it reminds me of what hard work actually looked like, and that I was capable of hard work at one point in my life, and that I was willing to do it. So, I think, maybe I’m going to rewind a little bit and give a little bit more backstory that I’ve normally haven’t really talked about myself in for this.
It actually goes back to basketball as a fourth and fifth grader, and into middle school, and I remember going to a middle school dance, and all of my friends and I bailing on the dance to go to the teachers’ lounge where there was like a little black and white TV, and watching Michael Jordan during the finals pouring in–. I don’t know if you guys remember, but like when he was playing against the Blazers that one year, and he was on fire from three-point range in the first half especially. And that was where he did like shrug thing like, I don’t know, it’s just all going in right now. It was a great moment. So, I played basketball in middle school, and then in high school, but here’s the thing.
I was at my sophomore year, so playing JV, I was 5’2″ and probably under hundred pounds. So, I remember going to away games and coming out of the locker room into the layup line, and just like you couldn’t help but feel like everyone was looking at you and laughing and pointing. But it wasn’t like, I was like a 5’2″ like Muggsy Bogues, who was super athletic. It’s just like, I just wasn’t developed.
Tobias: You weren’t a dunking 5’2″.
Jake: No.
Bill: Yes, you are Caucasian.
Jake: I was slow footed 5’2″. But what I did have was like, no one worked harder than I did. I’d be the first one on the ground for a loose ball. I think it did play a whole lot in the games. But practicing, I gave it my all every single practice. I viewed my job is like, “I’m going to make everyone else on the team work hard during practice, at least to try to keep up with me, even though, they’re going to be the ones playing in the game. It’s not going to be me.”
Bill: Did you have a decent wingspan, at least?
Jake: No.
Bill: Yeah, you had nothing.
Jake: Nothing. I had nothing.
Bill: No, you didn’t.
Jake: Other than just like I look like being able to play smart and getting into the right position ahead of time, which can hide a lot of lack of athleticism, if you’re positionally smart. All right, so then I got cut my junior year, and I was still undersized. I was a little bit taller at that point like, I’d grown a few inches, but I started working then. I worked in a grocery store from 16 and all the way through college until I graduated at 22. That whole time, I did every single job that was basically in a grocery store. It was a pretty sweet gig in a way in that like, I got paid reasonably well that, I paid for all of my college with the money that I made, my wages, and even saved some money all the way through college, and room and board. I never took a student loan the whole time.
I went to like a little state school. I kind of had a sense of an inferiority complex because of that. Because later in life, I’d meet people who went to Harvard or Yale, and for a lot of time in my 20s, I felt a lot of inferiority to those people like, “Oh, they must be so much smarter than me, they went to this great school.” A lot of people had a lot more of a typical experience of partying, and having fun, and like, I worked like, literally working night shift, I would go in at 11 PM, I get off at seven or eight in the morning, and then drive to school, go to school till 2 PM, and then come home and do some homework, and sleep for a few hours, and then, get up and do it all over again. That was hard work. It was over every day grinding, trying not to fall asleep in class, sleeping in between classes when I could in the hallway, I mean, stuff like that.
I still have dreams about this working in the grocery store. Even then, after I graduated, and I got a job running the power grid, there was one year, 2008, where I was in business school. I was working full time running the power grid. My wife was finishing her PhD thesis and we had a kid. I look back at that time, and I go, “How the hell did we even get through all of that?” There’s too many things happening there to even make one year haven’t make any sense. It was like, it was a lot of hard work. So, now, I think about like, “All right, what as someone who’s professionally investing now, like what does hard work look like? How would you know? Is it returns?” Well, it reminds me of Bezos, when they would tell him like, “Oh, hey, great quarter.” He would say, “Well, actually, that quarter was baked three years ago by all the things and the decisions that we did and the moves that we made three years ago.”
So, I’m working on the quarter that’s three years from now or you can also think about like Jim Grant’s quote that, “Successful investing is having everyone agree with you later.” So, any given one year, I feel like, returns is not an indication of how hard did you work this year. So, I went through and I looked at all of my numbers, which the software project that I’m working on has really helped in keeping track of this stuff, which is what has me really excited about it. So, here’s what my year looked like for what I consider hard work for this year. So, just on the investment side, I did 500– Then, most of this is towards the second half of the year, because the software took a big leap in the last six months. But I did 518 journal entries, I looked at 144 different potential investment ideas, I did 27, what I called deep dives, which is any idea that had more than 10 journal entries on that idea? I did measuring like 30 different sources of potential ideas. So, I track, where did an idea come from? Am I doing things to like broaden the network to hopefully find more good ideas?
I had 119 day, which is still going journaling streak. So, 119 days in a row, I’ve created a journal entry to really try to build good habits. I made 122 total decisions, which would include whether to buy something, or sell it or not buy it, or not sell it, and recording it then. Let’s see. I think, this is our 48th episode. So, this would be 48 vegetable servings that I came up with over the year. I read 42 books, you know, year to date which is a little bit under my normal average but that’s okay. Let’s see. I went through my calendar and looked and I had 215 calls, Zooms, meetings that were investment related over the year. So, nurturing your network, building relationships. What else? On the personal side, and I didn’t figure this out, but one of the coaches sent it to us just kind of he was messing around and looking at how much hard work we’ve put in as coaches, but just on my oldest son’s team, we had 72 practices and 74 games in the last– for 2021 calendar year, which is, it’s quite a bit of showing up.
Then, going forward, I think, some things that I want to start tracking that will be good will be, I recently got an Oura ring, which helps you track sleep and all that stuff. Actually, my wife got a new one and I took her old one. [chuckles] But I would like to know like, I’m aiming for a certain percentage of days that I wake up with a high readiness score. So, did I show up ready to play the game in a physically good state? I think, that’s important. So, doing all the little things like getting enough sleep, and exercising, and eating well that will hopefully keep my readiness score high enough to do good work. And then, I think, mental health wise, tracking the number of meditations that you do or yoga classes, I think for me will be a good thing to try to bump up. I also got to kind of thinking like, “What would be some anti-goals? What could I try to actually avoid using Charlie’s inverting?” I was like, “Okay, probably, number of emails sent should probably be tried to minimize because I can definitely waste a lot of time in email.” And then obviously, number of tweets read if I could keep track of that and probably the lower that number was probably the better off my entire life would be but–
Yeah. So, I don’t know. It just kind of got me thinking into the year reflection of like, “Well, what would a year of hard work look like in the investment context?” I think, if I focus on those things and really try to do a good job with all those, and work hard, and knows contexts, and measure it that way, I know, am I getting better or am I putting in more work or less, where am I in a tracking sense? I think that all of those things combined will create the end result that I’m looking for eventually.
—
Can An Oura Ring Make You A Better Investor?
Tobias: The Oura ring? Oura ring?
Jake: Yeah.
Tobias: However you say it, you got to pay some subscription fee on a monthly basis for that?
Jake: No, I don’t think so.
Tobias: Are your grandfathered in or is there a one that you cannot do that?
Jake: I think, it’s just you buy it one time. Best I can tell, unless, I don’t know that my wife’s paying all this stuff behind my back.
Tobias: [laughs] Okay. Because I thought, I had a look because I’ve got one of the old Fitbits that you don’t have to pay anything, but they always try to upsell on a subscription which I want to avoid. And I looked at the Oura ring and I thought there was a subscription attached to it.
Jake: I don’t know. I don’t think we’re paying for that but I could be wrong.
Tobias: You may be. Yeah, Oura ring, free of subscription, okay. Can you– Oura ring 2, no subscription? Is that different levels or is that just the–?
Jake: I have no idea. I can’t tell the difference between hers. I think the form factor just got a little bit better. maybe like lighter. Because it’s it is a little bit big and cumbersome compared to my normal wedding ring. But you kind of forget about it and it’s really easy to track sleep with it and exercise– [crosstalk]
Tobias: How long have you been wearing it?
Jake: Couple of weeks.
Tobias: Is it working? Does that help you in some respect?
Jake: Yeah. I think it’s good. I like seeing the readiness score in the morning when I wake up, and sync it, and see like, “How did I sleep and–
Tobias: What happens if you’re not ready?
Jake: Well, theoretically, if it was low enough, I might consider to not [crosstalk]
Tobias: [crosstalk]
Jake: No. Just maybe it’s not a good idea to be making a bunch of investment decisions that day, you’re probably not on your A game.
Tobias: Interesting, JT.
Bill: I have nothing to add.
Jake: [laughs]
Tobias: I got a question here that just came past? I don’t know the answer to this, but any thoughts on Apollo Global Management replicating the Berkshire model? You guys said that?
Bill: No.
Tobias: Sorry.
Jake: I’ve seen a little bit of talk about it but I don’t know well enough to speak intelligently. So, I’m going to bow out.
Tobias: Yeah. I don’t know anything about it. Let me– [crosstalk]
—
Berkshire’s Business Model Without Buffett
Bill: I’m more worried about Berkshire keeping the Berkshire model when Buffett dies than I am somebody replicating the Berkshire model.
Tobias: How would you characterize Berkshire model as Berkshire practices it?
Bill: Well, I think, what they’d like to say is that, the preferred acquire and trust within the organization enables complete autonomy within the operating companies. I think, mutual respect creates a scenario where people come there after selling and continue to work hard.
Jake: I would say that insurance leverage is also like probably, one of the most important things about Berkshire practices?
Jake: Yeah, but dude, insurance companies can blow up. That’s just a component of juicing return. I don’t think that has anything to do with what makes– I think that, that is important from the capital allocation standpoint, but insurance is not the secret sauce of Berkshire. It’s not, dude. Insurance is easy to kill. Plenty of insurance companies have gone under. You lose the talent. Insurance is not a good business at all.
Jake: I know. That’s why I’m saying that’s why it’s been so good for them.
Bill: I guess, I think, what I’m saying is, I think that’s because of the people at the top, and I think they– you’re like objectively going to lose one of the people at the top pretty soon, and I’m hoping that the bench continues to come to work for people that aren’t named Buffett.
Jake: Yeah.
Bill: Because if you start losing the whole bench– It’s funny. He talks about like here, find a business an idiot can run. An idiot objectively cannot run Berkshire. I think, anybody that’s just like, “Oh, it’s going to be fine.” I know Charlie’s says it, but I’m not so sure. I think, it’s got a better than coin flip probability. But I wouldn’t bet high certainty on it. It’s one to watch.
Jake: I agree.
—
U.S Market Flat Since ’09 If You Factor In Money Printing
Tobias: I’ve got a little tweet thread from Preston Pysh. Can I throw this at you, guys?
Jake: Yes.
Tobias: I’ll retweet this in a little bit but he starts with this idea. Why does everything feel like the world is falling apart yet the stock market has looked like this since 2009 and we all know what the stock market looks like. It’s got that very substantial ramp on it. So, then, he looks at major stock indexes around the world. Everything’s had a pretty good run. India is top the list at 638%, China on the bottom at 75%.
Jake: Since when? 2008?
Tobias: 2009.
Jake: 2009 to present,-
Tobias: To date.
Jake: [crosstalk] -stock market is only 73%?
Tobias: That’s in domestic currency.
Jake: Okay. Interesting.
Tobias: Changed to dollar terms. The US is on top at 533%, India drops to 396%, China improves to 89%, but then, he’s done this conversion. So, he’s looked at the M2 currency supply, how’s that changed since 2009? Well, it’s up a lot. So, then he divides that by M2 and he says, “The US gets to 139%, India to 92%, and in China on the bottom is -31%.” So, then, he consolidates all of them together by white, and he says the global market is up 171%. But then, you got to adjust that by M2 and so, the global stock markets are up 6.9% since 2009.
Jake: Cumulative.
Tobias: Cumulative.
Jake: Not compounding,
Tobias: Not compound.
Jake: So, basically, the markets flat from 2009 if you adjust for-
Tobias: US dollars.
Jake: -money printing, basically?
Tobias: Yeah. It’s just US dollars. I guess, adjusted for money supply, not just dollar to basement.
Bill: I don’t know.
Tobias: That’s kind of shocking. [crosstalk]
Bill: Feels like, I need some fact checkers on this one.
Tobias: [laughs] Well, the tweet thread is up there and I haven’t fact checked it. I just thought it was interesting.
Bill: Yeah. I have no idea.
Jake: What does it mean though?
Bill: Get long FAANG.
Tobias: Yeah. I don’t know what it means. I think, probably, it’s the same conclusion if we draw anyway that– The US is up a lot, and a lot of that has to do with some– We’ve printed a lot of money at the same time, too. But globally, it’s still outperformed. Then the other countries that are probably more currency, oh, sorry, more commodity type markets haven’t done as well, which value in commodities haven’t done well for over about that period of time. That might be the real conclusion from that.
Jake: Yeah. Like any series, your starting and stop points can completely change the story. And commodities went from 2000 to whatever, 2008 let’s say, absolute moon shot. Like China was laying down more roads than the US had in the entire 20th century. US just had extreme amounts of commodity usage going through the roof. So, you start from that level, and then project forward, and it doesn’t go anywhere. But I don’t know. It’s like we can move a few things a couple of years either way and you change all of the numbers.
—
What Happened To The Commodity Super-Cycle?
Tobias: Remember BRICS, BRICS as an investment thesis?
Jake: Oh, yeah. Of course.
Tobias: The commodity super cycle?
Jake: Yeah. Big time.
Tobias: What had happened to the commodity super cycle? Was that more in the telling than in actuality? Is there more narrative than facts to that? I don’t know.
Jake: Well, imagine that probably, there was a lot of capital cycle theory at play [crosstalk] where, if everyone’s demanding that much whatever material, then the market ramps up to provide it, investment happens in it, we get overcapacity, crash, profits go to zero, attrition started over again. [crosstalk]
Tobias: The China’s demand fall away. What caused the crash?
Jake: I’m not sure. It’s hard to– I don’t know.
Tobias: Has China slowed its growth over that period of time, materially?
Jake: I think so. Wasn’t it running at like 20% GDP for like the 2000s.
Tobias: That’s hard to sustain.
Jake: Yeah. I think, it come down to 5% to 8% or something. I don’t know. I’m pulling numbers out of my ass here, but I don’t know.
Tobias: Sure. It’s just interesting. When we were in that commodity super cycle, it made both the sides– [crosstalk]
Bill: Yeah, it was like, 2007, China’s GDP annual change looks like it was 14, then nine, seven, then 10, six. In 2010. Nine, six, seven, nine trending down to six-ish, five, nine last year two, three 2020. I don’t know. They grew in a pandemic. That’s not terrible.
Tobias: Still on an absolute basis, those are quite big numbers globally.
—
Bill: Yeah, I don’t know. I’m sorry. I was arguing with somebody over whether or not health tracking is the future. So, I stopped listening.
Jake: [laughs]
Tobias: I don’t think you’re going to be able to avoid a day.
Bill: What? Health tracking?
Tobias: Yeah.
Bill: Yeah. Well, that’s what I said. I said, if they force you to do it, then people will do it. But I don’t think people care very much. You got a pandemic and everybody’s using vices like crazy. I’m not going to buy that. People care about health. I tend to look at overall obesity, and how people act, and think, they might say, they care about health but they don’t. So, I apologize. I was distracted. It is the sativa.
[laughter]Jake: Speaking of health?
Bill: This is healthy, man. It is better than wine.
—
Carnage Underneath The FAANGs
Tobias: This monster seller for like– We talked about this a few times. The indexes are basically not telling the story of what’s happening underneath that the sort of carnage that goes on and there’s this old Wall Street saw that you got to be careful when the soldiers don’t follow the Generals, the Generals, I guess, the big popular. The FAANG, I guess, are the Generals. Fat men or whatever you want to call it. Does the fact that it’s sort of narrowed down to a handful mean anything?
Bill: It can be great. But I think it means that we’re ready for a rally.
Jake: [laughs]
Tobias: Well, that’s the other possibility, right?
Bill: I do.
Tobias: I saw Jake at Economic [unintelligible [00:40:03], this analysis of you know, if you look at the index and then you drill down into the underlying components, so you look at FAANG. So, he’s saying that this. “Once you do this, it’s not nearly as expensive as it might look on a CAPE basis.”
Bill: It’s definitely not. There’s carnage everywhere. Like, okay. So, Microsoft sports 37 times earning its valuation. Here, we can talk about when Jeremy Siegel wrote this paper. I acknowledged that it was 1998. But he’s saying 1972, NIFTY-50 to earn an 18% annualized return on Philip Morris, you could have paid 68 times earnings, Pfizer, you could have paid 72 times earnings, Bristol Myers Squibb, you’re down to 17%, you could have paid 50 times earnings, Gillette, you could have paid 45 times earnings, Coke, you could have paid 82 times earnings. Merck, you could have paid 76 times earnings. [unintelligible [00:41:00], 47 times earnings. Like, these are fantastic businesses and they have global scale.
Like Microsoft at 37 times earnings with Azure, GitHub, Xbox, LinkedIn, Office, I mean you want to tell me that it’s overvalued? Fine. It’s a huge portion of my net worth because my grandma gave me a bunch of it and there’s not a fucking chance I’m selling that stock. No way to go hide in what? Some shit code trading it like 10 times earnings? Fuck that.
Jake: [laughs]
Tobias: What about the others? Because there’s a few of us in there besides just Microsoft. Facebook’s probably, cheapish? Google’s probably, not stretched?
Bill: Yeah. I think, you can look at– Amazon displayed last year that they are absolutely, functionally, like society doesn’t work without them. So, I don’t know, what’s it worth? You tell me. I tend to think that if they trade like bond proxies with growth, that’s not the most insane thing in the world. And if you want to say, Well, what– [crosstalk]
Tobias: Yeah. What do you do with the rest of the index? Apple, I guess.
Bill: Well, but look under it. Like, there is stuff that has just been shattered. And not just like these high-flying things. You can find a lot of stuff that’s trading very reasonably right now. So, you know, I don’t know what to conclude off of it other than these big businesses with global scale and huge incremental returns are trading at optically high numbers, but we’ve never seen anything like this before.
—
Is LinkedIn A Waste Of Time?
Tobias: Which side of the balance sheet you put LinkedIn on? Is it an asset or a liability?
Jake: [laughs]
Bill: Oh, it’s a huge asset. It might be a pain to everybody, but it generates a lot of revenue. It has a [crosstalk] ton of users. I think it’s like 800 million users or something crazy like that. Yeah, 800 million members. That’s crazy.
Tobias: What is LinkedIn? But what’s it for?
Bill: I think if I was a recruiter, you must have it, right?
Jake: That’s the [crosstalk] people can troll through.
Bill: Yeah. Then, you got to pay to get in each other’s DMs. It’s like Twitter, but it sucks.
Tobias: Well, I was going to say, that’s what I was going to say. Would you be more likely to hire someone from LinkedIn or Twitter?
Bill: Well, I think, it depends how much I had to risk my job of hiring somebody with a non-conforming background versus if I was some corporate shill that just needed to hire somebody that filled a role on paper.
Jake: Checks and [crosstalk]
Bill: Yeah.
Tobias: Interesting. So, you think that if you need the pedigree, you need to go to LinkedIn. But if you need someone who is really good at their job or really good at something, maybe, you go to Twitter.
Jake: [laughs]
Bill: Yeah. You find somebody merit based on Twitter and you find somebody that’s good at marketing themselves on LinkedIn.
Tobias: Now, you can do some marketing on Twitter, too.
Bill: Yeah, that’s fair. Funny enough. Twitter can’t build a business out of it yet. So, what is that? I don’t know, man.
Tobias: How is that impossible.
Jake: Seems impossible. [laughs]
Bill: I don’t know.
Tobias: It can’t be that hard, can it?
—
Twitter ‘Super Followers’ Review
Bill: Dude, the super follow thing was really eye opening for me.
Tobias: What is that? What is super follow?
Bill: Well, it’s this program. I like the people over there. So, I hate to say this, but it’s like, I said, okay. So, you pay $999 a month, don’t pay, but if you want to do. That would be a waste of your money and it would go to me. I was like, “Okay, cool.” So, I could do unique things for people, I could host private spaces, right? They were like, “Well, we don’t have that.”
Tobias: [laughs]
Bill: I was like, “Okay, so, what can I do?” They were like, “Well, you could set up a Zoom call.” I was like, so, I have to set up a Zoom call outside of the ecosystem, and people are paying me and somehow, I’m giving Apple 30% for the privilege of doing that, plus, whatever you’re going to take. I was like, “Is there a way to get a slack function that people that pay are directly into message and then, it’s automate?” Nope, you can use DMs. I said, “If you guys ever used your own DMs?”
Tobias: No, I didn’t.
Jake: Oh, it’s a– [crosstalk]
Jake: Yeah. It’s terrible. So, I don’t know, man. They’re not executing basic stuff.
Jake: I looked too and I think there’s 3,000 or 4,000 people that work there, and then, I saw that they acquired some company that seems might be working on to improve the DMs. I’m like, “You have 3,000 people. There’s no one there who can build a little bit of a better experience on this.”
Bill: Like, how can you not search your DMs and how can you not reply to a specific message? Those are things that are just absolutely mind boggling at this stage of the game. And sadly, as I wanted to believe early in the year, I sold it like 61, because I told people, too. I was like, “I think, I can now trade people because I think I had better information and once I got that information to go to Zoom, [crosstalk] what I would surprise, sold it immediately.” I was like, “This thing, no fucking way, am I riding this train?”
Jake: [laughs]
Bill: No offense to people over there. I really do like you guys, but I really think you need some product improvements.
Tobias: LinkedIn is for reading Ray Dalio’s rants.
Jake: Oh, okay. [laughs]
Tobias: I think, that’s where they belong to.
Jake: Never fall in love with a hot dog too much.
—
@RudyHavenstein Is The GOAT On Twitter
Tobias: [laughs] Rudy’s got him.
Jake: Shoutout to Rudy.
Tobias: Rudy Havenstein, best account on Twitter. If Rudy’s gets– [crosstalk]
Bill: Dude, he’s been on a tear lately.
Tobias: Did you just see there was–
Jake: Well, he got a lot to work with.
Tobias: They killed off a whole lot of accounts like, they killed of the Epstein trial track– Ghislaine Maxwell trial tracker, and they killed a few other accounts. I almost tweeted out, if Rudy haven’t seen those, we ride, but I don’t know how many people do with me, but I don’t want to be in it like charging in there by myself but I thought about it.
Bill: I think he’s an important voice that if they were to like kick that voice off, I would have a major problem.
Jake: That’s a first amendment violation.
Bill: It’s like a freedom of speech issue. Yeah. I’m not cosigning every tweet that Rudy sends because there’s a lot of them, and I don’t know. He gets into mood sometimes.
Tobias: [laughs]
Bill: But I like the way that guy thinks. I’m glad he’s out there saying it.
Tobias: I like it when he says it to the Fed officials, and they have to respond to him.
—
Tobias: Send some questions in, dudes. We’ll–
Jake: Ignore them?
Tobias: We’ll just keep on talking to ourselves here.
Jake: [laughs]
Tobias: Yeah. [laughs]
Jake: Yeah, we need some Christmas mailbag here.
Tobias: Yeah. It’s an interesting setup for next year. I think given the huge sell off in all the tech names, there’s probably starting to be some reasonable value in there. And then, I still– [crosstalk]
Bill: Dude, I was looking at Peloton, again, because I can’t stop.
Jake: To give you a heart attack?
Bill: Well, I think, oh, yeah.
Tobias: [laughs]
Bill: Actually, interestingly, their head of advertising was on with, I think, it was Adweek today? It’s on YouTube but I think, Ryan Reynolds has a firm that does like, I forget what she called it. It’s almost like commercials as a service is what it’s called. But his firm is why they were able to spin that ad up so quickly. I think it took them two days to get that ad like-
Tobias: 48 hours, they– [crosstalk]
Bill: -from idea to out. That’s pretty impressive.
—
Samantha Written Out Of Sex And The City
Tobias: My wife is a Sex and the City devotee. So, I watched that. That was brutal [crosstalk] that whole episode. Oh, my God. [crosstalk]
Tobias and Bill: Yeah.
Tobias: Sex and the City is rough.
Bill: Dude, I’m certain, Peloton didn’t know my stepbrother is a part owner in a bar group in New York, and they own this bar. I’m pretty sure it was down the hatch that this happened at. Samantha went there, and they knew that they were going for Sex and the City. It was going to be filmed there. And then, Samantha bought weed from the bartender.
Tobias: [laughs]
Bill: And they didn’t tell him that that’s what was going on. I mean they didn’t care because they were like, “Whatever. All pub’s good pub,” but they were like, “We’re not weed dealers.” They just shilled cheap liquor.
Tobias: She didn’t make it onto the new show.
Bill: Really?
Tobias: Yeah. Didn’t want to come back. I can’t imagine why having watched it.
Bill: Oh, she’s got those city miles.
—
Tobias: Fear & Greed Index is showing extreme fear. Yeah, that’s usually a good time to take a swing. I don’t know. The only problem with that Fear & Greed Index, and this is all for fun. I don’t use it in anything that I do. I just like watching it and seeing what’s happening. The main problem with it is that, it doesn’t run back far enough. So, you can’t see what it looked like through 2007, 2008, 2009. So, I think that we don’t really get a rating on it until we get the next big extended bear market, and then we get to find out what so it recalibrates to the full experience.
Jake: [laughs] Turned out, there’s still greed. Sorry. [crosstalk]
Tobias: Yeah. that’s right. [laughs] A 20, you know, that’s greedy. You got to get negative five if we hit extreme fear.
—
Peloton Discounting Bikes But Stock Still Too Expensive
Bill: Oh, I’m Peloton. Anyway, the interesting thing and I was thinking about because I was reading the BIMO analyst, who’s talking about how these rapid growth companies, when you’re looking at churn, you really got to be careful on what your denominator is. What’s the probability that the first three months of usage or first year is even churning? And when you’re putting on that many customers, you can really make your churn numbers look artificially lower than they are. Plus, with Peloton, you’ve got the first cohort is by definition, the super fans like, that’s where I just can’t– I don’t know, man. I need it down like 50% before I buy it.
Tobias: Also, you get a pandemic year that makes it a hard comp run.
Bill: Yeah, and you’re only running it like, I want to say 200 million run rate gross profit, that’s you’re under a billion. Even if you assume it’s growing, it’s a billion then you’re paying $13 billion today for that billion. Oh. I don’t know. [crosstalk]
Tobias: Well, they’re trying to breakeven on the bike, and then drive that cost down, and then make money on the subscription right.
Bill: Yeah. But I have seen what my perception of is discounting of the bike to get it to move and like, I don’t know, man. For some reason Under Armour rhymes in my head.
Jake: Try to make a bike that doesn’t go anywhere move.
Bill: That’s kind of funny. Like Under Armour was a dope brand and people forget that. They were very, very cool for a while. And now, they suck.
Tobias: Yeah. Not even that not long ago.
Bill: I don’t know how big the difference between Peloton, the brand is and Nautilus, if you really start having to move Peloton.
Tobias: The differences though that-
Bill: That’s my fear. I’m not saying I’m right.
Tobias: -Under Armour [crosstalk] buying because you like Under Armour, and you’re ripping their brand for them everywhere you go with Peloton. You sort of got it in your own house and you’re doing it because you love it.
Bill: Yeah, I mean, dude, I get it. I like it. I did the workout a couple of days ago. But $13 billion still $13 billion used to be mine.
Jake: Yeah, that’s nothing. Grounds to zero now.
—
Tobias: Do you guys look at Chinese equities? I know Jake does it– [crosstalk]
Bill: Here we are again. [laughs]
Tobias: Alibaba is crazy cheap here, provided you get your money back at some point.
Bill: I think, that is the provided.
Tobias: Yeah, that’s a pretty big proviso. I don’t know how you assess that one. You probably just got to take a swing at it with a little bit of money that you can afford to lose and then never sell it.
Jake: Could be.
Tobias: Oh, that’s not investment advice, by the way.
Jake: Yeah. not investment advice.
Bill: Here’s the thing. Out of every security in the world, I just asked myself, “Do I have to play this Alibaba game?” My answer is, “No.” If it works out, I totally get it and I’m happy for the people that did it. But it’s just not something I have to swing at. [crosstalk]
Tobias: That’s core option/position [crosstalk] in it.
Bill: Yeah, but I don’t know. I got other shit I’m doing that with.
Jake: [laughs] Yeah. There’s lots of ways to play the game. You don’t have to do it the same as everyone else necessarily. Do what make sense to you.
Book Recommendation – Fallen Leaves
Tobias: Jake, book recommendations?
Jake: Best book, I read this year or at least one. It’s a little bit of recency bias here, but–
Tobias: Fallen Leaves.
Bill: The only answer to this is Shantaram. It’s the only answer.
Tobias: Oh, that’s a rough book.
Jake: I didn’t read that this year.
Bill: It’s a rough book. It’s awesome.
Jake: It’s good.
Bill: It’s long.
Jake: Yeah.
Tobias: I didn’t realize, I read it on Kindle. I didn’t realize how big it was.
Bill: Yeah. It’s very long.
Tobias: But it’s a rough read.
Bill: I [crosstalk] through it.
Tobias: It’s an easy read. Sorry. It’s a rough story.
Bill: Yeah.
Tobias: It’s not hard. It’s an interesting read. It’s just tough story.
Jake: Yeah. A Thousand Brains by Jeff Hawkins was very thought provoking. But yeah, this total recency bias, but that Fallen Leaves is by Will Durant, who’s written lots of history books, and really prolific author, and this is sort of him at 90 years old. His final words on a bunch of subjects of the human experience, and it’s incredibly well written, eloquent, exquisite language. It makes me jealous of how good of a writer he is and his word choices. But yeah, what else is good? I don’t know. It’s hard to give book recommendations because it depends on what else you’ve read in other contexts like it may fit with you better, and so, I try not to do too many book wrecks.
Bill: I was thinking about the hard work segment. I think the hard work that I’ve done is watching me get the shit kicked out of me and not doing anything.
Jake: That’s a good observation actually. That’s like the psychological test.
Bill: It’s not so easy to not do anything.
Jake: Yeah.
Market Forecast – February Crash, August Bottom, All-Time High 10 Years Later
Tobias: My forecast for next year is, the market crashes in February, and bottoms in August, and then, rockets to new all-time highs like, 10 years later.
Jake: [laughs] That’s helpful to trade around.
Tobias: Chisel that into stone.
Jake: Oh, boy.
Tobias: Is value dead, again? I think value is very much alive.
Jake: Dead again, already?
Value Set For A Good Ride
Tobias: Value spread is as wide as it’s ever been. And value had a pretty good year. As value’s not rotating, it’s a momentum. It’s going to be a fun ride, I think value for a while here. Still at a big discount to the market. It’s still cheap. Maybe not so much on an absolute basis, but relative to prevailing interest rates. Tough game. Who knows? If interest rates go up, which they seem to be showing no signs of doing, 10 years hammered, it’s like 1.4 something at the moment?
Jake: What’s that in real?
Tobias: No one knows. I guess, it’s like -4 something.
Jake: Eight, I don’t know.
Tobias: Who is Rudy in real life? I don’t know and I don’t want him out of here because I want him to keep on doing what he’s doing but I have no idea.
Jake: Yeah. There’ll be no doxing on this show.
Bill: It’s got to be somebody that’s retired. You can’t just sit at your work all day going, [blabbers]
Tobias: Maybe, he’s got a very [crosstalk] job.
Bill: Maybe.
Tobias: Why doesn’t China’s private debt scare of Ray Dalio given his knowledge on debt cycles?
Bill: No one knows as Gray. I’m not opining on this.
Tobias: I don’t understand anything that Ray talks about.
Jake: [laughs]
Tobias: Different world [unintelligible [00:56:47].
Jake: No.
The Global Economy Is Not A Machine!
Tobias: I think, the biggest deviation is, the global economy being a market machine. I just fundamentally disagree that that’s how it works. It’s not a machine.
Jake: Agreed.
Tobias: It’s some sort of organism complex adaptive system. UA makes things too baggy.
Bill: Yeah, that’s just not what killed it. That’s not what killed it.
Tobias: That’s what the kids want.
Bill: That maybe wouldn’t. Yeah.
Tobias: The kids will laugh at– [crosstalk]
Tommy Hilfiger Killed Their Brand With Baggy Clothes
Bill: Tommy Hilfiger made stuff too baggy, if you want to talk about somebody that killed the brand, making stuff too baggy.
Tobias: Ah, people liked it for a while.
Bill: Yeah, but that got a little absurd. Then, Ralph went the same direction. That was kind of sad to watch Ralph go through like 13 iterations of RL.
Tobias: Do you guys remember, Chamath? He was a black. He did some SPACs early this year. Haven’t heard that name for a while.
Bill: Dude, he has the tiniest leg. I was doing a leg workout yesterday and I was like, “My legs are so much bigger than Chamath’s. Chamath’s legs are as small as his returns.” That was what I said to myself.
Jake: Man, that’s– [crosstalk]
Bill: Also, in case y’all doubt, peep that beast.
Jake: [laughs]
Tobias: You’re doing calf phrases.
Jake: Oh.
Bill: Bro, I was born with that.
Jake: Brown sugar in that– [crosstalk]
Bill: The problem is that, that dude that used to train me, they called me muffin top. He just used to save as fat man calves that pissed me off.
Jake: Oh, it’s brutal.
—
Alibaba – Today’s Price Is The Wrong Price
Tobias: Yes. the thesis on Baba, I don’t know Chinese. I had never been outside my hometown but Munger bought Baba and has a backward-looking P/E, also had a podcast on it. I think, that’s a pretty good summation of the thesis.
Bill: I think, that’s not a sufficient investment thesis. I think, that’s about as likely to work as the AMC-8 thesis.
Jake: Ooh, full circle.
Bill: No, no, no, no, no. There’s a difference here. Munger’s thesis is way deeper than that thesis. That thesis is hot garbage. That’s not a thesis. That’s like a reason to maybe go do some work.
Tobias: I think they were joking. But I think, that was pretty funny.
Bill: They may have been joking, I don’t think that’s, like, a lot of people are doing that.
Tobias: I agree with that.
Bill: That is a big mistake.
Tobias: But here’s the thing. It’s qualitatively cheap. It’s going to keep on growing. The only thing you have to get over is whether you get your money back there, and it’s just like, no one knows. Everybody’s guessing.
Bill: Yeah. That is the only thing. Agreed.
Tobias: [crosstalk] that’s a big thing but you can’t–
Jake: I know it’s important but–
Tobias: You can’t research or think about it. There’s just no answer. That’s just diving into the unknown. That’s uncertainty. That’s what Seth Klarman would say. “Uncertainty is that extreme uncertainty like, it’s either a doughnut or a 10 bagel. I feel like it’s more likely to be up than it is to be at [crosstalk] I think, [crosstalk] on it.
Bill: Yeah. I mean, I would have said for a long time now, but I’d be more inclined to be long than short. It’s [crosstalk] short.
Tobias: I only hold two [crosstalk] securities, but if I did hold more than two securities, then I’d be–
Jake: About the only thing that could say is that today is the wrong price.
Tobias: Yeah, that’s right.
Bill: Yeah. It’s either zero or a lot higher.
Tobias: That’s right. No, that’s binary. The only problem is a lot of vol in the options. So, you can’t even– [crosstalk]
Bill: I say it zero. I don’t mean a zero. I’m sure somebody is like too specific with your price targets.
—
Tobias: I took a look at DBX. I thought it was–
Bill: Dropbox?
Tobias: Yeah, I thought it was interesting when I took a look. They’ve clearly got some [unintelligible [01:00:07] about capital allocation in it. It’s looking like a real business. I don’t know where it’s trading at the moment. I looked at it nine months ago, something like that.
Bill: Yeah, they came out with that a little while ago. I tell you [crosstalk] that I like–
Tobias: Same metaverse strategy. That’s what I want to know. Just don’t want to care.
Bill: Ah, I don’t know that they have one. They’re more of a two-dimensional product and you need a third-dimension in the metaverse. But don’t turn us off here. Hang on. I got some that Mike NonGAAP wrote up that I really liked. If somebody likes these crazy ass ideas that turn into special sits– ah, fuck me.
Jake: This is riveting radio, right?
Bill: You know what?
Jake: [laughs]
Bill: Hush. All right, I don’t know, whatever. I thought, I might be able to pull it up but I can’t.
Jake: Can’t get it up. It’s all right.
—
Read The Proxy Statements
Bill: It was great. No, well, I’m the only one that will know about it. I love how he looks at stuff, man. He went through where the person has also run a process, and then like, what previous outcomes were like– just kind of how this person is incentivized? I don’t know. I love the idea of looking at proxies to figure out situations, I’m just looking at where people have been and what the outcome has been. I think that’s a very cool way to invest.
Jake: Yeah, I think, information per page, proxies pretty high up there when it comes to financial statements. Don’t sleep on that.
Bill: There you go.
Jake: It’s a cash flow statement. I feel like it’s kind of criminally underappreciated.
Bill: Yeah, well, I think that’s probably true. If I had just lived by that, I would have bought Amazon real little and I’d be retired.
Jake: [laughs] I got a question.
Bill: Green Dot.
Jake: What are you guys [crosstalk] for the–
Bill: Green Dot’s the one to look at G-D-O-T. I think that’s cool idea. Do some research on the proxies, folks.
—
Jake: What’s holiday plans for you, boys?
Bill: I’m going somewhere with the fam and then, I think for the first, we’re having people here, and I think, I’m going to enjoy edibles and avoid the booze.
Jake: Okay. TC, what you got?
Tobias: Yeah. Family’s local here. My wife’s parents, the grandparents of the kids. So, we’ll just be staying local, and eating too much, I guess. What about you, JT?
Jake: Took the words right out of my mouth.
Tobias: [laughs]
Jake: Same plan.
Tobias: I’m going to try to do as little work as possible starting pretty soon. I think, I’m just about that point where if it comes in, I’m flicking it to 2022.
Bill: Hmm, I like that point.
Jake: Dude, is it 20% of this decade already in the books here? That’s kind of a mind F, isn’t it?
Tobias: Everything just gets fast as you get older.
Bill: Math’s checks out.
Tobias: As a portion of your life, like it just drains. So, that’s why old blokes, I think, reasonably good investors who they dislike five years. That’s nothing I’ve seen lots of us.
Bill: Yeah.
Tobias: When you’re young, seven years seems like a long time now. Five years, nothing. Rolls off really quickly. I can be much more patient at this session when I was younger.
Bill: Yeah. You know, [blabbers] while riffing on things, is it Credit Acceptance? I think, it’s Credit Acceptance.
Tobias: CACC?
Bill: Yeah. You see, they retired 8% of their shares outstanding in a quarter.
Tobias: That’s impressive.
Jake: Depends on what price.
Bill: Just in case you need a reminder that when the stock goes down relative to the cash flow, buybacks can go a long way. 8% a quarter is big quarter.
Tobias: Yeah, I like managers who buy back stock. Particularly, when they do it at a free cash flow.
Bill: Didn’t AGO really work out? That was one you used to like back in the day.
Tobias: I still like it. It is still going. I just don’t hold it anymore, but I still like it. I’ve got some other stuff in there. I think it’s a little bit more interesting.
Bill: Just for that reason, though, you really liked how that guy returned capital, right? He’s a management team.
Tobias: Oh, that’s Dom Pereira, I think, his name is. Yeah, I still think that’s really, really interesting stuff.
Bill: Yeah. Interesting.
Tobias: Massive discount to adjusted book value. All right, dudes. I’m going to call it. Merry Christmas. Happy holidays.
Bill: Merry Christmas to you, guys.
Happy Holidays Everyone!!
Jake: Happy holidays everybody.
Tobias: See everybody back in 2022.
Jake: Be good to each other.
Tobias: Ciao.
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