In their latest episode of the VALUE: After Hours Podcast, Ian Cassel, Jake Taylor, and Tobias Carlisle discuss:
- The Market Loves To Destroy Hubris
- Warren Buffett vs Cathie Wood
- During Drawdowns – Add A New Position Or Buy More Of What You Have?
- Keep Track Of Your Unforced Errors
- One Incredible Berkshire Statistic
- Investing Implications Of Dopamine
- Don’t Hold Cash Waiting For The ‘Right Time’
- We Over-Analyze When Stocks Are Dropping And Under-Analyze When They’re Going Up
- Expect That You’ll Be Down 50% At Some Stage
- It’s No Sin To Buy Something And Sell It Lower
- Hunting For Future Super-Compounders
- The Hedonic Treadmill That We All Live On
- Near Misses Send Dopamine Soaring
- Living Like A Stoic
- Denial Is So Important In A Busy World
- Elizabeth Warren’s Misleading Tweets
- The Physical Science Behind Earnings Calls
- Buffett’s Bet On Activision
- Buying Fallen Angels
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:
Tobias: Being livestreamed. Hello, folks. It is Value: After Hours. It’s 10:30 AM on the West Coast, 1:30 PM on the East Coast, joined as always by my regular cohost, Jake Taylor and special guest, Ian Cassel. How are you, Ian?
Ian: Doing great. How are you guys doing?
Jake: It’s Ian. I’m so excited to have you on, Ian.
Ian: [laughs] Glad to be here.
Jake: So excited, I put monkeys in the background of my–[laughter]
Jake: Like we’re three monkeys.
Tobias: Some exciting moves in the market over the last few weeks this year. Still haven’t entered technical correction territory, which we had to look up just before we all kicked off here. So, 20% correction. We’re not or is it a bear market? I forget which one.
Jake: Yeah. 10 I think is called correction.
Tobias: 10 is the correction.
Jake: 20 is bear market.
Tobias: Correction? You didn’t even get out of bed for a correction.
Tobias: 20, even that’s modest for deep value go, anyway. Portfolio can move around like that in a month, mostly down.[laughter]
Ian: I was going to say, my portfolio is in a correction.
Tobias: [laughs] Yeah. I don’t think I’m quite– [crosstalk]
Jake: Couple corrections stacked on top of each other.
Tobias: If this actually turns into the big flush, this will be the third one in my career. I started on April 2000. So, I’ve seen more bear markets and I’ve seen bull markets at this point.
Jake: Yeah. Two and two, right?
Tobias: Well, yeah. I’m assuming the we’re entering into a bear market here, I guess, I should have qualified it and said if that happens.
Jake: Yeah. What topics we got for today other than just lamenting falling stock prices? [laughs]
Tobias: I have a few never sell, hyperinflation, picking the right guru, and the risk of selling off 50%. I think one of those might be yours, Jake, but I’m going to grab it.
Jake: You can have it. [laughs] How about you, Ian? Not that you have to show up with anything, but if you do.
Ian: No, that’s okay. I thought I’d maybe share some thoughts on managing through drawdowns. Since I think a lot of people are dealing with this, whether you’re growthier or hypergrowthier value, you’re probably dealing with some drawdown. I think– [crosstalk]
Tobias: I’d also be interested in that topic.[laughter]
Jake: Taking notes here? I’ve got, perhaps, one of my more ambitious or maybe foolish, we’ll see, attempts at a veggie segment on dopamine. So, I’m way over my skis, but we’ll see how it goes.
Tobias: One of those monkeys looks like it’s got a brow like mine. What are those? What types of monkeys are they?
Jake: Those are baboons.
Tobias: Baboons, not a monkey?
Tobias: I don’t know. One of them is great apes. I always get that part confused.
Tobias: Do you want to kick it off, Ian? Or you want us to warm you into it?
Jake: Guest first.
Tobias: That’s a [crosstalk] thing.
During Drawdowns – Add A New Position Or Buy More Of What You Have?
Ian: Maybe a good place to start and I’ll pose this question to Jake first. During a drawdown, when you look at your portfolio in the fund or the assets you manage, when you’re staring at your own stocks going down, are you more prone to add a new position to the portfolio or buy more of what you already know and trust?
Jake: Mm. That’s a good question.
Tobias: It’s a good question.
Jake: Ideally, I would have calculated where my return on time and it goes, and what it is better to be spent on figuring out more in depth on the existing portfolio or searching for new positions to upgrade. I don’t know the answer to that yet, but I’m working on it. I’m gathering data on it at all times.
Tobias: Discussing your Journalytic at all. Is that public?
Jake: Yeah, that’s where it’s going to be recorded eventually. Well, okay. In a total drawdown, where everything is puking, I’ve only been in one of those scenarios. Before it’d been more idiosyncratic things puking, in which case, I liked doubling down. That’s pretty common for me. I actually try to buy small positions and work my way down to a lower cost basis as I go and keep capital available for that position to dollar cost average into.
So, I prefer buying more of what I know, actually, but that doesn’t mean I’m not pretty happy to occasionally scoop up something new or upgrade in the portfolio, as well, like punch something else out and feel I’m getting more quality for the same price. But yeah, I don’t know. Toby, how about you for the screen?
Tobias: Yeah. I have rebalancing dates now. I don’t react to what is happening in the market, because I used to not react very well. I think honestly, I can’t remember what I used to do, whether I used to add or double down probably a little bit of everything. Yeah, so, I’ve taken it part out of my hands now, because I’m not very good at it. I get too excited.
I get into that hot state when the market’s going down. So, I’m in a little bit of a heightened state at the moment, because I’m hoping we get a bit of a flush here, but we’re not quite there yet. Is there a good approach, Ian? Do you have a fair suggestion?
Jake: Yeah. Ian, what’s the right answer? [laughs]
Ian: I’m not saying there isn’t. I was just curious how you guys’ approach that, because it’s something I’ve been journaling quite a bit on through Journalytic, hats off to Jake, and you’re just thinking more about that. I find the more vicious the drawdown, it actually becomes harder to add a new position, because I think during drawdowns, you get shorter term, because the market just beats you up.
You get more short term and you get– You don’t want to lose more money. You start thinking more about every one of your positions, when their next earnings announcement is going to be. You start micromanaging your portfolio, because you really don’t want to take another leg down. It’s just like, you can’t handle it almost mentally.
And it affects me as well, I’ve been doing this for 20 years. One of the things I just tried to do is, try not to get more short-term during drawdowns, because that’s when you make bigger mistakes. I’m just trying to whether it’s a two-year time horizon, which I feel the smaller the company, the more impressionable that smaller company is the shorter time horizon you can look out.
But let’s just say, two years, or three years, or four years, you’re just trying to stick to that two-year timeframe and just keep on telling yourself, “Okay, this business is going to be bigger, earn more money, and not diluting.” If the answer is yes, there’s really not much else to do except buy more as that stock comes back in. If you have those opportunities, you believe in.
A lot of times it makes sense just to likely add more to the things you already own versus adding a new position, which you don’t know or trust yet. Because I do think that, especially as concentrates stock pickers, which is what I am, which I’m sure a lot of people are that are listening to this, I do view the– If you’re concentrated sub-20 positions, especially sub-10, I do view like, it’s almost like a relationship with these companies.
A lot of these relationships with the stocks, you don’t know how they really are until you’ve owned them for a period of time. You’ve got to see them react to different circumstances, whether that’s a macro circumstance or a micro circumstance. So, that was just one of the things I journaled that I had out there.
We Over-Analyze When Stocks Are Dropping And Under-Analyze When They’re Going Up
Ian: I think also, when stocks are dropping, you get more and more macro centered. I think, prior everybody on the Zoom probably has never thought more about interest rates, inflation, or whatever you want to call it more than in the last 60 days, and I think, the more you become more macro and less micro focus, the more you turn yourself into or trying to be a more of a market strategist, rather than a stock picker, that’s the wrong place to be, and it makes you unproductive, and it paralyzes you to making any decision for the portfolio. So, I think for me, a lot of times, I just need to stay micro focused.
The way I stay micro focused is really trying to stay in control of what I can control, which is the companies I invest in. If you want to add a macro component to that, fine. Then just decide that you believe that interest rates are going to continue to go up, and that a recession is going to start imminently, and make your investment decisions based on that, and make sure the quality level of those businesses you’re investing in can stack up well in that type of environment. So, that’s how I disconnect or at least try to disconnect in a productive way during the market environment, like, a lot of people are going through right now.
Jake: [crosstalk] I think it’s very insightful there with the short-termism that creeps in, because I think as you’re taking this quotational pain, you start to not want to see that next print. The next quarter, you’re like, “Oh, God, I almost don’t even want to see it.” There’s so much uncertainty about like, “Is this going to be a landmine that just completely explodes it.”
When you know that that’s lurking, that uncertainty is incredibly agitating and you’d almost rather– We’ll get into this when we get to the dopamine stuff, but there’s a difference between risk and uncertainty when it comes to dopamine. We find actual risk-taking often like you get a dopamine hit from it, but uncertainty actually turns that off and we find it agitating.[giggles] I think that you said something very smart there that short-termism now is, like, you’re looking into that next quarter. I don’t know if you felt this way when things were going up, but you look forward to that next quarter, because you’re like, “Ah, I think this company has been killing it. I can’t wait to see the numbers.” Now, it goes, it flips completely in reverse and now, you’re scared like, “Oh, [crosstalk].”
Tobias: [crosstalk] to see the print.
Jake: Yeah, I hope they don’t poop the bed in this quarter, because I can’t take another 50% drawdown.
Ian: That’s the human nature of it. You overanalyze when things are dropping and you under analyze when things are going up. Instead of becoming a macro strategist during drawdowns, you should just be nibbling the things you like as they go lower, instead of just trying to pick a bottom, which can cost you more money.
Tobias: You don’t want to spend time on social media through times like this. One of the things I don’t check my portfolio prices during the trading day. That’s one of my rules. I wait until everything closes, because it feels more static and slower. Things aren’t moving all over the place. I find it easier to think when nothing’s trading. But I can get like a contact high just by going onto social media and seeing everybody panicky one way or the other. I’ve certainly got it today, just from being on I can see everybody going absolutely bananas in my stream and yesterday, too everybody was going nuts. You don’t need to know what the actual print is to know roughly what’s happening– [crosstalk]
Jake: You can just [crosstalk] the room. [laughs]
It’s No Sin To Buy Something And Sell It Lower
Tobias: Yes, [laughs] It’s less relevant to me, because I already have as Jake likes to say, I have sealed myself into the capsule. I’ve removed all of my degrees of freedom for precisely this reason.
The only other thing I would say, when you’re trying to decide whether you add a new position or add to your existing holdings, I have found just through the testing that I have done that the best portfolios, of course, are going to be the ones that you form closest to the bottom. Sometimes, it’s not a bad idea, if you get something that you like. Maybe you should be thinking about the portfolio. It’s no sin to buy something and sell it lower because there’s going to be–
Assuming this is not like a March 2020 or late 2018 type market and this turns into the real thing, which is 2002 or 2009, where it proceeds down all the way. That’s going to happen. You’re going to buy stuff and you’re going to sell it low, because there’re going to be better opportunities in other stuff, and you just have to resign yourself to that fact, and get over it now, and know that you’re going to make a mistake on the way down. It’s unavoidable. Everybody’s going to be doing it. But the best thing you can do is the best portfolio at any given time. So, that’s what I’m trying to get in mine. I’ll rebalance in due course. I’ll be trying to get whatever I think is the best portfolio at that time will become the portfolio.
Keep Track Of Your Unforced Errors
Ian: Yeah. Maybe a couple of things that I also wrote down were some keeping track of some of the unforced errors I made over the last 12 months and probably the one that was front and center, which I have in my rules of not to do, which is another probably conversation. Oftentimes, it’s where you bend your own rules is where you can make irrational returns, but it’s also what I can also crush you and try to weigh that in your mind when you’re doing it.
Ian: One of the rules I broke in a position, nine months ago, is never to average down after a mediocre quarter, because 90% of the time, especially with a smaller company, another mediocre quarter is going to follow right behind it. There was an instance, where I rationalized buying into something after they had a mediocre quarter, sure enough and other one came in.
Ian: And especially, in this market environment, unless you’re beating expectations, you’re going to go down 20% the next day after earnings anyway, let alone messing. So, that was another unforced error that I had to relive that brought that roll back, front, and center just like, “Don’t do that again.”
Buying Fallen Angels
Jake: Ian, are there new things now falling down into your micro-cap world that are interesting? Because I would imagine that–
Tobias: Is a few former large caps? I think– [crosstalk]
Jake: Yeah. They used to be large caps and now they’re in Ian territory.
Ian: Yeah. There’s a lot of interesting things that are fallen angels right now.
Ian: It’s another thing I guard against mentally, because as a micro-cap investor, I like new ideas that haven’t been discovered yet, because then 99% of the investor community is new to that story, too. The incremental buyer is everyone else, where if I’m buying something that was a billion-dollar market cap, it’s now $100 million market cap, everybody already knows about it.
The analysts already cover it. It’s probably already liquid. So, it’s really hard for me mentally been how I’ve always been this way to make that leap and look at some of those fallen angels. But I am getting over that.[laughter]
Ian: I am going over that, because there are some interesting things that are coming down.
Tobias: Yeah. I was going to say, is that a benefit or a disadvantage? I’m not sure. It might be an advantage to have stocks already known by everybody.
Ian: Yeah, I think so. Because listen, I’m sentiment perception swing to extremes on both ends. So, I think with some companies, that extreme pessimism has certainly taken hold.
Jake: People can then imagine like, “Well, it was at a billion just–”
Tobias: It’s going to go back there.
Jake: It could go back there really easily.
Ian: Yeah. [laughs]
The Trust Factor In Warren Buffett
Tobias: I think not that I really want to dunk on Cathie too much, but I think that there’s a lot of that. We’ve been looking at the flows into Ark over the last– Ark’s been consistently buy the dip. The crowd in Ark has bought the dip pretty consistently through this. I think even up to, yesterday, it might have been the first day of material outflows. I think last time I looked, the stock price was around 42 of 156 which is coming on a 75% drawdown I think, which is extraordinary as my topic which we don’t have to jump to that yet, but that’s where I was going to go.
I’m not trying to dunk on Cathie. It’s more just a comment about, being in Berkshire talking to some of the people who are invested in Berkshire and I’m sure everybody listening to this is, we’re investors and we’re trying to learn from Buffett to apply those rules or learn from other investors.
It doesn’t have to be Buffett. But learn from other investors to apply those rules in the way that we invest. Was there a lot of people with Berkshire? I just hadn’t really thought about it. There are a lot of people with Berkshire who I talked to, who don’t know much about investing. They just trust Buffett like that’s the basis of their investment strategy, which I think– [crosstalk]
Jake: And crushed all of us? [laughs]
Tobias: Yeah. That’s probably right. The trust in Buffett, that’s paid off in spades. But you could easily have trust in another manager, who doesn’t have the same rigor in the process that Buffett does hasn’t been around through as many cycles. And that trust may not be appropriately placed and then, you flying blind a little bit. I think it’s that the representative bias, where you find your hero and you follow the hero regardless of what they do. And initially, it’s because what they do accords with what you believe in and then subsequently, they might go off pissed and you find yourself off pissed with them.[laughter]
Tobias: I think it’s to everybody’s good fortune or to everybody’s good judgment that they follow Buffett because there are other managers out there who might lead you astray.
Jake: Are you going to name names?
Tobias: No, I’m trying not to.
Jake: Yeah. Put criticize by category.
Tobias: Yeah. That’s one of the things I learned from Buffett. He was saying it to Charlie repeatedly during the year and Charlie said, “Can’t help myself.” [crosstalk]
Jake: He’s been saying it almost a decade.
Tobias: I know that’s better. I can’t help myself.
The Market Loves To Destroy Hubris
Ian: I find with investing especially, I think, we talked about before we came on live. I think this industry and finance and FinTwit, especially, people in finance really relish seen others do poorly. The peanut gallery is vicious. I think it makes sense, because our scoreboard is always front and center maybe, if not publicly in our own minds and it’s especially– [crosstalk]
Tobias: And it’s all relative. You can be doing very well. You could be knocking at 15% a year, which makes you a superstar for a long enough period of time. But if the NASDAQ is doing 17%, what’s wrong with you, baby?
Jake: Lately, don’t [crosstalk] lately, too.
Tobias: There are certain investors who are like, those indexes personified. So, yeah. Sorry, I didn’t mean to cut you off. Keep going.
Ian: No, no, no, it’s fine. I think it’s also proof that the market loves to destroy hubris in all its forms, and people like to follow hubris in a way up, and then they like to sell it on the way down. I know, it’s our human nature to and we’re all doing well we want to be loud about it. When we’re all doing poorly, you want to go into a rock–
Tobias: Hard. Yeah.
Ian: Yeah. And I think history is proven whatever the case may be, it’s better to be quieter rather than louder.
Tobias: You don’t want to call down the thunder? Summon a lightning bolt?
Warren Buffett vs Cathie Wood
Jake: Because even somebody like Cathie Wood, if she was less boisterous, obviously, not making the comment she’s made and it was just that super hypergrowth list of companies making no money, I don’t think it would be quite as negative towards her [crosstalk]. Yeah, even I was looking at the stats. Even since Ark’s inception, I think even after today, she’s on par with what Berk has done since Ark’s inception.
Ian: Yeah. You can say the other side of it, too. Well, Ark’s down 75% from the peak and it’s still on par with what Berk’s down since 2014. Ark could probably dead cat bounce and make the same returns Berk could do over the next three years. I’m not trying to rain fire down on me. I’m just trying to play the other– I’m not even trucking Twitter right now, but it’s interesting to think of that.
Then so, I was putting up the performance before we got on. But I think it all comes back to just trying to stay humble, stay quiet, and also, knowing that everybody can outperform, but it’s usually at different times. It’s a quite a hostile world, because obviously the opposite of value is somebody like her and we all have the opposite. When you see the opposite of yourself doing well, it creates resentment and that’s what we need to dig in.
One Incredible Berkshire Statistic
Jake: I saw a stat. I don’t know how true it is. I haven’t verified to check the math out, but Berkshire, if it was down 99 point I think it was 5%.
Tobias: It’s Chris Bloomstran, it’s probably right.
Jake: Okay. It’s probably right. Yeah. That would then put it at par with the S&P 500 over since 1965. You’d still be– [crosstalk]
Tobias: Chris sent that in a letter to Buffett and Buffett responded and he said, “I think you’re right, but let’s not test the math.”[laughter]
Jake: Even better.
Tobias: Yeah, that’s wild, isn’t it? It’s hard to even wrap your head around that he’s performed that well over that period of time.
Hunting For Future Super-Compounders
Tobias: I’ve got this bad habit of going back and looking at stuff that’s been beaten up and just running it back 12 months and seeing how it’s done. One of the things I did was AMC. I ran AMC back. AMC still up 25% over the last 12 months. That’s not bad.
Jake: Is it really?
Tobias: We’ve to be happy with that?
Tobias: Tesla, too. Tesla is up 25% over the last 12 months. Good run for that. A few of the other ones are getting a little bit gnarly. You got to run back five years, but I’ve been looking at a few of them.
Tobias: Yeah. Carvana which today is now done 90% from its peak, which is amazing, because we know quite a few people who are in that reasonably good investors, who for good reasons who have been in it. If you’re in any of those things, once the market hates them, then the hate is intense that they will get punished.
Possibly, it’s a good place to go hunting for some future super compounders. But those moves like that may indicate that to your point earlier, Ian, that there is some love for those things back up, way up high. So, maybe they can go all the way back up over a long period of time. Although, I think people are going to have a lot of scar tissue on them from this is going to be hard to buy them for a while. It might be a good time to buy them.
Ian: Yeah. It’s hard to stomach that when it’s down 80% from peak. That’s hard to stare back up at.[laughter]
Jake: Sometimes, you’re in a hole, you got to stop digging.
Tobias: Carvana is 90. That’s 50% down from 80. That’s David Einhorn’s method.
Tobias: It’s true. It’s true. You can calculate it out yourself.
Jake: The math checks out.
Expect That You’ll Be Down 50% At Some Stage
Tobias: Which is one of the other things we were talking about before we came on. Berkshire Hathaway is very, very stable set of businesses that have very consistently generated higher returns on equity and lots of free cashflow for more than 50 years now. Berkshire Hathaway has drawn down more than 50% twice in the last 20 years.
Who knows if this turns into a real correction then it is a correction a real bear market then it could easily be down 50% again. That’s just what happened. You got to believe that will happen to everything that you hold. I think Buffett and Munger have said that. You just got to expect that you’d be down 50– “Any money that you can’t have drawdown of 50% shouldn’t be in the market.”
Jake: Yeah. I think he said something like, “If you can’t tolerate a 50% drawdown with some equanimity, then you shouldn’t be invested in equities.” I think that’s Munger’s quote.
Tobias: What if I can do it without the equanimity?
Jake: [laughs] Well, you tied yourself to the math. So, that’s how you’re able to stomach the sirens song, but–
Tobias: I’m not at 50% drawdown, yet.
Jake: No, not yet.
Tobias: I managed to avoid it in 2020. I was down 37%. That might as well think that last 13% didn’t matter.
Jake: There is an interesting phenomenon. I think that in least in professional money management, where if you’re down 10% or 20% and you tell your LPs like, “Hey, I’m seeing great deals right now.” They send checks in, right?
Tobias: That’s noise.
Jake: You’re down 50%, then I think they’re like, “Well, you have bad risk management. They’re punching out.” And then if you’re down 90%, though, they’re like, “Well, this is a lot of–” [crosstalk]
Tobias: What’s that? [crosstalk] [laughs]
Jake: Yeah, it’s already blown up. I might as well try to write it back and so, then they don’t leave. There’s a weird– [crosstalk]
Tobias: Is that like that bell curve thing with the super smart guy, the moron on the two ends of the bell curve?
Tobias: Once you are down 90, it’s just all gone.
Jake: Might as well free roll it back and see what you can get it.
Ian: Yeah, to that point, I think if you are managing other people’s money, I think it’s also the best thing you can do. I manage a small fund. It was outside investors. The best thing to do is always be honest with people upfront about the volatility of a portfolio. Listen, we’re when we say volatility, nobody uses volatility describe the upside, but downside. I think it’s always the best is to be upfront.
Jake: You can tell them that though–
Ian: I know.
Jake: And it doesn’t really have to really sink in.
Ian: Yeah. You have to just be very blunt about it. Whether they actually can live through it, it’s another thing. But I think it’s important to make mention– One of the first things I tell everybody that came in was, if the markets down 30, I’m going to be down 45. Are you still interested? It’s hidden between the eyes. Because if you’re not, you can’t see through this to the end. Then don’t start, because it’s just inherent. The type of strategy that I do, so, I think it’s important to always be honest not describe yourself as something you’re not, which is always up into the right.
Tobias: I think David Tepper is one of those investors, who is quite open about that. He’s like, “It’s a high volatility strategy. There’s going to be a lot of vol both ways.” You know what you’re getting. [crosstalk] Yes, size your investment accordingly.
Tobias: You got to get that downside volatility to get that upside volatility, sometimes, I think.
Ian: It’s a spring.
Jake: Coil spring right now.
Jake: Getting more coiled every day.
Never Sell Has Become Never Cover!
Tobias: I saw it on Twitter, now. “Never sellers become never cover.”
Jake: [laughs] That’s dangerous, too, I think, isn’t it? Never, anything is just a probably is a way to go through life.
Tobias: There’s the problem [crosstalk].
Tobias: Never cover. I don’t think that’s going to work, either. I think you’re going to get covered.
Jake: Covered in what?
Tobias: [laughs] Dirt.
Buffett’s Bet On Activision
Tobias: “Anyone taking up Buffett’s bet on Activision?”
Jake: I’m not, but that doesn’t mean that there’s not something interesting there from a merge arb.
Tobias: I had a look at it today. It was 76 with 95 as the bid.
Jake: So, it’s got a bit of a spread, then, huh?
Tobias: It’s 25%.
Jake: It’s pretty fat for– At least that’s old school merge arb that used to– [laughs]
Tobias: 25%, I don’t know when it closes, but likely, probably, by the end of the year. I don’t know. Don’t bet on that. I don’t know.
Jake: We shouldn’t have been said it. [laughs]
Tobias: There is some antitrust that has to go through and that can delay it a lot. But I don’t think it would be. I’m going to guess, Microsoft’s going to be gaming division over there. Maybe that will be an issue. I don’t know.
Jake: Speaking of antitrust and enforcement, I was thinking about that in the shower today, because that’s what I do. I was thinking, actually like, if you were an enterprising politician, who really wanted to make a name for yourself, wouldn’t now be the time to go after some of these big monopolies?
Because if the bubbles burst a little bit, you’re not going to be blamed for blowing up everyone’s 401(k). It’s already started. There might be a little bit more vulnerable then– When everyone’s making money, no one wants to hear, why this should stop.
But if people aren’t making money and now people are willing to pile on to it, I don’t know. I would think that your political risk, actually, I think would maybe be dialed up now, if you were worried about that.
Tobias: Does it get the people going there? [crosstalk]
Tobias: Microsoft Activision?
Jake: Well, not that one, maybe specifically. But I’m just saying more generally, maybe the monopolies, the advertising shenanigans that some of the companies have that bothers some people.
Elizabeth Warren’s Misleading Tweets
Tobias: When I look at say, Elizabeth Warren as a demagogue, who likes to put these highly misleading tweets out that, “if you know anything about it, you know that it’s not correct.” But if you don’t and it’s very shareable, and I always think, nobody believes this stuff.
But then I was at a party on the weekend talking to people, who are of age, and they’ve got different views, and they are very upset about basically, it’s trickling down from her tweets, I think or other similar tweets like that. They’re absolutely convinced that the oil and gas companies are gouging people at the pump. I don’t think it works that way. If you could go back and have a look at how much money they made over the last decade, it’s not much.
Jake: Yeah. ROEs of zero, basically, for a decade.
Tobias: How do you make money from negative $37 oil?
Tobias: Subscriptioned. Oil as a service, gas as a service. Hang on, that might be a really good idea.
Jake: Ooh, hold on. Don’t give away all our good ideas. [laughs]
Tobias: I get a little carry on. Anybody here, little trail on whoever puts that one together. JT, you want to do yours?
Jake: No, but I will.
Investing Implications Of Dopamine
Jake: All right. This segment comes from, I finished recently reading this book called Behave by Robert Sapolsky. He’s a professor at Stanford, who teaches about neurobiology and a bunch of other stuff, and spends his summers with baboons for the last 30 years in Africa studying them.
Hence, my little background of some monkeys is the little tip of the cap to Robert, who actually, honestly, is on my top five of if I could have lunch with anybody, and just pick their brain, and chat with him, he’s on there. Because I think he’s so interesting and so smart.
This segment is on dopamine, specifically, which is a neurotransmitter in your brain that actually, I think it would be useful if maybe what– As I’m going through, you guys think about potentially business and investing implications.
Because I’m increasingly of the belief that the dopamine actually drives the success of every single business. The consumer behavior is all driven by dopamine. All right. I’m going to go through and share some facts about dopamine that might be fun, or entertaining, or just edifying.
At first past, the dopaminergic system, which describes like these multiple parts of the brain that function bit differently depending on how much dopamine is in there. It’s about reward. There’re various pleasurable stimuli that will trigger release of dopamine in your brain. Drugs like cocaine, and heroin, and alcohol trigger the release.
Tobias: Have you tried Robinhood, though.
Jake: Well, so, we get to that.
Jake: If you block that release, though, something that was previously rewarding, the stimuli becomes aversive. It’s chronic stress and pain will deplete dopamine and decrease your sensitivity to it. That’s what produces the symptoms of depression and it’s called anhedonia, which is the inability to feel pleasure. That chronic stress and pain, Toby of your portfolio over the last– [crosstalk]
Tobias: I was going to say, it’s a Deep Value Investor.
Jake: [laughs] It depleted your dopamine in a big way, decreased your sensitivity to it. And now, of course, we have to talk sex releases dopamine in every species that’s ever been examined, which if you think that a chicken is an egg’s way of making another egg, it makes sense. As you might guess, these responses to sexually arousing stimuli, they’re greater in men than they are in women. The finding is that, it’s not specific to humans. Apparently, male rhesus monkeys will go for– They’ll forego the chance to drink water when they’re thirsty in order to see pictures of basically crotch shots of female rhesus monkeys.[laughter]
Tobias: How did they figure that out?
Jake: In the lab.
Tobias: I don’t.
Jake: Other pictures of the female rhesus monkey and other contexts, they’ll still go drink the water, but it’s the crotch shots, apparently.
Food also evokes dopamine release in hungry individuals of all species. But if you’re full, there’s actually no activation. It’s interesting. Another thing is, we respond to pleasurable aesthetics. In one study, people were listening to music, like, new music. The more that their accumbens was activated, which is an older part of your brain, the more likely they were to buy the music afterward and they could actually correlate that.
We’re Wired To Punish Norm Violations
There’s also activation for cultural inventions. Picture like males looking at pictures of sports cars will trigger your dopamine. Research from economic game shows that there’s dopamine triggered when you punish someone who’s a jerk in the game, who’s cheating. And punishing of any norm violations in society is a triggering and a satisfying thing.
Jake: Yeah. We’re wired to punish norm violators. You could say like Karen is driven by dopamine effectively. Winning an auction will release dopamine, losing it will inhibit dopamine release. No wonder, it can be painful to chase stock prices with limit orders that never get filled. [chuckles] You can see why Buffett never participates in auctions, because he’d see that he’d be subjecting himself to chasing dopamine.
The Hedonic Treadmill That We All Live On
Here’s a depressing finding. Take a monkey, put him in a lab. He learns that if he presses this lever 10 times, he gets one raisin. All right, nice. He gets 10 units of dopamine released. Now, take that monkey, and he presses it 10 times, and he gets two raisins. Oh, score, like it’s 20 units of dopamine.
Now, the lever continues to do this two raisins for every 10 presses, but the dopamine response actually trends back down to the 10-unit release, even though, you’re still getting two raisins. You become habituated. Now, reward that monkey with a single raisin for his 10 pushes and now, the dopamine levels decline, and he’s upset, he’s angry.
This is basically the hedonic treadmill that we all live on. I think it explains a ton of man’s miseries, basically, we go around pushing the lever 10 times that we’re getting more raisins from society than we ever got as a species, and yet, we’re still unhappy. And nothing is as good as the first time that you experience it.
Jake: Other monkey studies have shown that the dopamine system is actually, it’s scale free. They take a monkey, and they train them to expect either two or 20 units of reward, and then they give them either four or 40 for a surprise ward, and it shows actually the same burst of dopamine.
The scaling doesn’t matter. If you bring them back to one or 10, you get a decrease, even though, 10 is way more than the two that they were getting before. Basically, if you get what you were expecting, you get this steady dribble of dopamine. But if you get more reward or you get it sooner than expected, there’s a big burst of it. Of course, if you get less than what you’re expecting or it happens later, you get a decrease in dopamine.
This system, unfortunately, I think for our modern version of ourselves evolved in a completely different environment. Your ancestors might have occasionally stumbled over a beehive and got access to a bunch of sugar, and then triggered this huge dopamine hit. And now, we have hyperpalatable foods on every single corner like you just can’t get away from it.
We used to have very subtle, hard-won pleasures. And now, it’s all bright, flashing lights, loud noises, confetti over the top sexuality. We live in this artificial deluge of intensity that is just hammering our dopaminergic systems in a way that most of our evolution would have been completely foreign.
Next segment is about, like, dopamine is also about anticipation. Take our well-trained monkey, put him back in the lab, and a light comes on in his room, and that signals the start of a reward trial. He goes to the lever, presses it 10 times, gets his raisin. There’s this small increase in dopamine for each raisin as you’d expect.
However, there’s actually lots of dopamine released when the light first comes on, which is the signal to the start of the reward. Once the monkey becomes habituated to that, the dopamine is less about the reward and more about the anticipation of the reward. Dopamine, in that context is really about mastery, and expectation, and confidence, like, “I know how this works and this is going to be great.” That’s when you get it triggered.
Near Misses Send Dopamine Soaring
But here’s where it gets a little bit weird. The light comes on, and that signals the start of a reward trial, the monkey presses the lever, it gets the raisin, but only 50% of the time. That’s the twist on this part of the study. Suddenly, there’s far more dopamine released. And why?
Well, nothing feels dopamine release like that. Maybe of an intermittent reinforcement, so, that chance of winning. Of course, near misses send the dopamine soaring. Of course, Las Vegas figured this out a long time ago. Randomness to it, 50% of the time, maybe winning and then showing you seven-seven, cherry. Wow, so close to winning like dopamine through the roof.
Another study showed that, if you take two identical betting situations, so, the probabilities of reward are the same, but the information that’s given about the contingencies of the reward, like, how would you win are different. The situation with less information, a lot more ambiguity about it than risk activates the amygdala, which is your fear center, and that actually silences the dopamine signaling.
What is perceived to be a well-calibrated risk, it becomes addictive, because that triggers dopamine. But where there’s ambiguity, it’s just agitating. That goes back to what we were talking about with the uncertainty of that next quarter, like, hating uncertainty way more than actually even perceived risk. And Mr. Market, I think identifies that pretty readily.
Dopamine is also responsible for goal-directed behavior. It brings the value of the reward of that resulting work and it actually gives rise to motivation, and often, those are from projections that come from your prefrontal cortex. This is kind of where delayed gratification and willpower come in.
But what about something where our species is very odd and we’re able to imagine scenarios years out. You go to school for 10 years to get some job, whereas there’s no rhesus monkey that’s like, “Oh, I’m going to wait. In three years, if I work hard at this, I’m going to get this outcome.” There’s this much more short timeline.
The dopamine actually gradually ramps up as a function of the length of the delay, and the anticipated size of the reward. It turns out that it’s this weird concoction of your dopaminergic system, your frontal cortex, your amygdala, which is the fear, your insula, which is an old part of your brain.
They all code for different aspects of what the reward might be, the magnitude of it, how long it thinks it’s going to take, the probability of winning, and it concocts it into this entire thing that basically will influence whether we managed to do the harder more correct thing over time. Will power is made up of all of these things. Last interesting thing, because I know I’ve been rambling on here for quite a while.
Tobias: That’s good.
The 7R Variant
Jake: The 7R variant of this dopamine receptor, DRD4 is associated with impulsivity and novelty seeking. If you have this 7R variant, you’re more likely to go after new experiences. What’s amazing is that, if you look at a map of the prevalence of the 7R variation in the populations today of the world, you could actually track how humans migrated out of Asia and they went island hopping down into Micronesia, and all of Philippines, and all down through these islands that are in that area like Oceania.
The further you go south, the more 7R variant that you see. And then also, if you go over the Bering Strait, and down through North America, and down into South America, the further you in South America, the more that you see the 7R variants.
Basically, the reason that people are spread at different parts of the map is related to how much novelty seeking they had. They’re looking for new experiences, and they just keep going, and traveling. That’s all driven by the response to dopamine. All right. That’s all I got. I’m ready to take the rest of the show off.
Jake: But I don’t know if you guys want to try to chime in with some business stuff, that might tie this all back together.
Tobias: I thought that was great. How do we harness the dopamine receptors for good rather than evil? Because I think San Francisco Tech Companies, Bay Area Tech Companies have figured out how to harness it for evil, get you scrolling on Instagram, or TikTok, or whatever. How do you use it for good?
Living Like A Stoic
Jake: First of all, I think it’s just good hygiene to take breaks from it and let your dopamine system downregulate. That’s probably, time in nature, time with family, time without screens. Recreate camping. Recreate a hunter-gatherer type of life for a little while at a time. I think the stoics actually stumbled upon something with this as well, where they’d live roughly for a day or two a month to just reset like, “What are your expectations as to– what should the world be offering me? [chuckles] What do I deserve?” So, they would eat poorly, wear rough clothing. sleep under a bridge. One of them, I think, did it famously. Toby, I’m sure better than I do.
Tobias: Yeah. Diogenes always slept in a barrel, but he was a cynic, not a stoic.
Jake: Okay. See, I’m all off.
Tobias: But I think that’s true. Cynic talks about that living a little bit roughly, every now and again, just to remind yourself.
Jake: I think the other frame of mind that I’ve started using lately is like, “How is this company tapping into dopamine for its consumer, for its customer?” Is it, like we said, speed matters, like convenience? The sooner you get it, if there’s a surprise, then that triggers dopamine. The size of the reward, delivering above expectations, because that’s one of the issues is, we see that the dopamine falls off as we get– We only get what we expect, then dopamine, it dribbles downward. But if they get over delivered then and that goes back to something we’ve talked about before is this idea of the cost, and the price, and the value having to be aligned correctly to be the iron law of economics, basically.
Tobias: There was another time we talked about this. There was some optimal rate of delivering the prize. You didn’t get it every single time, but maybe, it was half the time or something like that. Do you remember that?
Jake: Yeah. The study, I didn’t quite go into all of this, but if you deliver the prize 75% of the time, it’s actually a lower dopamine response. If you deliver it 25% of the time, it’s a lower dopamine response. There’s something about 50%, then is the maximum delivery.
Denial Is So Important In A Busy World
Tobias: There’s a Stanford neuroscientist, Andrew Huberman has been doing the arounds on podcasts. He’s got his own podcasts. I follow him on Instagram.
Jake: He’s great, isn’t he? I think he’s brilliant.
Tobias: He’s interesting. I think it’s interesting that a lot of the things that he talks about– One of his ideas is, you deny yourself a pleasure. You think I want to go and get a glass of water and then he says, “No, just wait. Deny yourself this time.” For every denial, you’re supposed to get, I think 20 or 25 denials over the course of the day. That keeps your dopamine receptors squeaky clean. You don’t get that feeling of not being rewarded.
Jake: [crosstalk] adjustment.
Tobias: I think it’s funny. There’s some other stuff you know meditation or sitting alone with your thoughts or– I think it’s funny how modern neuroscience is rediscovering all of these things from religion. Meditation is physiologically, probably identical to prayer and that idea of not giving yourself– That’s the abnegation like the monks used to perform that abnegation, like, deny themselves all the time.
Tobias: I think we’re going to reinvent religion– [crosstalk]
Jake: Even fasting is a pretty common in most religions.
Tobias: Fasting, yeah.
Jake: There’s a lot of ancient wisdom embedded in religions, which I think allows them to probably why they’ve persisted like they’re useful.
Tobias: Fish on Fridays, the Catholics.
Jake: Your take?
The Physical Science Behind Earnings Calls
Ian: For some reason, as you were talking to the area that caught my attention, it’s just how companies communicate with investors around the thought process of under promising, overdelivering those that provide guidance, those that are transparent, it all feeds back into dopamine. I, for one, I hate when companies give guidance, but I love when companies are a 100% transparent.
When they do have that communication cycle every quarter on earnings calls, where you ask them a question and they give you an answer. That’s what I came away with when you were talking. I was just thinking about how that works with companies communicating with investors and doing it in a consistent, transparent manner. Are they doing it in a way to incite dopamine or try to attract more even-keeled investors that aren’t trying to gamble?
Tobias: That they’re 50% right like you were saying.
Jake: Yeah. Not those 7R variants of the dopamine receptor, who are all novelty seeking and risk taking. [laughs]
The Problem With Research Trials
Tobias: How much of this do you think is going to suffer from the replication crisis? How far away from figuring out all this is bullshit?
Jake: I don’t know. I think that’s less because number one, there’s the animal analogues as well that drive a lot of this, the neurotransmitter parts of it. One of the issues with especially, like, plagues, social sciences is that, they’ve only studied US freshman psychology majors, who are a certain subset of humanity.
Tobias: Not real people.
Jake: Yeah, they’re not real people. [laughs] If you go take that and try to apply it in Asia, some of the findings are completely off, because there’s material differences and there’s a really interesting book about that called The WEIRDest People in the World and weird is an acronym for Western, Educated, Industrialized, Rich, Democratic? Something else. You’re not getting the actual human experience when you only look at this little subset that’s at a university, where a lot of research was done.
Tobias: Have we killed the marshmallow test? Is that we decided that that’s not true?
Jake: My last, I heard about that was that, it failed replication, but then some others have found that it did have some explanatory power. So, I think maybe the jury’s still out on that. I don’t know.
If You Don’t Have Cash To Invest, Turn Off Your Monitor
Tobias: About the market at the moment. And shoot us the questions, guys, if you’ve got anything. Yeah. Now, you are becoming less macro, Ian. But do you–
Jake: But where’s the market going? [laughs]
Ian: Yeah, where is the market–
Tobias: [crosstalk] my opportunities, my screens filling up with opportunities.
Ian: It is. There’re a lot of opportunities right now. The first question I asked Jake is, where I’m at, where I’m just trying to wait new ideas versus things I already know and trust. There’s also adding a new position also gets back to where your concentration limits are, too, because you only want to add perhaps so much to the five, or six, or eight companies you already own as well, so that might force you into new ideas, but– [crosstalk]
Jake: Maybe [crosstalk] inverted way of asking this is like, “How are you thinking about cash balances?”
Ian: Low at the moment. I really liked the opportunity, so that we have it. It’s relatively low, but I also can’t pick a bottom. What the portfolio looks like today is me adding pretty much every day a little bit and it might not be material on any day, like, the amount I’m adding to the overall performance in two years. But we have enough that we can add a little bit every day and also scratches the itch that you’re taking advantage of the opportunity that’s present in itself.
Jake: Yeah. It makes the down day a little more palatable, when you can like–
Jake: “Well, I’m averaging down.”
Ian: It’s more of a psychological thing almost. Yeah, exactly.
Jake: This feels good.
Ian: Nothing’s worse than going through a drawdown and not having cash to take advantage of it. That’s why, if you don’t have cash take advantage of it, turn the monitors off. There’s no point in watching the madness, because what else you’re going to be doing. If you know your businesses and you believe in them, you don’t have any cash, there’s no use getting more emotional watching the ticker tape.
Jake: That’s pretty sound advice, I think. Less there’s trading up that you are really interested in doing.
Ian: Right. Yeah.
Jake: Otherwise, yeah. Just batten down the hatches.
Don’t Hold Cash Waiting For The ‘Right Time’
Tobias: I’ve got lots of people reach out and say, “I’ve been holding a whole lot of cash. There is this opportunity and if it goes down another, like, pick your percent.”
Tobias: Yeah. [laughs]
Jake: I’m all in.
Tobias: I’m all in. Yeah. I think we’re all in. At that point, we’ll be ripping up the floorboards in the caboose and throwing them into the boiler. I don’t think that’s a good way of doing it to just hold a big pile of cash and hope that you’re going to get some arbitrary number on the drawdown or arbitrary number on the index [crosstalk].
Jake: And then [crosstalk] trade the bottom tick.
Tobias: It works once every 10 times. And the other nine times, you wish you bought a little bit, I think. I think it’s a better way.
Jake: And you’re only going to get the five of these in your life. So, I don’t think you want—
Tobias: Yeah, that’s right.
Jake: You don’t want to go one [crosstalk]
Tobias: No, it’s not a high enough, right?
Jake: Yeah. [laughs]
Tobias: I’ve had two. Who knows? I get the feeling that we might have that. Actually, I don’t know. It could be. I don’t know if it’s 2018 or 2008. It could be 2022 for all and I’ve gotten– [crosstalk]
Tobias: I haven’t been keeping track.
Jake: Maybe it’s a sound thing, too. It doesn’t always have to have an analog, right?
Tobias: Yeah. Does it help to have an analog?
Jake: I don’t know. Not sure, I mean they’re all so different in their own ways, and then we try to smash them into these boxes, and say like, “This is like this,” even though.
Tobias: Yeah. Does it change the way you behave if you think it’s like, “Oh, this is 1972 with a hint of 2008?”
Jake: Yeah. It’s 27% 1972, 34% 1999.
Tobias: I wonder how they will characterize this. Do you think that the tech companies which all started tipping over in February last year, and then there was a value bounce, which took until September 2020, and now, we’ve gone into another drawdown? So, what is driving this? I think this is a very strange set of circumstances.
Jake: I don’t know.
Ian: It’s above my paygrade.
Jake: I know.
Jake: Yeah. No kidding.
Jake: Against my better judgment. People worried about a bigger recession, like, macro problem. Or, is this just a valuation led. Listen, this has got way ahead of itself. We need to bring some of these multiples back to reality a little bit and that’s what it could look like. It doesn’t mean that the world is ending.
Tobias: There’s some genuine business interruption out there with inflation for businesses and then that’s coupled with the supply chain problems.
Jake: Hasn’t really [crosstalk] yet though have it? I don’t know.
Tobias: The supply chain problems are real. I talk to guys all the time.
Jake: Where are the bankruptcies, though, if they started?
Tobias: That’s fair. Everybody’s very cashed up. I saw Jake at EconomPic was talking about this a few weeks ago that, “House prices have tended to follow not affordability, but discretionary income.” As people get more discretionary income, which there seem to be a lot of discretionary income through 2020.
Tobias: Well, that might be why the NFT’s were not. I don’t know. That is a little bit above my paygrade.
Ian: There’s so many undercurrents to it. Toby, as well. I got a friend of mine, he owns a fleet fueling company. When diesel, at least, here in the US went above $6 recently, $6 a gallon and who knows what it is in Europe. It’s probably double that. But for the independent truck driver, it was more or less like a 25% decrease in take- home pay. You know what’s occurred over the last-
Ian: -two months.
Ian: That’s supply chain disruption. That’s money. There’re so many undercurrents to this disruption of everything. It’s hard to come out with a single answer that makes sense.
How Big Is The Value Of Value Right Now?
Tobias: There’s a question here. “What’s my feeling on value, real economy stuff? I think it falls out of bed with everything else works as growth falls out of bed. That’s what I was trying–
Jake: That’s the billion-dollar question.
Tobias: That is. That’s what I was alluding to before when you’re trying to pick the analog for this time around. If this is 2000, then value rips, and everything falls over, and I’ll be cheering, everybody else will be crying, or everybody on this call, probably will be cheering. But then, I honestly don’t know.
I think to be fair value is at least fair value or close to fair value. So, I’ve never seen a drawdown stop at fair value. They always go well through fair value. I would say, you can’t rely on holding up. I assume everything’s going to get down 50%, if it happens.
Jake: Yeah. How big is the value of value right now?
Tobias: Well, the spread [crosstalk] I know, someone wanted an update on the spread. AQR updated the spread. Cliff Asness updated the spread. Jake sent it to me yesterday. It’s only just moved. I think what was that– It’s only just begun year to date. What did he call the chart?
Jake: Oh. Yeah, I can’t remember. It was a clever, pithy title.
Tobias: The spread is still very wide. I was trying to get the Alpha Architect website update to deliver it, but their data only goes through to 3/31. Still looking for the 4/30 update for how wide that spread is.
Jake: It’s got less.
Tobias: But Bill didn’t seem– Well, it’s not Bill. Cliff Asness, I often get them confused. Cliff Asness was saying-
Tobias: -he thinks, the spread has started closing, but that’s driven by energy, I think.
Tobias: “When do you decide to catch the knife?”
Tobias: I think that you want to ignore price action as much as you possibly can and just when you get your price, because you’ve got no idea what everybody else in the stock is doing. Why there are selling? People could be selling, because they got margin calls or they got other stuff they want to buy. They’ve got personal expense–
Jake: Still crazy after all this year to date.
Tobias: There you go.
Tobias: It’s just a chart. He’s just started tweeting at charts. Where he has just started posting charts.
Tobias: Here’s a good one from Samson. “Why is Bitcoin correlated to the market?” I’ve noticed that, too, and I don’t know. It’s correlated to NASDAQ. It correlated to tech stocks.
Jake: This is risk on, I guess. I don’t know.
Ian: Yeah. I think so.
Tobias: “Keep up your Tweets Ian. They are amazing”
Ian: Yeah. It’s interesting the last 12 months, Toby. You probably talked about it for more than I have. But you hadn’t the COVID trade technology goes straight up, and then you had COVID getting better trade cyclicals kick in, travel kicks in, and now, people are worried about recessions. They come off. I think an interesting spot just is going to healthcare, because that’s usually defensive. And then you look at the XBI, I’m not sorry about unprofitable healthcare, which the XBI is, but it’s an interesting area that’s been clearly wiped out.
Tobias: It’s that a biotech?
Ian: Yeah. That’s biotech. But more the healthcare side of things. So, it’s been fairly brutalized. That’s a very defensive place to be. So, I find that area interesting kind of healthcare in general.
Tobias: I noticed that 2008, 2009, I bought a lot of biotech, that was sub cash. I don’t know if I do that again. But they were– [crosstalk] Yeah. A lot of biotech was sub its cash and I went for the ones that had activists in there trying to get the cash out.
Jake: How did it work out?
Tobias: It did work, except the best one that I had was that the FDA approval, not an activist getting the cash, yet.
Jake: Yeah. There are some homeruns in there, if you can–
Tobias: Better to be lucky.
Jake: Yeah. But you’ve buying cheap lotto tickets in a way, so, I think sometimes in that basket.
Ian: Yeah. A friend of mine, who’s a biotech investor, he was going to be putting an article together or somebody together about the top 10 opportunities he sees of the basket of companies that are trading the cash can– [crosstalk]
Jake: It had do to an ETF for us to– [crosstalk]
Ian: I know. Yeah, exactly.
Jake: I don’t want to do all that work. [laughs]
Ian: I know. I was like, “I’m not doing it either.” But he’s working on it. That’s his area of expertise. Because not all cash is created equal, especially when you’re burning through it a lot of those companies, too.
Ian: But it’s still some interesting setups.
Tobias: Brad actually has said, “Saw a chart recently about 20% of XBI being sub cash.” That’s why I was referring to it, because I think that does exist now, which might be an argument that we’re close to the bottom than we are at the top. I don’t know. Bottom callings above my paygrade, too.
Jake: Is there an–
Tobias: 30% either direction from here over the next 12 months, that’s my pick.
Ian: Very bold.
Tobias: That’s time. Thanks, Ian.
Ian: Yeah. Thanks for having me.
Tobias: We appreciate you every now and again.
Tobias: JT, as always– Sorry, just a note. We’ll be off next week. I’ve got a clash. I’ll be on Bloomberg.
Tobias: If you want to listen to me talk about things that I can’t talk about on this podcast. I will be Bloomberg at 10:18 Pacific, 1:18 Eastern on Tuesday next week.
Jake: That’s your second recording?
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