VALUE: After Hours (S04 E024): Is The Value Run Over?; Ed Thorp on Markets and Life; Buffett Buys More $OXY

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In their latest episode of the VALUE: After Hours Podcast, Bill Brewster Jake Taylor, and Tobias Carlisle discuss:

  • Why Warren Buffett Is Buying More $OXY
  • Is The Value Run Over?
  • How Ed Thorp Beat The Stock Market
  • Bell Curve Jedi
  • When Did This Bear Market Start?
  • Is The Market Rhyming With 1973-1981?
  • 80% Of The Stock Market Is Now On Autopilot – JP Morgan
  • Ed Thorp Uncovered Madoff’s Fraud
  • Inflation Expectations 8%
  • Opportunities In Corporate Credit
  • Does Gold Catch A Bid Here?
  • Real Estate Follows The Stock Market With 12 Month Delay
  • Home Prices Rose 20.6% In March From The Year Before
  • There’s A Shortage Of Homes In The U.S
  • Fed inflation & Wage Inflation

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

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Full Transcript:

Tobias: It’s been pushed. We are livestreaming. 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 Bill Brewster and Jake Taylor. Jake’s in the witness protection program on an island in the Pacific.

Jake: Yeah.

Tobias: What’s happening, fellas?

Jake: 7:30 AM here. So, you’re lucky to get me.

Bill: Dang.

Tobias: It’s so early.

Bill: That’s early.

Tobias: That’s an early kickoff. Are you the first one up or is everybody still on the continental time?

Jake: Yeah, everyone’s still pretty West Coast time. The kids are up early. But the good news is, we all go to bed early, too. So, it works out. I actually like it. It’s my preferred schedule. [chuckles]

Tobias: Yeah, I like it, because you get to see the dawn when you’re in Hawaii.

Jake: Yeah.

Tobias: Take the family down, watch the Sun come up, it’s cool.

Jake: Wife and I went for a little walk this morning with morning coffee, watched the sunrise.

Tobias: Oh, that’s nice.

Bill: There you go.

Tobias: That’s very nice.

Jake: Yeah.

Tobias: Very relaxing.

Jake: Won some points there. [laughs]

Tobias: [laughs] We should do this week at home. No, we shouldn’t.

Jake: Nah, it’s okay. I’m just going to get on Twitter instead. [laughs]

Bill: That’s right, get angry.

Jake: Yeah, get all angry to start the morning.

When Did This Bear Market Start?

Tobias: This market is, it’s testing the patience. My optimistic take is that we’re in this mega bear and it started when Ark fell over in February last year. But I posted on Twitter. That’s not a very popular view on Twitter. I get everybody arguing that it only started in this year. I’m like, the implications are that [crosstalk] very, very early on and we got a long, long way to go.”

Jake: Sometimes, you have to go down to go up.

Bill: Always, always.

Tobias: Carve that on the fortune– [crosstalk]

Bill: It’s a planned bottom.

Jake: Plan the bottom is all we say.

Bill: Yeah. That’s what I used to do in training.

Tobias: What’s that?

Bill: I just get really drunk and tell myself that was my low.


Bill: Nowhere to go but up.

Tobias: Oh, man. What’s on the agenda for today, JT?

Jake: I’ve got a fun one prepared on Ed Thorp, who’s one of my favorites. So, we’ll get into some Ed Thorp trivia. [chuckles]

Bill: [crosstalk] Morningstar sees lots of cheap stocks. So, there’s that.

Tobias: Yeah, that wide moat list that I got tweeted.

Bill: Yeah

Tobias: Yeah, that was interesting. There’s some good stuff in there.

Jake: Oh, yeah? All right.

Tobias: I’ve got Brandes– [crosstalk]

Bill: So, they don’t know what they’re doing.

Tobias: Yeah. We should talk about that a little bit. I’ve got Brandes Institute article, “Is the valley run over?” Because we can’t have nice things. It’s been going for all of two months or something.

Bill: A week.

Jake: Yeah [laughs], It’s over.

Tobias: Yeah, I don’t know why everybody keeps on asking like, “Has it started or is it over?” But here we are. There are three reasons why they think that it’s only just begun and I’ll be discussing those.

Jake: Only just begun.

Tobias: Making my devotions to the value Gods.

Bill: “Is it over?” That’s a rude thing to ask already.

Tobias: Oh, my God. Everybody’s so scared of it. We got Scotland in the house. London, Nashville, North Korea, nice. Julius Caesar, North Korea.

Jake: Yeah, it can’t be over until everyone thinks it can’t.

Tobias: Yeah. It’s not over until everybody’s a value investor.

Jake: Yeah. We need to get all those casual sideliners like we were in 2006. [laughs]

Tobias: Yeah. Samson’s got the better question. “Has it started?” Yeah, I think that’s the real question.

Jake: Yeah, good point.

Tobias: Shall I kick it off? You’re going to do–?

Jake: Yes, please.

Is The Value Run Over?

Tobias: Is the value run over?

Bill: Sure.

Tobias: Brandes, they traced the beginning of it to Pfizer Monday. They’re calling it in November 2020. I guess, that was when the jabs came out, and the market bounced, and they say there are three reasons why it’s not over, because value tends to work at the beginning of an economic recovery. Have to think about that one a little bit. Inflation is good for value and value spreads is still really wide. The economic recovery one, I guess, we’re going to be debating that a little bit. Maybe we’re relative to where we were in the middle of the pandemic, but it doesn’t look very recovery-ish to me at the moment. It’s not tail end of a ball. I don’t know what we have at the moment. Depths of heading down, probably. [crosstalk]

Bill: [crosstalk] for very green shoot.

Tobias: Yeah.

Jake: Green shoots, yeah. I remember those.

Bill: Just a green shoot.

Tobias: Yeah, no green shoots.

Jake: [laughs]

Tobias: I think the more interesting one is the impact of inflation. So, they do this quintile, mostly expensive quintile minus the most undervalued quintile. It’s the 20% of the market quintile is the market divided into fifths and they track it against the consumer price index year over year. That long short of value minus growth has tracked inflation pretty well. So, it seems that in periods of high inflation, value does well. And they’ve got some reasons for the correlation. Financials tend to be in value. They’re the largest component of the value indexes. They’re seeing that they do a little bit better in periods of inflation.

Bill: What’s the total return for both in periods of inflation?

Tobias: Well, they don’t have the total return. They’ve got– They look at– [crosstalk]

Bill: One that‘s less shitty.

Tobias: 12 inflationary periods since 1940 and they say that– [crosstalk]

Jake: Say that? Okay.

Tobias: Value was positive in 83% of them, growth was positive in 75% of them. Outperformed the S&P 500 value 92% of the time, growth 50% of the time, average return for value, 9.2%, growth, 2.6%, and then they further divided into large, and small, and so on. The stagflation by decade 1920s, 1940s, value stocks were mostly positive through those at a reasonably good clip, mostly outperforming GDP. If it is in fact inflationary that might be good. But I don’t know about the other points. I don’t know if we’re economic recovery. That’s a long bow here.

Bill: Ah, maybe, I don’t know, I don’t think so.

Jake: Not having that. [laughs]

Bill: It’d not be my guess going in the tightening cycle.

Tobias: Yeah, I feel we’re dipping here a little bit more than– I said this for the last few weeks, but I think we find out that we’ve been in a recession for six months, in about six months and I’ll say, “Yeah, we’ll backdate it for a year.” So, we’ve been in inflation for a year, but we don’t find that for another six months.

Jake: Now, we all knew it all along. [laughs]

Fed inflation & Wage Inflation

Tobias: Yeah. The thing that bothers me is the Fed looks at those numbers and they’re like, “There’s no problem. There’s no recession. Just keep on doing what you’re doing.”

Bill: Well, I don’t know that that’s really what they’re saying.

Tobias: What are they saying?

Bill: I think they’re saying, “The wage inflation is a bigger issue right now than whatever risks to the economy there is.” But obviously, once the firings roll off then maybe the balancing act changes.

Tobias: Yeah, I have seen that argument– [crosstalk]

Bill: They’re terrified of a wage inflation spiral because then you can’t see stop inflation.

Jake: Because [crosstalk] getting too much money to pay for food and energy.

Bill: Yeah, God forbid people should actually make enough where labor actually wins for a little.

Jake: Yeah.

Tobias: I just don’t see how wage inflation is outpacing CPI at the moment. It looks to me like wage inflation wobble at CPI, which means that people’s purchasing power bases are getting poor, the wage inflation spiral.

Bill: Yeah, I just don’t know how sticky they think CPI is. You’re not managing for one year nor should you.

Jake: The Fed?

Bill: Yeah.

Jake: Oh, I thought they were just taking it a day at a time.


Bill: Yeah, I don’t want policymakers to manage for what’s going on today. So, I think if they had a longer view, I would be hopeful that they have a longer view

Jake: That’s going to require a lot of hope.

Bill: Yeah, I don’t know. They got us through 2020, okay? Now, you got to pump the brakes. Unfortunately, after every good night out, you get a hangover. So, I don’t know. I do wish Putin didn’t bomb a mall yesterday. That wasn’t great. It doesn’t seem like incrementally positive development for the commodity complex.

Jake: I knew malls were dead money, but I didn’t realize that was why.

Jake: Ah.

Tobias: [laughs]

Jake: Yeah, sorry. Too soon.

Bill: Yeah. But I’m glad it was you and not me.

Jake: [laughs] Ooh, crickets. Ouch. Yeah. It’ll be interesting to see how– Can I get rates up enough? I don’t know. Who knows? But just as you noodle through some of these dynamics of the interest expense for federal debt at a higher level, and it rolls off, and we have to refinance it, number one, who’s ponying up to buy these treasuries again? And then number two, at what price will they be buying these? If it’s just the Fed buying them, then I don’t know, how do you ever get inflation under control then?

Tobias: Yeah. I think the problem that we were discussing before we came on is that there’s an issue for the federal government if interest rates get too high and that interest rates need to be– The point at which interest rates are ahead of inflation seems to be the point at which the federal government runs out of money. That seems to say that’s not possible, that’s not tenable. So, we’re going to be keeping rates below the rate of inflation, which means that it’s hard to get inflation under control.

Jake: Yeah.

Tobias: Fortunately, Brandes Institute brought up the thing that says that “Value does well in inflation.” So, for purely selfish reasons that might be okay for us.

Jake: Yeah.

Tobias: Bad if you are– [crosstalk]

Bill: I don’t think it’s a good outcome.

Jake: Bad if you eat food or-

Tobias: Bad if you eat food. Yeah.

Jake: -you need energy to live.

Tobias: Or, drive your car.


There’s A Shortage Of Homes In The U.S

Tobias: I saw that housing is now more expensive than it has ever been relative to disposable incomes.

Bill: Yeah.

Tobias: It’s 10 times today, that’s high. That might be–

Jake: Yeah, that’s because of high prices and then high interest expense now, or higher–

Tobias: High prices and not a great deal of disposable income, I’m guessing, because that’s being eaten away by inflation. It seemed to suggest that there’s probably something nasty coming for the property market, too.

Bill: Nah. In June 2020, I don’t think there is. I think that’s a flawed conclusion. I bet a fair amount on it, too. So, I hope I’m right. Let me see something. There’s no housing supply out there. So, yeah, I guess, prices could crash in some theoretical way, but I don’t think–

Tobias: The thing is that there’s always lack of supply at the top and an abundance of supply at the bottom. That’s just what happens.

Bill: Yeah, but you don’t have credit issue–. What’s going to force the liquidation cycle?

Tobias: Loss of jobs.

Bill: Okay. Yeah.

Jake: Job loss.

Bill: But what are you talking about? What’s the average job loss in a typical recession?

Tobias: The thing is that it’s always set at the margin. Every time a tech company sends out a release now, it’s to say that they’re letting go of 5,000 people. That is that up over time.

Bill: Yeah, but what are we talking about? Half a percent of all homes traded a 20% discount to where they are today and then in five years, right back here, that’s not the craziest– I don’t know.

Tobias: Probably.

Bill: Yeah, that’s nothing. On a total volume weighted trading basis on your VWAP, that’s nothing.

Tobias: That’s true. You don’t– [crosstalk]

Bill: Yeah. What the fuck are people talking about? As long as you got a locked in mortgage and it’s fixed then, yeah, you’re right. A house isn’t a trading asset. Correct. If that’s the conclusion that people come to, welcome to the party that everybody’s been living in. If you treated it like a trading asset, then you’re going to find out duration mismatch from the asset that you own potentially. But I don’t even think that that’s really going to happen if you own good land. But I could be wrong. I’m certainly not very intelligent.

Jake: Yeah, one problem could be, let’s say, you do have some job loss and it’s really hard to move, because of you’re just not going to be able to refinance at a rate that you were at before. Now, that creates a very brittle social fabric, where you have to look for a job in the same place, because God, I can’t really afford to move. That’s probably not good. You want the things to be– [crosstalk]

Bill: The problem is, rents are– [crosstalk]

Jake: You want those things to be pretty pliable, if you can.

Bill: Yeah, rents crazy right now. There’re bidding wars for rent. I think the real bad scenarios and explosion to the upside in housing prices, not the downside.

Jake: Hmm.

Tobias: “Homes only trade 5% of stock per year vs 200% for stocks.” It’s Keith Smith. [crosstalk] interesting.

Bill: Yeah, that’s not– [crosstalk] Yeah. People don’t flip their homes. Some do, but on average, the home that your wife is raising her children in you’re not going to be like, “Oh, [crosstalk] did.”

Jake: It’s too expensive.

Bill: Yeah.

Tobias: [laughs]

Jake: To get high.

Bill: Wait, you got to– [crosstalk]

Tobias: Pack the bags. We got a bid.

Bill: Yeah. otherwise, you’re paying the realtor 6% and if you’re in Illinois, you’re paying a 1% transfer tax and some half percent tax on something else. It’s just crazy. So, I don’t know. But I could be wrong. What do I know?

Tobias: There does seem to be have been a trend of people-

Jake: Could be right.

Tobias: -taking up the home equity loans and using those to improve their houses.

Jake: Like bitcoin.

Tobias: [laughs] There’s probably some of that going on to be fair.

Housing Slowing Is Not Good

Bill: 100%, that’s going on. And I think it’s a real risk to the economy. Housing slowing is not good. Don’t get me wrong on that. I just don’t know that outcome manifests itself in a price crash. Now, if people can say, “Well, how can you have a huge recession and not have a price crash?” I just don’t know that we have this huge recession over the long term. It seems to me that the problem that we have is, we overstimulated the economy, so the conclusion that it can’t happen again seems pretty flawed, unless you say, “Well, no one’s going to accept the paper and how in the world are we ever going to do what we just did,” but I think I would have said that in 2020 and I’ve been disproven. So. it– [crosstalk]

Tobias: Probably, we have some hangover from the 2020 stimulus, but they can correct that with more stimulus, because we can’t see how they’re going to do it. That’s not really relevant because we couldn’t see how they were going to do it in 2020. And so, they’ll figure out a way to–

Bill: Yeah, they obviously overstimulated. But I think if we shut down the entire economy and figured out how to avoid complete economic disaster, I’m not that worried about a recession. Now, you don’t have the political will. That’s a big change. I don’t see Republicans giving Biden some big stimulus package right now, especially not if you’re going into 2024. That’s a big difference. So, it could be a problem.

Tobias: Hiking Fed.

Bill: Yeah, but I just don’t know that that the conclusion that the head is hiking in perpetuity is the right conclusion. Not that long ago is a cutting fat in perpetuity. They actually seem they move slow, no doubt, but they are moving.

Inflation Expectations 8%

Tobias: I think I saw some stuff this morning on Twitter that they were inflation expectations are still 8%, which is a very high number and they’re so far behind the curve that they’re likely to another 75 basis points the next time they meet whenever that is July.

Bill: Yeah. June 24th, 2019, all right, hang on. $1.861 trillion, I believe, trillion was the taxes that were brought in withheld income and employment taxes, 1861. That’s 2019. If we look at today, year to date, it is– What is this number? Come on now. Oh, crap, I ruined it. I’m sorry. I’m trying to do this on the fly.

Jake: [laughs]

Bill: Oh, it’s quarter three. I always get confused by this stuff, because it’s not Q1. All right, so, 1861 is what we were looking at in 2019, today, it’s 2352, so 2352 divided by 1861 is what are we looking at here? 26% in three years. Yeah, that’s not going to keep up with inflation, I don’t think. Will it? I don’t know that—[crosstalk]

Tobias: It’s 26%.

Bill: That’s the increase in withheld income and employment taxes– [crosstalk]

Jake: You’d be saying, nominal basically like tax.

Bill: Year to date through this year versus 2019.

Jake: It’s probably real flat maybe.

Bill: I don’t know. Yeah.

Jake: 26% in the last three years, maybe or maybe not.

Bill: Yeah, I don’t have a good sense, but it’s not nothing that I do know. You’re looking at 9% increases per year.

Home Prices Rose 20.6% In March From The Year Before

Tobias: We definitely haven’t seen any weakness in the real estate market. Sorry. All the numbers that I see are that they [crosstalk] their prices–

Bill: Median home prices were up 15%.

Tobias: Yeah. Well, they’re more 20% year on year. 21.8% was the number that I saw this morning year on year. But those numbers are all delayed three months. They don’t give you the point in time. All of the narrative in Fortune Magazine and other stuff like that is that there’s a housing bus going on, but it hasn’t yet shown up in any of the numbers, which tend to be a little bit delayed, the Shiller numbers, stuff like that.

Bill: Lennar said that they are seeing weakness in Seattle and Austin. When they talked about their sales incentives, they were talking about 1.6% of a sales price. That’s not a huge sales incentive. That doesn’t imply some crazy, crazy bad thing, Austin, so, they said about Austin– [crosstalk]

Tobias: [crosstalk] equity, though. That’s a lot.

Bill: Yeah. It’s within the realm of history. They said in the conference call, they were like, “This is pretty normal.” Austin’s been the most impacted market in Texas following back-to-back years of 40% price appreciation. So, yeah, if we pull back 10%, who gives a shit? Still up 62%.

Tobias: Yeah.

Jake: It’s still too damn high.

Bill: Yeah. Well, inventory is limited– [crosstalk]

Jake: That guy was a visionary. [laughs]

Bill: Oh, the red is too hot.

Jake: He really knew what he’s done.

Tobias: What he is up to now?

Bill: They go on to say– [crosstalk]

Jake: [crosstalk]

Bill: They go on to say, “Higher rates in June, and headlines on the stock market decline, and the distressed national economy has sidelined many buyers who are waiting for reset in home values. Well, inventory is limited, cancellation rates have increased, and we’ve reduced prices in many communities on a home-by-home basis, and have offered extremely competitive mortgage programs.” These pricing adjustments started to generate increased activity and fundamentally, Austin is poised for long-term growth. So, that’s what they’re saying is in their worst market. The rest of their markets, they’re saying a relatively healthy.

Real Estate Follows The Stock Market With 12 Month Delay

Tobias: Why the homebuilders have all been so beaten up?

Bill: They don’t have volume. They’re not going to deliver nearly as many homes.

Tobias: Because they constraint on the supply side, on the input side.

Bill: Yeah, they’re going to protect the margins, I think is what they’re saying and that they’re going to pull back construction, which if you have a shortage is only going to exacerbate the problem.

Tobias: I think the real estate market follows the stock market with about a 12-month delay.

Bill: Yeah.

Tobias: It just tends to be stickier for the obvious reasons you can trade much more easily, whereas it takes a long time to get in and out of a house.

Bill: I think my conclusions about housing are the amount of the economic activity that reduced from HELOC, could potentially be reduced, but I don’t know. I guess, you got wealth effect, if people think that their houses are worth less than they spend less. That’s a possible follow-on effect, but I don’t know.

Tobias: Do people really do that, do you think?

Bill: Oh, yeah.

Tobias: Is it a HELOC thing or is it a– I checked Zillow and it’s down, we’ve got a constraint [unintelligible [00:23:13] this month.

Bill: I think people know roughly what their house is worth.

Jake: Can we go back to the talking about kind of inflation and value?

Tobias: Yeah, please.

Is The Market Rhyming With 1973-1981?

Jake: There was a little table that somebody– I don’t know where the source came from, but [unintelligible [00:23:29], one of my friends posted it and it showed the 1973 through 1981. Just different asset classes and what did they do on each year. The CAGRs on them are kind of interesting. The first one is on CPI for that time period and he had a 9% CAGR during that.

Tobias: CPI was 9%-

Jake: 9%.

Tobias: -year on year?

Jake: 73 to 81.

Tobias: Oh.

Jake: Yeah.

Tobias: That’s roughly where we are now. We’ve had a year at least 8%, maybe more than that.

Jake: Yeah, and what’s funny is, you watch it change 73%– I’m going to go through them– 6.2%, 11.1%, 9.1%, then you have three years where it’s 5%, 6%, 7%, and then 11%, 13%, 10%. So, you thought maybe, “Oh, we’re a little bit past this.” And then, “No, it’s back with a vengeance for three more years.” But 9% on that, so then against that you have the 10-year Treasury did 3.4%. Your real is 5.5% in the whole.

Bill: There you go. That’s what I always say about why should bonds yield more than inflation. There’s the answer. They didn’t.

Jake: They didn’t. S&P 500 total return, 5.3%. 4% real negative.

Tobias: Was this for a decade? Oh, no, 73 to 81? Sorry.

Jake: 73 to 81. Yeah. Value stocks, I don’t know how they define that, but did 13.6%.

Bill: Dang.

Jake: You had a real 4.6% return. NASDAQ, 4.3%. You were under the S&P little bit better than treasuries obviously, negative real. Energy index did 35% CAGR.

Tobias: Wow.

Jake: And then the Precious Metals Index did 25% CAGR.

Tobias: Wow.

Jake: Interestingly, last year we’ve seen energy certainly not put up, I don’t know. Well, maybe it is 35% CAGR, I don’t know. But definitely, Precious Metals haven’t seemed to have kept up with that analog yet. I don’t know if it’s waiting to happen or if it’s not going to happen, but I find that to be a little bit curious. That’s the one thing that isn’t driving right now.

Why Warren Buffett Is Buying More $OXY

Tobias: The energy thing is interesting, because Buffett seems to be plowing an enormous of money into OXY, just consistently buying big chunks of OXY. Why he is so concentrated in one? Why not spread it around the complex a little bit more?

Jake: I don’t know. That’s good question. Bill, you got any ideas?

Bill: I don’t know. I think it’s the biggest in the US, right? Now, after that– [crosstalk]

Tobias: OXY is bigger than Exxon.

Bill: Well, Exxon is very global. I’m not sure he wants all of Exxon. He and I don’t talk.

Jake: [laughs] He’s not returning my calls right now.

Bill: Yeah. But I just wonder if it’s the biggest pure play and it’s all in America, so, he likes that. Maybe there’s reduced political risk there.

Jake: Are the valuations much different between Chevron, Exxon, and OXY? I’m not sure.

Bill: I don’t know what the reserves are.

Tobias: Yeah, you think he’s going to bid for the whole thing?

Bill: It wouldn’t shock me.

Jake: It wouldn’t surprise me.

Tobias: Or, just keep on buying until–

Jake: Yes.

Tobias: Yeah, more than 16% according to Astrid Wilde of OXY.

Bill: Yeah, I don’t know if my estimates are any good, but this year, I guess, $13 and a half billion of free cashflow and OXY is a $56 billion company. It’s not a lot of turns, whereas Exxon is, yeah, $46 billion and a $381 billion. So, I don’t know. OXY’s probably a little cheaper.

Tobias: In that little chart that you’re talking about before then Jake, was it only Precious Metals? Did they look at commodities or they look at anything–? [crosstalk]

Jake: It just said Precious Metals Index. I didn’t even have any details about what that meant.

Tobias: This is the thing about commodities. The companies will look very cheap. They’re all in one-year of– I guess the argument is that they’ve over earned and they’re too cheap as a result. Sorry, that looked too cheap as a result, but they’re not really too cheap. I remember Icahn had his run at whatever it was something at one time. I think it was US Steel one times. It’s a one times P/E at the time that he bought it, presumably because they thought that was over earning as well.

Jake: That’s the bet right now. How do you normalize? If the answer of normalization is that it’s going to look more, like, it has in the last year or two, the persistence of it will be longer than everyone expects, then you’re buying something really cheap. If it goes back to previous periods, then it’s not nearly, it’s just optically cheap.

Tobias: Pooh said, “Gold did well (between 1973-1981) because it was suppressed until 1971.”

Jake: Yeah, that’s probably something of that. Although, you would think once it was let when Nixon declared that it was just found the right price or pretty quickly, but seemed each year was kept going up. So, I don’t know.

Tobias: Yeah. Gold is roughly where it was five or 10 years ago at the moment. It’s $1,700. I haven’t looked at it really closely.

Jake: Yeah, it’s $1,850 or something right now in that range.

Tobias: $1,850.

Jake: Certainly, not what probably I think a lot of people would have expected if he told them 9% CPI prints, where’s the price of gold? [laughs]

Bill: Well, the dollar is insanely strong.

Jake: That’s true. I have seen some charts about gold price and other currencies and it does look it’s winning more there. So, maybe that’s the problem is using the dollar.

Bill: Yeah.

Jake: Maybe in priced in bitcoin. I bet it is looking pretty strong.

Tobias: Where is bitcoin today? I should have a look.

Jake: I don’t know $20,000.

Tobias: [laughs]

Jake: Are you being serious or you–

Bill: No, it probably is.

Tobias: No, it’s $20,000. No, you are right. $20,600, I guess that’s about roughly where it’s been for the last month.

Jake: [laughs] Are you being serious? Stop messing with me.

Tobias: Yeah, okay. $20,600 at the time recording. When you listen to this on the audio, that will let you know.

Jake: That’s the timestamp. That’s how we timestamp it– [crosstalk]

Does Gold Catch A Bid Here?

Tobias: When we recorded. Yeah. So, does gold catch a bid here? If bitcoin disappoints, if crypto disappoints, inflation really starts ripping, then it’s got to be gold, right?

Bill: No, I don’t know. Depends on your time horizon.

Jake: If some of the tinfoil hat energy that was being dissipated into bitcoin finds another outlet, gold is a logical place for them to look.

Tobias: We need to harness that energy. That’s a renewable.

Jake: Infinitely renewable energy. [laughs]

Tobias: Well, yeah.

Bill: Golden Euro terms is quite good.

Jake: Oh, yeah?

Bill: Yeah.

Tobias: It’s ripping in Euro terms?

Bill: Yeah.

Jake: What’s it look like over the last year, let’s say?

Bill: Up into the right.

Jake: Oh.

Bill: It’s consolidating a little bit.

Jake: Strong– [crosstalk] [laughs]

Bill: Yeah, it’s consolidating a little bit. But it’s doing well really since 2018.

Jake: Hmm.

Bell Curve Jedi

Tobias: “US Steel’s at one time P/E currently.” Ryan Baxter, thank you for that. Yeah, it’s cheap. The question is whether that E is sustainable there. I don’t know. I don’t know what happens to steel through something like this. I have to go back and have a look.

Jake: Could you make the argument that long, statistical value is short macro, perceived macro insights? Basically saying, I don’t know, nobody knows, who cares.

Tobias: Yeah.

Jake: Just buy it cheap. I don’t have any fortunetelling abilities.

Tobias: I think you missed all of that nuance, but you’re focused on buying stuff that’s so cheap. It might not be one time. It might be three times or five times, in which case it’s probably still too cheap.

Jake: Is this the bell curve Jedi?

Tobias: Yeah, on the caved-in head on the far left side.

Jake: Yeah. Oh, I thought you were up at the top of the bell curve.

Tobias: Yeah, sorry. I’m in the middle.

Jake: Yeah. Screaming furiously about why that this is not normal.

Tobias: I need to get back to the caved in. It’s at middle or bottomy-

Jake: [laughs]

Tobias: -which coincidentally gets you on the far-right hand side too.

Jake: Right. Full robe status.

Ed Thorp on Markets and Life

Should we do some Ed Thorp?

Tobias: Let’s do that.

Bill: Veggie it up.

Jake: All right. Let’s get after it. I watched Tim Ferriss do an interview with Ed Thorp here not too long ago and–

Bill: A recent one or did you just find it?

Jake: No, I think it’s relatively new.

Bill: Interesting. Okay.

Jake: What’s amazing is when you look at him, you’re like, “Oh, that guy’s probably like 65, maybe.” But he’s two years younger than Buffett. He’s 89.

Bill: Wow.

Jake: He looks amazing. He is killing it.

Tobias: What’s the secret?

Jake: Whatever he’s doing?

Tobias: Peanuts, brittle, and Coke?

Jake: He talks about it. No, I don’t think that was it. [laughs]

Tobias: Exercise.

Jake: Yeah, he’s pretty diligent about his exercise. I think he lifts weight still. He talks about it. I think whatever he’s doing is working for him. I don’t know if that works for everybody, but it’s working.

Tobias: I think that’s a pretty good prescription isn’t it? Lift weights until you can’t?

Jake: I think that’s probably right.

Bill: Peloton.


Jake: [laughs] Peloton.

Tobias: Bill, I’ll be interviewing you when you’re 130 and I’ll say, what was the secret? You say, Peloton.

Bill: Nah, man, I’m going to be dead long before that, thankfully.

Jake: Well, the other part of that though is, I think avoiding stress. Buffett’s got that one right. Long Peloton is not avoiding stress. [laughs]

Tobias: [crosstalk].

Jake: Riding it, maybe. There you go. Okay, so, after watching this interview, I’ve been intending on reading his biography or autobiography, A Man for All Markets, but it inspired me to finally pick that up and read it. It was rather enjoyable, although, it gets a little meandering at the end where he’s a little bit of yelling at clouds, old man yells at clouds. He goes into “Why 2008 crisis was– how it got to be such a mess and then how we didn’t fix anything?” It is the typical diatribe that you would hear from, maybe one of us yelling at clouds.


Jake: Maybe even me yelling at clouds. But in general, it was really interesting to hear all the stories. I’m going to try to hit some of the highlights of the stories. As a kid, he’s probably a genius. I don’t know what his IQ is, but it’s probably up into the genius level. He got a PhD in math from UCLA. As a kid, he was just this relentlessly tinkering little mad scientist.

Ed Thorp Turned A Swimming Pool Red

He built his own radios, and then he’s got his ham license as a little kid, like one of the youngest ever to do it. Then he’s always messing around blowing things up. He had this little workshop in the back of the house, where he’s mixing chemicals that would blow up and then somehow he got a hold of this super, super high concentration dye like the kind that where you’re measuring in parts per million type of dye. He figured out a way like he snuck it in the public swimming pool and turned it like blood red.

Bill: Nice.

Jake: [crosstalk] I thought that was hilarious. [laughs]

Bill: That is pretty funny. I’d be so pissed if that was my kid, though.

Tobias: I’ll be little bit proud. Come on.

Jake: I don’t think anybody found– Oh, yeah.

Tobias: Execution of that.

Jake: I pooped in a pool once. Does that count?

Jake: [laughs] No.

Bill: Okay.

Tobias: Not if you are in your 30s at the time, Bill.

Bill: Yeah, that’s fair. It was actually yesterday.

Jake: Was it a Baby Ruth or Snickers?

Bill: No, but it was a baby pool.

Jake: Okay.

Bill: So, they didn’t have to drain too much. Needless to say, my IQ is lower than his.


Jake: [laughs] People would always tell him, “Something was impossible” and he had this compulsion to want to check for himself to make sure that that was actually right. That started with, “You can’t win in Vegas.” He wanted to know like, “Well, is that actually true or not? You can’t beat the market. I’m going to get figure out if that’s true or not.” And so, he had this mathematical horse sense, where he can apply it and a very deep scientific understanding, where he was pretty good about figuring things out like, is it actually true or not and he’s always looking for an edge once he did see if it was true or not, and finding that edge and exploiting it. Actually, applicably exploiting and not just academically talking about it, he was doing the real work of making money from these things.

How Ed Thorp Beat Blackjack

When he came to blackjack, which was his first big win, he devised a very simple card counting system, where it was basically, as you saw different cards, it would be a plus or a minus and you just keep a running count. This was before the days where they had an eight-card deck that they were shuffling every two hands. So, you got a sense of actually, when the edge tipped in your favor and then you varied your betting size. He would go to the Las Vegas casinos, and he’d be disguised wearing fake beards and all kinds of stuff to try to keep getting kicked out. At one point, they brought him a drink and he was loopy, passed out, like, they drugged him effectively, and it happened a few times. Actually, even he had his brakes tampered with.

Bill: Really?

Jake: Oh, yeah. The casino– [crosstalk]

Bill: Oh, that’s serious.

Jake: Yeah. No, it’s serious. Also, there was very, very frequent cheating that would happen with the dealers. They would deal the second card, they would take a peek at it, and then second card him. He would study with the people who were like these mechanics to learn how are they doing it, so that he could see when it was being done to him and then he’d be like, “Well, I’m out of here.” It’s not you could do anything about it, except just leave. So, in 1966, he wrote, Beat the Dealer for a lay audience actually ended up selling 700,000 copies of it. It’s a pretty, pretty big success. What’s another thing that’s a little funny piece of trivia is that he wanted to name the book, Fortune’s Formula.

Tobias: Ooh.

Jake: Yeah, but the publisher didn’t like it. So, they called it Beat the Dealer. Then, of course, later, William Poundstone, which I have to assume that he named his book as a nod to Thorp Fortune’s Formula, which is a great read a few if you ever get around to it. Then in Roulette, after he conquered blackjack and then of course, they made all the countermeasures, so that he couldn’t do it anymore, he found the next game, which he went to Roulette. He was at MIT. This was 1960. He’s a professor of math, but he’s doing all this stuff on the side for fun to make money. He built the first wearable computer with Claude Shannon, who is the father of Information Theory, basically.

Bill: He’s Toby’s guy, right?

Tobias: Yeah.

Jake: Oh, Shannon. He’s a beast, right?

Bill: Yeah.

Jake: The two of them went to Vegas with their wives with this wearable computer, where it basically had a little toe clicker that they try to sync up with the ball, as the rotor spinning, they would sync that up and then with the ball it would do a little equation to figure out what little section the ball was more likely to land in and so, then they would bet according to that, and they actually had an edge, like, they were making money in it. It had this little earpiece that would run up and do a little musical tone to tell you which quadrant it was going to land in or more likely to land in. So, kind of interesting.

Bill: That’s dangerous, I wouldn’t do that. That sounds like something you could get thrown in jail over in Vegas.

Jake: It wasn’t illegal at the time. They passed laws later to make it illegal to have anything that helps you like that.

Bill: Yeah.

Tobias: It’s one of the first wearables. It is incredibly sophisticated, right? He got shocked when he got a drink spilt on him or something like that?

Bill: Oh, really?

Jake: I’m sure. I know.

Bill: That’s funny.

Jake: Well, I know that the little wire that ran up to his ear would always be falling off and then-

Bill: [laughs]

How Ed Thorp Beat The Stock Market

Jake: -he couldn’t see it and then people were looking at him funny. [laughs] Like, “What the hell’s going on with this guy?” Then, of course, countermeasures for that. Then, he discovers the stock market, and he was looking at options pricing, and he basically discovered what’s now the Black-Scholes options formula before Black Scholes had done anything with it. He was using it as an actual practitioner. It gave him a huge advantage because he had a much more accurate price for things like warrants and other derivatives and he could compare that to the underlying, and then just basically make market neutral bets all day long on the spreads there. The markets were much, much more inefficient at that point, they didn’t really have a good way of measuring these things. So, he’d be long a warrant and then short the comment or vice versa. And so, all these different ARBs–

He founded this hedge fund called Princeton Newport and it was market neutral derivatives trading, basically, before that was a thing. His main fund ran from 1969 to 1988 and cumulative put up 2,734% versus the S&P 545.

Bill: Is that good?

Jake: That’s good [crosstalk]

Bill: Seems good.

Jake: I think he said, he only had one or two down months even.

Tobias: [chuckles]

When Ed Thorp Met Warren Buffett

Jake: It wasn’t like, “Oh, this year or this quarter,” but it was months were like, “Oh, yeah, that one bad month we had in the last decade.” So, printing money basically. Next piece, interesting trivia. Summer 1968, an early Buffett partnership investor, who’s being kicked out now at this point where Buffett’s moving on, meet Thorp and asks basically, introduces Thorp to Buffett, so that Buffett can evaluate Thorp to see like, “Is this guy the real deal? I want to invest with him for one of his previous LPs.” They have dinner together, and Buffett tries to impress him with his– he had these non-transitive dice, where you let the person pick their pair of dice, and then you pick the other one that is– It’s a rock paper scissors kind of thing. Buffett’s always winning and people are wondering, “How is he winning?” Of course, Thorp figures it out in no time and calls him on it.

Bill: So, how did he win?

Jake: I think he just said like, “I’m not going to play that game or let me go second” that kind of thing. “You pick the dice and I’ll go second.”.

Bill: The Buff dawg.

Jake: Then they get together and play Bridge at Buffett’s house in Southern California, which is close to where Thorp lives. All this time, and of course that investor, this guy named Gerard, he joins Thorp. This guy went from riding Buffett in his heyday to then riding Thorp through his. I don’t know how much money this guy ended up with, but talking about hitting a homerun on manager selection. Of course, Thorp’s, after meeting and he’s like, “This guy’s going to be the richest guy in the world someday. I’m just doing the compounding math in my head and this guy’s such an animal.”

He loses track of him a little bit, but then in the early 80s, he realizes Buffett’s running Berkshire and he sees it. I think Thorp bought a lot of Berkshire in 1982 like $980 class A price. I think he’s held on to it this whole time. Aside from his own selling 700,000 copies of books, or taking a bunch of money out of Vegas, or printing money from derivatives, he might have made the most money from just throwing money at Buffett and recognizing that he was going to be good for a long time. Then in 1990, he met Ken Griffin and Thorp was the first LP in the Citadel. Well, maybe that was even more money. I don’t know. This guy’s just got a golden touch, right?

Ed Thorp Uncovered Madoff’s Fraud

Then last one, 1991, someone asked Thorp to look into this track record and he goes, it’s the stellar performance every month is like, it’s up, it’s always winning, and he’s like, “What the hell is going on here?” He looks into it and actually, digs into the trades to try to– He asked his market contacts like, “Did this volume even happen that day that it’s reported?” No, it wasn’t. It turns out and this is 1991. This is Bernie Madoff.

Bill: Wow.

Jake: He sees that it’s fake and he tells the person that asked him to look at it like, “Don’t go anywhere near that. This is a fraud.” It’s not till 2008 that this gets uncovered. So, 17 years from when Thorp knew and even sounded the alarm [crosstalk]

Bill: I was talking to somebody who said that it was pretty well known that Bernie Madoff was a fraud and I was surprised to hear that. It gave me I was disenchanted by that. It was not well known when Thorp thought it, but that’s amazing. What a fucking career that guy put together?

Jake: Yeah. And then he’s super healthy, had a wife for 50 years, family man, didn’t get all stressed out, didn’t try to grow to be too big, I think either that was part of– Shutting things down when it got to be too much stress or too big and just move on to the next thing. What a life well lived and just an incredible investor in winning in so many different places, and ways, and really knowing what your edge is? I find that to be very inspiring.

Bill: I have no idea if this is the truth or not, but it seems to me through the stories that you told that he was having fun while doing it, too.

Jake: I think he had a blast the entire time.

Bill: Yeah.

Jake: He was always just trying to solve a little– like puzzles and he just this steel trap mind that was applied to these things like figuring out the simple solution, the smart way of doing it, well, how do I have an edge? Yeah, just incredible.

Bill: Yeah, that’s cool.

Tobias: That’s a great story.

Bill: That’s inspiring. Good veggies, Jake.

Jake: I am a little humbling as to, “Oh, what’s the edge here we’re looking at?” [laughs]

Bill: This is why I [crosstalk] index. I’ve been humbled. I’ve been– [crosstalk]

Jake: Thorp’s actually a pretty big advocate of indexing for most people.

Bill: Yes. Sprinkle in some other ETFs alongside, but it’s not the craziest thing. You actually get to live a life.

Tobias: I think Thorp gave his Princeton Newport Partner’s got to $200 million in assets before he shut it down and then he gave the know how, the brains of it to Citadel.

Jake: That’s right.

Tobias: That was one of the reasons why he invested with them, so, they had the advantage of his whatever, strategy used in the market.

Jake: He actually give them a bunch of datasets that only he had to from different prices of convertibles and things like that that were not really well, they weren’t well established. The other thing that actually did happen was a bit of a downer was, he had a business part—Princeton as in New Jersey, so half the operation was there and half was at Newport, where he was, and he was the academic like, figure out what to do and then send it to New York or New Jersey to put all the trades on. That half of the business got the SEC and actually it was Giuliani who did it. At that time, Giuliani came in, and was trying to make a name for himself, and he kicked over a whole bunch of funds trying to– Actually, he was intended more to squeeze them to try to get it like Michael Milken.

Tobias: Yeah, it was parking, right? They thought they were parking stock for– [crosstalk]

Jake: They were just looking for anything, right? They just came in, they froze everything, they subpoena to every single piece of paper. Basically, turn the office inside out. Actually, some of the traders at Princeton/Newport got in trouble, although it’s kind of a question of, I think it was insider information that was– I don’t know. To me that seems a really difficult like, where’s the line on those kinds of things? I don’t know. I think it was more of a political ploy to launch Giuliani at least according to Thorp. [crosstalk] shutting it down because of that, because it was like, “All right, this is just too much of a mess now. I’m going to go, take my couple billion dollars’ worth of Berkshire stock and [laughs] live the rest of my life.”

Bill: See you later.

Tobias: So, what does he do? I think he was a professor at UCI, which is down that way. UC Irvine, math professor at UC Irvine. And then he’s run the funds. What did he do when he stopped running the funds?

Jake: I think family office basically sounds like– He even did some other kind of interesting things in the savings and loan crisis, there were these mutuals where, “If you were a part of that bank, you were eligible to bid for the equity of it when it converted over from a mutual to a stock-based institution.” And so, basically, it was these little auctions and stuff that where you could go get the stock and he could put a little bit of money in that bank and then go buy a fair amount of equity at an underpriced rate and it would just take time– So, basically, he knew he’s going to make money on it. He was just like, “How long was it going to take to make money?” I guess, even up until 2014, he still had some that were maturing and he was cashing those checks. [laughs] Just always grinding, I guess.

Tobias: Yeah, that’s great story. What a great life.

Bill: Campaign–.

Opportunities In Corporate Credit

Tobias: I don’t know where we go from there.

Jake: Yeah, take some– [crosstalk]

Bill: I think that there’s some decent opportunities in corporate credit. I don’t know. It depends what you want your yield to be, but–

Jake: Higher.

Bill: Yeah. No, that’s the thing. But I talked about cable a lot and let’s see you don’t like– [crosstalk]

Jake: Real positive? Is that a–? [laughs]

Bill: No, well, you’re not going to get it right now. But let’s say you don’t like the equity risk. You could get on something like Charter, I think the 2033 bonds firstly unsecured. Those are yielding five, eight. That’s higher than we’ve seen in a while. It may not be high enough, but there’s other names like that. I don’t know. It’s interesting for the first time. I’m sure there’s way spicier stuff that you can get into. I saw it in Qurate’s like north of 15 or something like that on– [crosstalk]

Jake: Is it really? Wow.

Bill: Yeah.

Jake: But again, if you’re going to go there, you might as well just get the– [crosstalk]

Bill: Yeah, I tend to prefer a little bit less yield when it comes to credit. I like my spice on the equity side, not the credit side. Credit side, you have asymmetric downside. It’s different math.

Jake: Yeah. Just go leaps only. [laughs]

Bill: Yeah.

Tobias: When you’re getting into it, that’s almost a little bit of the arbitrage that he was pulling off, that Thorp was pulling off.

Bill: Yeah.

Jake: Yeah.

Bill: I don’t know. I heard someone describe– I need to hear them redescribe, but what Ackman figured out with some of the CDS, there’re some of those guys, you get to look cross asset class, you see some real opportunities. [crosstalk]. So, I do not.

Tobias: One of the things that Thorp was doing was, when the conglomerates all got busted up, they all had all of this weird securities and paper and equity. One of the first things you learn in Finance 101 is that I can’t do it off the top of my head, but the equity equals the put, plus a call, plus the risk-free rate, plus– it’s something like that. And so, he was just working at how you could–

If he found something representing all of those pieces and you could find an edge in there, you could create a market neutral trade, where you made money on pieces of it and you took no market risk. It was just the dislocation. There might be some of that around. I don’t know. It’s all been ARBed out with HFT. o many people doing it. But I guess, when you get a dislocation like this, some of it might pop up.

80% Of The Stock Market Is Now On Autopilot – JP Morgan

Bill: I was reading Laughing Water’s letter the other day and he said that there’s J.P. Morgan stat that like, I don’t know, 80% of the market is just mechanical, which I think is interesting. Maybe you can give hope to the 2% of people [crosstalk] long-term value investors. [crosstalk] said something similar.

Tobias: Passive? Is passive?

Bill: I think mechanical. Yeah. I don’t know the definitions of passive versus active with computers. But this particular example was citing like a GICS code that misclassified a business and he’s like that 80% of the investors don’t even know what this business is, because GICS code is off.

Tobias: Shootout to Matt, he listens to this sometimes, he says.

Bill: There you go.

Jake: Hey, Matt.

Bill: Yeah, hello, sir.

Tobias: Yeah, that’s a little troubling if you believe in price discovery.

Bill: I believe in liquidity and flows in the short term.

Tobias: It’s a good thing, right? It creates the opportunity.

Jake: I’m saying, if you’re depending on others to tell you what your security is worth.

Bill: Oh, yeah, can’t do that.

Tobias: But that’s always been the case, right? There are lots of reasons why people trade in stocks. There are momentum traders out there. There are noise traders. There are people looking at symbols and they’re looking for those up and [crosstalk] charts.

Jake: Scrabble bag.

Tobias: Scrabble bag. [laughs] Yeah, the scrabble baggers too.

Jake: [laughs] Scrabble baggers. That’d may be a good name for the MOMO, who might be a little less sophisticated.

Tobias: Somebody tweeted out Davey Day Trader saying, “I’m the Captain now. Buffett’s washed up.” That was the top–

Jake: So, that tipped off it?

Tobias: As if that wasn’t clear at the time. Pretty fun– [crosstalk]

Jake: I think we all do it, right?

Tobias: It did go on for a lot longer than I thought it was going to go on for that to be fair.

Jake: Yeah, but when you look at it 10 years on, Toby when you’re– [crosstalk]

Tobias: It’s true.

Jake: You’ve crushed it over the next decade, and you look back at this little time period, you go, “Yeah, no, I remember that. It was hard.” But that didn’t feel like it was that bad.

Tobias: The pain does fade from memory really quickly. That’s true.

Jake: That’s like childbirth, right? [laughs] I’ve heard.

Tobias: Yeah. I don’t think they’d get back again and again, if you remember the pain of childbirth anyway.

Jake: Yeah.

Tobias: Yeah, this is a nasty feeling market to me. I don’t know. I still feel we’re in the two thirds. Do I say this or was I talking to you before we got on I was just to say this live when– I’ve been trying to say that the market actually didn’t start falling over until–

Bill: Oh, yeah. You said this live.

Tobias: Did I say that at live?

Bill: Yeah.

Tobias: Yeah. It’s hard to tell these days.

Jake: [laughs]

Tobias: I’m glad you caught me. Thanks.

Bill: No, you could have done it, again, but we did hear it.

Tobias: That’s good,

Bill: Yeah. Dude, I agree. I don’t know. I don’t think we’ve seen the big wash. You look at where valuations are. It’s not screamingly cheap stuff out there. It’s still pretty reasonable. I don’t know that we get screamingly cheap. We may be in a fundamentally better place than we have been in previous crashes, but if we go a lot lower, I’m not going to be shocked.

Tobias: There’s a couple of good top ticks here. David Wilson says, “Ark’s commercial making fun of other styles of investment.” Yeah, that was a good one. And Danny Beltran says, “How about the 2021 Twitter thread with all the $5 billion companies that would–” I think they were going to become $100 billion companies and there are like 721 of them.

Bill: Yeah, that was tough.

Jake: Did someone say that was like, “The ultimate shortlist to–”

Tobias: They have all been pretty much shredded those companies. Yeah.

Bill: I’m very impressed. Naked Wines is one that I was interested in. I’m impressed with the size of the angel base in that thing, which is their subscribers. Peloton– [crosstalk]

Tobias: Why is it getting so beaten up?

Bill: Dude, I don’t know. I was looking at it the other day. I haven’t figured it out. I guess, there’s probably some questions about standstill EBIT, is probably one of the things, but I’m not really deep on it. I’m just reading it. I don’t fully understand that one. I think peloton’s like, I’m impressed with what’s going on with their business. They got problems. Don’t get me wrong. They introduced operating leverage at the wrong time, but their churn rate is still quite good, their average– What is it? workouts per member, it’s 18 a month, that’s crazy.

Jake: That’s pretty good. Good engagement.

Bill: It can’t be 18 a month. Maybe it’s a quarter. Maybe I’m just looking at the model– [crosstalk]

Tobias: That sounds right. [crosstalk] Every second day– [crosstalk]

Bill: I think you were doing it– [crosstalk]

Jake: Is that one person who rides three times a day.

Bill: Yeah. Well, yeah. You are skewed for sure by the power users. Yes. And you’re also skewed by, I suspect that if you do a stretch after a ride, they count that as two workouts.

Tobias: [laughs]

Bill: Because if I had the Juke stats, that’s what I would do.

Jake: Yeah, for sure.

Bill: Yeah, so, that’s a good point. Still, though, I don’t know. I thought it would be in a lot worse fundamental shape from a user perspective. Forget about, the income statement has problems. So, I agree.

Tobias: That’s time, amigos. We did it. We made it.

Bill: Peace.

Tobias: So, I think next week is July 4th. I think we’ll take a break for July 4th and then we’ll be back the week after that.

Bill: Yeah, I may be gone a little bit longer, but we’ll talk–

Tobias: [laughs]

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