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or Register Broker Dealer remember s I PC. This

0:17

is Masters in Business with Barry

0:19

Riddholts on Boomberg Radio. This

0:22

week. On the podcast, I have Ken

0:24

Fisher and just a really quick story.

0:27

The first time I had Ken Fisher as

0:30

a guest. Uh. We had

0:32

a conversation that was quite fascinating.

0:34

I'm intrigued by the business

0:36

he's built and how successful he's been

0:39

operating in a way that the

0:41

rest of the world to finance just

0:44

hasn't and he really has created what

0:47

is a unique path to build a very successful

0:50

firm. After we finished

0:52

the interview, we walked over and we I think

0:54

we were in the green room um of the

0:58

television area. He had a somewhere

1:00

else he was heading to or appearing, and

1:02

we started talking. After we talked

1:05

for ninety minutes last time, and that

1:07

ten minute or so conversation made it

1:09

clear to me, Gee, there's a ton of stuff

1:11

I didn't get to. I want to talk to you about his

1:14

business, how he grew, with the things he did,

1:17

and so when I saw he was coming

1:19

back into town. I think it's about uh

1:21

two years since our last interview, UM,

1:24

I jumped at the opportunity to interview him

1:26

again. This is a very much

1:28

a business focused

1:30

conversation. We talked about markets and stocks

1:33

and everything else, and his love

1:35

of annuities, but we also talked

1:37

about how he built his business.

1:40

UH, and I found that absolutely fascinating

1:42

and I think you will also, So, with

1:45

no further ado, my conversation

1:47

with Ken Fisher. This

1:51

is Master's in Business with Barry

1:53

Ridholtz on Boomberg Radio. My

1:56

special guest today is Ken

1:58

Fisher. UH. He is the founder

2:01

and chief executive of Fisher Investments,

2:03

which manages just under

2:06

eighty billion dollars. Ken

2:08

has been named one of the twenty five most influential

2:11

figures in the financial industry.

2:13

He's the author of a dozen or

2:15

so books, half of which have been

2:17

New York Times best sellers. He

2:20

was named I Think you were Number two twenty

2:22

five on the Forbes four hundred list. Is

2:24

that, Uh, that's

2:27

good because normally under two hundreds,

2:29

No, it doesn't count you. You're not even median, really,

2:31

so median meet medians, you know, two hundreds.

2:34

So I was always below average. Well,

2:38

Ken Fisher, welcome back to Bloomberg, you

2:40

know, and and and it's tough to be above average. It

2:42

is tough to be above everybody in money

2:45

matter. So let's jump right into the concept

2:47

of building a business based

2:50

on the dying art of stock picking. And the

2:52

first question is is it truly

2:55

a dying art? You know,

2:57

I think stock picking was always very

2:59

tough. I don't think it's any tougher

3:01

than it ever was. I think there's more light

3:03

being shown on that. Now. That's a really

3:06

interesting fact is that when I was

3:08

young, a long time ago,

3:10

there was very little, uh sort

3:12

of data analytics. Uh,

3:14

there was very just think a computerization

3:17

and all those features on how primitive that was in

3:19

that world then. And the

3:23

I was at an event yesterday

3:25

and John Bogo was speaking, and he

3:27

was making the point that he had actually done analytical

3:30

work in nineteen sixty one showing

3:32

that average on average active

3:34

investors lagged uh the market.

3:37

And yet while you could do that analytical

3:39

work in nineteen sixty one. Uh,

3:42

the public perception of it really

3:45

didn't much exist for a very very

3:47

long time. And he talked to some length about

3:50

how agonizingly slow that was for him.

3:53

Uh. And yet often things

3:55

that change in the world change like that, where

3:57

for a long time they go nowhere fast and then

4:00

lowly they start getting traction and continue.

4:02

Um. I don't think countered at

4:04

some people's perception because passive is

4:07

all the rage right now. I don't think active

4:09

ever disappears. Um. But

4:12

stock picking an active management have always

4:15

been tough to do and succeed at. So

4:17

a couple of I'm hearing a couple of things. First, the

4:20

analytics are much more readily

4:22

available to anybody who wants to sit

4:25

down at at Google Finance

4:27

or Bloomberg Terminal and look at the numbers. But

4:29

then you mentioned Jack Boglane.

4:33

They didn't launch their index funds till

4:36

seventy four, and he describes it

4:38

as a colossal failure at first, that the

4:40

five years, five years of failure, right just did

4:42

nothing attracted almost no ask no

4:45

I remember that world. I mean, I was, you

4:47

know, I was in this realm of endeavor in those days.

4:49

And I remember that world at

4:51

the time, and of course

4:54

you know the big cahuna and mutual funds at the time

4:56

with Dreyfuss and uh,

4:59

yet the war was for it different. And I

5:01

also remember that in those days,

5:04

you know, Forbes big annual issue

5:06

was its mutual fund special, and the

5:08

mutual fund special had I'm not talking

5:10

about a couple of hundred fund

5:12

families. They had a couple of hundred

5:15

funds in the mutual fund special because

5:17

there weren't that many mutual funds in the world a where there

5:19

are today. All of this evolution

5:22

is a slow evolution and that's not abnormal

5:24

that that's that's fascinating the fifty

5:26

five years later. You know the old joke

5:29

isn't only takes only takes a decade to be an

5:31

overnight sensation. Um, so

5:33

you've built a huge r I A

5:36

based on what I have to

5:38

think is a somewhat different process

5:41

than many of the larger asset

5:44

managers build. What what makes the

5:46

ken Fisher approach so unique?

5:49

When I was young, I became very enamored

5:53

early, very early on in nineteen

5:56

with New Course Steel and New

5:58

Course Steel New Ork operation, the steal manufacturer

6:01

when it was just starting into steal ken

6:03

Iverson. I came by coincidence

6:05

to get to know and I was very impressed

6:08

by what he was doing. And uh,

6:10

he taught me that steel production

6:13

was a function of multiple compound yields

6:15

and if you could keep you didn't have to be the best in any

6:18

one of them. You had to have the best combination of all

6:20

of them. And then sounds

6:22

like a portfolio. Then when I studied IBM,

6:25

I saw that they never ever had the best

6:27

computer. They always had a very good computer,

6:29

but they never ever the best one. But if you took

6:31

all of the pieces of what they did sales

6:34

serve us, all of the pieces together they

6:36

compounded to the best totality for the

6:38

customer. And what

6:41

I would like to think is that we from the beginning

6:43

started thinking about all of those pieces.

6:46

So, you know, people tend to think of us in terms

6:48

of our advertising because that's what they see. That's a

6:50

really wrong notion. We

6:52

do a lot of advertising, that's true, but we're

6:54

not actually very good at it as nearly

6:57

as good as I'd like to be. We,

6:59

on the other and are exceptional at service. And

7:02

people don't have a most people in the world don't

7:04

have a clue about our service capabilities. We do all kinds

7:06

of things in service other people don't do, and

7:09

then we have a good give me for instance, or

7:11

is that like the secret source that secrets

7:14

you know? We We have an elaborate

7:17

array across the English

7:19

speaking world of UM

7:22

a variety of forms of

7:25

client only seminars. These are not sales

7:27

seminars. These service seminars for

7:29

clients and their families that

7:32

come in different types because different

7:34

people receive information differently, and

7:37

they range from very large

7:39

ones with five people at a crack

7:42

run by senior people at the firm,

7:45

providing hours literally

7:47

hours of both couple hours

7:49

of presentation of detailed

7:52

information as to how we're seeing things

7:54

and why we're thinking this and why we're not thinking that, etcetera,

7:57

etcetera, which include an education component

7:59

all along with DNA, followed by a couple of hours

8:01

of Q and A now all the way

8:03

down to tiny little events run

8:06

by people who are

8:08

MN I see tiny little ten twelve people, ten

8:10

TOLF customers and with

8:12

technical answers being only answering

8:15

questions. Two events that we

8:17

do to nobody else in the world would do where we put

8:19

you know, twelve twenty clients together

8:21

for a lunch and there's nobody from Fisher there at all, and

8:23

we let them talk about whatever they want to talk about, so they

8:26

can talk about us behind their back. Because for

8:28

a lot of people, actually that's

8:30

the proof of the pudding is being able to talk

8:32

about their advisor behind their back and know that

8:34

the advisor trusts them enough to do that. Therefore

8:36

they have an increased trust level in the advisor. I'm

8:39

Barry Ridhults. You're listening to Masters

8:41

in Business on Bloomberg Radio. My special

8:44

guest today is Ken Fisher of

8:46

Fisher Investments, a firm that manages

8:48

just about eighty billion dollars

8:50

in assets. Let's talk a little

8:53

bit about where we are today in the world.

8:55

It's

8:56

seventeen

8:59

for those you listening to this far off in the future.

9:02

Valuations in the US have been

9:04

called high. Interest rates are low,

9:07

there's not a whole lot of inflation, and the Fed

9:09

has said that they're starting

9:12

a series of rate hikes to normalize

9:14

interest rates. First question is

9:17

how unusual a set of circumstances

9:20

is the stock market in today?

9:23

UM I would say that the stock

9:25

market is in its um

9:28

usual unique position. The

9:31

stock market I went to wait, wait, before

9:33

you go forward, I have to put that in quotes, usual

9:37

unique position. Yeah, the stock market

9:40

is always full of

9:42

what appears to be morphing into

9:45

different unique things. People are almost

9:47

always to my opic about the features

9:50

that we confront today that always seem to be

9:52

so different and so unique and so unusual,

9:54

and in retrospect appear not to be when

9:57

I say retrospect, far retrospect, and

10:01

um, all of the things

10:03

that you said are quite literally correct. Uh,

10:06

but I don't think that has much to do

10:09

with real fundamentals.

10:11

So how do the fundamentals look here? What do

10:13

you see at this point in

10:16

in the market cycle. Valuations

10:18

are high because interest rates are

10:20

low. Uh, they of course

10:22

important interest rate that really matters is the long

10:24

rate, not the short rate so much. And

10:27

uh, you know, people have been forecasting

10:30

long rates to rise for a long time, and they've

10:32

always been wrong, and they'll be wrong again

10:34

this year. And uh, I mean

10:36

you can just kind of count on them being wrong every ry, you know, every

10:38

once in a while they get to be right for a little while before they

10:40

end up being wrong. But the consensus has to be wrong, because

10:42

that's the market pre pricing all widely known information.

10:45

That's what capital markets theory says markets

10:47

do for a living, and they do it pretty well,

10:49

not perfectly, but pretty well. So valuations

10:52

in the US are stretched. What about I don't

10:54

think though you don't think so. I think valuations

10:56

are if you think of pees. For

10:58

first of all, I'm

11:01

getting ready for that. He ees have never been

11:03

predictive, for sure. And

11:06

uh, the Schiller cape

11:09

pe folk always

11:12

talk about that it's really only

11:14

intended for ten years down the road, but

11:17

then they apply it almost always to next month.

11:19

And the fact of the matter is

11:22

that the Schiller kpe P has been

11:24

wrong so long, so many times

11:26

that anyone should know not to

11:28

use it for any kind of even intermediate term

11:31

timing, and yet people

11:33

forget that. I keep let's

11:35

stay with k SEK. I totally agree with

11:37

you. I think going back to CAPE

11:41

has been above its long term average

11:43

for the time. However,

11:47

as Bob Shiller would say, when you buy,

11:49

if you take the average CAPE at fifteen or

11:52

sixteen, if you're buying stocks

11:54

when you're at above average valuations,

11:57

your forward expected return should be

11:59

below average. And when you're buying Cape

12:02

at below average PE,

12:04

your forward expectations should be above

12:06

average. Is that a fair statement the

12:09

professor makes or do you disregard that? I

12:11

think it totally ignores behavioral

12:13

realities of what humans are. Uh.

12:16

What the way humans are is

12:18

that if the next ten years are going to be lousy,

12:21

but the next five years are going to be great, Uh,

12:23

people are gonna lose their mind before the next five years

12:25

are over, and then they'll lose their mind differently five years

12:28

after them. Okay, and that's fair.

12:30

And the fact of the matter is that,

12:33

uh, the CAPE has never been good at short

12:35

term timing, and therefore

12:38

that should have nothing to do with what your short

12:40

term expectations are. And

12:43

the reality is that

12:46

a little, as I was saying before, if

12:48

we could say with certainty, which of course we cannot,

12:51

that the market was going to be great for

12:53

the next three or four years, people would want

12:55

to be in it. And the notion that I'm going to stay

12:57

out of the market for three or four years while

12:59

it does rate, or be out of

13:01

the market for three or four years while it does

13:03

great, or suffer three

13:06

or four years of terrible nous. Look at the

13:08

people that became Perma Bears

13:10

after two thousand seven nine and got totally

13:12

whips odd and in record

13:15

all the time. I got out No. Eight, but I

13:17

thought people crazy jumping back in in March

13:19

O nine. And I've said on the sidelines for

13:21

seven years that is not a rare

13:24

state. No, it's it's it's more common than not. It's what

13:26

behavioralism says, people. Do you know? So again,

13:28

I was in the earlier segment I

13:30

mentioned listening to John Bogo yesterday, and

13:32

I admire the man greatly, but he said some

13:34

things are just wrong, such as,

13:37

uh, well, the first part of what he said here

13:39

was right. He said that one of the things that

13:41

slowed down the growth of passive was

13:44

that the eighties and nineties or two decades back

13:46

to back, with seventeen percent average annuals

13:48

five hundred returns. That seems reasonable, and

13:50

that's true. And then he said, and

13:53

uh, the average mutual fund did

13:56

a couple of percent worse than the equity mutual fund

13:58

did a couple of percent worse. Not got about fifteen.

14:00

And he said, since investor sounds probable,

14:02

Yeah, he said, so, since investors were getting

14:04

fifteen, they didn't really care. So much

14:07

about relative returns because the high absolute returns

14:09

and made him happy. All that sounds plausible, but the reality

14:11

is that that's wrong.

14:14

The reality is they didn't get anything light close

14:16

to fifteen percent because as all the behavioral

14:18

studies show people in and out of all

14:20

the wrong times and they typically get about

14:23

half the return of the equity funds because

14:25

they end owed him at all the wrong time. The dl

14:27

BAR studies shows people

14:30

underperform their own investments, which on

14:33

the surface sounds ridiculous, but for

14:35

your reasons, it's normal for behavioral

14:37

purposes. And so in reality,

14:40

what he said that was wrong is that in

14:42

that period people didn't get returns like our

14:44

returns to look more like seven and

14:46

they actually switched quite a lot

14:49

from this to that and chase things.

14:51

And in the mid nineties and nine, four and

14:53

five, before the market took off, they get terribly

14:55

desponded. And it was all that period where

14:58

you know the uh. In UH

15:01

two, George rowarka Bush is running for reelection

15:04

and he's saying the recessions over and people

15:06

saying, no, it's not, and Bill Clinton saying it's

15:08

the economy stupid. Well, in retrospective recession,

15:11

was over. That's not the way people felt,

15:14

and people voted with the way they felt. And also

15:16

they invested the way they felt. And that's the problem.

15:19

People invest the way they feel, and

15:21

the way they feel is almost always backward looking,

15:24

and and they in and out at all the wrong times,

15:26

and that generates much more cost than anything

15:29

else. And there's all these studies going back

15:31

to things like dal Bar that are perverse

15:33

in that they show that things like load mutual

15:35

funds do worse than no load mutual

15:38

funds. But the people that invest in the load mutual

15:40

funds do better than the people invest in the no load mutual

15:42

funds because they feel trapped in them, and they hold them much longer,

15:44

which is very perverse, that is, you know.

15:47

And then and then everybody says, I would never do that, And

15:50

then of course that's

15:52

true for a very small percentage of the population.

15:54

Most people do that. I saw something very

15:56

recently, and I don't I don't want to cite

15:59

the wrong them that wrote it, but

16:01

they pointed out the difference between soft

16:03

economic data like sentiment

16:06

and actual hard and economic data

16:09

like GDP seals, etcetera.

16:11

And they said the gap between the sentiment

16:13

and the reality is the biggest it's been

16:16

as long as you've been tracking such. So another way to

16:18

say that verry that I've become

16:20

fond of is that economic

16:23

marginality, as taught by Alfred Marshall,

16:26

marginality has been marginalized. Marginality

16:29

has been marginalized. Yes, the reality

16:32

of economic marginality is that

16:34

intuitively, an idiot knows that

16:37

the difference between the

16:40

viability of a loan for

16:42

a CAPEX project at today's

16:44

interest rates versus half a point higher or

16:46

lower should be immaterial to whether the

16:48

CAPEX project should go forward or not, because if you

16:51

can't justify the return at

16:53

a half a point higher or lower from where we are today,

16:55

it's got to be a pretty lousy project to begin with. And

16:58

the fact is that it really more

17:00

about what hasn't been marginalized

17:02

is a shift in animal spirits, which is your sentiment

17:05

point, and we really need

17:08

to find ourselves in a CAPEX

17:10

sense and in all other ways. Uh,

17:13

moving toward that animal

17:15

spirit that says I'm

17:17

not afraid because of agency

17:20

risk, which you know after two thousand nine CEO

17:22

s were hunkered down for for agency purposes.

17:26

I am optimistic that

17:28

this project will work, and I'm going

17:31

to invest in this project and make

17:33

this improvement for the benefit of

17:35

my customers and the world. And that's

17:38

really a sentiment issue. It's not really uh,

17:42

interest rates or a quarter point higher, So I'm not going to

17:44

move forward. I'm very rid Helts. You're listening

17:46

to Masters in Business on Bloomberg Radio.

17:49

My guest today is Ken Fisher. He

17:51

is the executive chairman and co chief

17:54

investment officer of Fisher Investments,

17:57

a twenty person firm

17:59

manage in just under eighty

18:02

billion dollars. He's the author of a number of best

18:04

selling books on markets

18:06

and investing. Let's talk a little

18:09

bit about an insurance product that you're

18:11

pretty vocal about. I

18:13

keep reading why does Ken Fisher

18:16

hate annuities? That that's

18:18

an advertisement that I've seen online.

18:21

Tell us about your views of annuities.

18:25

Let's see. Um, let me just say

18:27

the simple line, I hate annuities. Uh

18:30

uh so why

18:33

why do you? First of all, let's define annuities.

18:36

For for most people, it's a tax deferred

18:38

products that is sold

18:40

by insurance breakers with

18:43

a fairly substantial

18:45

six eight nine commission

18:48

up front that essentially

18:51

can do more or more than nine percentidden

18:54

and essentially is a rapper

18:56

around mutual funds, equities,

18:59

bonds, whatever you want to put in there that you can go

19:01

out and purchase from a broker.

19:03

That is that a fair assessment. Annuities

19:07

are a lot of different things. Annuities

19:10

are a contract of some type

19:13

that is very complicated, almost

19:15

always that are almost never really

19:18

understood by the consumer, even though they often

19:20

think they understand them, and they're

19:23

almost always sold on

19:25

a misleading basis. When

19:27

I say that, when you actually take the

19:29

contract and go through it with the

19:31

customer and and then

19:34

call the insurance the number

19:36

that's associated with the contract, where you get a service person,

19:38

not salesperson, and you say

19:40

not does this mean this? Or does it mean that? And

19:43

then they tell you what it really means. The customer

19:45

is almost always appalled, and they

19:48

in that regard I say, they're always almost always sold

19:50

on a misleading basis. So you know, the sales

19:52

guy will say something like, well where else can you get

19:55

us guaranteed six percent return? Except

19:58

for that's going to be a return of their cap will not

20:00

a return of not an income return. It's

20:02

not a return like we think of in the investing

20:04

world. It's a return of their capital, which

20:06

anybody can do for themselves just by taking

20:09

their principle, putting it wherever they want, and taking

20:11

x percent of it out. On that basis,

20:14

you can have a thirty return until you run

20:16

out of money. You just return your capital, right,

20:19

So so what about invested

20:21

in nothing and have a percent return? One

20:23

of the more interesting aspects of the change

20:26

in fiduciary rules, which is UM

20:29

at this point, I assume everybody knows, but on

20:31

the off case that we're not, people aren't

20:33

as tracking this as closely

20:35

as we are. Uh. The last administration

20:38

changed the rule for governing

20:42

retirement plans and that could include four

20:44

oh one ks and four three b s and I

20:46

risen things like that and said that the

20:48

advisor has to treat the client UM

20:51

has to operate in the client's best interest,

20:54

which the current administration is not sure

20:56

they want to continue that rule. But since

20:59

the fiduciary rule chains were announced,

21:02

many of the big insurance insurance companies

21:04

that underwrite annuities have seen

21:06

their sales fall off a cliff, especially

21:09

with people who service four own case

21:11

and four three b s. So what what

21:14

is your view of the fiduciary rule and what that

21:16

might mean for for annuity sales. I

21:19

think it's a stupid

21:21

rule with great intent when

21:24

you actually look at the devil

21:27

in details. Devil in the details

21:29

is that it's largely fraudulent in that.

21:32

Uh, you get the vice exemption

21:35

best interest contract exemption,

21:38

which has some specific wording that you're

21:40

allowed to kind of bury in a big complicated

21:43

contract. So the customer, you

21:45

know, it's like sign here, signed there.

21:48

Uh, you know, I got your best interests at

21:50

heart, but the government makes me have you do all this paperwork.

21:53

So a cleaner, simpler best interest client

21:55

and the sentence would have been better a be

21:58

there's no governmental enforcement of this. What's, however,

22:00

zero. The only company

22:03

compliance enforcing these sort of things, whether

22:06

the insurance I doubt that they'll even know, they haven't

22:08

known in the past. Thirdly,

22:11

uh, the only enforcement is a claimate's

22:13

lawyer. This is a This

22:16

is set up for PIABA, the Public Investor's

22:18

Arbitration Bar Association, of which I don't

22:20

have a problem with PIABA, but the reality is it

22:22

is the only enforcement arm of this.

22:25

There is no part where the government comes

22:27

in at any point in time and says

22:30

you company X have violated

22:33

the fiduciary standard. Therefore,

22:36

and therefore we are doing

22:38

something to you that doesn't

22:40

happen under this law. This

22:43

law, in my opinion, toothless Yes,

22:46

well, no, no, I wouldn't go that far. It's kind

22:48

of like it's got a rotted tooth dangling out

22:50

the side of an otherwise empty mouth, and that

22:52

rotted tooth is the is the claimate's

22:55

bar. When this was announced,

22:58

we saw a ton of motion from everyone

23:00

from Bank America, Mery Lynch down to small

23:03

one person's shops and having to adjust

23:06

to the change in advisories

23:08

because I don't think they actually understand. I

23:10

think you'll which you'll see if it goes forward,

23:13

is them moving that way at first and

23:16

then slowly backsliding into

23:19

what they've traditionally done, which is

23:21

to do a word that's otherwise profane on the

23:23

radio to their customers. Okay,

23:28

I'm sure that that won't make it through

23:30

the sensors, But let me ask you

23:32

one more things backwardly, I mean, people have done things

23:35

backwardly forever. Get

23:37

these sensors to lighten up a little bit. So what

23:39

do you do when a new prospective

23:42

client comes to Fisher Investments and you're

23:44

looking at their portfolio and you say, what

23:46

is this, Oh, that's an annuity I bought some

23:48

years ago. Are you just stuck with that?

23:51

Or can you work your way out of that without

23:53

it being an egregious problem for

23:55

the investor. Again, an annuity

23:58

is a specific contract, so they're not a blanket

24:00

rule. You can say, but all annuities but blanket

24:02

ruletor can say is that we

24:05

have our people who are specialized

24:07

in this, So we'll look at that contract to

24:09

take the customer and call the number

24:12

associated with that, go through it with

24:14

the clients so they really understand what the contract

24:17

is, and if they want to get out,

24:20

we will pay the fee that's

24:22

the penalty fee to get them out under certain circumstances,

24:25

which they then amortize rolling forward

24:27

against their costs

24:30

of being a client with us, and the

24:32

I think we're the only people in the world to do that. What

24:34

we do is perfectly legal, and it's

24:37

legal in all fifty stage. Well,

24:39

there's a lot of annuity sales people that don't

24:41

think it should be legal. We actually get questions periodically

24:44

from UH state insurance commissioners

24:46

that don't actually understand what we do, and they

24:49

say, how can you be doing this? Know?

24:51

How can how can? We don't say things like that to

24:54

them, but they say, you know, how can you be doing this in

24:56

our state? And then we explain it to them and then they say okay,

24:59

Um, but they don't out at first because they don't really know

25:01

what we're doing. And until they know what they're doing, why

25:03

why wouldn't they want to ask? And uh?

25:06

Then Um. The

25:08

reality is that, as

25:11

I said earlier, it is almost

25:13

never true that these people customers

25:17

really understand what the annuity contract does

25:19

correctly, and they're almost always appalled when they

25:21

truly find out. And while there are exceptions

25:24

to that, they're rare and um,

25:27

and I'm delighted for the exceptions,

25:29

but almost always, whatever it was

25:32

they thought they were going to do with the annuity,

25:35

there's a better way to do by owning principal

25:37

underlying securities. Let's do that a different way.

25:39

Fundamentally, what the insurance company does

25:42

is takes the money, invest

25:44

in a bunch of securities with

25:47

a lot of fees put on top, and somehow you're

25:49

supposed to get this magical, spectacular return.

25:51

Well, if that's the case, why aren't these the greatest active

25:53

managers in the world, and why haven't

25:56

they actually come to take all of the business

25:58

to pass. It does away from all the passive people because

26:00

they're so great at doing this stuff that they can put

26:02

these complicated, big fees on doing

26:05

the same things that other people would do. The

26:07

fact is that's all nonsense. The fact

26:10

of the matter is they buy principle underlying

26:12

securities. The people can accomplish

26:14

the same end result if

26:16

done correctly with principal underlying security,

26:19

and have it be much cheaper. I'm very

26:21

rid Halts. You're listening to Masters in Business

26:23

on Bloomberg Radio. My special guest

26:25

today is Ken Fisher. He

26:28

is an author, raconteur, preserver

26:31

of redwood forests, and perhaps

26:34

most famously, a well

26:36

regarded stock picker. Tell

26:38

us about the process that you use

26:41

to select stocks. It's

26:44

called lousy. Um. I'm

26:46

not really a good stock picker, so

26:48

I thought of as a stock picker in some ways, but I'm

26:51

really not. What I'm good at doing

26:53

is sort of like somebody that goes fishing, and I figure

26:56

out a good pond of fishing, as

26:59

opposed to act actually being good at getting

27:01

the fish specifically. So

27:04

if you can pick the right pond to fishing,

27:06

it helps a lot. That's half the battle, isn't

27:08

it. Uh So I would

27:11

describe myself as a top down

27:13

guy, not a bottom up guy. And most of the world

27:15

kind of sees itself at bottom up. Explain the difference

27:17

between the two four people who may not be uh

27:20

insiders understanding that. So the way

27:22

the way I would start looking at the world is

27:24

I would say I'm managing against this part of

27:26

the world here and get geographically

27:30

or BBSMP five could be the world

27:32

could be, if could be what you

27:35

picked the benchmark, and then I say it's made

27:37

up of this stuff in these proportions. And

27:40

then I think these are the parts of the world

27:42

in those proportions that would do better or worse.

27:44

And I'm gonna want to overweight here and underweight there,

27:47

and that would be both by things like geography,

27:49

but also things like sector

27:52

and things like size and things like valuation.

27:54

I'm not a constant guy to want to be a value guy

27:57

or a constant guy to want to be a growth guy, because sometimes

27:59

the one does better and the others on smalltock to better,

28:01

big stock to better, sometimes foreign stocks

28:04

to better, sometimes US stocks do better, on and on and

28:06

on, and so I winnow that down

28:09

and that leads me to what I was earlier

28:11

kind of referring to as the ponds you want to be in.

28:14

And then I say,

28:16

so, now I need to own if I'm

28:18

going to be overweight to this and underweight

28:20

to that and this and that, then I need to own,

28:23

you know, five out of these seventeen. And

28:26

then I'm going to look at those seventeen and

28:29

I need to own three of these twenty and

28:32

and that's where the stock picking comes. It's extracting.

28:34

The actual stock picking is extracting

28:37

those from the ones that fit the criteria. But by

28:39

the time you get down to selecting individual

28:41

stocks, you've already made a number of decisions in

28:43

terms of valuation, capitalization,

28:46

location, sector, et ceteras, your allocation

28:48

decisions. It's almost the individual

28:51

stock is almost irrelevant, and not completely,

28:53

but it's a it's it comes towards the end

28:55

of the process, and then that decision

28:58

comes to where I'm prepared

29:00

to throw out some of the baby with the bathwater. So I

29:02

look at the at the at the at the universe

29:04

of those and then I say, okay, I want to throw out the ones

29:07

that have like funny accounting, because I always

29:09

distrust funny. It's true, Uh that

29:11

doesn't always mean that they're bad, but it means

29:13

they're different, and I want the category. So if

29:15

they do things, if they're weird for the category, I'm

29:18

going to throw them out too. They might be exceptionally good,

29:20

but I'm prepared to throw out exceptionally good. Funny

29:23

accounting always means increased risk

29:25

of something untoward happen. But it's

29:27

not just funny accounting. That's right, but it's not

29:29

just that. It's also if it's

29:33

in a sector, but it doesn't really

29:36

seem like it's the sector, and it doesn't

29:38

act like the sector. I want that

29:40

quality, so so I throw

29:42

a bunch out. And then I look among the others for

29:44

what I call competitive advantages, and competitive

29:47

advantages of things like low cost production, high

29:49

relative market share, uh superior

29:51

distribution system. And then I look

29:53

to see as the management awhere

29:56

truly of their relative competitive

29:58

position, and are they doing things to try to maximize

30:01

that? And I am a fan of

30:04

uh Mr Buffett's line that

30:06

you know when and I'm not sure

30:08

that I'm paraphrasing him perfectly, but that

30:11

when a bad management meets a great business

30:13

model or vice versa, it's a

30:15

management reputation. It's likely to change, not

30:17

the business great. Great businessmen

30:20

don't usually turn allousy business into a great

30:22

one. It could happen, but it's not the usual

30:24

thing. And lousy businessmen don't usually

30:26

destroy a great business model. Um, it

30:29

does happen, but it's not the usual. Usually,

30:32

if lousy businessmen become the head of a

30:34

great business model, they've become seen as great

30:37

soon. Um And uh

30:39

so I'm really looking for those attributes.

30:41

And then it finally comes the valuation

30:44

feature. Last. I've never

30:46

been a believer that valuations are predictive of

30:48

much of anything. Uh And there's

30:50

a time and fact where I want high

30:53

valuations because that's the time

30:55

where people are paying up for equality,

30:58

for perception. That that's the ninth nineties

31:00

verses the nineteen seventies at last

31:02

year, okay, and last year.

31:04

Well, I use the nineties as an example.

31:07

Expensive stocks became more expensive

31:09

and you had great returns. In the seventies

31:11

stocks were cheap and they got a whole lot cheaper. So so

31:14

a standard thing that happens. You

31:16

know, one of the things that's important in thinking about

31:18

the market in general is you

31:21

know, people say, and it's not true that markets

31:24

hate uncertainty. What markets

31:27

hate is rising uncertainty. Markets

31:29

like high levels of uncertainty that are falling.

31:32

If you've got high levels of uncertainty that

31:34

are falling, you're moving to lower levels

31:37

of uncertainty, and markets like that a lot. So

31:40

when that happens, and you give me

31:42

it for instance, on that, I have to wrap my head

31:44

around that. When when do we have high levels of uncertainty

31:48

for a falling Last year, it's a perfect example.

31:50

At the beginning of the year, you've got sixteen Republicans

31:52

running for president. Nobody knows who's gonna nomine

31:54

you're gonna be. You've got five people running on the Democratic

31:57

side. Most people think Hillary Clinton will be the nominee.

31:59

Then you don't know which one of those will win. You

32:01

got a Brickxit out coming up. Nobody knows what

32:03

will happen, but it scared people a lot. There was a lot

32:05

of the beginning of the year with the correction that occurred,

32:08

a lot of fears about China implosion. You

32:10

go on and on with uncertain the beginning of last year. By the

32:12

time you get to the end of last year, all that's gone away.

32:14

We got a winner, well, but you have that

32:17

the political uncertain who goes away, but you still have

32:20

completely but it falls, it falls. Isn't the way

32:22

completely? When Mr Trump gets elected, we

32:25

still have but

32:27

it's less than we had before. Is

32:29

there going to be a trade war? Is there gonna

32:31

be the what's gonna happen to the dollar? Are

32:34

we going to have still in a process of falling uncertainty?

32:36

And I don't want to get into, you know, fighting about right

32:38

now, but but we've gone

32:41

through a period of falling uncertainty and we're going to continue

32:43

this year into more falling uncertainty, and that's why we have a

32:45

bull market. But in that as you have

32:47

falling uncertainty, you typically extend

32:50

forecasts further out into the future. And

32:52

as you extend those forecasts further out of the

32:54

future, people become more growth oriented. Huh,

32:57

that's interesting. Let's let's let me shift

32:59

gears you a little bit. We keep

33:02

reading that private companies want to

33:04

stay private for longer, and if you look

33:06

at the universe, at least in the US

33:09

of number of public companies. There were

33:11

seven thousand companies that

33:13

were publicly traded twenty years ago. Now

33:16

that's down to four thousand. The

33:18

joke is the Wilshire five thousand is now

33:20

I think thirty seven hundreds something like that. What

33:23

does this mean for the process of stock

33:25

selection? What does this mean? What does

33:27

this say about the environment

33:30

publicly traded companies find themselves in? Well,

33:34

I think the tour are somewhat separate issues. The

33:37

thinking of it from the public company's

33:39

viewpoint. Uh Sarbanes

33:41

Oxley increased the costs for small

33:43

companies going public. The I

33:45

p O market is not been

33:48

buoyant because, you know, in the John Templeton

33:50

phraseology, bowl markets are born on pessimism,

33:52

growing skepticism, ature and optimism and die

33:54

of euphoria. And we clearly have

33:57

had a very long bowl market. That's been what

33:59

I've referred to for a long time is

34:01

the most joyless bowl market in history, because

34:03

we haven't had those multiple years of very high

34:05

end That's a great phrase. The most

34:07

joyless bowl market I've been calling Jos,

34:10

I've been calling it the most hated bowl market. But

34:12

joy less is a different components.

34:14

It's clearly been a bowl market. It's clearly

34:16

been long, and it's been joyless. And what that means

34:19

is we haven't gotten to the exuberance part. And it's usually

34:21

in that optimism transitioning to exuberance

34:23

that you get high levels of I p O. You know, in my book,

34:27

I wrote a lot about how I p O means

34:29

it's probably overpriced. And the

34:31

fact of the matter is that I p O s are

34:33

done at the pricing benefit of the company. A'ssure

34:36

not pricing benefit of the consumers.

34:39

And so in the process of

34:41

this we haven't really gotten to that phase.

34:44

Regulatory costs are higher because of our bins

34:47

Oxley. The public has become

34:50

in the aftermath of two thousand seven nine, often

34:53

critical of things that relate to

34:55

public companies in terms of attacking

34:57

people. People don't like to in

35:00

management executives. People don't like to be attacked.

35:02

Uh, And so you say, why do I want

35:04

to do that? And then there's actually lots

35:07

of what are thought of as alternative

35:10

lending practices now that allow

35:12

people to borrow money at

35:15

what to Again, going back to my point

35:17

about the traditional

35:19

Alfred Martial concept of economic

35:22

marginality, has been marginalized. The

35:24

fact is paying up a little bit in the private

35:27

market for loan market is actually

35:29

cheap compared to equity capital today on

35:31

an after tax basis. So you know, going

35:34

back to the so called infamous

35:37

Fed model and forget about the

35:39

treasury rate, but think about corporate rates

35:41

and think about tax rates and adjust

35:44

them. It's actually much cheaper and better for the company

35:47

on average, unless you're thought of as a very low

35:49

quality company to be borrowing

35:51

money rather than issuing stock. So staying

35:53

private seems to be a rational decision

35:55

because why why do the other If people

35:58

want to find your works, where, where's best

36:00

place for them to go to read about

36:02

some of your views, commentary and

36:05

everything. Well, hey, I

36:08

still write a monthly column as they

36:10

have for four years at Financial Times,

36:12

and you can go to their website. Uh,

36:15

my older stuff is you know, all on Forbes

36:17

still uh I

36:20

uh, right around in other

36:22

places, and I'm hoping to find a new home post

36:24

Forbes in America for things that aren't

36:26

the Financial Times. I

36:29

love the Financial Times. It's a great publication and I

36:31

encourage anybody to read the Financial Times because

36:33

it really is the global business newspaper. It's

36:36

the Global business newspaper. And if you

36:38

don't think global in this era, you're

36:40

actually parking up the wrong tree. I

36:43

just want to take a second ago off on a tangent America

36:47

lad the market for years

36:49

and years now, and I believe that this is

36:51

the year where foreign takes over in US lags

36:54

and that that accelerates in the back half of this year.

36:57

And I might be wrong about that, but it will happen at

36:59

some point if I'm wrong about it now. And the

37:02

folks that and I don't have a problem with passiveness,

37:04

but the folks that are passive with us only better

37:07

be prepared than to be in a three four

37:10

year period where they're not actually getting

37:12

what they think of is as well as the other

37:15

stuff. And if in fact you

37:17

want to be passive, you have to come to a self

37:20

searching argument. When

37:22

that moment occurs, do you

37:24

switch to a passive vehicle that

37:27

gives you more foreign exposure? And if

37:29

you do that, is that a passive decision or is

37:31

that an active decision using passive vehicles both?

37:35

You know, if I'm doing this off the top of my head by memory,

37:37

but I want to say the ten year return for

37:39

the SMP is about and

37:42

the ten year return for take

37:44

Europe is flat, and that assumes

37:46

dividends reinvesting. I don't know if

37:48

we've had that big a gap for that long

37:51

period. Yes we have, we have, But

37:53

let me just say that in the long term, and this is

37:56

so basic that people can't get it. In

37:58

the long term, pricing controlled

38:00

by shifts in the supply of securities, not

38:02

demand. Demand doesn't fluctuate by as big

38:04

a bandwidth the supply can, because supply

38:07

is created a destroyed by shifts and paper product.

38:09

And if you've got the right economics and a little bit of

38:11

regulatory costs, you can overwhelm any level

38:14

of demand. And in the long term you will.

38:16

In the short term you won't. And in

38:18

that uh, in the long term

38:20

it is axiomatical with a very long history

38:23

that shows that US and form returns end

38:25

up eventually in the same place. They just do it in wildly

38:27

varying cycles, and one leads

38:29

for a long time, then the other catches up, then the other takes

38:32

over, and it is axiomatic that

38:34

eventually foreign catches up with US, and

38:37

so then you can debate when. But the point

38:40

is that the passive investor

38:42

that's gone US only has

38:44

to be prepared for long periods where

38:46

US under So if you're a passive investor,

38:49

you would advocate being a global Yes,

38:52

I believe that in this era if you do not,

38:54

no matter what your tactics are going to be, if

38:56

you don't think globally, you

38:58

know there's quite a lot. I

39:01

don't have any political

39:03

arguments, but the politics,

39:05

I mean I study politics about how many political arguments

39:08

that I'm passionate about in terms of making. But

39:10

the populism movement

39:12

is a nationalistic movement wherever

39:14

it exists. But that doesn't mean you shouldn't

39:17

also be thinking global at the same time. Makes

39:19

sense. We have been speaking with Ken Fisher.

39:22

He is the co c I

39:24

O and executive chairman of Fisher

39:26

Investments. Be sure and stick

39:29

around for a podcast extras where we keep

39:31

the tape rolling and continue to talk about

39:33

all things investing. Check

39:36

out my daily column on Bloomberg

39:38

View dot com or you can follow me on Twitter

39:40

at rit Halts. I'm Barry Rihults.

39:43

You're listening to Masters in Business on

39:45

Bloomberg Radio. What could your future

39:47

hold? More than you think? Because at Merrill Lynch

39:49

we work with you to create a strategy built around your

39:52

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39:54

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Mary Lynch makes available products and services offered by

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Merrill Lynch Pierce Federan Smith, Incorporated, Register Broker

40:00

Dealer. Remember s I PC Ken, Thank you so much

40:02

for doing this. This is it's always fascinating

40:04

to to speak with you, and my

40:06

pleasure bearer is always fun to speak with you. And

40:09

I, uh, there's so much stuff we didn't

40:11

get to. I wanna. I want to continue

40:13

discussing for for people

40:16

who are listening at home who either

40:18

I have heard of Ken Fisher or have seen

40:21

his advertisements on UM

40:24

the internet. You're fairly ubiquitous.

40:27

It's it's hard to google anything and not

40:29

see you come up anything related to finance.

40:31

We spend a lot of money advertising, do you We've

40:33

been a lot of money doing a lot of things. People see our advertising.

40:36

I told you that earlier, and they think of us

40:38

in terms of adverting. They just don't see all the rest of what we do.

40:40

So what I find fascinating, But

40:44

by most definitions, over the past

40:47

thirty years thirty plus years,

40:49

you've built what is essentially the

40:51

largest r I A in in

40:54

America by any standard other

40:56

than a UM where Financial

40:58

Engines is bigger, but in all other ways than just

41:01

straight at u M, we're bigger than Financial Right

41:03

and they're really a four mostly four one

41:05

K provider there for a large defined

41:07

contribution plans for very large You're you're

41:09

a registered investment advisory servicing

41:13

PYE net worth individuals and institutions. How

41:16

many clients do you guys have at this point and

41:20

employees? That sounds like you

41:22

figured out how to scale something that

41:25

most other people are having a hard time scaling.

41:29

Well, that's I'm unable to speak for most

41:31

people. But we're comfortable with the

41:33

business we do. I mean, the fact of the matter

41:36

is that we have a very low termination

41:38

rate and basically we have happy clients, and

41:41

we operate in lots of places, and

41:44

uh, we're not I

41:47

mean, we're as I've said often, we don't

41:49

have any market share. I mean, we're

41:51

bigger than others, but weren't any market share. We're a peanut.

41:54

Eight billion dollars is not a lot of money in

41:56

a world where there's you know,

41:58

sixty trillion dollars of suggestible

42:00

assets. What's a couple of billion dollars.

42:03

But that said, within the universe

42:05

of advisory firms, you're

42:08

essentially the largest. I'm fascinated.

42:11

I'm fascinated by the

42:14

business side of that and the steps

42:16

you took when you took them to

42:19

grow that business, because listen,

42:22

the whole world of people in the in

42:24

finance. This is what I

42:26

think a lot of people don't understand. That guy

42:29

got lucky, he was born on third

42:31

base. That sort of stuff. The universe

42:33

exists as it as it exists at any given

42:35

moment. You are looking

42:38

at the world of finance at that time and said

42:40

I think I'm gonna do this, this and this, and

42:43

then thirty years later, oh look, we're running

42:45

eighty billion dollars. That's an amazing

42:47

process to me because everybody

42:51

is essentially looking at or has

42:53

access to look at the same things,

42:56

but not everybody reaches

42:58

the same conclusions and executes

43:00

the same plan to go forward.

43:03

And I'm just fascinated by how

43:06

you've accomplished what you've accomplished. It is

43:08

called masters in business. After all. You

43:10

know, as I told you the last time

43:12

that I was here with you, I'm a

43:15

youngest brother and My older brothers were

43:17

by definition older, bigger, stronger.

43:20

Both of them happened to be smarter. And

43:22

I knew when I was a little kid that if

43:25

I wanted something, I couldn't want what they wanted

43:27

and take them head on. It just couldn't work, and

43:30

so I had to try to be This is kind

43:32

of the beginnings of me being what some people

43:34

might call contrarian. But I had to figure

43:36

out either different things I wanted or

43:38

going about getting them a different way. And

43:40

that's been true for me all of my life. I've

43:43

always had the little brother complex, and

43:45

the little brother complex from the beginning

43:48

has had me trying to figure out how

43:50

I could get what I wanted

43:53

in the face of superior competition.

43:56

And there's an abundant amount of big

43:58

guns out there already to shoot. And

44:02

so then I've also

44:04

been prepared to operate

44:06

by trial and error and trying this and it

44:08

doesn't work. And you can do a huge

44:10

amount of things on a small scale and testament

44:13

and see if they work, and then if they work, do them on a bigger

44:15

scale, and if they don't work, move on to the next

44:17

one. And so you know, again, yesterday

44:20

when I was here in Town. Investment

44:23

News was giving me this award as one of their

44:25

inaugural innovation winners. And

44:28

you know, we've just done a lot of

44:31

things that people in our realm of endeavor always

44:33

thought were stuff either you couldn't

44:35

do or you shouldn't do, not that they were illegal. But

44:38

you know, for example, you talk about our advertising,

44:40

people in our realm of endeavor have never advertised

44:42

the ways we do. We started off doing direct

44:45

mail, and then we moved into direct email,

44:47

and then we moved into Internet banners,

44:50

and we just kept rolling in

44:53

marketing tests over time, over a long

44:55

period of time. Mind you too, this has now been twenty

44:57

years that we are still doing direct mail. Absolutely

44:59

it's in effective. Yeah, we do it differently

45:02

than we used to, and it's not as effective

45:04

as it was at first, because when we were doing it at

45:06

first, it was like going back to my fishing

45:08

analogy. The first time that you you know, you

45:11

cast your line into a

45:13

clear pool and there's no fish that have been taken

45:15

out of the pool at all. Your odds are greater than

45:17

after you've taken ten fish out. And so

45:22

but yes, direct marketing works for us,

45:24

and we know more about direct marketing, on the other

45:26

hand, and we did when we started. Uh,

45:29

you know, we're not maestros at

45:31

this. I disagree. I

45:33

think you're an evil marketing genius. I've described

45:35

you that, not evil, but a

45:38

brilliant. First of all, if

45:40

we were competing direct head on with Procter

45:43

and Gamble for their business, we would get our

45:45

clock cleaned. But but you don't

45:47

know anything about selling toothpastes. Don't

45:50

know. But I don't know anything about marketing compared

45:52

to Procter and Gamble. That's my point. And

45:54

and the fact of matters. Yes, I don't know anything about two days.

45:57

I have used the stuff, but but occasionally,

46:00

but it's every Saturday, whether you need it or

46:02

not. I forget some santacas,

46:04

I forget. But but but you

46:06

have to admit your

46:09

approach to marketing

46:12

to individuals has been wildly

46:14

successful compared in

46:17

the industry. What we thought for a long time

46:19

was that there was no reason you couldn't do these

46:21

kinds of things in our realm of endeavor

46:24

that other people weren't. But we're doing in other

46:26

realms of endeavor. And what

46:28

I've tried to do a lot in my career

46:31

is to do things that people were doing in other realms

46:33

of endeavor that they weren't in this the

46:36

forty act advisory world. And

46:39

uh so you know we were early in computerization.

46:43

Uh. We have all kinds of

46:45

service models that we use that other people don't

46:47

do. Uh, we're very

46:50

we've customized sales and ways that other

46:52

people haven't give me. For instance,

46:54

by the way, I love the annuity thing. How how

46:56

you buy people out of their contracts? What

46:58

do you do that you need in terms

47:00

of service that other people

47:03

don't do. So we have a

47:05

whole series of

47:08

different types and different

47:10

sizes of customized

47:14

client only seminar

47:17

and events to communicate

47:19

to them how we're seeing

47:22

things about various things. And

47:25

that's because we've learned that different people

47:28

receive information best differently.

47:31

And so we have a huge we we

47:33

we we have clients

47:35

at over. We have over fifty seven

47:38

thousand client event

47:41

contacts a year where

47:43

clients go to events and interact.

47:46

This is not These are not sales events. These are service

47:48

events where clients go to these

47:50

events of different types all around

47:52

the English speaking world and a little

47:55

bit in Germany and talk

47:57

to our people. Some

48:00

small events, some big events. We separate

48:02

completely sales from service. So our sales people

48:05

do no service. It's completely specialized.

48:07

We're extreme and specialization of labor and

48:09

we and we have been forever because

48:11

I didn't want the salesperson to be able to do post

48:14

sales service. Because if the sales

48:16

person um does

48:19

the boom doggle on the sales person on the customer

48:21

and and and and you know, lies

48:24

and cheets and steals, and they do post sales

48:26

service, they can keep it keep someone

48:28

else. Second, we want a prophylactic

48:31

protection at the point of client intake. And

48:33

so at the point the contracts signed, the service people

48:36

come in take over and start all over again, and

48:38

they don't get commissions. So they're

48:41

sitting there seeing and the sales people

48:43

know that. So the sales people are less prone

48:45

to want to do the U. That

48:48

makes sense, And you build in a structural

48:51

oversight that's even separate from the compliance

48:54

department, just your process has because

48:56

it provides a prophylactic protection.

48:59

Uh lie was. Our

49:02

orientation in general is

49:04

somewhat different, I think than most people

49:06

because we push very hard what

49:10

we consider to be

49:13

needs based investing versus

49:16

what we see as goals

49:18

based investing. And not a financial

49:21

plan or no, no, no. What what

49:24

I mean is an awful lot of people

49:26

ask client questions like, so, what's

49:28

your risk tolerance? And you know, I did

49:30

work twenty years ago that they can't.

49:33

It's it's whatever the market's doing the past

49:35

half hour and now, yes, exactly if you don't

49:38

understand that. But but I don't think most

49:40

of the world fully gets that that. It's

49:42

a little like a boxing analogy, where most people

49:44

haven't haven't been hitting the gut hard enough enough

49:47

times the way a good boxer would

49:49

know how they react when they get hitting the gut.

49:51

The good boxer actually knows what is risk tolerance

49:54

is to a gut punch, but the average person doesn't.

49:56

In the market gives you gut punches all the time, and

49:59

so we focus on needs

50:01

orientation and then adapting the service

50:04

to whatever that recent thing is that's

50:06

a gut punch to keep the customer going

50:08

to what they need, and what they need is

50:10

almost always a much longer time horizon

50:13

than they think, because unlike

50:15

prior generations, people are going

50:17

to live longer than they ever have before. They

50:19

need to stretch their money much further than

50:21

they ever have in the myopic view

50:24

that says, when I'm sixty five, I

50:26

need to get real conservative was

50:28

perfectly fine in the days that to find benefit

50:30

pension plans were first invented, and people

50:33

live to be sixty five, retired and died at seventy.

50:35

But now you're probably talking on average,

50:39

and this is not what the actual royal tables say.

50:41

This is what I'm telling you. It probably happens on average thirty

50:43

years. And that thirty years, yeah,

50:46

because people's lives keep getting longer in

50:48

their lives and even more complex.

50:50

If you make it to seventy five, it

50:53

means you didn't die as a teenager. You didn't

50:55

die and childbirth, you didn't die. All these

50:57

previous windows where whether these

50:59

big demographic surges

51:01

and the odds are you going to go another x years?

51:04

So ironically to that point, Berry,

51:06

if you actually look at the survivors

51:09

of the Donner Party, the survivors

51:11

of the Donner Party, who by definition were tougher

51:13

than the non survivors, lived

51:15

to be really really old, all of

51:17

them because they were just tough. And the

51:20

fact is that longer living leads to longer

51:22

living. But in this day and age, within that longer

51:24

time period. We have all of these

51:26

advances being made in medicine that

51:29

push our lives longer and longer. When I was

51:31

young, when you were young, senior sports didn't

51:33

exist when I was I

51:35

just was reading about this ninety year old marathon,

51:39

astonishing because

51:41

in the old days, a guy got to be post

51:43

retirement age and he sat in a chair and

51:45

of course, and of course women didn't

51:48

get to retirement age, didn't work, and

51:50

that was just a different world. And the world has shifted,

51:53

and now your time horizon

51:55

post retirement is so much longer,

51:57

but people haven't emotionally learned

51:59

to adapt to that and plan for that long

52:02

time horizon. That needs to

52:04

really say, the

52:07

most brutal thing that I can do is run

52:09

out on money when I'm really old, and your

52:11

poverty is the most brutal thing that you could

52:13

do to something. That is the biggest

52:16

question that you hear from people

52:19

not in their twenties and thirties who have a

52:21

long enough time horizon to save, but

52:24

in their fifties. Hey, I'm concerned I'm going to

52:26

run out of money when I'm fill in

52:28

the blank. Well, you

52:30

know, one of the problems we've always had in behavioralism

52:32

is people don't save enough. And I'm not going

52:34

to get on the soapbox about saving. People are what

52:37

people are. But then when

52:39

they get to be retirement age, whatever

52:41

it is they have, they need to plan

52:43

for a long time. And so if that's retirement

52:46

agent they don't have the money, that means they need to find another

52:48

way to work. Uh and uh

52:50

oh, I'm just gonna get money from this

52:53

or that or the other, social security, what have you.

52:55

Well, if you think you're going to rely on some

52:57

dependency, you've made yourself a depend

53:00

and and that's a tough go to. You

53:02

know, people get these

53:04

things wrong, but we have a long life. Young

53:06

people. Young

53:08

people ought to do age appropriate stuff. People

53:11

always asked, not always has me. People often

53:13

ask me, so, what kind of advice would you give to

53:15

an eighteen year old? And my view

53:17

would be, well, if you're an eighteen year

53:19

old guy, you know what I do. I chase girls. And

53:22

if you're an eighteen year old girl, I'd worry about

53:24

how the guys chase you. And I think that's

53:26

age appropriate. And you know, it's

53:28

better to be chasing girls when you're eighteen than chasing

53:30

girls when you're a grandpa. That's for darn share. And

53:33

uh. The fact of the matter is age appropriate

53:35

activity is one that people have a hard time scoping

53:38

out correctly. But part of age

53:40

appropriate activity is realizing that you're

53:42

going to live to be much like long,

53:44

much longer likely than you envision

53:47

that you will. When I was young, I

53:49

bought a term insurance policy, and then I

53:51

outlived the need of the term insurance policy,

53:54

and it sat in a drawer for a long time. When I got to

53:56

be post fifty, I went back and looked

53:58

at it, and in the twenty five five years

54:00

from fifty, the

54:03

life expectancy of a fifty year old

54:06

had I looked at the terms that went with it, and

54:08

the life expectancy of the fifty year old had grown

54:10

by seven years. In those twenty five years,

54:13

more or less, I got almost a

54:16

year for every three that I lived,

54:19

added on to what the life expectancy

54:21

of a fifty year old would be. And that

54:23

process isn't over yet. We're still extending

54:26

life as we know

54:29

it, and we're also making better quality of

54:31

life later and so all

54:33

of the features even for and

54:35

again, we've got a lot of clients, we hear a lot of stories

54:38

uh, widows and divorced

54:41

people in older ages trying

54:43

to figure out things like I'm

54:45

eighty two and my spouse died,

54:48

and now I want to move to be closer to

54:50

where my grandchildren are, and how

54:53

do I go about finding someplace where I can be

54:55

an active, healthy, eighty two year old because I am,

54:58

Because they've never thought about that before, because they were living

55:00

in the house they were living in. They weren't planning to move, they weren't

55:02

planning to change. And activities in your

55:04

eighties aren't something that anybody ever said in school,

55:06

Oh, here's what you should do when you're in your eighties, because we

55:09

don't have stuff like that. So I

55:11

know I only have you for another fifteen

55:13

minutes or so, is that right? What

55:15

time are we out of here? Twelve thirty one

55:17

o'clock? As

55:20

Charlie, I think we have to be out of twelve thirty.

55:23

Um, So let me jump into my favorite

55:25

questions. And there are a few I really wanna

55:28

go over. God, you know, there's so many questions

55:31

we did not get to. You're You're easy

55:33

to talk to when we we you

55:36

ask your question for both is good and he

55:39

is good. On an interview, and I sucked the airspace

55:41

out of the interview. That's right now, you did, not twelve

55:44

thirty. Alright, So I'm gonna I'm gonna

55:46

go over my five favorite UM questions.

55:49

Tell us about your early mentors. Who are the people

55:51

who influenced the way you looked

55:54

at the world. Ah, well,

55:57

of course with almost everyone, my

55:59

mother and my father. Uh and your

56:01

father especially was a famous

56:03

author and uh yeah, But when I was very

56:06

young, he was a father and he

56:08

was actually marvelous

56:10

in weird ways. He was a weird man. He was on you. When I say

56:13

weird, I mean out the bell curve, and he was. He

56:15

was weird. I don't mean weird as bad, I mean weird. And

56:18

he was statistically unusual. He had

56:20

Asperger's before Aspergers was understood.

56:23

And on the other hand, he was as marvelous

56:25

bedtime storyteller. And I didn't

56:28

understand at the time that in the bedtime stories

56:30

he was telling me, he was telling

56:32

me what he wanted me to be. Um.

56:36

I still choke up when I think about him what

56:38

he wanted me to be. When I grew up, he

56:40

was telling me in these fictional stories that he

56:42

made up, what he wanted of me. Was he making

56:45

these stories up, like right off the

56:47

top of his head. I don't know that. I never

56:49

knew if he was making him up off the top of his head or

56:51

if he pre planned them. Uh. And they were

56:53

different every night. Sometimes

56:55

he told me the same stories over and over again because

56:57

because because those were the ones he really wanted to drill

57:00

into my head. And then also

57:02

my grandfather was terribly important to me. I one

57:05

died before I was born, and if christ didn't know him, but

57:07

my paternal grandfather and I were very

57:09

close and I idolized him and

57:11

he was He was a big influence on my life

57:14

in other ways, in ways of what's

57:16

good, what's bad, what do you do? How

57:19

do you do things? Uh? He was an

57:21

important role model to me. He was in

57:23

a lot of ways. There was a guy named Clarence Bennett

57:25

after after my grandfather died that became a kind

57:27

of a substitute grandfather for me. He

57:29

was a former New York life insurance guy and

57:33

he was also a great tree explorer and

57:35

a great and a great explorer. Um

57:37

he discovered the largest and oldest Western

57:40

juniper in the world. Still famous tree that Bennett

57:43

juniper, and uh, he kind of

57:45

became a very

57:47

famous tree when when when I

57:49

became older and I got involved in trees, and all my tree

57:51

buddies knew that I had known Clarence Bennett

57:53

when I was young. They were like, whoa, um

57:56

anyway, um, Now, by the way, I have

57:58

to just stop you and ask. So

58:00

when you say when I became a tree guy, let's

58:03

let's dig into that. You

58:05

you have committed to advancing

58:07

the world's understanding of redwood forest

58:10

and the ecology they represent.

58:12

You endowed at Humboldt State University

58:14

the Ken Fisher Redwood Forest

58:17

Ecology Chair. So

58:20

that's how you, Bennett, is

58:22

what led you to your interest in redwood

58:25

forest. No, I was already interested in being in the way. When

58:27

I could, I could hop over my parents back fence and be

58:29

out in the woods when I was a little boy, and I just loved being

58:32

in the woods, and I loved everything about it. And I

58:34

already loved that. But Clarence Bennett had a huge

58:36

impact on me. He lived not that far

58:38

away and I could. I worked for him when I was a little kid.

58:40

I mean I picked fruit for him and I tended his vegetable

58:43

gardens and he was retired by then, and

58:46

uh and he was a great guy

58:48

and uh and uh

58:52

and he's influenced me a huge But then I

58:54

went to forestry school at Humble State, and

58:56

then I decided that would be a lousy career, but I maintained

58:58

it might love r us And yes,

59:00

I've done that. But I also, you know, have finance research

59:03

and Douglas for uh uh

59:07

western spruce, uh western

59:12

red cedar through Japokata. And I'm

59:15

big on what you would view as the ecology

59:18

of big and tall and old

59:20

tree species, on the code discoverer of the

59:23

single oldest known uh um

59:27

uh sequoias and provirons extent

59:30

in the world. What do you wi is

59:32

this in Redwood National Park? What do you

59:34

make of the pushback against

59:38

and through pogenic global

59:40

warming? And what's going on

59:42

with e p A today. It looks like we're seeing

59:44

a big shift at the government level

59:47

versus the past eight years. I

59:50

don't really get into all that stuff very much. I can

59:52

tell you this, which

59:54

nobody wants to believe, um,

59:57

but I know it's true because I've been fundamental

59:59

to to again most most big,

1:00:02

most big, tall

1:00:05

and old western tree science in

1:00:07

recent years has been done under my large house, and

1:00:10

uh, we've done the only

1:00:13

long term project on the

1:00:16

health of redwoods in relation

1:00:18

to climate change. And they

1:00:21

don't give a rats darn. They they just

1:00:23

blow off whatever climate does that.

1:00:26

I don't mean in the short term they necessary. You're

1:00:28

talking about over thousands. They are so adaptive

1:00:31

compared to other species that they

1:00:33

know how to wiggle and give and move to

1:00:36

gain competitive advantage against other tree

1:00:39

species, and trees

1:00:41

sort of invest in this versus that at

1:00:43

a point in time, and they know they're

1:00:46

more adaptive, Like a simperviruns

1:00:49

is a hex eployd. It's got a much more complex

1:00:51

chromosome makeup than other tree species

1:00:54

and it just knows how to take advantage

1:00:56

of the circumstance to it no matter what

1:00:58

the circumstances are. Well, you drop

1:01:01

a nuclear bomb on if that's not going to be the climate

1:01:04

climate, not whether climate

1:01:06

climate. So if it's appreciably cooler

1:01:08

or possibly warmer, you get drought, you

1:01:10

get heavy rain, you get warmer,

1:01:13

you get colder. Now, mind

1:01:15

you, that's again shy of like some catastrophe,

1:01:19

an ice age, normal climate that would

1:01:21

include the incremental changes

1:01:23

that we talk about when we talk about climate

1:01:26

change, I'm not again talking about you

1:01:28

know, some some huge

1:01:32

asteroid from outer space. It's the world. You

1:01:35

know something even an ice age when you have glaciers

1:01:37

coming south off the North Pole. Uh,

1:01:40

that that's a once. I don't

1:01:42

know how how many terms

1:01:45

of anything that would happen for our grandchildren's

1:01:48

lifetimes. Redwoods

1:01:51

in terms of nature, Uh,

1:01:54

not only redwoods. Douglas firs are more adaptive

1:01:56

than people ever thought. Western red cedars

1:01:59

more adaptive than people ever thought. These

1:02:01

trees got to where they are because

1:02:04

of that feature through lots

1:02:06

of stuff in the past. And in fact,

1:02:08

redwoods are gaining

1:02:11

relative share in forests, to

1:02:15

within their landscape, to other tree species.

1:02:18

In warming climates,

1:02:21

redwoods gaining market share. Redwoods

1:02:23

dominate. So let's talk about you

1:02:25

mentioned mentors. What investors

1:02:28

influenced your approach to to invest

1:02:30

in well, in a textbook sense, you know, the standards

1:02:33

of the past. I mean, you know, people

1:02:35

like Um Buffett Um, but

1:02:39

people like Graham Um,

1:02:41

my father, John Templeton

1:02:43

personally, I was a big Templeton fan. I

1:02:46

mean he was just a marvelous human being. Uh

1:02:49

it seems fascinated. Oh no, he was a great guy.

1:02:51

He was he was his

1:02:53

spirituality. His

1:02:56

spirituality led him

1:02:58

to a form of int a calmness

1:03:01

that's rare, uh in that

1:03:03

he would make investment decisions without

1:03:06

the emotion that so many other people

1:03:08

had because he was more at peace with himself than

1:03:10

most people are. That's interesting.

1:03:13

And and of course, as we all know, most people's

1:03:15

emotion as their worst enemy when it comes to investing.

1:03:18

Uh. You might deal with that this way, and you

1:03:20

might deal with that that way. But he was a very

1:03:23

at peace human being. And uh

1:03:25

so those would be uh the

1:03:28

main ones. And uh, you

1:03:31

know then that's a good run that

1:03:33

for Oh, no, no, you know, I don't

1:03:35

have anything unique. Um, you

1:03:37

mentioned textbooks. Let's let's talk about books.

1:03:40

This is the question people ask more

1:03:42

than anything else. What are some of

1:03:44

your favorite books? Well, my alternate

1:03:46

favorite book is Hunting with Bow and Arrow by Saxton

1:03:49

Pope. Pope was a friend of my grandfather's

1:03:52

and was the father of modern bow

1:03:54

hunting. And I had different

1:03:56

impacts on me because a lot of other things

1:03:58

that I like in life are sort like hunting. Uh.

1:04:01

And when I was young, I actually was very interested in be hunting.

1:04:04

I did be hunting when I was young. Um. But I

1:04:06

also am a big fan of an

1:04:08

old book by a guy named Frank Hibbin

1:04:10

called Hunting American Lions, which

1:04:13

is another book about chasing stuff,

1:04:15

because ultimately, investing is a different form of

1:04:17

chasing stuff. It's a metaphor. I read it over

1:04:19

and over and over again. Um. Oh yeah,

1:04:22

and you know what it's also both of those books

1:04:24

are really good for grandchildren. Um

1:04:27

and uh. Then

1:04:30

I like, um, and

1:04:34

you're not going to find this surprising. An old book

1:04:36

by guy named Edgar Cherry called uh

1:04:39

Redwood and California Forests,

1:04:42

And there's only thirty seven

1:04:45

known copies in the world, and I owned three of them. And

1:04:47

I'm a big fan of that book. But you can

1:04:50

you can get you can get reproductions of it on Amazon.

1:04:52

So you can't get the original. No, no, you

1:04:55

know, if you find one, I probably catch you ten grand

1:04:57

But um, but if you find

1:04:59

one, let me know what all by it. I'd corner

1:05:01

the market in that book. Um uh.

1:05:04

And then you know, when investing books, it's pretty

1:05:07

much just the old standards and all the old standards. When

1:05:09

I was young, you know, I pretty much read

1:05:12

all of them. That I could get my hands

1:05:14

on, ranging from you know,

1:05:16

all of the standard names that you know, there's none, none

1:05:18

of the standards. Give us give us one or two plus

1:05:21

your plus your dad of course, Intelligion

1:05:23

Investors, Security Analysis by Graham, those two

1:05:25

classic gram book, my father's book, you know, Common

1:05:27

Stocks and in Common Profits, which you know

1:05:29

is still a great book. You

1:05:32

have to take up any of those books like that and kind

1:05:34

of adapt them in your mind for all of the modern

1:05:36

technology. Uh, intuitively

1:05:39

that's people kind of forget that sometimes when

1:05:41

they read that stuff. Those guys wrote those things without

1:05:44

My father operated in a world with a hand crank adding

1:05:46

machine and a pencil, right, uh, and difference

1:05:49

then we have a different world. But the principles

1:05:51

largely apply. If you extract away,

1:05:54

how would you have done things then with a pencil versus

1:05:57

today with the computer, Um would

1:06:00

be the same. But for example,

1:06:02

I was always a big fan of of Jerald

1:06:05

Lobes books, which a lot of people

1:06:07

always decried and and and I

1:06:10

think Jerald Lobe actually had a bigger impact

1:06:12

on me. My father knew Gerald Lobe

1:06:14

pretty well, and he did not like Jerald Lobe. But

1:06:17

Jerald Lobe was actually Uh.

1:06:20

Interesting in the Jerald Lobe brought

1:06:23

understanding to commonplace

1:06:26

investors that they did not have before he appeared

1:06:28

on the on the on the horizon. He was in some ways

1:06:31

sort of a Jim Cramer of his day. And

1:06:34

uh, and there's a valuable function in that. The

1:06:37

battle for investment survivals is

1:06:40

the I couldn't pull. That's his iconic

1:06:42

And then and then and then of course, oh

1:06:45

and I'm having Uh I used Google.

1:06:47

I cheated because I was having that same moment.

1:06:50

There were all of the Adam

1:06:53

Smith books. And then uh,

1:06:56

there's all

1:06:58

of the the Great Crash.

1:07:02

Uh. And then there's the Hilbrunner books.

1:07:04

What are the Hilbrunner books, all the economic

1:07:07

ones, Robert Howe Brunner. Uh.

1:07:10

And then of course

1:07:12

then forgetting about those, you know, must

1:07:14

reads are How to Lie with Statistics

1:07:17

by Darryl Hoff Suh. I

1:07:19

mean, if if hey, I encourage anybody

1:07:22

ever to always take the

1:07:24

what I always considered the core education classes,

1:07:27

you know, which include stat core

1:07:29

economics. Uh, you know,

1:07:32

you're a calculus I mean,

1:07:34

if you don't understand, if you don't understand

1:07:36

marginality, calculus will get you to or you understand

1:07:38

marginality called Kyle Brunner. The

1:07:41

one book I know is The Worldly Philosophers,

1:07:43

that's one of his classics. And the Making of Economic

1:07:46

Society. So that's what I was gonna about to say,

1:07:48

teaching, um, the essential Adam Smith,

1:07:50

Marxism, for and Against the Making of economic

1:07:52

society, the Nature and Logic of Capitalism.

1:07:55

He has a run of great

1:07:59

The Human proSP Behind the Veil of Economics,

1:08:01

Visions of the Future, the Debt

1:08:04

and the Deficit Force Alarms, and he's

1:08:06

got a huge run of books, Five

1:08:08

Economic Challenges. I

1:08:11

didn't realize he was that so prolific.

1:08:13

Uh. And then uh, um,

1:08:18

if you can find Angus Black's two books, Angus

1:08:21

Black is really Roger Lee roy Miller. Um.

1:08:24

But Angus Black's two books, Radical

1:08:26

Guide Economic Reality and The Radical

1:08:29

Guide to Environmental Reality.

1:08:31

Uh, they're actually classics. They're

1:08:34

hard to find today. Um. But Roger

1:08:36

Lee roy Miller is the great economic textbook

1:08:38

writer. Uh. And

1:08:41

I mean I think he the Devil's Covin.

1:08:44

No, that's a different Angus Black, one

1:08:47

less Radical Guide Economic Reality and

1:08:49

Radicals Guide to Environmental Reality.

1:08:51

Angus Black. Yep, it does

1:08:53

a pen name that he made Uh. He

1:08:56

was a universe Chicago PhD from

1:08:58

the sixties. Uh, was

1:09:01

a very good communicator. He's still around,

1:09:03

he still exists, he's well, he's older now. Guide

1:09:06

to economic well better than the alternately.

1:09:09

Yeah, absolutely, A radicals guide to economic

1:09:11

reality of radicals. Guide to self destruction,

1:09:14

a radicals guide. So those

1:09:16

are the two big ones, self destruction

1:09:18

and economics. I heard a lecture by

1:09:20

him once when I was young, and in

1:09:23

an hour, he moved

1:09:26

me along quite a lot in one hour because he was he

1:09:28

was a great communicator. Uh. I

1:09:30

mean I studied a lot of economics by the

1:09:32

time I heard him, and he was kind of like watching

1:09:34

all the moving parts work together. Suddenly

1:09:37

you see the engine working. It just clicks. Yeah. No, he's

1:09:39

a great communicator. Um and uh.

1:09:43

And you know you

1:09:46

asked me these questions, and there's so much that I forget

1:09:48

about because it's been a long time. I

1:09:50

warned people, these are the questions that require

1:09:52

recall. Well, you know, the older

1:09:54

you get, the more I worry about do I have dementia? And

1:09:57

uh And that started around fifty. But

1:10:00

I used to have an encyclopedic memory

1:10:02

of album names, songs, and

1:10:05

now I can't remember I left the encyclopedia. It's

1:10:07

just it's just so, my wife

1:10:09

likes to say. Well, at a certain point, your head gets filled

1:10:12

up with enough facts that if you want to enter

1:10:14

a new one, you gotta lose an old one. So

1:10:18

UM, let me get to my last few questions

1:10:20

before they come kick us out of here. Let's

1:10:22

talk about what you do to keep mentally

1:10:25

and physically fit? And what do you do what

1:10:27

makes you think that I mentally and physically fit? Well,

1:10:29

we were just talking about de mansia. What what do you do to stay

1:10:32

entertained? What do you do to relax outside

1:10:34

of the office other than go to

1:10:36

the forest? Uh? Well, I do spend

1:10:39

as much time as I can in the woods. I

1:10:42

do try to take care of myself physically. I

1:10:46

am UM. When

1:10:49

I was very young, I get captured by

1:10:51

this female and I've been a prisoner

1:10:53

to her ever since. Uh, and

1:10:56

I UM like to spend

1:10:58

time with her grandchildren. Uh.

1:11:00

They're the most marvelous human beings

1:11:03

that I've ever known. And I

1:11:07

that's They're a prime form of relaxation

1:11:10

for me. And uh,

1:11:13

although most people don't think of children is relaxing.

1:11:15

Almost every game, almost every grandparent does,

1:11:18

and most

1:11:22

of them are misled in that regard because I do. And

1:11:25

um they're they're just wrong. And uh

1:11:28

the the you know, there's these

1:11:30

age old features. I mean, how in the world these

1:11:33

children that you have that don't

1:11:35

know a darned thing, that grow up

1:11:38

and then have these most miraculous

1:11:41

children. It's like somehow jeans just get a

1:11:43

generation. And um so

1:11:46

I, Uh, I am a very

1:11:48

heavy diet fan. I

1:11:51

I used to weigh a lot. I used to a hundred pounds

1:11:54

more than our way and I

1:11:56

while I was younger then, and I worked very hard

1:11:59

hundred pounds less than I was I was younger

1:12:01

to that. Do we just trade? Yeah? I think so. I

1:12:03

think I won the trade. Um I

1:12:06

I so, I spend a fair effort

1:12:08

trying to. I've got a very bizarre diet

1:12:11

and I focus on my weight a

1:12:13

lot. And when you say bizarre diet, what

1:12:17

what makes you diet bizarre? Well, the greatest

1:12:19

principle because I when I wait

1:12:21

a lot more, I was prone to overeat

1:12:24

a lot of things. My definition is

1:12:26

that I try not to everat anything I like. That's

1:12:30

a lot of discipline there. So you only

1:12:32

eat things you don't really care for. No, that's

1:12:35

not true. I try to only eat

1:12:37

things I don't care for. When you travel, you

1:12:39

get stuck with stuff. That's the worst part.

1:12:41

Traveling is the toughest. But when I'm at home,

1:12:44

I only eat stuff I don't like. Oh,

1:12:47

I'm basically a vegetable

1:12:49

and fruit guy. And then for I

1:12:52

eat a handful of walnuts every day at

1:12:55

home, and then I have to drink

1:12:57

some milk for calcium. And I also,

1:13:00

you know, a minuteing vitamins and all that kind of nonsense.

1:13:02

But stay with the let's

1:13:04

skip the vitamins unless

1:13:06

you really do radical calcium

1:13:09

pills? Are you doing? Like when you get older?

1:13:11

When you get older, you're gonna worry about Austina. You're not that

1:13:13

much older than me. I'm gonna tell you,

1:13:15

I'm not that far away. I don't know how old you are, Berry,

1:13:17

I know how old I am. That's the key thing is knowing

1:13:20

yourself. I'm sixty six. I was gonna say mid sixties,

1:13:22

the most early sixties, and I'd like to live

1:13:24

in this thirty years and have that be a good life.

1:13:26

And so it's spent a lot of time taking care myself. The

1:13:29

old joke. It's not the years, it's the miles. That's

1:13:31

the like. I'd like to have both. I'd

1:13:34

like to have years and miles and uh

1:13:36

so again, I walk a lot.

1:13:39

On average, I walk about twenty miles a week. I

1:13:42

love this thing, even though it's annoying, because

1:13:45

it gives me a baseline of how much I'm walking

1:13:47

around. And they want you to do ten thousand

1:13:49

steps a day and I'm pretty consistently

1:13:52

doing fifteen thousand. I think

1:13:54

the typing is probably sets it off a little

1:13:56

bit. Maybe I'm cheating a little

1:13:58

bit. I take it off as the equivalent when

1:14:00

when we were young, when they when they actually had

1:14:03

phone books and you let your fingers through the walking white.

1:14:06

But it's every now and then. I'll

1:14:08

there days when young people don't know about

1:14:10

phone books. No they don't they I

1:14:13

told people about the post office. People don't

1:14:15

understand about you know, you could be able to go to this building

1:14:17

and give them a letter and they would send it

1:14:19

somewhere like what do you mean a letter like t

1:14:22

or people don't understand how it It's

1:14:25

amazing to watch the transition, and

1:14:28

we've spent enough time watching the

1:14:30

next generation come in that

1:14:33

we learned how to use computers. We've adapted

1:14:35

to them. Computers are just part of the background.

1:14:38

There's always been computers to them, so it's a very

1:14:41

different interaction. To

1:14:43

me, it's this is still a thing of joy and

1:14:45

wonder. To them, it just what

1:14:47

do you mean it's a computer. There's that's

1:14:50

supposed to be mobile, right, Well, the piece

1:14:52

of glass that you carry around with you is a

1:14:54

computer to them. But to

1:14:57

us it's a music. Yeah,

1:14:59

And to them it's just part of the background. All

1:15:01

right. Before they throw us out, let me get to my last

1:15:03

speaking. Think of what you think of how

1:15:06

my great grandfather would

1:15:09

have thought about life. If my

1:15:12

grandfather could have told him about

1:15:14

truly what he would see by the time he died

1:15:16

in the nineteen fifties, my great

1:15:19

grandfather would have thought that my grandfather

1:15:21

was out of his gourd. And now just from

1:15:23

the fifties to today, it's ten

1:15:26

x's. Although my grandfather's

1:15:28

generation saw more relative

1:15:31

change, that's ute change, that's right.

1:15:33

They went from They went from late industrial

1:15:36

to late electronic, early electronic

1:15:38

too late electronic, to early computers.

1:15:41

My grandfather was born in seventy five, before the Industrial

1:15:43

Revolution, took hold and the industal

1:15:45

revolutions eighties thing in America, and

1:15:48

so the steam engine is really

1:15:50

a thing of his youth in terms

1:15:52

of mass in America. That transition

1:15:55

to go to there, to radio,

1:15:58

to telephones, to television,

1:16:01

to airplanes, to

1:16:03

actually know that computers existed,

1:16:05

not that the computers would exist like we have them

1:16:07

now, but that they existed in the way IBM and

1:16:09

would have had them in as

1:16:12

opposed to. So let me share something fascinating

1:16:14

with you about airplanes. We were

1:16:16

talking about the other day in the office

1:16:19

about bad news and good news, and

1:16:21

one of the examples that I

1:16:24

used of good news, my head of

1:16:26

research, Mike Batnick, did this whole thing about all

1:16:28

this good news on the chart, and most

1:16:30

of the good news that came out you would never

1:16:32

have thought twice about over the past

1:16:35

decade because it's just a tiny

1:16:37

little thing. And you know what, even when

1:16:39

the iPhone first came out, no one really paid much attention

1:16:42

to how big a deal is it? But think

1:16:44

about flight and think about nineteen

1:16:46

o three Kitty Hawk. Now that North

1:16:49

Carolina has one, uh the n

1:16:51

c A A. It's it's so I'll tie it

1:16:53

into recent news. There were

1:16:55

no newspaper articles. It never made the New

1:16:57

York Times. They flew

1:17:00

I want to say, a half dozen or a dozen times

1:17:02

before the local whatever you want

1:17:04

to call it, newspaper or newsletter or

1:17:06

whatever, had it like a paragraph,

1:17:09

mentioned a blurb. The

1:17:11

Right Brothers managed to get their heavier

1:17:13

than aircraft to fly fifty

1:17:16

yards. They've done it five or six times. Whoop

1:17:19

do you do? And yet think of the impact

1:17:21

of that. So even

1:17:24

when you're in the midst of an incredible technological

1:17:27

change, you may not even

1:17:29

be aware of the significance of

1:17:31

it. Forget centuries later, just a

1:17:33

few decades later. It's it's I find that just

1:17:35

fascinating it. I'm

1:17:38

pretty sure that people like the Right Brothers

1:17:40

couldn't have predicted exactly how it

1:17:42

would go, but that they would have thought that

1:17:44

it would have been an important thing. This is

1:17:47

significant. They would

1:17:49

have known it was something that mattered. They wouldn't

1:17:51

know exactly how all that well. I don't think anybody can forecast

1:17:53

all those little wiggles with accuracy in the slightest,

1:17:56

in the same way that you know. When I was listening to

1:17:58

John Bogol yesterday, he was

1:18:00

talking about with confidence that yes,

1:18:03

for five years this wasn't working, but he was

1:18:05

sure it was the right thing to do, and

1:18:08

that eventually if we could survive.

1:18:12

But that wouldn't say that the thing was wrong. It

1:18:14

just implied that if he couldn't survive, someone else would

1:18:16

probably have to do it later, and that you'd have

1:18:18

to be some crazy guy like he was

1:18:21

to do that, which has always been true of anybody

1:18:23

that was ever entrepreneurial about anything. Sure,

1:18:25

you know, they're always kind of the wing, that crazy

1:18:27

guy. And and and you managed to do

1:18:29

it before, you know, the right

1:18:31

brothers probably didn't cash in a whole lot on

1:18:34

flight um Bogel is one of the lucky

1:18:36

people started young enough that forty

1:18:38

years later. You know, the the other one that they awarded

1:18:41

yesterday in the icon mode. I mean they had a bunch

1:18:44

of us that were awarded in the innovator mode,

1:18:46

and then they had these two that were awarded in the icon

1:18:48

mode. And the other was Chuck Schwab. And

1:18:50

the same thing in a way was true with Schwab

1:18:53

when he first started the five Well,

1:18:55

when he first started it wasn't a discount brokerage

1:18:57

firm, which first started as a standard little Brook

1:19:00

firm, that he then got the idea for the discount

1:19:03

after he started the firm, and

1:19:05

then he went with that. And again

1:19:08

in the early days, Schwab of course was laughed

1:19:10

at in San Francisco where

1:19:12

I was in my time. I

1:19:14

mean, I'm a young guy in the realm of

1:19:17

endeavor at the time, and people laughed at Schwab

1:19:19

in those days. And of

1:19:21

course a lot of time people

1:19:23

start businesses that don't work and fail.

1:19:27

There's lots of failures for every success. And

1:19:30

yet Schwab was a tremendous success and

1:19:32

a continuous innovator. How old does

1:19:34

Chuck Schuab these days, Uh, I

1:19:38

don't know exactly, but he's uh late,

1:19:41

very late seventies. I

1:19:43

don't know exactly. You know, any big could looked

1:19:45

that up on Wickham. He's he's no longer than you

1:19:47

don't see him as the face of the firm as much,

1:19:49

but he you know, you've seen him

1:19:52

around for a long long time. He had

1:19:54

a huge impact as an innovator for

1:19:56

a long time, which is how he became an icon. But

1:19:59

again that again that this is

1:20:01

this notion of the you know, the instant success.

1:20:04

The instant success does not happen. Even

1:20:06

Bill Gates and Microsoft took a long time,

1:20:09

had a huge impact on the world, but it took a

1:20:11

long time before the world fully was doing

1:20:13

that. Uh in scale

1:20:16

seventy he is seventy nine

1:20:18

years old. I was more or less

1:20:20

right to the last two questions before they come

1:20:22

throw us out of here. Uh So, millennial,

1:20:26

a recent college graduate comes

1:20:28

to you and says, I'm interested in

1:20:30

getting into the world to finance.

1:20:32

What sort of advice would you give them? Talk

1:20:35

to people that are about five years older than you are,

1:20:38

that have done it, because they know more about it than I do. Older

1:20:42

than them, people would have done it recently,

1:20:44

So you're saying it's a young man's game, not a or

1:20:46

young person's game. I know the

1:20:49

course that they have to follow is different than

1:20:51

the course that I had to follow once upon a

1:20:53

time, because the world has evolved and

1:20:55

the people that have done it recently understand

1:20:59

that. So seek out young mentors

1:21:01

for what I gotta do, and

1:21:04

then simultaneously remember that it's a long

1:21:06

run. It's a long life. The

1:21:09

people that think they're gonna hit big and

1:21:11

you know, go retire in five years are

1:21:13

barking up the wrong tree. Because that's not really the way

1:21:15

the world works. You're in it for the wrong motivation

1:21:19

if you think you're going to make If you're

1:21:21

just in it to make money, you're doing the wrong thing.

1:21:23

You know. I'm, as you said in the introduction, supposed

1:21:25

to be something like the four richest person

1:21:28

in America, and it was

1:21:30

never about money for me. The money is a

1:21:32

result. It's not a consistent theme I hear

1:21:34

from people who I interview. The reality

1:21:37

is, if you're doing it for the money,

1:21:40

you're not really doing it for the customers.

1:21:44

And if you're doing it for something

1:21:46

other than the customers, you're barking up

1:21:48

the wrong tree. In the longer term, the the you

1:21:51

mentioned how long it is. I love the expression

1:21:53

the days are long, but the decades are short,

1:21:56

and that that really yeah, I really

1:21:59

like that. I know know what I'm stealing that from,

1:22:01

but I'm sure some reader will tell us. And and

1:22:03

lastly, what is it that you know about

1:22:06

the world of investing in markets that you

1:22:08

wish you knew thirty five years

1:22:10

ago when you were first getting your legs underneath

1:22:13

you. Uh So,

1:22:15

maybe this sounds strange to you, but

1:22:18

I wish that I would have understood.

1:22:22

And I don't know it's thirty five years ago, but twenty

1:22:24

years ago, I wish that I would have understood

1:22:27

the course in the transition that would occur

1:22:29

to journalism. Really, that's

1:22:33

interesting because I think journalism has

1:22:36

big impacts for good and for bad on

1:22:38

sentiment in investing, no doubt, and

1:22:41

that that world has morphed quite a lot in

1:22:43

ways that I try to understand,

1:22:45

but I'm not sure I fully do, and but

1:22:48

I work out it a lot. And um,

1:22:51

the fact is that in

1:22:53

an awful lot of what we see in journalism today,

1:22:56

journalism has lost its way and forgotten

1:22:58

the core principles of journalism, and so

1:23:00

much of journalism today does not start

1:23:03

the way it did when I study

1:23:05

journalism in school, which is to lead with

1:23:07

the five when, why

1:23:09

and how? And from that lack

1:23:12

in the lead, which was why it was always supposed

1:23:14

to be other than the opinion page.

1:23:17

Uh, I mean opinion opinion. The news

1:23:20

stories are so to lead with a five Disney age.

1:23:22

Uh. Now so often you look at the news and

1:23:24

you can't actually find early in the story

1:23:26

anything but opinion, and it's,

1:23:29

you know, thought to be. In journalism school, they teach you

1:23:31

to be hard hitting journalists, and

1:23:33

so the stories are hard hitting, but its

1:23:35

opinion, and that creates a lot of shrill

1:23:38

that becomes noise to people, and people

1:23:40

have a hard time getting to the facts.

1:23:42

They get impatient. And so then you can parallel

1:23:45

out with gallops. Uh now,

1:23:47

uh, twenty five year history of

1:23:50

tracking media credibility by the same

1:23:52

standards and seeing media credibility fall,

1:23:54

and as media credibility falls, not

1:23:57

in a straight line but in an irregular

1:23:59

line. Obviously facts

1:24:01

and circumstances contribute and to tract from that,

1:24:04

but as that has happened, it changes

1:24:06

the impact of media on sentiment. And I wish

1:24:08

I had understood that better because I spast

1:24:10

time studying sentiment and media twenty

1:24:13

five years ago. But I never anticipated

1:24:15

I mean, if you just look at worlds that you and I know, and

1:24:18

what's happened to things like I was talking to Jim Cramer

1:24:20

this morning and uh early,

1:24:23

and he was recalling to my memory that when

1:24:25

he started writing, he started writing for Smart Money,

1:24:27

And then I thought about why I haven't thought about Smart Money magazine

1:24:30

in a long time. They haven't been around. Yeah, exactly,

1:24:32

That's the point the world publication

1:24:34

the world just you know, and you

1:24:37

know, you guys here at Bloomberg

1:24:39

bought Business Week for a dollar literally

1:24:41

a dollar plus thirty

1:24:43

eight million dollars worth a dead of memory is

1:24:46

yeah. But you know, if you think about

1:24:48

it, this whole world has had these features

1:24:51

and you know, as we speak, time warners up

1:24:53

for sale and uh, you

1:24:55

know the world. You look at the

1:24:57

transition and evolution of

1:25:01

The New York Times, which has been going downhill

1:25:03

at an irregular pace. I mean, recently they've

1:25:05

gotten a trump uptick. That's a

1:25:08

huge uptick. Yeah, but it's a short

1:25:10

term phenomena. The trend for that has

1:25:12

been downhill for twenty years.

1:25:15

And well, everything that's

1:25:17

printed on pulp trees

1:25:21

and and not digital has become

1:25:24

uh dinosaur and his

1:25:26

fading. Uh. And then

1:25:29

with that, uh, you know, the

1:25:32

nature of employment inside journalism has

1:25:34

shifted. I mean, Bloomberg is really quite an exception

1:25:36

to the general It's a data services company

1:25:39

with the media attached to it.

1:25:41

And and and you know, so Thompson Reuters

1:25:43

has a little bit of that too. Um. But

1:25:45

the traditional core journalism

1:25:48

world as it existed has

1:25:51

shifted to where there's not enough

1:25:53

compensation to justify heavy

1:25:55

research. In most places, the channels

1:25:57

are more narrow uh, compensations

1:26:01

constrained. Uh. And from

1:26:03

that, you know, one should be neither

1:26:06

hostile nor sympathetic to journalists

1:26:08

one way or the other anymore than other category. But

1:26:10

from that, the output has

1:26:13

moved evermore to this principle of

1:26:15

trying to gain short term attention

1:26:17

to shrillness at the

1:26:19

loss of longer term credibility, which

1:26:22

then forces the investor to find ways

1:26:24

to become more self reliant. No

1:26:26

doubt about that, you know, And that need

1:26:29

to become self reliant alters

1:26:31

the way we should think about sentiment. That's

1:26:34

interesting. You know, you have some new

1:26:36

formats coming out, like pro

1:26:38

Publica or even The Guardian, which was

1:26:41

basically turned into a giant

1:26:43

trust um with

1:26:45

its own funding as opposed to having

1:26:48

to sell newspapers. They still sell newspapers,

1:26:51

but they're now a self funded, freestanding

1:26:54

entity. Same with Pro Publica. It's

1:26:56

an outside investment that allows

1:26:58

them to be free standing.

1:27:01

Who knows what's going to happen to the ft or

1:27:04

the New York Times. I think the Wall Street Journal

1:27:07

is stable, but is we move more

1:27:09

towards indexing? Who knows? You know well.

1:27:11

I was in London last week talking to

1:27:14

John Redding and the CEO of the FT, and

1:27:17

they seem to be pretty on top of No. No, I think,

1:27:19

I think they're doing great. But they have learned

1:27:21

likewise that they have to do a multiplicity

1:27:24

of things and that they have to adapt. And so

1:27:27

there's the one part of the world that I think, you know people

1:27:29

readily except, which is that they got

1:27:32

to be strong in the online side. And

1:27:34

then the other part that they've done very well is to build

1:27:36

up their conference business. And there's

1:27:38

actually a cyclically regular

1:27:41

need increasingly for people to get together,

1:27:44

because getting together is another form

1:27:47

of increasing your credibility

1:27:49

and what's going on, you know, World War Ide, less

1:27:51

trust media. If I get

1:27:54

together with people and I hear stories

1:27:56

and we swap information, I

1:27:59

can gain greater sense of

1:28:01

confidence in what I'm doing. So their

1:28:03

conference business has been growing and

1:28:06

I and and of course John in particular

1:28:09

is a big fan of uh the

1:28:11

importance of print being a

1:28:13

piece of the puzzle, the puzzle

1:28:16

because it provides tangibility. And

1:28:19

so I don't see the pink, which

1:28:21

is you know, the legendary name for the FT. I don't

1:28:23

see the pink disappearing. But it's

1:28:25

thinner than it used to be, and it's done differently

1:28:28

than it used to be, and that's necessary in this

1:28:30

era. But more and more, you know,

1:28:32

I just think of the world of local newspapers that

1:28:34

used to exist, most of which has been completely wiped

1:28:36

out, going away, going to digital.

1:28:39

When you think about eBay replacing classified

1:28:41

ads along with Gregg'slist, well

1:28:43

you just took the heart of the financial

1:28:46

business model away from it. We

1:28:48

we could digress about this. I know

1:28:50

they're literally throwing us out of here in five minutes. Ken,

1:28:53

thank you so much for being so generous with your time,

1:28:55

Thanks for having me. And uh

1:28:58

for those of you who are listening, Um, we

1:29:01

have been speaking, still listening to us

1:29:03

after all this time, we have been speaking with Ken Fisher

1:29:05

of Fisher Investments. If you

1:29:08

enjoy this conversation, be sure and look up an

1:29:10

inch or down an inch on Apple iTunes

1:29:12

and you can see any of the other hundred

1:29:14

and forty three or so of

1:29:17

these conversations that that we have had.

1:29:19

I would be remiss if I did not thank

1:29:22

my head of research, Michael

1:29:24

bat Nick, for helping put together

1:29:26

some of the subjects and questions

1:29:28

we discussed today along with Taylor

1:29:30

Riggs, who is my producer

1:29:33

booker. UM, I'm Barry

1:29:35

Ridholtz. You're listening to Masters

1:29:38

in Business on Bloomberg Radio.

1:29:40

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