Practical Lessons from Larry Swedroe | Why Evidence Beats Market Narratives

[00:00:00] If you ask people who they think is the greatest investor of all time, most people think of Warren Buffett. And yet, if you ask them how they invest, they tend not only to ignore Buffett's advice, they tend to do exactly the opposite. Make sure everything you're doing is based on evidence, not Jim Cramer's or anybody else's opinions. And make sure that your portfolio is highly diversified.

[00:00:27] Don't judge the quality of your decision by the outcome. Judge it by the quality of your process. There are pretty much no good forecasters, especially when it comes to economics. You cannot make the argument that the value investing has become a craving. That's obviously wrong. Welcome to Two Quants and a Financial Planner, where we bridge the worlds of investing and financial planning to help investors achieve their long-term goals.

[00:00:52] Join Matt Zeigler, Jack Forehand and me, Justin Carbonneau, as we cover a wide range of investing and planning topics that impact all of us and discuss how we can apply them in the real world to achieve the best outcomes in our financial life. Jack Forehand is a principal at Validia Capital Management. Matt Zeigler is managing director at Sunpoint Investments. The opinions expressed in this podcast do not necessarily reflect the opinions of Validia Capital or Sunpoint Investments. No information on this podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of clients of Validia Capital or Sunpoint Investments.

[00:01:20] So Matt, with all the speculation in the market recently, I think it's time to start talking about evidence. Let's bring up the evidence. Let's get all the way into the facts and the nuance and the data mining of it all. I can't wait. And there's no one better to talk about if you want to use clips about evidence than Larry Swedero. I can pretty much guarantee you he is not in the two-times micro-strategy ETF. He does not have any fart coin in his portfolio. He is probably staying away from all the things that people seem to be getting into today.

[00:01:48] You know, part of me really wants, like, can't Larry Swedero have his own meme coin just for fun? Can we have, like, the Swedero coin? I was thinking more like Speddy, like the SNL bit, like the Speddy coin. Like, we need something for the guy. Let him play a little bit. So against everything he believes in that, I don't think that would be possible, but it would be interesting if it ever came out. Well, you know, I'll still try to pitch him on it. Next chance I get, I'm looking for that sweaty token.

[00:02:17] But we've had Larry on four times now. We did two regular episodes and two Show Us Your Portfolio episodes, and there's been so much good stuff in there. I had a hard time. I mean, we came up with nine clips here, and I had a hard time coming, getting it down to nine. But today we're going to learn, talk about the biggest things we've learned from Larry. We've got a bunch of clips from Larry we're going to look at along the way. And for the first clip, I thought the best thing to start with is probably what we just said, which is everything Larry does is about evidence.

[00:02:41] And when we asked him the first time he was on, which I don't know when that was, maybe 2021, probably, or so, we asked him what is the one lesson he would teach the average investor, and he started with evidence. I think I'd go back to my core principles. Make sure everything you're doing is based on evidence, not Jim Cramer's or anybody else's opinions. And make sure that your portfolio is highly diversified.

[00:03:08] You're not taking more risks than you have the ability, willingness, and need to take. To remember that all risk assets go through long periods of poor performance. So that's the reason why we diversify and never engage in resulting. Don't judge the quality of your decision by the outcome. Judge it by the quality of your process. And if your process is good, it's likely you just had a period of bad luck and you need to stick with your process.

[00:03:38] Yeah. So this is I think this is getting lost a little bit in the market. You know, I guess it does at times. That's just part of what happens. It got lost in the late 90s, but like you want to have some and it doesn't mean quantitative evidence necessarily all the time. Although for me and for Larry, that's probably what we do. Like there's got to be some basis for what you're doing, some sort of evidence that would say this might work. And I feel like there's a lot of things going on in the market right now where there is not that evidence to say this might work. It's funny, too.

[00:04:04] And not just because based on evidence, not just not Jim Cramer, which I think is hysterical. Yeah. But and and I don't know, maybe this is just a side comment to this, too. But I feel like coming into this year, I think I got more spam emails to sign up for bogus newsletters and other sketchy investment services than I've ever gotten. And it seems like they all started a couple of weeks ago coming into the new year, like the holiday season where they were like, sign up for our 10 free stock alerts and all this stuff.

[00:04:34] And I've just been like deleting them and unsubscribing and junk mailing auto sending them left and right. But it's yeah, it's and he says this in a couple of spots here, but it's more about narrative than it is about evidence. But does anybody care about any evidence anymore? Do we all just want the next variation of Jim Cramer for everything in our lives? Yeah. And, you know, maybe you do. I mean, if you're a Bitcoin person, you can have evidence to believe that Bitcoin is a long term investment. Like it's not going to be quantitative evidence or I mean, from the world I come from.

[00:05:04] But some of those people do have evidence to believe what they do. It's when you get into the peripheral stuff that it becomes like any of these leveraged ETFs, you know, holding them for any long period of time. There's no evidence to suggest that's going to work. That always blows up eventually. So, yeah, I just feel like we've gotten away from it. But it's a great lesson from Larry. And in this clip he had and sometimes when we ask this closing question, people, you know, don't have just one lesson. Sometimes they throw a few other ones in there just for for good measure. And he did as well. And and I like this idea of don't take risks.

[00:05:32] You don't need to because that's like that's something that happens with a lot of people. You probably see in the financial planning world, like people who are exceptionally rich, who have everything they're ever going to need. Like why? Why are they speculating on all this stuff? There's just no need for it. There's the entertainment value of it. And I'll I'll support that when when you know it's entertainment value. But it's also.

[00:05:52] It's this idea of just the process you got to enjoy and appreciate and understand the process that you're taking, which is to say, if you've already got a bunch of money and you want to go speculate in crypto. Understand you're going to speculate in crypto. Understanding that the purpose of this is to take a flyer to instead of scratchy lottoes, I'm going to go buy this coin or whatever it is.

[00:06:13] It's OK to do if you approach it from the this is a risk I don't need to take, but I'm choosing to take for some slim marginal or outcome where I admit I have no process on the way in. And that's really hard to do. And I think a big part of this evidence point is just is there something tied to this process that I feel like is authentic to or align with my approach where I can be wrong and still look at it and say I did that for the right reasons.

[00:06:41] Yeah, the last thing you said before we get to the next clip is this idea of never to never use resulting. And I think that's a really important thing, because it like, for instance, if you think about what Michael Saylor is doing right now, first of all, we all have to give him credit. It's worked out exceptionally well for him. But where the resulting comes in is where someone like me looks at that and says, well, now I can draw conclusions about the future based on that result that this is something I should do in the future.

[00:07:04] And that's the key is like you want to have a process that you think is going to work and you don't want to just judge the use the results to determine, like, what can I learn from this thing? It's kind of like when you're cooking and you put too much salt in, you can't you can't really pull it out. You can try to dilute. You can try to do certain things, but resulting is like re-salting. Like it's just once it's there, it's a problem. And back to the Michael Saylor thing, you got to look at that.

[00:07:31] You got to think of your own process or how you feel about this guy on TV talking the stuff up and just go, would I make that decision? And would I feel good about making that same decision? Now, you'd feel really good with the results. Everybody wants the extra magical commas in their bank account. But at the same time, if you can't fully get behind that type of decision or that kind of behavior, it's OK to pass on it. It's just OK to pass on certain things. So this next clip gets into evidence based investing as well.

[00:07:56] And I actually didn't know this, but I guess Larry Swedger at one point was in his career with somebody who did issue economic forecasts. He mentions this in the clip, but here's him talking about what he learned from that. I was trained as an economist and I spent a large part of my career before joining Buckingham selling economic forecasts and market forecasts on interest rates, exchange rates to some of the largest companies in the world.

[00:08:21] And what I've learned was this, when I got a forecast right, I would take credit, of course, for my brilliant analysis. And when I got it wrong, I would always point out to some totally unforecastable, surprising event that occurred and blame it on that. Well, if you do that, you're always a genius or just unlucky, right?

[00:08:45] Well, the fact of the matter is, if you dig into the research, Philip Tetlock did groundbreaking work on this. There are pretty much no good forecasters, especially when it comes to economics. And so that's one of the things that here's I wrote a book called Think, Act and Invest Like Warren Buffett, Playing the Winner's Game. I pointed out a great irony.

[00:09:10] That is, if you ask people who they think is the greatest investor of all time, most people think of Warren Buffett. And yet, if you ask them how they invest, they tend not only to ignore Buffett's advice, they tend to do exactly the opposite. So he tells people, for example, never try to time the market. But if you can't resist, buy when everyone else is panicking and sell when everyone else is greedy.

[00:09:38] Yet many people are trying to jump in and out, time the market. You know, I heard Buffett quoted as he was asked about economic forecasts. And he said, you know, I haven't even read or listened to an economic or market forecast 25 years. So if he's that smart, why shouldn't you listen to him? So that's one thing investors should be aware of. The second thing I try to teach people is this.

[00:10:05] They need to learn the difference between information and value-relevant information. So, for example, if, let's say, you're a college basketball fan and North Carolina, our perennial contender for the national championship, is playing Southeast Dakota State. Well, you know with almost a virtual concern they could play 100 times and North Carolina will win.

[00:10:34] Does that do you any good, Justin, in terms of betting? You want to bet on North Carolina to win? I mean, I would think it would do you some good, but probably not. It can't do you any good because you're not the only one who knows it. Now, if you want to bet on North Carolina to win, you know, you can go look in the newspaper or online and you'll see North Carolina's favored by 32 points, which is an unbiased estimator of the actual outcome.

[00:11:03] In fact, there was a study done on the NBA, six seasons of results, and the actual average spread versus what the betting was, was less than a quarter of a point. Now, of course, sometimes the spread is 10 and they win by two or win by 20. But if you average them, their point spread is that true unbiased estimator.

[00:11:28] And the way to think of that is stock PEs are unbiased estimators of the right price for that stock. So, for example, everybody knows, for example, let's say that Microsoft is a better company than Ford Motor. But that doesn't do you any good in getting risk-adjusted outperformance because everybody knows it.

[00:11:51] And Microsoft, I'm just making this up, is trading at a 30 PE and Ford is trading maybe at a 7. And that equalizes, that difference in PE ratios equalizes your odds of outperforming on a risk-adjusted basis. The only way you can benefit from information, well, actually, there are two ways. One, nobody else knows it. And Martha Stewart found out what happens when you trade on that type of information.

[00:12:21] Or two, you somehow can interpret it better than everyone else. Yeah, so I think this idea of what's priced in is such an important idea because everybody wants to say, all right, I can make this, you know, we just did our forecast episode, which is basically a fake forecast episode last week, where we talk about what we think is going to happen in the year, understanding that we're going to be completely wrong. But the idea is I don't have to just know what I think is going to happen next year.

[00:12:45] I have to know what's priced in because the way I'm going to make money is differing from what's priced in. And that's the real challenge of any kind of forecast, whether it's economic forecasting or forecasting, what's going to happen with a stock or the market. That's the challenge is there's a lot of smart people that are determining what's priced in and being different from that and being correct is hard. I like to remind people a lot, especially this time of year, especially as all the Goldman and BlackRock and Vanguard

[00:13:13] and everybody in the world comes out with their capital market assumptions and their forecast for the year ahead and all their S&P price target projections like we did in our prediction episode. Everybody comes out with that stuff. And it's not so much that you're looking at what's this telling me about what the future is going to hold because we know they're wrong. What we're looking for, where's the consensus in those things? What are the things that everybody knows that everybody else knows? They're going to tell you this is what the flavor of vanilla ice cream is.

[00:13:42] It's not there to try to discover Rocky Road or some exotic new Ben and Jerry's flavor. It's actually just there to set that standard of here's vanilla ice cream for the year ahead. Here's what everybody thinks is going to happen. And then you can start to introduce the knowledge if you want to try to have any type of shot at an edge whatsoever of what other information isn't known by everybody else that I want to stack into my tilts or whatever I'm going to do. And that's just stepping back to realize that and to realize how hard it is.

[00:14:11] I really want the Larry Suedro book, How to Always Be a Genius, where he just goes full snark through this whole thing. It's another one I'm never going to get, like his coin. But yeah, you got to understand that those expectations of what everybody knows and what everybody knows that everybody else knows are hugely, hugely important when you look at forecasts. As you mentioned, the extreme of this is the annual S&P price target, where it's like, I know I'm going to predict exactly where the S&P is going to be. And obviously your 7,000 price target for this year, which was based on some sort of pop culture or something.

[00:14:41] I forget what it was based on, but I'm sure that's going to end up being correct. But like we have to think about that, like thinking about all the stuff that's priced in and all the things that could happen, like to try to tell me where the S&P 500 is going to be at the end of the year is quite a challenge. Not just quite a challenge, damn near impossible. And if you get it right, you're lucky. And it goes back to that first idea about would you do it? Was there actually a process there? Did you feel good about that process?

[00:15:05] When I say I think the S&P is going to 7,000 on my lucky sevens Atlantic City theory, what I'm really saying is I don't know, you don't know, and I'm okay with making a projection based on why I don't know. Because I'm comfortable being wrong about last year's projection of 5150 on the S&P based on Eddie Van Halen's AMP and the way I was feeling on the day I made that forecast.

[00:15:30] Deliberately putting the process together by something I can laugh at helps me cope with my ability to inevitably be wrong 12 months forward. This next one plays into what we've been seeing in the market in recent years. And Larry's 100% right about this, but we've been seeing some like deviation from this in recent years. So I think this is a really interesting one. So here's Larry talking about the persistence of abnormal earnings growth.

[00:15:53] The reason by far that growth stocks tend to underperform in the long term is that investors persistently, including analysts, overestimate the ability for abnormal earnings growth to persist. That's this Airbnb argument, if you will, that Damodaran has made. So let's say that typically earnings are growing at 6% a year.

[00:16:22] Okay, so 3% real, 3% inflation. And you're growing at 26%. So you're growing 20% faster. Farnham and French wrote a paper long ago, I think about 20 years ago or so, maybe even 98, so 26 years ago now,

[00:16:42] which found that abnormal earnings growth, both positive and negative tend to revert to the mean at a rate of about 40% per annum. And that's very logical because you have the abnormal earnings growth. What does that do? It attracts competition. If you have negative abnormal earnings growth, what happens? Companies exit the industry. Capacity gets shut down.

[00:17:11] And the negative side tends to revert even faster than the positive reverts down. So they look at the estimates from analysts, the IDES kind of data, and they find that the analysts persistently overestimate this growth rate. In fact, they're underestimating the reversion to the mean.

[00:17:39] And that is ultimately what causes P-E ratios to come down. And that's why growth underperforms. Investors are overconfident about the ability of companies to either grow persistently or to forget that the economy causes contraction in industry, so supply shrinks. Just think about any mining stuff.

[00:18:05] What happens if some mineral is in short supply? Well, it takes a long time to open a mine, get regulatory approval. It may take five or 10 years before you get the ore out of the ground. But then all of a sudden, prices go up and up. And then all of a sudden, the supply comes on board, and the prices go crashing down because you've got new supply. So the earnings revert to the mean. Yeah, he's completely right about this.

[00:18:35] I mean, this is a mean reverting series. And he mentioned it in both directions, too. Like, a lot of times, the below average earnings growth companies tend to come up, and the above average earnings growth companies tend to come down. So he's completely right about this. And this is why, as he mentioned, this is why growth investing is so difficult. Because you assume, oh, I see this company growing at 60% a year. I assume they're going to keep growing at 60% a year. But the odds are, from history, they're not.

[00:19:00] This idea that we chase these things and we chase things from behind, and then sometimes after we chase from behind, we get all the way ahead of them. It's an ongoing problem everywhere. And he tackles this in some of the other clips, too, where we might just be getting, for narrative purposes, further and further ahead on the growth stocks of assuming the abnormal earnings growth is going to continue.

[00:19:23] But likewise, we might be getting out of hand on the other side, too, assuming stuff is really, really bad, when maybe it's not really all that bad. And some of that stuff is going to start converging. You have to approach it from both angles. I kind of see this. I'm curious if you do, too, as complementary to even just value versus momentum investing. This is just we're behaviorally flawed as humans. We have to assume this exists anywhere and everywhere all at once. Yeah, and recognizing that is the key.

[00:19:49] And the other interesting point with this is we've kind of seen a violation of this in recent years. Now, the earnings growth of the Mag 7 has reverted down. It's not what it once was, but not nearly at the rate you would expect based on what you see in history. These companies, at the size they are, are growing at rates you have not seen from other companies. And so that's what makes this challenging. Larry's right about the principle. But if you had known that the Mag 7 were going to grow in ways that other big companies had not, you would have made a lot of money because you effectively would have invested in them.

[00:20:18] So it's what's challenging about this is there's always these hard and fast rules, but there also can be exceptions to these rules. And when you see those exceptions, you have to decide, like, can this continue? Like, and that's where we are right now. Can this earnings growth of the Mag 7 continue to defy expectations of the future or not? And how you feel about them as a function of your decision on that. Yeah. Yeah. And it's hard to find a basis for comparison, I think, too. Like, it's hard to say we haven't really had, we've had things that rhyme with these companies, but you haven't had these companies before.

[00:20:47] And that's part of what makes it so hard. Part of what makes it so tempting to project stuff into the future because you're going, oh, there never was an NVIDIA or an Apple or whoever you want to pick. But likewise, there's just the reality that trees can't grow to the sky. And you have to remind yourself of that all the time, too. And it's an argument for indexing in some ways. And the next clip kind of gets into that, too, because one of the things Larry's talked about a lot, and this is his second time we asked him, what's the one lesson you teach the average investor?

[00:21:13] But this time it was in the context of what's the one lesson he's learned from his own portfolio that would teach the average investor. So here's Larry talking about long periods of underperformance and the importance of sticking through them. Any good financial economist knows that all risk assets, any strategy involving investing in a risky asset will go through very long periods of poor performance.

[00:21:35] For example, there are three periods of at least 13 years with the S&P 500 underperformed totally riskless Treasury bill. From 29 to 43, that's 15 years. 66 to 82, 17 years. And 2000 to 12, that's 13 years. That's almost half of the last 93 years of data that we have. And yet, if you held on, you got 10% a year.

[00:22:04] But if you panicked and sold, you did. And that's a problem. Now, maybe people hold on when they think about stocks, but we know many people panic and sell. But if you don't panic and sell during that period because you're smarter than that, built a plant to withstand it, why do you panic and sell when value does underperform for four years? Or reinsurance has three bad years from 17 to 20.

[00:22:33] Or AQR style premium had a horrible period for three years or so because we had a five standard deviation event where value had a bigger, you know, growth had a bigger bubble than it did in the 90s. People panic and sell because they think three years is a long time when it comes to judging performance. Five years is a very long time and 10 years in eternity.

[00:23:01] That literally is nonsense. And what that tells you is, since any risk asset can and will go through long periods of underperformance, here's one other. Gold from 1980 to 2002, this supposed inflation edge, underperformed inflation by 86% over 23 years. Every risk asset you can think of goes through such periods.

[00:23:31] So what should you do about that? There's only one logical thing you should do. Since you can't predict which will do well when, all the evidence says active management fails at doing that. You want to diversify, of course, as many unique sources of risk. As you can identify, that meet the criteria Andy Bergen and I put in our book, Your Complete Guide to Factor-Based Investing, meaning that it has a premium.

[00:24:00] It's persistent across economic regimes long periods of time. It's pervasive around the globe across asset classes. It's robust to various definitions. So value works, whether you use PE or EBITDA or cash flow. Momentum works, whatever the formation and holding periods are. It's implementable, meaning it survives transactions costs. And there are logical risks or behavioral reasons why you think the premium should persist.

[00:24:30] If it meets those criteria, then you should diversify across them. So you don't run the risk of all your eggs being in, say, a beta basket. And here's the final example to make that point. 40 years, 69 through 80, both large cap and small cap growth stocks underperform the 20-year treasury bond,

[00:24:55] which is the totally riskless asset for a long-term pension plan with nominal liabilities. That's 40 years where growth stocks outperform and you abandon it, and then you miss out on the great returns you got after. So why would you abandon value when it underperformed for four years or reinsurance when three or a long-short value, you know, long-short factor strategy underperform? So that's why we diversify, rebalance, and stay the course.

[00:25:25] Yeah, this is the key, I think, of everything I think we talk about in the podcast. Probably the most important thing for investors to understand, because as soon as you become different from whatever it is you're judging yourself against, as soon as you become different from that, different is going to be good and different is going to be bad. And when different's bad, if you can't stick with it, then you should go back to the thing you're comparing yourself to in the first place, which in the case of most people is the S&P 500, and just be in that.

[00:25:50] If you can endure, and Larry gets into the details here, but these periods were of bad, depending on what it is you're doing, and if what it is you're doing is value investing, they can be atrocious, as we know right now. They can be really, really long, they can be really, really painful, and most people can't stick through them. This idea of extra, I know they did the complete guide to factor investing, but extra hitchhiker's guide to the galaxy, you know, don't panic. That's the whole message.

[00:26:16] Just don't panic, have a process you can stick to, or you don't panic. When he lays down this idea of all the years and the long stretches where the S&P 500 underperforms treasuries, and how it's almost half of the deficit, or like you're living in it, that is a brutal stat. That is the type of brutal stat that only makes you ask, what is the process I'm doing through that period, and do I believe that it is good, sound, or valid?

[00:26:44] Even when it's going against me, does it still feel like a decision I think is worthwhile in making? Having that don't panic idea tattooed on the inside of your eyelids, so you can just stick to what you're doing, that's the only chance you have of surviving. Everything else is just you betting against yourself. It's so hard, so true. And that long period of underperformance thing is really interesting, because you'll see all kinds of different people give different stats on that, depending on how you look at it.

[00:27:11] So it's true that there's never been a negative 20-year period for the S&P 500, but there have been 20-year periods where it didn't exceed inflation. There have been 20-year periods where it didn't exceed T-bills. So depending on the type of return you're looking at, it's a very different thing, and sometimes when you look at those stats, they can be a little bit deceptive, and a lot of times the people who are trying to tell you something like, you know, there's never been a 20-year period in the S&P 500 are doing it to prove a point, but you have to see the other side of the point as well.

[00:27:38] I think about this a lot in the financial planning conversations we have, especially when we run projections. And a lot of times you're just thinking on a rebalancing perspective, or if you're drawing funds out for, you know, gifts, consumption, retirement, whatever it might be, you're looking for those. There's not a lot of three- or five-year windows where the market return is fully negative, but you get spikes and you get drops inside of those periods.

[00:28:04] And one of the hard parts is you really have to understand this over the 20- or 30- or 40-year long time horizon, and then over the micro, you know, six-month, one-year, two-year time horizons, to be able to go, when I get these pops and drops along the way, I need a method, especially when I'm extracting money from a portfolio, to say, I might have that 20-year period, but that 20-year period is full of these weird pops and drops.

[00:28:30] And I have to have a plan for how I'm going to rebalance or take advantage of these things to get the money that I need out of it, because, back to that point, all these 12-year periods where the S&P underperforms or lags the treasuries or barely gets above the inflation rate, what's that do when you actually need a portfolio to pay money out to you? It's a really tricky and thorny problem. And it's really important to look at the data and be honest about how savage the data is.

[00:29:00] We won't now do Japan here, but this would always be the point where somebody would insert now do Japan when I say there's never been a 20-year period where the S&P has lost money. So, I mean, I don't think the U.S. would ever be Japan, but that is something to keep in mind. And the only other thing I want to say about this is, and you and I were joking beforehand, like, I don't think I can come up with all of them, but the P's and the whatever they are, the five P's and pervasive, persistent, robust, intuitive, and there's one I'm missing, which you're probably not going to come up with off the top of my head either. Nope, nope, not going to happen. I'm impressed I got four.

[00:29:30] But those are really good when you're evaluating anything. When you're evaluating anything you want to invest in, like trying to look at those things and say, does it meet these tests? And, you know, the intuitive thing has come a little bit into question in recent years because people think maybe we don't need an explanation as to why things are working. But still, the other ones in that one probably as well, like that's a great framework to use. And I highly recommend that book, The Complete Guide to Factor Investing. 100%. That if you are an allocator of any way, shape, or form of portfolio manager, that's the kind of book you have on the shelf.

[00:29:59] Not just because you can't remember the five P's, but also because it's just a great reference guide to recenter around whatever big thorny complex problem you're thinking through. This next one is, it was recorded a while ago. So this is not necessarily his current view on the market, although I think it probably is still because nothing's really changed with respect to this. But I thought this was really important because all of us talk about the market. And there's a lot of things that go on behind the scenes of the market. The market is not one thing. So here's Larry talking about bifurcation.

[00:30:27] Equity valuations are kind of bifurcated. And by that, I mean, if you look at the big market cap indices, which the cost of market cap weighted and dominated by a few stocks, the top 10 in the S&P today account for 35%. That might be a record high. And so their valuations look high.

[00:30:54] Their market P.E. is something in the low 20s maybe today versus lower historical number. But if you look at the rest of the market, international stocks are trading more at the 12 and 11 for emerging markets and developed. And small value stocks around the globe, at least for the funds of families that get deep factor exposure like Avantis does,

[00:31:22] you're talking in the 7s and 8s, which is like a depression scenario. So those 7 and 8s are predicting much higher expected returns, reflecting what the market perceives as the risk in those areas. So you can't broadly make statements about equity valuations. You have to look at the various segments and see what your portfolio is exposed to

[00:31:51] when you forecast returns. Yeah, I just think this is important to keep in mind because everybody will say, the S&P 500 is expensive or the market is expensive. But when you look at different things, different things are different levels of expensive. Right now, obviously, your average stock is significantly cheaper than the S&P 500. And then a value universe is significantly cheaper relative to history than that. International stocks are really cheap relative to history. So I'm not saying that's going to revert or that's going to change,

[00:32:19] but it's important when you say the market is expensive to understand there's a lot of other things going on behind the scenes and the market is not one thing. I think it's always useful, especially in anything that's market cap weighted, where you're looking at the relative total size of the free float adjusted market capitalization of securities or whatever it is. Just check in with a couple of different things. Even if you just look at here's S&P 500, but without the top 10 holdings,

[00:32:48] what's the, if it's the PE multiple, what's the PE multiple look like then? What's price to book or enterprise value to EBIT look like then? Take these things, tease them out. Look at where international is. Look at where small cap is. Look at where, just look at other ways to slice stuff up. Pick only securities that start with the level C, letter C. See how they're doing. Try all sorts of crazy things. I'm surprised I'm not an ETF with that yet, like just with each letter or something, given everything that's come out.

[00:33:16] I'm pretty sure that was like a Jim O'Shaughnessy thing from years ago, where he was like, you can, you could outperform like one of his silly factor recommendations. And it was like, if I only bought securities, let's start with the letter C. Look how much I have for my... I should take them on like every letter historically and see which one works best. And then I'll just launch that ETF. That would be an idea we're selling. Just in question to think about what, what letter would outperform the other letters. I mean, obviously it wouldn't persist in the future, but I don't even know. Yeah. Or is it going to be some...

[00:33:43] Like with Z, I'd have a more concentrated portfolio rather than the other ones. So maybe that works to my advantage. I don't know. I was going to say, what if it's some weird thing where you get, yeah, a letter that has like two holdings or something like a Z or whatever. But just this idea of like bifurcated, yes, but also just slice it up in different ways to get the understanding of what you want to do. I think about this a lot too when, like when people are shopping for cars or real estate

[00:34:08] or whatever, nobody ever goes to shop for a car and thinks like, well, clearly the only car available is like this top level, whatever the Chinese car we were joking about. Whatever this like top level, like Range Rover is or something. You look at a spectrum, like you probably don't, you know, you or I aren't going to go buy like a 16 year old or something like the most expensive car in the market. You're going to think about what other options are there and what criteria do I care about? How safe do I need this car? How fast do I want this car to go?

[00:34:36] How much do I care if there's hand stitching on like the, you know, the seat rests, the seat covers or something. There's all these other factors that go into play and you can separate them by size, by style, by location. And just slice it up a little bit differently. Don't, and be careful about people who just paint, paint stuff with statements like the market is expensive. Okay. What part of the market is expensive? That's a misleading statement. That car thing is funny because I was just having a conversation with my 10 year old daughter

[00:35:04] the other day and she, she was like, daddy, I'm going to get a new Tesla when I'm 16. And I'm like, there is no chance whatsoever. You're going to get a new Tesla when you're 16, but you can't do. So like when I first got my first car, it was a Volkswagen Rabbit, a stick shift Volkswagen Rabbit. And it was a piece of garbage. Love those cars. Those cars are great. You could barely get the thing to school when I was driving it. But so like that, that's my general view on like what kids should get for their first car because I think you learn a lot from that. But we unfortunately live in a world where a lot of safety things come out. And so you can't necessarily, like you can't just give your kid the worst car of

[00:35:34] all time because they're not safe. So you have to find like this. Not anymore. Not, yeah. It's like not giving them a new car, but you also want to give them like one, it's bad, but not, but it has the safety features. So I don't know how I'll figure that out, but I think that's the balance. I'm gonna have to try to figure out how to strike. My buddy, shout out to my buddy, Mike, my buddy, Kriv. He had, he had a rabbit and that was like the car that as terrifying as it was to drive around in that car. The glory of that car was you could basically fix anything in that car with anything else

[00:36:02] that was modestly acceptable as, you know, not entirely flammable. I think that was the first car where I saw you could replace a belt with a pair of pantyhose from a gas station to like keep it running. Shout out those first cars. That's a good one. Open the hood and try to fix anything. Like, good luck. It's a computer. Right. Good luck. Jumpstart the car. Where the hell's the battery? Like, it's like, it's, this stuff is like, it's like buried under these poles that you have to like uncover. It's like, yeah, they've, they've made it. So you're, you're certainly not fixing anything these days, but we digress as we usually do.

[00:36:32] So Tesla appreciates you in six years making that purchase. So congratulations. So, so this next tip I think is really interesting because obviously the Holy Grail and like Ray Dalio has talked about this. The Holy Grail is like owning a bunch of these uncorrelated return streams. All of us tend to invest, you know, mostly we're benefiting from market beta and we benefit from the market going up. But here's Larry talking about the benefits of owning other premiums. If you think about the one way to invest would be to own the total stock market.

[00:37:01] That's certainly the cheapest and the most tax efficient, but that loads a portfolio up with one single risk called market beta. Now we know there are other factors in the literature that have significant premiums and they're either low correlation or negative correlation with market beta. And therefore, if you believe that all risk assets like value as a factor in size and profitability, quality, momentum, they should have the same risk adjusted returns as market beta, right?

[00:37:31] And why do I want to own only market beta and have big tail risk? Because market beta can get crushed and it can happen to get crushed at the same time as your state bonds are getting crushed as what happened in 2022. The other thing is any risk asset, any risk asset, including market beta, can have very long periods of underperformance, which can be really damaging in creating tail risk and sequence risk, especially for retirees.

[00:38:00] So people look, for example, at value, which had a dark winter, I call it, from October, sorry, November of 2016 through October 2020. That was only about four years. All right. But it really underperformed the market. It didn't do poorly. Value stocks did OK. They just dramatically underperformed growth stocks. But so a lot of people panic and sell, right? Three years, they think is a long time.

[00:38:26] Well, if you go back to 1929, market beta was negative. So meaning stocks underperformed T-bills for 15 years, from 29 to 43. It underperformed for 17 years, from 66 to 82. And it underperformed for 13 years, from 2000 to 12. That's a reason to diversify, not avoid a risk asset. I'm not telling anyone to avoid market beta. There's a logical risk premium.

[00:38:54] That's persistent, pervasive, robust, implementable. But it's a reason to diversify so you don't happen to have all your eggs in one risk basket at the wrong time, which is at the start of a retirement. Yeah, this is interesting because these things are a lot of the premiums he's talking about are becoming more available now. I mean, obviously, the market, you know, the equity risk premium is the biggest premium probably you're going to get access to. And it's probably going to help you the most in terms of achieving your long term returns. But by the same token, he referenced sequence risk in there.

[00:39:24] And, you know, there's big periods of time where that doesn't work. And so the question is, can I own some of these other premiums, long, short factors or whatever other premiums I can come up with? Can I, you know, supplement that in my portfolio? And also, are those types of things becoming more available to your average person? I mean, obviously, 10 years ago, your average person is not going to be thinking about, you know, the long, short factor premiums or something like that. But that type of stuff is becoming more available. So it's interesting to think about, like, are there other premiums investors should be investing in besides just market beta?

[00:39:53] And how much they spill over into each other. I know he makes the point of just, you know, you own the total stock market. You still own that market beta. And that market beta spills over into everything else. Like, I can own stocks and bonds and some weird alternative strategies and reinsurance or whatever else. But there's still the reality that, like, that equity market risk kind of creeps into everything else. Creeps into the availability credit. Creeps into where interest rates are. Creeps into the stuff. You're never going to be removed from the financial system.

[00:40:22] So then what you can start to do is start to think about what other betas, what other things can I have exposure to in different ways so that I'm just spreading out some of those gross levels of risk. Understanding they're going to converge from time to time. They're going to get correlated. But if I can reduce that even just a little bit, even spread it out just a tiny bit, that might be the thing that gets you through a really hard period of markets when you need money to fund some goals and objectives or, you know, buy expensive cars for your teenagers. Which hopefully I won't be doing.

[00:40:52] But this next one. So sometimes we ask questions in the podcast where we know the answer, but we ask it anyway because we think the lesson is really important. And this is an example of that. So the question we had asked Larry here is, should investors be updating their portfolios or making changes to their portfolios due to high levels of inflation? And obviously, I know the answer Larry Swedra is going to give to that question. But like the way he answered it and then this idea of taking into account your unique risks I thought was really interesting. So here's the clip. Yeah.

[00:41:17] First of all, when you develop a plan, as I said earlier, you need to take into account your unique risk. What risks are you more exposed to than the average person? And then shift your policies to address that. So like I said, if you're an older investor and might avoid longer term fixed rate, you know, nominal bonds and own more things like tips or shorter term credits.

[00:41:44] If I'm a younger investor and I've got a good safe job, you know, well, I don't worry about getting unemployed. I can also own more equities, et cetera. And then you want to think about, you know, especially if you have economic cycle risk because you're a water worker or a construction worker, you might want to think about owning other assets that don't correspond with the economic cycle risk.

[00:42:10] There are a whole slew of assets that weren't available to the general public except through very expensive things like hedge funds or private equity, 2 in 20 fees, if not more than that, that have become available because of the invention, if you will, of the interval fund structure about five years ago.

[00:42:33] That allow people to invest in less liquid assets and earn a big illiquidity premium in uncorrelated assets in the same way that the Harvard's and Yale's and Stanford's have been doing for years. So what I do is I broaden my portfolio and think much more of the way Ray Dalio and Bridgewater think more of a risk parity type portfolio directionally.

[00:43:00] So I own things like reinsurance, life settlements, drug royalties, and none of them are costing me 2 in 20 anymore. They're not cheap, but they're giving you access to huge illiquidity premiums and unique risks that don't correlate.

[00:43:20] So this year, when nominal bonds got hit at the same time, stocks got crushed, literally every one of my alternatives, including 8QR style premium wood fund, which is a long short factor fund, is up. And some of them are up 20% or more. Now, prior years, they were down and the markets were up, but that's why you diversify. I don't think investors can benefit from shifting strategies.

[00:43:50] So my response is, you're going to sin, as Cliff Asna says, by changing your strategy. You should sin a little. This is so important because I'm a big believer in indexing and I'm a big believer in certain types of evidence-based investing. But what works for one person is not what works for another. I mean, all of us face different risks in our lives. All of us have different jobs. We have different family situations. There's no one size fits all answer to this.

[00:44:18] And I think this idea he was talking about, about understanding your unique risks and how, because he was talking about inflation. And some people are much more exposed to inflation in their lives than other people are. And maybe those people, maybe they don't have to change their portfolio because of inflation, but maybe they should always have something in their portfolio that protects them against inflation. So I thought that was really interesting. Understanding the things you're concerned about for your future and then building.

[00:44:44] It's not even, they're not fancy custom solutions, but just being aware of what they are. Working with a family who, the husband has a great pension benefit, but it's fixed rate with no inflation adjustment. So it's more than great today. We expect it to be less than great in the future and kind of suboptimal long, long term.

[00:45:06] But just knowing that, okay, if this thing doesn't have an inflation rate tied to it, what other things do we need to have in the plan that have an inflation rate tied to it? The importance of social security and that COLA becomes a totally different input in their equation for their very specific circumstance that has to be thought of. And it's something that they're very tied into too. They know they're like, we have this thing, but we're never going to get a raise on it. How do we make sure that this works?

[00:45:34] Because 30 years ago when they bought the house and they did the other stuff, they know what those differentials are too. So to think forward 30 years means they're going like, holy crap, how do we think about inflation? One of our biggest assets, one of our most reliable income streams, like is never going to get adjusted. What's that mean? These are abstract thoughts. They're very personal thoughts. And this is, I think, is one of the advantages of working with an individual who can help you sort of tease those apart and say, A, you're not crazy.

[00:46:02] B, inside of this kind of crazy little idea you have, I thought we make sure we don't sacrifice the rest of the plan for expressing enough of a view that we get, we get this fear addressed. That's what it is to be human. We all have little quirky things we're scared of like this. It's okay if they don't make sense, but there's ways to address them that don't involve expensive, crappy products.

[00:46:26] Yeah, and I think about Sin a little at the end I thought was really important because as much as he's going to say you shouldn't shift your strategy for inflation or for anything else, it's still like if you're a person who feels like I need to do it, if you can do it around the edges, if you can do it in little ways, and that's going to make you more comfortable with sticking with the entire plan, then it's not necessarily a bad thing. Even if in theory, you know, I should never make changes based on inflation. Like if you can do that and it makes you stick to what you're doing long term, it's probably a good thing.

[00:46:52] So if I'm a portfolio manager and I'm Satan, do I still sin a little? Is everything by nature sin? Do I have to save a little? Do I have to like, what's the inverse? Is it the corollary? If I'm inherently evil, do I still sin just a little? How's that work? Do you know? Well, I know you're going to turn this whole thing into philosophy and then you go to levels that you know I just can't go to. So you really need to ask yourself these questions. Okay.

[00:47:14] I'm going to ask myself those questions and given that I'm less than a few days off of getting over the flu, I'm going to leave the Satanist portfolio manager up to fever dreams where it belongs. So the second to last one here, Larry has a significant portion of his portfolio in illiquid assets, more than probably anybody else does. And he's utilized interval funds to do that. But we asked him in general, in this clip, he's talking about illiquid assets and he's talking about risk adjusted returns of assets and why he does what he does.

[00:47:42] I have what are basic called first principles, the things that matter most when you think about building portfolios. And they follow some pretty simple logic. And this is the way I think all investors should think. First of all, all of your principles should be based upon academic evidence-based peer-reviewed research. And the first thing we know is that while the markets are not perfectly efficient, there are lots of anomalies that go unexplained.

[00:48:09] Investors are best served by acting as if the market is highly efficient using systematic, transparent, replica strategies like index funds. But index funds have some negatives which can either be minimized or eliminated through intelligent design. So I use all strategies that are systematic, transparent, or replica. I don't own a single index fund. So my starting point is you should be systematic, transparent, and replica.

[00:48:37] Some people use the word passive to represent. I don't think that's descriptive enough. So I use those three words. If you believe markets are highly efficient, then it must follow that all risk assets have very similar risk-adjusted returns. Not similar returns. Riskier assets should have higher expected returns to compensate for that risk. And risk is not just volatility. It has to consider other things like how fat are the tails?

[00:49:06] What's the skewness and kurtosis using the technical terms? And in addition, you want to also look at things like liquidity. Neither of those things are captured in things like Sharpe ratios. So people who need liquidity have to give up and can't earn an illiquidity premium. But for someone like the Yale Endowment, which spends, say, 5% or 6% of their endowment every year,

[00:49:32] they can load up on illiquidity premium is as close to a free lunch as you can get. I'll take the opportunity to point out that I've asked our over 100 advisors. We manage $26 billion ourselves. And collectively, all the firms in the BAM community, there are over 1,000 advisors. I've asked them all. I've never heard one yet say. It doesn't mean it doesn't exist.

[00:49:58] I've never heard one of our clients say they're taking more than their R&Ds from their IRAs, which means even at age 90, you're not taking 10%. So most people vastly underinvest in illiquid assets because they're missing the opportunity for whatever the reason. They think they need liquidity when the reality is they don't, at least for a significant portion of their portfolio. So if you believe that all risk assets have similar risk adjusted returns,

[00:50:28] why would you concentrate your portfolio in any one factor or unique source of risk? And the typical 60-40 stock and bond portfolio has 85%, 90% of the risk in market beta when we know there are lots of other sources of risk. So the Harvids and Yales of the world have been addressing this for decades by building more of what are called risk parity type portfolios.

[00:50:55] And while even our clients only typically hold 10% to 15% in alternatives, the Harvids and Yales own 50%, 60%, and most individuals own close to zero. I think the numbers should be much closer to that of the Harvids and Yales, especially those clients who actually don't need a lot of liquidity. My own portfolio, I've been moving over the years up and up. I'm in the mid-40s now and probably moving a bit higher.

[00:51:23] And I've moved higher as private vehicles, which are less liquid, have become available and are much cheaper, if not cheap still, but they're much cheaper than the 2 in 20 fees that typically prevailed up until a few years ago. And so assets that I would have liked to invest in, but the management firms were capturing all the value. And so I didn't, unless you were Yale and Harvard and could negotiate much lower fees. But today that world has changed.

[00:51:53] And the fees, while not low compared to index funds or other systematic strategies, are now much lower, allowing you to capture a significant portion of that excess return. Yeah. So I like this idea. He talked about this idea that all assets should have similar risk-adjusted returns, not necessarily similar returns, but similar risk-adjusted returns. And although that may not be 100% correct in the real world, I think it's a good framework to use to think about that because it gets at the idea of the trade-off between risk and return

[00:52:21] and what you're doing in a portfolio. This idea of the risk, it's kind of like the taxes thing, where no matter where you are, you pay taxes, but those taxes are commensurate with the thing that you get from that area. You can kind of normalize it. Everywhere you go, you still have to eat some food and walk your dog and do your regular life stuff. It's just a matter of how much are you willing to pay for that priority in different places, different parts of the country or in the world. So like with the liquid assets, same thing.

[00:52:51] I might get great returns for owning my own business, but I might not be able to sell that business at the drop of a hat to just anybody on the street. And with that might come the very, very cyclical ups and downs of owning and operating a private asset business that's illiquid on the other way around. That risk-adjusted piece, I think also helps you explain in your rebalancing how and why you take away from one thing and add to another in those different environments. If I'm going to have something that's highly, highly illiquid

[00:53:20] and therefore high risk with hopefully a good return, but that risk adjustment really would neutralize it, then I know, great, when I'm taking some money away from this thing or I'm taking my salary or my profit distributions out of it, I want to go to something that has a different risk profile tied to it where I can still get either similar returns or get a more appropriate level of comfortable savings. Thinking about how this all stacks together, I think is really, really useful. And I really envy the way that Larry explains

[00:53:48] how he fits this together in his own portfolio. Now, having said that, there will be some comments on this YouTube video about a cryptocurrency beginning in X that'll say that this defies the rule, that all assets do not have similar risk adjusted returns because that is going to the moon and Donald Trump likes it. And I don't even know what else they talk about. It's 74 comments I have to delete from every single video. And they're exactly the same, other than they change the name of the cryptocurrency because I can block the name of the cryptocurrency and they have to change it every single time so that it gets through my blocking and makes me delete 74 quotes.

[00:54:17] Well, see, when you move past the liquid and you get into solids and gases, then you start to understand the true power of these currencies. I don't want to look these things up and see if they even exist because they're like, it's like X something and they change all the digits after every single time. So are they like actually making these things every time and like they're making a new one every week? I don't even know. I mean, I guess some people fall for it. I try to get it out of the comments as quickly as I can.

[00:54:44] Yeah, the two things that I've learned coming into this year, how many spam emails I've gotten about newsletter stock pitching services and subscribe now to this and that drop for things that are gobbledygook for characters. And it's just like, this is the new Nigerian prince, right? That's all this can be, right? Or in our comments, financial advisors who exist solely on Telegram. And so I was thinking like of the various things. I mean, they talk about a lot of red flags, like don't use a financial advisor if they charge high fees or whatever.

[00:55:14] I'm pretty sure if they exist exclusively on Telegram, that should probably be the ultimate red flag. They're staring at it. Or that they're not actually a person or a financial advisor in the first place. An AI image of a person that doesn't exist. God, help us. So this last one, you know, I'm a value guy. I had to get this in here because it's just, I have to defend value in everything we do. But we had an episode, our most recent one with Larry, where we went through all these arguments against value investing and we tried to have him refute each one of them. And this is just one that I thought was really good.

[00:55:44] And this is this idea that people say, you know, there's been this academic research. It came out in the early 90s, you know, supporting the value premium. There's been a bunch of research since then. There's an argument that once this research becomes public, everyone becomes value investors. And that's why it's not working anymore. And Larry explains why that's wrong. Once this stuff gets published, a lot of people might say, hey, this is a good thing. I'm going to add assets. And so one of two things can happen. If you're a risk-based premium,

[00:56:14] then that premium should shrink, right? Because more people are buying it, but it should never disappear, at least if markets are logical. Because if it's risk-based, this should be a premium. But premiums are time varying depending upon the economic regime, right? And if the economy is doing well, then the value stocks are less risky. If the economy is doing poorly, then they become more risky. So the premiums should jump up and down.

[00:56:44] Unfortunately, as we just said, there aren't good predictors. Now the question is, what happens when that premium moves, right? Well, if lots of money flows in, the premium shrinks. Let's just say we're at a starting point when PEs for growth stocks are 20 and value is 12. Well, if money is flowing in and coming out of growth,

[00:57:12] the PEs relatively short will be maybe 18 for growth and 14 for value. So that means the value premium has gotten smaller, but it's still there. Okay. So that's what should happen if it's risk-based. If it's behavioral-based, it should virtually disappear. But there are, we know, limits to arbitrage like the risks of shortening. And we should talk about that because I think that's changed a lot in the last few years.

[00:57:41] Not only the risks, but the costs of shortening. Okay. So now to answer your question specifically, while it's a logical argument if more people are investing, the premium can shrink, but the exact opposite has happened because we're in what I would call a story or narrative environment, no different than we were in the Nifty 50 era, in the era of the late 90s and the dot-com. And now we have this narrative

[00:58:10] about large growth stocks, you know, technology, whatever. Okay. And the spread has widened. So you cannot make the argument that too much money is chasing value because the spread should have come in. And Cliff Asnes and the team at AQR has written a bunch about this and wrote some papers you can find on their website, I don't imagine, that show that the spreads, last time I remember

[00:58:39] their last analysis on this, they had reached like the late 90s level of the 99th percentile of cheapness. And then they've come back since maybe they're in the high 80s or 90s still. So you cannot make the argument that the value investing has become a craven. That's obviously wrong. Yeah. So I think he's right about this. I mean, I think that this is the easiest. There's some of the arguments against value that are a little harder to refute.

[00:59:10] But I think this one is one of the easiest ones because ultimately, if everybody was becoming value investors, value stocks would get more expensive relative to growth stocks. Premiums would shrink. You could argue I shouldn't be a value investor anymore. The exact opposite has happened. Premiums have widened out a lot. So this is one of the ones that doesn't hold water. But I think this is a good, going back to that evidence-based thing we talked about at the beginning, this is a good evidence-based example of taking a narrative that's out there and saying, all right, the evidence doesn't support it. Lots of people

[00:59:39] with lots of different philosophies make up the market and different ones are going to be in vogue at different points of the time. And that's kind of a feature, not a bug. It is to say, you got to find your process and what you can stick through to navigate the ups and downs to Extra Hitchhiker's Guide again to say, don't panic, to not forget your towel, to remember that six times nine equals 42, all the important lessons that we learned from those books. But that's what gets you through is knowing that all these different things take over.

[01:00:08] And if you're a value investor, that's where you say like, okay, not everybody is chasing this thing. There's some pieces of reality that I know and believe to be true, or at least you, Jack, know and believe to be true. And I will look at and go, does anybody know anything ever anymore? But the narrative just isn't in that favor. So not everybody wants to thump Ben Graham. Those are still probably some of my favorite things. I think they trickle through from like TikTok or something, something, where like you'll have like the crypto guy and they'll spot the Ben Graham book like in the background

[01:00:38] or whatever. And they like tried out the screenshot. They're like, ah, ah, or the people who throw the intentional or the intelligent investor in the trash can, you know, after these things, like, it's just the reality of it. There can't be too many because then none of these things would exist. And it doesn't mean there wouldn't be any opportunities. It's just, it's a great point. I love how level he is and just taking this claim and just cutting right through it with a samurai sword. Well, it's obviously selfishly I'm a value investor.

[01:01:07] Plus in our market forecast episode for the eighth straight year, I predicted the outperformance of value this year. So, I can do everything I can to get this thing going. Yeah, well, you know, it's on you, Jack Forehand, to educate the masses and bring value back. You are our only hope, young, young Luke Buffett. And obviously, as a good forecaster does, once it comes back, I will be taking massive credit for it and ignoring the other seven years that I got it wrong. Oh, yeah. I mean, look, if you're not part of the solution, you're part of the problem. So, you got to make sure you put that crown on. We'll do a whole

[01:01:37] celebration lap episode for you on the year that that happened. We'll take a celebrating, Jack's value. I like it. We'll play all your clips and then just talk about how right you are. It'll be great. They'll be like, from eight years ago, so I'll look so much younger and be like, well, wait, what happened in the interim there? You were just predicting the future, Jack. You're that brilliant. We'll come up, we'll make some ads. By that point, AI will be able to make us some really schlocky ads for your newsletter service out of that. So, on that note, long the value investing and we'll wrap up here. Thank you,

[01:02:07] everybody, for joining us. guys. This is Justin again. Thanks so much for tuning into this episode. You can follow Jack on Twitter at Practical Quant. You can follow me on Twitter at JJ Carbono and follow Matt on Twitter at Cultish Creative. If you found this discussion interesting and valuable, please subscribe in either iTunes or on YouTube or leave a review or a comment. Also, if you have any ideas for topics you'd like us to cover in the future, please email us at excessreturnspod at gmail.com. We would like this

[01:02:37] to be a listener-driven podcast and would appreciate any suggestions. Thank you.