Motley Fool Money - 2018 Year in Review

Episode Date: December 28, 2018

Most surprising business story of the year? Best & worst CEOs? Andy Cross, Ron Gross, and Jason Moser analyze those topics (and more), reflect on the year that was, and share the dumbest investments of 2018. Plus, Oaktree Capital co-founder Howard Marks shares investing insights and talks about his latest book, Mastering the Market Cycle: Getting the Odds on Your Side. Learn more about your ad choices. Visit megaphone.fm/adchoices

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app, which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money Radio Show. It's the Motley Full Money Radio Show. I'm Chris Lowe, joining me in studio this week, senior analyst Jason Moser, Andy Cross, and Ron Gross.

Good to see you, as always, gentlemen. Hey, Chris. It is our year in review special. Woo-hoo. Next week will be the 2019 preview, but we're going to take some time today and look back on the year that we are wrapping up. And Ron, I'm going to start with you. Let's start with your business or investing headline for 2018. Chris, Chris, much to my chagrin. My headline is that the market has given back all of the gains it was supposed to get from the tax plan of 2018. We're back to September 2017 levels.

Earning's got a significant boost from that plan. There's no doubt about it. And the market was off like a shot. But it seems it was just a blip in time. Now, theoretically, we will all benefit from the $1 trillion plus of share buybacks that occurred during the course of the year, but that does remain to be seen. So the excitement that we were all seeing in early 2018 when we looked at our portfolio statements has subsided quite a bit. Boy, the mid-year review started off on a much more positive note, Jason. Really? I mean, I guess I'm sort of in line with Ron here. And just the story to me is, hey, you know what?

Chris, markets actually do go down. And you can't really determine when. It's hard to predict when, because, yeah, the past couple of months really have been difficult. But I think that this is a great year that reminds us that investing is a marathon and not a sprint. I mean, if you look back at the last 10 years, the last 20 years, there are not very many years where the market actually recorded negative returns. This looks like it's going to be one of those years. They do happen. You know, if you go all the way back to the beginning of the year, Ray Dalio, I'm a lot of the year. I think a guy that we probably all would agree is pretty smart.

Pretty smart. I mean, he said it'd be crazy to be in cash at the beginning of the year. And, well, how's that working out? You know, I mean, it's not to knock him. It's to say it's very unpredictable to sort of try to figure out what's going to happen month to month year to year. But the long haul, obviously, is what we're focused on. And, hey, you know what? Things will get better.

But, guys, things were going so well. I mean, we had our first trillion-dollar companies excited about, I think Apple had passed that mark, Amazon kind of up there, too. So, like, things were going so well for the first three-quarters of the year. And then it really turns out. I mean, the story for me is just the fact that volatility, we've been talking about it for the past a couple years. And we saw it come back in four. So far in 2018, we had 17 days with the S&P 500 crossing a daily gain of more than 2%, either positive. or negative. We had zero days in 2017. Actually, the average, I calculated this, the average

going back over the last 20 years, two decades, is about 20 days per year of the S&P 500 moving plus or minus 2%. Now, some of those days, obviously during the market volatility days of 2008, 2009 were really extreme. Same thing with 2001, 2000. But generally, you know, over the last two decades, the markets are moving. And we didn't see any of that. in 2017. So 2018 is a little bit more normal. It just happens to be that it came over a few months here to end the year. And I'll just refer back to a tweet. Maddie Argersinger sent out not all that long ago. That volatility is really actually our opportunity. I mean, you have to embrace it when you do see it because that is what gives us the opportunity to separate ourselves and to outperform

over longer periods of time, isn't it? But having said that, I'd like to go on record as saying, I prefer the up years. Well, you had them. You could quote me on that. That could be a famous quote one day. You had a good decade of, you know a good Ron, Ron. You had a good run. Yeah, I feel like you put that on the studio door here or something.

Up next in our year in review, fill in the blank, Ron. This year I was really surprised by Blank. The fact that retail came back from being on life support. Many predicted retail, brick and mortar retail specifically, was dead thanks to the likes of of Amazon and online shopping in general, and it partially has taken quite a hit for sure. Many retailers have been forced to close stores. Many of the most egregious unprofitable retailers have actually gone out of business, but the rate of store closings has slowed.

The stronger players are capitalizing on industry failure. Some online stores are actually moving to brick and mortar like a Warby Parker or an untucket, and UBS is actually forecasting brick and mortar can still deliver about 1% sales gains annually going forward. So the demise of retail was a bit premature. Jason? Yeah, I'm surprised at how quickly the leadership team at Facebook of Mark Zuckerberg and Cheryl Sandberg, they went from what I would consider a reason to invest in the business to a duo that I just don't think I can ever trust anymore. in the course of just one year.

And, I mean, there were privacy issues abound. It seemed like there was a new headline every week, and that has a lot to do with it. But they really haven't been very upfront and transparent about what they're doing about it and how they're going to make this right. Now, here's the thing. Like, I personally don't want to own Facebook stock. It's not something I'm interested in. But as an analyst, I have a hard time seeing a scenario where investors would lose money on the stock five years from now.

It's just this, it's a massive network, and I think it ultimately boils down to people. We'll sit here around this table and criticize and complain about what Facebook does. But I think that when you look at people in general, they will get past it because ultimately they value the access to that network above all else. And there's actually data out there that proves that. There's a 2017 Deloitte survey of 2,000 U.S. consumers found that 91% of respondents willingly accept. legal terms and conditions without reading them before installing apps. And I'd be willing to venture, I guess, that all four of us around the table fall in that 90-1. I was going to say, that's not a surprise.

It's not a surprise at all. And I think that's a surprise that it's only 91%. I think that's the point really is that regardless of the behavior, I think people are still going to want to access to those networks that just really shows that the advantage that that network effect really has for Facebook and his properties. Andy, what surprised you this year? Gentlemen, the industrial conglomerate is dead. long-lived the industrial conglomerate.

I mean, look at what has gone on with General Electric, United Technologies announcing that they are separating. I mean, the GE story is just to me, continue to get worse and worse throughout the year. We actually shorted it in our never-lasting service and made some good money on it, but only a dollar or two, if we just kind of held on, we would have gone and went from 14 to seven now. I mean, the story, as they continue to struggle with their industrial business, finding in the right units that work out. I mean, it's just been a decade of just disasters at GE,

unfortunately. So I don't think the nail is in the coffin in GE. It's still a $60 billion business. But going that direction and then United Technologies splitting up, trying to find more opportunity for shareholders as three distinct businesses rather than just one. So I think the conglomerate is just going the way of the dodo bird now. I'll just add on to that. I was surprised that John Flannery, who was CEO at General Electric when the year began, I was surprised they fired him halfway through the year, or a little over halfway through the year, because at the beginning of the year, we talked about Flannery as being a CEO to watch in 2018, in part because he was so transparent.

He did such a good job of communicating. This company has problems. Everything is on the table in terms of the levers I'm going to pull to try and fix this. And they had no patience. Yeah, it was one of the risk factors, Chris, that we identify because they're selling off. assets, trying to cut the cost dramatically by cutting staff. But they just, when the dividending got cut and they just continue to see the dim prospects at GE and that he wasn't the person to solve it. Another fill in the blank, Ron. Looking back, Blank got way too much attention in 2018.

I will go with Tesla Model 3 production levels, but specifically Elon Musk, who just sucked the air out of the room too many times in 2018. No responsibility. No. for the SEC or corporate governance or the Wall Street community. Hard to argue with that, Jason. Yeah, you know, I was actually considering that. But I will go with something we mentioned earlier this race to a $1 trillion market cap. I mean, we're complicit. I was going to say, I just mentioned it.

As much as any one business or investing program, we're guilty. Yeah, I mean, we'll step right into the spotlight there. But I think we also made a pretty good point when we spoke about it that it ultimately was more or less meaningless. It was a neat subject to talk about because it's something that's never happened before. But you look at where everything stands today and we no longer have any companies out there with a $1 trillion market gap anyway. We get to do the whole story over again. Exactly. I mean, we've just got a whole spate of content for 2019 just setting itself up so nicely.

But, I mean, listen, Microsoft, all these businesses, they're just wonderful businesses regardless. They'll get there. They'll pass it. They'll stay past it. And then we'll talk about $2 trillion at some point, I'm sure. Andy, what about you? You guys may have heard that Amazon was searching for a new headquarters and ended up not just with one. They went with two.

Jeff Bezos went with two and two of the most obvious ones. I mean, really, didn't they just kind of waste everyone's time? I mean, a lot put into this. I mean, cities all around the country put in bids and tax breaks for Amazon. Amazon collected a ton of data. But this just continued to build. And it's not done, by the way. Obviously, here in Crystal City, Virginia, up in Long Island, New York, or Queens, New York,

they're going to build these facilities and hire a lot of people. So the story is going to be a long-term story. But, boy, just the whole process of how it went on, got dragged on. And then they announce it's not just one headquarters. too, a little bit disappointing there. Well, now have you read the articles that are coming out since these announcements is like, oh, by the way, this is going to be a lot slower rollout than probably you all anticipated. It's only going to be maybe a couple of thousand people the first year, maybe a couple of seconds.

So it sounds like it's going to be something that we probably won't feel as quickly as we thought we might. So real quick, Ron, if that got too much attention in your mind, Elon Musk, what was under the radar? What needed a little bit more oxygen in 2018? So harking back to my earlier thoughts on retail not being dead, and it's something we talked about a few weeks ago on the show. The rebound of R.H, formerly restoration hardware, was very much under the radar for me. I had no idea the company was performing as well as it has this year up 42 percent, the stock. Left for dead at one point. They really reinvented themselves with a subscription-based membership program, reducing inventory,

rebuilding the stores to look more like galleries. They bought back a bunch of stock, which was a very good allocation of capital so far. It appears to be at least. And I just think most investors don't even realize. Can I just throw in on top of that Burlington stores? Yeah, exactly. Over the last five years, shares of Burlington stores have outperformed some of the best companies in America. Jason, what about you?

Yeah, I mean, I was thinking about this earlier, and it's been such a tough year we talk about the market being down. And I think there are a lot of reasons why we invest in individual stocks. I think one of the reasons is while the market may be down for the year, that doesn't mean that all of your holdings necessarily have to be down. And one of mine, thankfully, McCormick is not down for 2018. It's had a nice year. Stock up between 35 and 40 percent sort of fluctuating here with this volatility. But in the face of the market that is looking like it's going to chalk up negative returns

there, McCormick has been a nice little array of light on the portfolio. And I think a lot of that has to do with the fact that the RB Foods acquisition that they just finished digesting, no pun intended, really turned out to be a good move. I think the market rightly was a bit skeptical. They had to take out some debt to make that deal happen. And it wasn't like it made perfect sense at the beginning, but it has made sense here in hindsight. And I think they're getting the credit for it now. And a total outlier when you look at the package food industry. Oh, yeah, really, absolutely.

Andy? It has not been an easy go for actively managed mutual. funds, they continue to see money flow out the wrong way and not into the funds out as ETFs take on more and more assets in their management. The one bright spot has been socially responsible governance investing. So up to some estimates, a quarter of all assets and around the world are tied to ESG, environmentally social and governance investing. I think that is just going to be a big spot in 2019 as more. and more investors look for better ways to both support their own personal interests, as well as

it's historically been a very good place to put money to recently. And there's a lot of great businesses out there that qualify. So the ESG movement is real, and it's here to stay. Our year and review continues right after the break. Stay right here. This is Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Moser, Andy Cross, and Ron Gross.

It's our year-in-review special. Let's talk about the best CEO of 2018. And you know what, Ron, if you want to throw in, maybe it could be a worse CEO or just something that you just can't believe is still around. Throw it in for good measure. Let's start with Best. Mark Bennyoff of Salesforce.com, a leader in the cloud computing industry, 97% glass door rating from employees.

Company continues to put up strong results in a competitive business. Growth continues. Stocks up 27% in 2018. And for worst, I'm going to go with Mr. Zuckerberg of Facebook. I don't really think he should be throwing out the door, but the media and the conventional wisdom certainly thinks he should. More likely, I think, we'll see Cheryl Sandberg's C-O-O depart in the near term. Well, save the predictions for our 2019 preview.

Jason Moser, what about you? Yeah, best. Hey, let's go with Josh Silverman, with Etsy, brought into the company in mid-2017, when the business was dealing with some challenges. He right-sized. He focused on growing out its mobile offering. It was able to push through a little price increase there without having customers defect from the platform. Stock has had a phenomenal year. You're up around 150 percent. And I am a proud owner of shares. So I am rooting for him to keep doing what he is doing, Chris. And as far as worst CEOs, and this really probably qualifies as one of the worst human beings out there, is less moon viz. I mean, hey, let's shine a light on everything that he really did. And it really really, and it really qualifies as one of the worst human beings out there. And it really is, you know, really just seem to come to a head there. I'm glad that CBS denied him that $120 million

severance package because clearly he's been behaving very badly for a very long time. Good riddance, in my opinion. Fired with cause. Yep. Andy Cross? Sotianadella of Microsoft has done the impossible. He's made Microsoft hip again. It is a place that people want to work. His acquisition of GitHub over the last couple of years has been just an example of that. stocks up 20% over the last year. It was one of the largest companies in the world. Revenues growing 15% a year. That's way up than what they were a couple years ago and returns in equity, 20%. So Satya and Della continues to do a great job at Microsoft. I can't believe, and I just shopped there last night, Barnes & Noble continues to be around. It does $3.5 billion

in sales. It's a $500 million market cap. It has 600 stores. The process for Barnes & Noble, just not very smooth, considering you can just go on in line and use Amazon so smoothly. They have some troubles, and they continue to struggle, and I'm not sure where they go from here, Chris. All right, just a couple minutes left. Ron, the dumbest investment of 2018. It would have to be Bed, Bath, and Beyond's share buyback program. 2.8 billion since 2015, $100 million in 2018 alone, terrible allocation of capital. They have remaining balance of $1.4 billion on that program. God help us if they do it.

stocks down around 45% this year. Jason? Yeah, I feel like I've been batting 1,000 with Snap so far, but I'm going to go ahead and stick with what it works. I feel like it's pretty amazing to see them doubling, nay, tripling down on the failure that is spectacles. I mean, it appears that Snap Lab is going on its third boss in six months. To me, that really tells you all you need to know.

And that's fine if they want to dabble with this stuff and try to figure whether there's an opportunity out there, but as it stands right now, it looks like they are falling flat on their filtered faces, Chris. Andy? If history repeats itself, the acquisition of Time Warner by AT&T will not be a good move considering the acquisition AOL did of Time Warner back in 2001 was a disaster. So I think AT&T buying Time Warner is a stretch, and it loaded the balance sheet up with a lot of debt.

So we'll see how that plays out. Anything involving Time Warner and the word acquisition is just not good. Not good. All right, Andy Cross, Jason Moser, Ron Gross. Guys, thanks so much for being here. Thanks, Chris. Coming up, legendary investor, Howard Marks, talks about his latest book, Mastering the Market Cycle, Getting the Odds on Your Side.

Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Warren Buffett said of our guest this week, when I see memos from Howard Marks in my mail, they're the first thing I open and read. Howard Marks is the co-founder of Oak Tree Capital.

where he's crushed the market and earned billions for investors. A few months ago, Motley Fool analyst Bill Mann had the chance to talk with him about Mark's new book, mastering the market cycle, getting the odds on your side. Bill kicked things off by asking him how investors can determine where we are in the market cycle. Well, I think you really have to understand what produces cycles. And I go through examples of what led up to the tech bubble and the subprime bubble and the unwinding of the subprime bubble and so forth. And I go through these progressions step by step to give an appreciation. As you say, it's not science, it's not numbers, it's not formulae.

It's understanding developments in the real world. world and how they occur and and and how the elements uh combine to produce those cycles and and uh only by having an appreciation for the workings of these things not by expecting to be given a formula that you can plug and play can investors perfect this essential skill you know when i read this book i i saw or thought of one word over and over and you've used this also in your memos, and that is temperament. I once had a really fun conversation with Daniel Kahneman, who won a Nobel Prize for his work in behavioral finance. And he spoke about how he actually panicked during the financial collapse and sold everything. How do you think that one

becomes more unemotional about investing? Well, that's a great question. The first answer is, as they say in basketball, you can't coach height. And, you know, no matter how good a basketball coach is, his players are not going to get me taller. So, you know, the improvement has to be intentional. And the first thing you can learn is why it's important to be on emotion and why emotionality is the enemy of the investor, why human emotion conspires to constantly make investors do the wrong thing.

Then the second step is to do it. And I think probably many more people can understand the need for it than can actually apply it. But you don't have to apply it perfectly. You only have to do a better job than you used to do. And I think most people should be able to attain that skill. Yeah, and I think the very interesting thing when you think about market cycles is that they're very real things, of course, but it's not like these things are, they're not naturally occurring. They are entirely driven by human behavior. Maybe a good piece of background would be for you to describe what you think actually causes market cycles. Sure. And to reinforce what you just said, let me point out that, you know, start.

Starting at the University of Chicago in the 60s, people, even before the computer age, figured out what the return on stocks had been. And since 29 to 62, I think they did the work 9.2 percent. Then it's been extended since then. And so stocks return 9, 10 percent a year, on average for a long periods of time. We know that. And I think they've never actually returned exactly 9.2 percent a year. That's right.

And the point I was going to make is that. that they rarely return between 8 and 12. Yeah. Many more observations are outside of the 8 to 12 range than inside it. So, you know, my first observation is that the average is not the norm. And so why is it? If stocks return 12% a year on average, why don't they just return 10%? I don't know if I said 12, but it stocks return 10% a year on average.

Why don't they just return 10% every year? And the biggest answer is emotional to the upside, which then require correction to the downside. If you think about the value of a company and what it's going to be worth in 50 years, that does not change very much from day to day, week to week, month to month, even year to year. It's pretty stable. You know, and the changes in this year's or this quarter's earnings are not that important. But people react excessively to these things, and we want to be on the right side of those reactions and not the wrong. So when things are going well, the economy is humming and corporations are doing well.

they're reporting earnings which exceed on the upside. The media are issuing only positive reports and interpreting the news positively. The prices are going up every day. People feel terrific. They love the things they hold. They want to go out and buy more. The only people who are unhappy are the people who don't hold. They want to buy for the first time. All of these things together produce rising optimism and rising euphoria and greater self-satisfaction and consequently higher prices. So as the prices rise, the emotion turns more positive until you reach a top when the price is at its maximum and the emotion is at its maximum. Now that's when you want to be selling when the price is high and by definition very few people do because they are feeling so positive.

And of course the reverse is true in the opposite direction and I will not belabor it. But at the bottom, the price reaches its minimum at the same day that the investors are the most depressed and the most unlikely to buy. So, you know, we must do the opposite. We must stand against the herd. We must stand against math psychology. We must sell when fundamentals are at their peak and emotions are the most positive. And we must buy when fundamentals are at the trough and people are most depressed. You know, the goal is to buy low and sell high. More people buy high than by low. We want to be different from most people. We have to understand what's going on. We have to understand why people are doing what they're doing. You have to understand what's

wrong about it, and you must be able to stand against it. So I think we would maybe best describe the market as being one part psychology and the other part path dependency. Probably right. Yeah. Yeah. And the psychology part is very important, and the people who learn financial analysis in school don't learn much about psychology.

And this is, but this is the thing that's really going to determine whether you have good days or bad days. Yeah. I love that you said that because, you know, as I've looked through your background and I've read, I've read your memos for decades now. And they are an absolute gift to me. But as I was reading this book, I'm reminded of the fact that you have a fairly formal traditional finance education, having gone to Wharton and the University of Chicago. but when I read this book and when I read your memos, I feel like I'm reading the works of a history major, in particular in your focus of tendencies over predictions.

Yeah. Well, you know, I started 50 years ago this summer, and I've seen a lot. And I've seen a lot of mistakes made. And if you have your eyes open and you're conscious of what's going on, you learn from mistakes and you put together a view of the world, can be helpful. And, you know, I started in 68 at Citibank, and Citibank, and most of the banks were what we called nifty-50 buyers. And they bought the stocks of the 50 greatest, fastest-growing

companies in America to which nothing bad could happen. Well, number one, a lot of the companies to which nothing bad could happen had bad things happen, so much for predicting the future. But number two, because the companies were so highly rated, they were extremely highly priced. And if you joined when I did in 68 and you bought those 50 stocks and you held them diligently for five years, you lost almost all your money. Not because in every case the companies were troubled, but because in every case they had been overrated. psychology had been too positive, leading to excessive pricing, which then the air went out of the balloon. So, you know, it's not what you buy that makes you a successful investor. It's what you pay for it. And what matters most is not the quality of the asset, but the relationship between the price and the intrinsic value.

And you get bargains, you get easy, safe profits by buying things for less than their worth. And if you pay more than their worth, you're going to have a trouble ringing out a profit. So relationship betrays and value. What determines that? Emotion. Not what's going on, but how are people reacting to what's going on? How much are they paying for the fundamentals that are present in that situation? And so I think it's extremely important to understand the, I sum it up with the word emotion,

but that's an oversimplification. You want to understand what's going on in people's minds and emotions when they price assets and you want to buy the ones they're underpricing and sell the ones they're overpricing. You want to buy the market when it is underpriced and you want to sell it when it's overpriced. I love that you've made this point. and I do want to challenge something because a lot of people who will be reading and listening to this will think that what you are talking about is market timing. But you're not.

You're not talking about getting in and out of the market at the right time. You're not talking about reading the tea leaves and thinking about the trade sanctions in China and pulling out of certain parts of the market. You are talking about focusing on the areas where there is opportunity based on, based on, what is out there, and where the market sits at any given point in time? Exactly. Nothing in the book, nothing that we do at Oak Tree, is based on forecasts. What I say about, you know, I'm strongly opposed to basing investing on forecasting.

And what I say is, we never know where we're going, but we sure is hell ought to know where we are. Yeah. Where is the market in its cycle? Is it depressed or elevated? When it's depressed, the odds are in the buyer's favor, and when it's elevated, the odds are against him. And it's really as simple as that. And, you know, your listeners should distinguish between markets that are high in their cycle

and markets that are low. They should vary their behavior. on that basis. They should take more risk when the market is low in its cycle, less risk when the market is high in its cycle. This is not saying, you know, who's going to win the election. What will the earnings be? When will rates be increased? You know, so many people ask me for so many years, what month is the interest rate increase going to take place? And I would say, why do you care? That's not what matters. What matters is whether interest rates are going up or down, whether it's going to go up a lot,

or a little, and people don't understand how money is made. They think that knowing which month the interest rate increase is going to take place is going to make them money. And that's not what it's about. It's about investing more and more aggressively when the market is propitious and less and more conservatively when the market is precarious. Coming up, Howard Marks explains it's not what you buy as an investor, it's what you pay for it. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Chris Hill. Let's get back to Bill Mann's conversation with Oatree Capital co-founder, Howard Marks. To me, there is so much voodoo that gets thrown about when it comes to the markets. I'm going to take a little bit of a risk here and, you know, I believe that we are perhaps kindred spirits, but it drives me to the point of insanity when pundits who ought to know better either credit or blame their performance of the stock market or the credit markets based on who happens to be sitting in the Oval Office. Right. How do you think that people should put either political conditions or macroeconomic events into the context of market cycles themselves? Well, it's obvious complex.

By the way, let's go back two years ago to October of 16. everybody in America, I shouldn't say everybody, but most people believe two things. Number one, that Hillary Clinton would win the presidency. And number two, if Donald Trump did, the market would collapse. So instead, Hillary lost Donald won and the market soared. So I think that mere fact should be enough to convince most people that they don't know what events are going to happen. And they don't know how the market is going to react to the events that happened. You would think.

You would think. And so, but having said that, how do you factor in politics? All things being equal, it is more favorable for the market that we have a president who is extremely pro-business. And I think clearly Donald Trump is and his administration, and Hillary would not have been to the same extent, and Hillary would have been under pressure from the progressive wing of her party to the hostile business. And so this is going to continue with the Trump administration, all things being equal, that'll be a positive. Now, that doesn't mean it's all good, among other things. Or that it's not already in the market, correct?

Exactly. I was just going to say that, but you're absolutely right. So, you know, one of the biggest mistakes that most people make, and you and I were talking a minute ago about the voodoo, one of the biggest mistake people make is they sit here and they say, I think there will be positive events, which means I think the market will go up. And that identity is not dependable because maybe there will be positive events. but maybe they're already priced into securities, in which case they'll be a big yawn. Or maybe there will be positive events, but not as positive as were factored in when stocks were priced, which means you'll get a positive event, and the stocks will go down. So, you know, as I say, predicting these events and predicting the market's reaction to them is very, is very thorny.

Do you think that there are opinions or beliefs in the market that you find to be particularly unhealthy for investors? The first thing, and I try to make this clear in the book, and it's essential if people are going to be able to deal with cycles, you know, everybody wants an easy answer. Every wants to say, how long does enough swing last? And the first step is you must dispense with any concept of regularity. The whole book is based around Mark Twain's statement that history does not repeat, but it does rhyme. When he says it doesn't repeat, he's saying that in our case, he wasn't talking about the market, he was talking about history.

But the truth of the matter is, market cycles vary one to the next in terms of their amplitude, their speed, their violence, their duration. it's all different. And so people want to know how long is an upswing. And the answer is we absolutely can't tell them. So expecting regularity and thus predictability is wrong. And then, you know, you can go from there to the whole concept of predictions. And you know, what makes the market go up and down? To a small extent, it is what I call fundamental development. in the economy and the companies. But to a large extent, it's psychology or, let's say, popularity. And it should be clear by now to everyone that the swings in popularity are unpredictable.

Howard Mark, the latest book, is Mastering the Market Cycle, and it is available everywhere. That's going to do it for this week's edition of Motley Full Money. Our engineer is Steve Roydo. Our producer is Mac Career. I'm Chris Hill. Thanks for listening. We'll see you next week.