We Study Billionaires - The Investor’s Podcast Network - TIP 086 : Part II - Jack Schwager & Stock Market Wizards (Investment Podcast)

Starting point is 00:00:00 We study billionaires, and this is episode 86 of The Investors Podcast. Broadcasting from Bel Air Maryland. This is the Investors Podcast. They'll read the books and summarize the lessons. They'll test the waters and tell you when it's cold. They'll give you actionable investing strategies. Your host, Preston Pish and Sting Broderson. Hey, how's everybody doing out there?

Starting point is 00:00:30 This is Preston Pish, and I'm your host for The Investors Podcast, and as usual, I'm accompanied by my co-host Stig Broterson out in Denmark. In this episode, we continue our discussion with best-selling author of the Heads Fund Wizards book series, Jack Swagger, and I'll kick it off with the first question. So one of the critique that value investors often have about traders are that how can they use fundamentals? Because there might be intradate traders, so they might do, as you say, like 500 trades a day.

Starting point is 00:00:57 I also know that when you are a trader, you can actually look at real fundamentals that might change within a day, within an hour, and still make rational trading decisions. So could you please provide some examples of how traders use fundamentals? Sure. Well, and I put this in some of my analytic, you know, my trading books that I write for myself, not just the books I've interviewed people. And it comes into the market wizard books as well. And that is that applying fundamentals to trading. Let me back up here for one second. I'll just throw this out on the side because it's just a good example and then I'll go to the other point. But to make the distinction, so from my own perspective, it's not for everybody. But for the most part, if I'm trading and I trade,

Starting point is 00:01:40 I go for grades depending on how busy I have or what else I'm doing. Sometimes I'm trading, sometimes or not. Last few months I've been trading or whatever. But when I trade, if I put on a position, I'll put a stop in. I'll put it with long. Trade futures, basically. My trading is in the future. If I go long or short, whatever it is, when I enter the trade, I put in a stop, which kind of defines my approximate worst loss. So I don't have to think about it anymore. And that's one of the things I got out of the books, it goes back to your other question, what I got out of the books. One of the big things I got was from Bruce Covener, who said, always decide where you're getting out before you get in. And this point was because that's

Starting point is 00:02:17 when you have objectivity. And that's great advice. And so I do it myself. And so I always, I put in literally the order is a El Bain orders to either at a limit or a market to get in and attached to it is with a good till cancel stop. And that's it's paired. It's part of the same trade. So that's for a trade. Okay. That's that's one approach.

Starting point is 00:02:36 But there's then the things which I might consider an investment. So here's an example. Some months ago, I had kind of, well, actually maybe it wasn't some months ago. It was probably last year, sometimes late last year. I had gone through the stock market. And I was like thinking, well, let me write down some levels of. some stocks where just put in order as well, where I think there would be big support, where if they went down there, I'd buy them.

Starting point is 00:02:58 And I look at markets, which are sectors, which are out of favor. Because everything rotates and where your really best opportunity is come when sectors are completely out of favor. Well, China was slowing down. You could always find your reasons. I don't care what the reasons were, but like XME and that whole, all the metals oils, everything was like going down. So for energies and metals, for some of those ETSs, I like, a big,

Starting point is 00:03:21 numbers. And X-XME efforts come very, very low numbers, and they actually got hit. It might have have been between 14 and 12, and I picked them on technical reasons. I think if it gets down there, I don't care. I mean, I went back in 2008. In 2008, it hadn't gotten that low and whatever. So I thought if it goes down there, I'll hold it. It's an ETF and some multiple equities. I don't care. I'll care. I don't care if it goes to zero. I mean, I do care, but I think it's not going to go to zero. I'll hold it for years. It doesn't make it. That's an example of an investment. So for me, I figured, hey, XME, you know, the metal's the ETF goes from 50 to 12, it's going to have value eventually.

Starting point is 00:04:00 I'll just hold on to it, that type of thing. So that's an example of an investing trade. So that's, I have no stop on that. I don't want to buy it at 12 against, put a stop. But that's not the point. I'm not worried about. So that's the mentality of an investment is you're buying something where you figure it has intrinsic value and it's very, very low relative to its potential long-term range, and you buy it

Starting point is 00:04:25 and you hold it until things change. But from a trading standpoint, it's the opposite. You want to have your risk control. A good way to kind of synopsize what you just said there. Would it be you're really kind of trading the volatility for a short-term profit, but you're doing it in something that you don't mind holding for five years, six years, because you know the intrinsic value of the long-term trend is eventually going to basically save you or pull you out in the event that it just continues to move against you for a long period, call it three months, four months or something like that. It's moving against you.

Starting point is 00:04:59 You're not losing any sleepover because you're really in it and something that you know is going to have a long-term value for yourself. Yeah, it has to be like the type of thing where you say, I'll hold it to zero type of thing. But you don't do that. You only do that for a small portion. You don't put all your money and stuff like that. But you can do that selectively. You do it in things which have, why didn't need, why was doing that with ETS?

Starting point is 00:05:20 Because there are multiple stocks. So, I mean, you could pick a minding stock and it can go broke for whatever reason. Who knows? But if you buy a basket of stocks for an ETF, you're not exposed to that. Before, there was a very interesting question about fundamentals, using fundamentals of trading. This is a point, I never hear anybody else make this. And I have put it in my own books, but I think it's really true. And when it comes to fundamentals, the way fundamentals are most useful to trading now, not investing.

Starting point is 00:05:50 Now, I believe people can use fundamentals to invest. An example I gave is maybe like a way you could use it, right? But for trading, where you're taking more of an in-out, you know, more leverage type position, there, the value of fundamentals is not what the with the fundamentals, it's fundamentals where the market hacks opposite of the fundamentals. So it's not, it's a contrary in use of fundamentals. So it's a matter of fundamental news comes out. It should have the market going up and the market failure budgets or it goes down.

Starting point is 00:06:27 So let's just talk about the current conditions right now. So we're in the, we're in April 24th, 2016. You're seeing all these companies missed their earnings. earnings are just going through the floor for all these companies. You'd make the argument that the fundamentals are bad. You would think the multiples would trade lower. And the market screams back to almost its highs that it's been seeing. So in that situation, everyone can kind of relate to that because everyone's actually seeing that in their account right now.

Starting point is 00:06:56 Talk to us about your example so that we can kind of apply. Yeah. So the trader's perspective would be that, hey, you know, certain isn't coming out. Stock should go down. it's going up. So it's not like what an investor's perspective or what maybe a novice investor's perspective would be, hey, this stock's going up and the news is bad. It's even a better, you know, I mean, it's even a better sell, you know, and something like that.

Starting point is 00:07:22 But a trader's standpoint is, hey, this stock is kind of, you know, looks like it's high. News has come out. It should have gone down. It's going up. I don't know what's going on. I don't care what's going on. The market is telling me it's going up. So it's when fundamentals do the opposite of what's expected that's important from a trading perspective.

Starting point is 00:07:42 Yeah, I think it's a great example, Jack. And if I could just come up with a really simple example. So whenever I was, I think I mentioned there's a few times on the podcast, but I used to be a commodities trader, being one of those doing like 500 trades a day, which seems strange since I now feel I'm overtrading because I did like one trade, I don't know, eight months ago. But whenever I was trading, I was looking at the weather. So I was a power trade. I was looking at the price of electricity.

Starting point is 00:08:06 And giving how much demand and how much supply that were coming out of the market, there was a given price that the market believed would be the correct price. So I would be sitting and look at fundamentals. I'll be looking at the weather and says, okay, if there's more wind coming in, that means there's more supply,

Starting point is 00:08:22 which means that everything else equal, the price should go down. What Jack is saying is that there was a variety of different ways, but really it's just a question of, what does the market expect in the shop run, and what is really happening? And you can actually do that with fundamentals, even though it sounds strange to a value investor that you do have fundamentals within an hour or two hours.

Starting point is 00:08:43 In most cases, fundamentals ultimately determine markets direction. Obviously, markets will just go up or down for no reason, but they can take a long time. And fundamentals work, but they work broadly. They're very blunt instruments. They can't be used for timing. They can be used for investors. They can be used for taking positions and only get from a year. or stuff.

Starting point is 00:09:04 That's how they can be used. But they can't be used for saying, oh, here's fundamental news. It's bullish. That means I should buy. That doesn't work unless it's a complete surprise, in which case then the market may respond to the direction, but then, of course, they respond so quickly you can't take advantage of it immediately. But the thing is, in most cases, the real value, if you're going to use them for timing,

Starting point is 00:09:28 it's in a contrary to fashion. That's the main point I'm trying to make. If you use them for investing, you use them to weigh the logical way, so to speak. If you use them for trading, you use them contrary. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord,

Starting point is 00:09:51 and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses, and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people. are using right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having

Starting point is 00:10:40 dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops on freedom tech, and financial sovereignty, immersive art installations, and conversations that continue long after the sessions end. And it's all happening in Oslo in June. If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes are available at Osloof Freedom Forum.com with patron passes offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just a conference. It's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world?

Starting point is 00:11:26 because the upside is huge, but guessing your way into it is a risky move. With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system. And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs while making fast AI-powered decisions with confidence. And now with the NetSuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on,

Starting point is 00:12:06 it's AI built into the system that runs your business. And whether your company does millions or even hundreds of millions, NetSuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide, demystifying AI at netsuite.com slash study. The guide is free to you at netsuite.com slash study. NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely. That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world.

Starting point is 00:12:54 and 10% of all e-commerce in the U.S. from brands just getting started to household names. It gives you everything you need in one place, from inventory to payments to analytics. So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions and even enhance your product photography. Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing

Starting point is 00:13:29 sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. So Jack, I was going to ask you a question right now about Edward Thorpe, but we already talked about Edward in the first question. So what I'm going to do is just kind of amend this a little bit. And two people, two billionaires that we talk about on our show a lot are Stanley Drunken Miller and Ray Dalio.

Starting point is 00:14:04 And you've interviewed both of these guys. Which one of those two guys would you rather talk about during this question that you found maybe a little bit more interesting than the other that you think might have a little bit more of an interesting discussion? Well, is there a particular question about? Yeah, because I'm going to tailor the question more towards the question. Then I'll pick which one. All right. Well, then let's talk about Dahlia's risk parity. I know that in your interview hinted at the idea that he said, this one thing is the holy grail of investing. And I would like for you to kind of talk to our audience about that interview with Ray Dahlia, where it took place, kind of like what it was like in his office, what his personality was like, and then a little bit about risk parity and this holy grail to investing. Well, the Bridgewater is sort of this huge hedge fund, but more with a thousand people. So they're there in large office complex in Connecticut. And Dalia's office in particular, it's a nice bucolic Connecticut setting. There's like a stream outside.

Starting point is 00:15:04 And it's sort of a nice vibe to it. Dalia himself was kind of a tourist guy, I would say. I don't know if he's like that for everybody. But he did give me the interview. We did meet twice. but it was like I was scheduled. I was scheduled for one into you, a schedule for the other interview,

Starting point is 00:15:22 and sort of the time was up. You may have said time is up at the second interview. Yeah, I think I remember reading that. Yeah, I think I remember reading that. I think I did a job that time's up. You know,

Starting point is 00:15:30 it's like the end time going. It's like, okay, that's it. You got it. That's all for it. That's all folks. That was Dallio.

Starting point is 00:15:37 Drug and Billeri contrast, which I interviewed a long time ago. I interviewed Druck and Miller in his New York apartment and some weekend afternoon. And we went on for hours and hours. And he had a lot of stories and there was a much longer interview. Although Dracquiller, I did on one whole sitting, in Dallio's case, I did it in two, but I still spent more time with Drac and Miller.

Starting point is 00:16:00 What Dallio is talking about, the real edge sauce, the real key. And I think this is what you're referring to, is really the power of diversification. And that if you take a single investment, you have a very. a certain amount of return to risk built in. If you took a lot of equivalent investment, but that were not correlated, or at least partially uncorrelated, you still get the same return, but he drew like this curve, which shows the risk coming down as you add, you know, more investments. And so that's sort of a critical part of it is this diversification element. And I kind of, and that's absolutely true. It's not, I don't think that's particularly

Starting point is 00:16:41 unique. I think a lot of people understand that, but it is really very core to his whole thinking. And mathematically, it is true. Mathematically, it is absolutely true. That's why, for example, you could take a fund, a multi-manager fund, and if you pick managers or about equivalent, you have a much better product with a multi-manager fund fees aside down, but just from the straight to the investment point. Because if they're all about equivalent, then the return level shouldn't be affected, but your risk goes way down. So that diversification concept is, yeah, in fact, the line I probably used myself, and I don't know if it's probably not original to me, but I mean, it's kind of a common line is diversification is the only free lunch on Wall Street.

Starting point is 00:17:25 I got a quick follow-up question because on our show, we've, we had Jim Rickards, I don't know if you're familiar with Jim Richards, but we had him on our show just recently. And Jim's, you know, pushing gold really hard. A lot of people on our audience are kind of listening to that interview and kind of reading a little bit more about gold. And we know Stanley Drunken Miller took an enormous position in gold. I want to say, what is it? 20%, 25% of his whole portfolio is in gold right now. Yeah, it's significant. And he also talked about how best. It's really interesting all these billionaires going to gold right now. So this is a question more to you, Jack, because I know you're a futures guy. I know you dig into

Starting point is 00:18:03 this stuff. What's your opinion on gold in the next year or three? Okay, so that opinion is based on a technical reading, but I would see people about studies on gold, right? And they say, well, gold production, they break down production and they have gold consumption and jewelry and all this. And, you know, I thought to myself, if you look at the numbers, gold is one of these markets where there's never, never a short, it can never be a shortage of gold. Why? Because gold gets mine, it gets stored, and there's about 100 times as much gold as you use in any given year. all this writing and stuff that goes on about the fundamentals of so-called fundamentals of gold about what's being produced and what's used. And it's nonsense.

Starting point is 00:18:41 It's like 1% of 100. It makes absolutely no difference. Gold is determined by one thing. Psychology. It's a pure psychological market. That's it. Pure psychology. Now, the psychology could be affected by inflation expectations,

Starting point is 00:18:54 relative interest rate levels, currency fluctuations. Those are the types of things that affect gold. The tricky part is they use some of these things. usually affected the same way, but in some cases not. So it's not as simple as just saying, well, you know, gold will always go up if there is inflationary expectations. Well, it usually will, but not always maybe. But in any case, it's purely a psychological market. Now, I think it's pretty hard to trade something on trying to anticipate psychology. My opinion is you get the psychology by looking at charts. And in case of gold, what you have on the charts is actually

Starting point is 00:19:30 a very strong, bullish pattern on a long-term basis. Because what gold did is it had this bear move, and after a large bear move, went into this rounding bottom. And that rounding type of pattern doesn't occur that often. It occurs every now and then. But usually when you get a rounding pattern in markets, even bottom or top, and then the market goes like you get a saucer and it pops out of the saucer, it keeps on going and maintains it.

Starting point is 00:20:00 That usually is a long-term bottom. And so if I had to guess, if you said, hey, here's $100,000, you're going to have to put, you have to be long or short, you know, you've got to pick one. And you've got to hold it. And you have to hold it for two years, three years. You can't do anything. You have to hold it. Or if you're longer short, you have to hold it. Definitely, I would go long, even though it's gone straight up for recently.

Starting point is 00:20:27 So Jack is always really interesting for Preston and I to be able to. to grow our knowledge with our guests. That's something that really value. And we do the same thing from our audience. We talked about not showing Japanese yen, the whole thing about independence and having your own strategy. And we think that's super important.

Starting point is 00:20:44 I think that goes for all three of us, but we also use other people to grow our knowledge. Jack, I know that you recently founded Fund Cedar. Could you please explain how you implement the inputs from the community in your own strategy? Okay, so first I've got to tell people, Most of the audience will not. Fund Cedars knew, so I'm sure the vast majority of the audience will not know about it.

Starting point is 00:21:07 So Fund Cedar is not my original idea. I can't take credit there. I'm a partner in the firm and the founding partner, Emmanuel Bollari. We have another partner, James Bivings. But he had the idea of using the web as a central source where you could bring together traders worldwide who have trading skill, but our target. totally unknown and have no way of access in capital and act as a connection between them and investors who are looking for new trading talent and don't want to, you know, invest

Starting point is 00:21:44 to say multi-billion dollar managers everybody else is investing with. So that was his basic concept. And the idea was to create a website where traders could post their numbers, not they themselves posted, but they could link their accounts to the website. Therefore, the numbers get verified from the broker. So you create a verified trader base of traders all over the world just because, not because we're saints or anything like that. Our self-interest is if we can attract unknown, unknown, but good traders to the site, then we will be able to find them before anybody else does. And then we have a separate company for Fundseeder investments that will use the database that we form on Fundseeder to select superior traders we find and then

Starting point is 00:22:29 package them in individual funds or multi-manager funds and use that product for investors. So that's the basic model. So we act as the connecting link through two separate companies. The fund-seated technologies attracts the traders and gets the verified track records. And then the fund-seater investments uses that intelligence to form a superior and completely different product. So, Jack, whenever I hear something about measuring the performance of portfolios, I always think it's an interesting conversation because it's really hard to find the right answer to how do you really measure who's doing well. I mean, it's also a question how much risk are you assuming.

Starting point is 00:23:05 So can I ask you because you've spoken to so many traders and so many investors, how do you measure portfolio performance? I have my own favorite single, my own favorite single measure, favorite because I think it is in one number captures the essence of return and risk. And it's much better, I think, than a lot of other things in the use. So everybody uses is the sharp ratio, right? That's the popular thing. That's nothing wrong with the sharp ratio is okay. However, there are a couple of drawbacks to the sharp ratio, but maybe the biggest drawback of the sharp ratio is how it defines risk. The sharp ratio says, well, you have your return, you're divided by the risk. What's risk? Risk is volatility. Now, here's the interesting thing.

Starting point is 00:23:50 Sometimes high volatility is indicative of high risk, but it's not always the case. You could actually, I can give you examples where low volatility is indicative of high risk. And the other part of that is that high volatility is not necessarily bad. Traders don't mind high volatility. I'm not traders, investors. Investors don't mind high volatility. They mind losses. You know, I've been in this business for a long time.

Starting point is 00:24:17 I've never had investors say to me, darn, you made 10% last month. I can't stand that type of volatility. investors don't mind volatility. They don't like downside volatility. So if you're trying to measure what risk is the way investors perceive it, why use volatility, a symmetrical volatility measure, which is penalizing strong returns. And then you penalize really good managers who will sometimes have very large gains because they really hit it right. like we're talking about green black with that Wells Fargo trade,

Starting point is 00:24:53 but he's structured a trade where if he's wrong, he loses a little bit. And if he's right, he makes a lot. So you're going to penalize it because he's made a lot? Yeah. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business.

Starting point is 00:25:13 That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy frameworks. Companies like Ramp and Ryder spend 82% less time on audits with VANTA. That's not just faster compliance, it's more time for growth. If I were running a

Starting point is 00:25:49 startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at Vanta.com slash billionaires. That's Vanta.com slash billionaires. Ever wanted to explore the world of online trading, but haven't dared try? The futures market is more active now than ever before, and plus 500 futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, 4X, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. Deposit with a minimum of $100 and experience the fast, accessible futures trading you've

Starting point is 00:26:39 been waiting for. See a trading opportunity. You'll be able to trade it in just two clicks once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an unlimited risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit Plus500.com to learn more. Trading in futures involves risk of loss and is not suitable for everyone.

Starting point is 00:27:08 Not all applicants will qualify. Plus 500, it's trading with a plus. Billion dollar investors don't typically park their cash in high. yield savings accounts. Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes thanks to the Fundrise income fund, which has more than $600 million invested and a 7.97% distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years.

Starting point is 00:27:47 Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. The fund's total return in 2025 was 8%, and the average annual total return since inception is 7.8%. Past performance does not guarantee future results, current distribution rate as of 1231, 2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income fund's prospectus, at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. Yeah, so, Jack, my question would be, say that I would be a trader and I would want to raise money because I'm doing the best trades and I can show like a really good track record. So if I was a trader who comes to you and say,

Starting point is 00:28:36 okay, Jack, you need to fund me or need to find someone who can fund me because I have a great track record. Would you look at the Sotino's ratios? Is that it, which is basically just the maximum drawbound in a given month or a given time period. Is that a better measure giving your critique of Sharp's ratio or what do you think? Yeah, the Sortino ratio is definitely much better. And what I personally use is something to call the gain to pain ratio, which is closer in conceptually much closer to the Sortino obviously than the Sharp. And the gain to pain ratio and the Sorino will have a lot,

Starting point is 00:29:08 we'll have a reasonable amount of correlation. I like the gain to paint because it's real simple and it boils things down to its absolute core. So with the gain to pain, the defining the people, and I guess it's my own measure. There are some things out there like the omega function, which is a curve, which evaluated at zero level will give you the same ranking. But as a single statistic, the gain to pain ratio, as far as I know, I was the first one who started writing about or using it. So what the gain to pain ratio is, you take all the monthly returns and you sum them.

Starting point is 00:29:39 And then you take only the monthly losses and you sum those. and then you take the first sum, which is the sum of all the gains, all the total amount of money made, that's net, because you're making some months, you're losing in some months. But if you add all the months returns, what you basically get is the sum of all the returns you've made. And then you divide it by the absolute value of all the losses. So what you're basically getting is the amount of money gain

Starting point is 00:30:05 for the amount of losses suffered during that period. So the more losing months there are, you know, the more, the bigger that denominator will be. The larger the losing months are, the bigger it will be. So you're penalizing exactly what you want to penalize. You're penalizing multiple losing months. You're penalizing larger losing months. And you're really differentiating a track record where the gains are made without a lot of losing months, without big losing months. So basically that's the concept. It's the amount that it's a total of all returns divided by the total of all the losses, the absolute value of that. That's the ratio. So you can have

Starting point is 00:30:40 managers who are riskier than you realize. For example, you get a manager. You look at his track record and he's got a, let's say you've got a 5% down month. You say, well, that's not too bad. But hey, how do you know? All you know that manager could have been down 25%, just managed to come back and landed up down 5%. If you have daily numbers, there's no place to hide. So if you do a gain to pain ratio of all the days, you take all the days add them up. You take all the losing days, add them up. You take that ratio, boy, that gives you a microscopic look, and it tells you everything. It gives you the positive thing for the return. It gives you the negative thing for every single daily loss that occurred.

Starting point is 00:31:19 And that ratio is a powerful number. Very simple, powerful number. So that's what I personally use. In my mind, it's a single best, most effective, and meaningful and easy to calculate statistics. So that's my favorite statistic. That'd be neat to see that graft. If you could take that daily snapshot and graph the performance over time, I think that's what we do.

Starting point is 00:31:38 That's what Flet's see that does. Yeah, that's the main thing it does. In fact, I like it because as a trader, you can put your record, you can look at your equity curve. It's really nice to be able to see your record curve. You can see when you're starting to go down or whatever. And so that's one of the things. And brokerage companies, as far as I know, they don't offer that.

Starting point is 00:31:54 They probably don't offer it for a good reason because if people start to see their record to go that in my close their accounts, I'm just, I'm just guessing here. I'm not accusing anybody of any. Well, I'll tell you what. I know there's going to be a lot of people on our audience that are interested in this out. So if you are interested in going to Jack's site here that has all this service, please go to our show notes. We're going to have a link there. So just in the event you forget the name or whatever, just go to our website, go into our show notes. We're going to have that in there. We're going to have

Starting point is 00:32:21 all of Jack's books. And let me tell you, as a person who's read multiple of these books, they are just fantastic. And Stig, I know can attest. And if you guys go back, we did a podcast episode. I don't remember what the episode number was, but we did a podcast episode on Hedge Fund, Market Wizards, and we just love that book. And this is before we knew Jack and before we had Jack on the show. And everyone knows we're pretty honest with our reviews. If we don't like the book, we're pretty upfront and honest about it. So we really enjoyed all of the books that you've written, Jack, and we definitely want

Starting point is 00:32:53 the people in our audience. If you haven't read any of Jack's books, you are going to love them. So we're going to have a link to all of his books on Amazon in the show notes. Is there anything else, Jack, that you would like to hand off to our audience that they can learn more about you website or anything like that. Well, like the main one is funseater.com. I also have another website, jackshueger.com. I would also throw out that there are narrated versions of the market wizard books,

Starting point is 00:33:19 audio versions. And I'm currently the first time and I've had the opportunity to actually pick the narrator. And so one of my market wizard books, new market was this never had, never had the narration done. My agent was great in getting the rights for me. So I went through a process of picking narrators through ACX. which is connect with audible. And they've got just phenomenal narrators.

Starting point is 00:33:39 And it was, I was floored. Like, I got, like, I put up a couple of excerpts, and I got like 40 people respond. They were all, there's so many of them were great. And I got it down to 10, and I got it down to four. And I got it down to one. And the guy is just doing, he's doing just a knockout job. So this is the best narration of any book I've had of mine, which is coming out about a month.

Starting point is 00:33:58 And that'll be the new market. Where it's the fellow's name is DJ Holt. Well, so one of the things that we offer, so we have a deal with audibles, Jack, through our website. If people go to our, onto our website and they use our link for Audibles, they can download their very first audio book for free using our link. So you might want to even hold off if you want to get your free book or you want to buy it when it comes out in May. It's up to you. But we'll have a link to the Audibles link. If people want to do that and get their first book for free, we'll have all of the links to Jack's book. Jack, thank you for your time.

Starting point is 00:34:28 I know that you've got a very busy schedule. You do countless things. So to take some time out of your weekend to sit down and chat with Stig and I for an hour and 20 minutes. We are just so thankful and really appreciative. And I know our audience is going to benefit from this greatly. So thank you for your time. This was fun because you guys went into you got a lot of different types of questions. They get so tired of getting the same questions all the time. So it's nice to get something from left field.

Starting point is 00:34:55 Well, thank you for your time, Jack. Hey, so I want to take this moment just to make a quick announcement to everyone in the audience. So one of the things that Stig and I want to start doing is doing more live events all over the world. So, for example, in June 11th, we're going to have an event in Seoul, South Korea. So anybody listening to our show from Asia that's out near South Korea, if you want to link up with us for a free dinner event on the 11th of June, and this is coming up in 2016 in Seoul, South Korea, We're going to have a sign-up location on our website at theinvestorspodcast.com where you can go in there. You just basically click on a link. You give us our email address and then we'll provide you more information about the event.

Starting point is 00:35:40 And it doesn't cost anything to sign up or just you basically pay for your dinner and that's it. And you guys get to kind of meet us and hang out. So for the one in Seoul, South Korea, it's just going to be me. Stig's not going to be able to make that one. But we have other events. And if you're interested in doing this, just go to our web. site and go to this page. You'll see it at the very top of our homepage. It's in the drop-down menu and then also where we have our priorities for the show. We have a thing where we have

Starting point is 00:36:09 one, two, three. And then number three, it says, link up with us for a live event. And that's where you'd sign up for this. So just a heads up. So in the 16th of July, 2016, where I'm going to be in Huntsville, Alabama. So if you live in Atlanta, Nashville, or anywhere down in that area, feel free to come out. These are all on Saturday nights. And then in Baltimore, Maryland, on the 24th of September, there's another event. So if any of those kind of are in your neck of the woods or in your neighborhood, feel free to go to our website, sign up for those, and then we can kind of hang out for a night. So I want to make that announcement. We're going to have a lot more of these coming up in the future. So just kind of stay tuned and keep looking at the tab to see if we're

Starting point is 00:36:49 coming to a town near you. Thanks for listening to The Investors Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www.theinvestorspodcast.com. Submit your questions or request a guest appearance to the investors podcast by going to www.com. If your question is answered during the show, you will receive a free autographed copy of the Warren Buffett Accounting Book. This podcast is for entertainment purposes only. This material is copyrighted by the TIP Network and must have written approval before a commercial application.

We Study Billionaires - The Investor’s Podcast Network - TIP 086 : Part II - Jack Schwager & Stock Market Wizards (Investment Podcast)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.