We Study Billionaires - The Investor’s Podcast Network - TIP130: Mastermind Discussion 1Q 2017 (Investing Podcast)

Starting point is 00:00:00 We study billionaires, and this is episode 130 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 Stig Broderson. Hey, hey, hey, hey.

Starting point is 00:00:29 How's everybody doing out there? This is Preston Pish, your host for The Investors. investors podcast and as usual, I'm accompanied by my co-host, Stig Broderson, out in Seoul, South Korea. And we have assembled the crew here, the mastermind group for the first quarter of 2017. We have Colin Yablonski with us. He's up in Calgary, Canada. Is it cold up there, Colin? How's your weather been?

Starting point is 00:00:51 We had a Chinook this week, so it wasn't too bad. We got Toby Carlisle out in sunny, California. How are you doing, Toby? I am doing well. It's cold. It's cold here. Probably as cold as wet cold. I'm sure that 70 degree weather is just brutal.

Starting point is 00:01:06 Yeah, I would trade you your cold, Toby. Bleak me. And of course we have Hari Ramachandra up in Silicon Valley in California. How are you doing, Harry? Not sunny here too. It's cloudy and raining. Oh, man. All right.

Starting point is 00:01:21 So if you're joining us for the first time and you're not familiar with our mastermind group. So Colin Yublonski is a search engine optimization expert living up in Calgary. Toby Carlislew has his own. financial company. He does all sorts of things. He's the master of value investing. He can tell you everything you ever wanted to know about Graham, Dodd, Warren Buffett, all that stuff. And you'll find that out real quickly when you listen to some of his comments here. And then Hari Ramachandra, he's an executive at LinkedIn out in Silicon Valley. He gives us all the good scoop on what's happening out there in the valley. So great to have you guys here with us again. And I think, Colin,

Starting point is 00:01:57 you got the first topic you want to talk about. So go ahead and take it away. Yeah, sure. So I just got finished reading Warren Buffett's 2016 letter to shareholders. And I thought that we might kick it off by talking about some of the content within his letter. I had four topics, but one that I really wanted to touch on right out of the gate. And it's within the first two or three pages of the letter. Is a comment that he made about economic skies, filling with rain clouds. And once every century, it rains down gold. and that during that time

Starting point is 00:02:31 you need to be prepared with, what did he call it, a wash tub or a teaspoon, and Berkshire Hathaway has that wash tub, or more accurately, probably like an Olympic-sized swimming pool, if you look at all the cash

Starting point is 00:02:44 that they have on their balance sheet. But I just wanted to kind of open it up with that statement, because I think it's quite indicative of the time that we're in. So I kind of wanted to open it to the group and see what your thoughts on that were. Great comment.

Starting point is 00:02:55 Buffett is very bullish, but I think he's always very optimistic, So I don't know that you can draw anything from that. But he's also carrying a lot of cash, which means that he's not finding a huge number of opportunities to deploy capital. So it might be more a case of looking at his actions rather than his words. Or maybe what he's saying is he's hoping for a downpour so he can run out with the Olympic-sized bathtub and fill it up. Actually, Toby, you brought up a very interesting point.

Starting point is 00:03:22 I also have observed that Buffett is usually the optimistic person when you see Munger and Buffett, Munger is more realistic. A couple of weeks back, I was at the DJCO annual meeting. And Munger was in his free flow in terms of expressing his ideas and thoughts. In fact, after the meeting, he stayed back a couple of hours just talking to folks. And it was a very interesting discussion. Somebody has recorded that on their smartphone and uploaded on YouTube. And I will share the link with Pristin and Stig so that the listeners can also listen to

Starting point is 00:03:57 some of the nuggets of wisdom shared by Mr. Munger. And what I gathered from that meeting is Munger is not as optimistic as Buffett overall about the markets and even the prospects of Berkshire earning returns going forward. I guess Buffett is also pretty forthcoming about their disadvantage because of the size of funds they have. Yeah, I agree with you, Hary, in terms of looking at Buffett. and Charlie Munger differently. I definitely think that Warren Buffett places a lot of emphasis on his legacy right now. And he's always starting out his letter

Starting point is 00:04:37 by talking about prosperity of the US. There's something in the institution, something in the spirit of America that he's really bullish on without being too concrete. I think this is definitely a classic Buffett in that sense. But I did read the letter exactly the same way as Colin. And it really made me think about Beatles.

Starting point is 00:04:55 I know it sounds super weird when I'm saying, you know how Buffett's letter is sort of like Beatles? We're all looking for clues, right? Oh, this Beal song probably means that the Bealists did X, Y, C. Whereas it probably just meant, you know, it's just rhymed, oh, whatever. And I kind of feel the same way whenever I'm reading through Buffett. I do read it exactly the same as Colin, and at the same time I'm thinking, like,

Starting point is 00:05:15 perhaps it's just a coincidence that he actually put it like that. It's interesting, though, because, you know, two pages later, he goes into detail as to why share repurchases are not always a good idea. And so I'm not sure if that's an external pressure that he has on him from his investor saying, well, you're carrying $86 billion in cash. Yeah. Why are you not now making those share repurchases? You know, for me, when he talks about that, and we've mentioned this on the show a bunch of times is when do you value liquidity over maybe being exposed to equities with some of your portfolio size? I think that he's kind of talking to that.

Starting point is 00:05:52 And I'm sure he's getting an enormous amount of pressure from a lot of shareholders of like, hey, you're sitting on cash, why not just buy back your own stock? You know, why just continue to sit on all that cash? And I think that my personal opinion is he's value in the liquidity more than he is and having that ability to have flexibility if something happens. I think Buffett's always been fairly explicit about the fact that he doesn't try to time the market. And he's also been fairly explicit about the way that he views buybacks. When the stock is at a discount to its intrinsic value, then buying back shares concentrates the value for the remaining shareholders. When it's at a premium to the share price, then you're sort of tearing up capital doing that

Starting point is 00:06:36 and you're better off taking the buyback and leaving at that stage. I don't think he's saying anything other than he thinks that Berkshire Hathaway is within the range of being fairly valued to overvalued or it's certainly not undervalued. And he's put a floor, not a hard floor, but a floor at around, I think 120% of book value where he won't consider it until it gets to that level, which I think is a little bit higher than it was in the past. I think it might have been 110%. Yeah, you're definitely right, Toby, about the limits for a repurchase.

Starting point is 00:07:04 So back then it was 110 and now it's 120%. So today, when you look at the book value, it's 1.5, so 150%. Berksie Heatherwe seems fairly valued. Now, keep in mind, though, that in the portfolio of common stocks is currently priced at $122 billion. And some of those stocks definitely seem high the price the moment. But in general, yes, it seems to be a fair value stock, as you're saying. You know, Toby, when we talked with Monish Pabri back around Christmas, he was saying the exact

Starting point is 00:07:35 same thing that you just said. But, you know, the other side of me, so I agree with you. And I do believe Monish, I mean, he talks to Charlie Munger all the time. And I mean, he's an insider with these guys. So if he tells us that's what they really are thinking, I believe that. But at the same time, if you do a discount cash flow on Berkshire, stock today and you look at the free cash flow of the business, what kind of yield do you come up with? Anyone in the call know what the yield is if you're looking at? I would guess it's around five or seven percent, right? Stig? Yeah, it's close to seven percent. Yeah, seven percent. So let's look at that. Seven percent yield on Berkshire stock. He buys back his own shares. He puts

Starting point is 00:08:15 them into the treasury, you know, on his balance sheet under the equity line and he retires those shares. You know, he's locking in a 7% return. The market right now is priced at a Schiller PE of 30, which gives you a 3.3% returnish somewhere around there, 3%. And I just want to add, that's the same valuation that we had in the 1929 crash before the 1929 crash was a Schiller PE of 30. So I hear what you're saying. I hear what Monish Pabre is saying. And you hear everyone in the value investing community say that. But at the same time, he's actually. He's acting differently. And for me, if your stock is priced at double, more than double what the rest of the S&P 500 is, why aren't you buying your own stock? It doesn't make any sense.

Starting point is 00:09:04 And I guess what that does is that leads me back to Hari's original point. Can you give us a synopsis or a quick summary of what Charlie Munger was saying on this video that we are absolutely going to share on the show notes. What was he saying, Harry? Sure. So you know how the DJCU are meetings go, it's basically folks there asking Munger questions and Munger sharing his wisdom along with his wit. He is much different than how he is at the Berkshire meeting where he speaks much less. Here, he's the man of the show. He's talking all the time.

Starting point is 00:09:39 There are a couple of things that I observed in that meeting. He was talking a lot about his own mortality and he was even talking about he wrapping up his life in a way. He also spoke about diversification versus concentration. He said his entire net worth is three stocks, but not really three actually. The one he said is Berkshire, obviously. The other one is Costco. And the third one is Lilo, but Lilo obviously runs a fund. He was very bullish about China. And in fact, somebody from China, somebody from a financial news agency in China was there, he asked a question saying, if I'm a millionaire in China and I want to diversify, how should I invest in US? And Munger's answer was, if you're a millionaire in China,

Starting point is 00:10:28 why would you even think about investing in US when your country is growing so well? So that's kind of like, you know, overview, I would say it was mixed. He was cautious. He was not pessimistic, but he was not optimistic as well. On final note, he said is that investment management business today is really, really hard. And he said the kind of deals and the kind of opportunities that Munger and Buffett over the years, when they were growing, they used to find, are not available anymore. The information arbitrage or the information edge you could get is really hard to get now. So he said, it's a tough business, but at the same time, he said, hey, why should it be easy?

Starting point is 00:11:11 So it was a fun conversation. I'll definitely share the link with you guys. That sounds awesome. All right. So Colin, you said you had four main points. Did you want to hit any of the other ones? Well, one of the points was just that Warren Buffett counter to Charlie did paint a really optimistic picture of the United States. And I thought that that was really interesting because, again, he dedicated almost a full page in his letter to shareholders going through how, you know, the United States starting from a stationary position 240 years ago has now grown to become one of the economic superpowers in the world. And I just thought that narrative given potentially the lack of confidence in the current administration in the United States was really interesting to include in his letter to shareholder. Let's take a quick break and hear from today's sponsors. All right.

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Starting point is 00:15:59 Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. Well, I guess one of the things that he really likes, and he doesn't mention politics, specifically, but he's talking about legislation just like as a general concept. And he's also talking about how BNSF, the railroad company, and energy accounted for 33% of the operating earnings. So that's one side of it. That's super interesting. The other thing is that,

Starting point is 00:16:31 going back to the legislation, is that they invested almost $9 billion in planet equipment last year. And I think that's something that he's really looking into right now, with the current administration might look interesting in terms of building of America's infrastructure. And one thing that I found particularly interesting is that if you look at the power grid in the US, it's very old and it's very expensive to work with at the moment. And I wouldn't be surprised if we were looking at a company like Berkshire. There's definitely not like cash in terms of helping the nation building up that infrastructure. Because it gives Buffett what he really likes, gives him.

Starting point is 00:17:11 the chance to create a monopoly power, right? So he can make what we would call supernormal earnings. Basically, he can make more than market return by investments like this. And he can't make, you know, 20% a year like he has been used to, but he can definitely be more than the market. And it's very, very hard for all the players to enter a field like that. That was one of the takeaways I had from the letters that we will probably see even more than that in the years to come. So what did you guys think about the ETF conversation at the, at the tail end of the letter. Harry, I know you got an opinion. Yes. One of the things I was thinking is if Buffett is so far indexing and since he has such a huge capital base and it's really

Starting point is 00:17:53 hard for him to earn super normal returns, why doesn't it just come off his funds and index fund himself? I think that's a great point. So he talks about how difficult it is. I mean, he has the bet with the portfolio managers and all that. And when you look at his marketable securities, You don't see any ETFs for marketable securities, which I find kind of interesting, especially, you know, as different markets kind of dip and accelerate and gain, you'd think that maybe he would invest more of his marketable securities into some of those industries that are maybe struggling and just kind of take a basket approach using ETF vehicles. I mean, he had a huge, for anybody that's not read the shareholders letter, really big write up about ETFs and how Jack Bogle is probably one of the most important people that. that's contributed to providing the common person of vehicle to invest and have great returns at very little fees. And I completely agree with that. 100%. I think Jack Bogle is going to go down in the books as somebody who's really kind of changed the industry for the good in a major way.

Starting point is 00:18:58 I mean, he already has. I also had a question to Toby about index funds. One of the ironies of index funds is that if everybody starts doing it, then it might, might lead to an inefficient market and we might end up making less return. So I wanted to hear Toby's thought on index investing and how active fund managers take advantage. The reason I'm asking this is a couple of fund managers recently have commented about the perils of index investing, including Seth Claremont in his latest letter to his investors. I think it's a great thing if everybody starts becoming index investors.

Starting point is 00:19:44 I think everybody should do it right now and stop trying to beat the market. Partially that's a selfish comment. Partially it's, I think that Buffett's got the best approach to it where he says, if you're not prepared to spend some time studying the market, then the best place for your money is in the lowest cost index fund that you can find, which is probably an ETF because it has attractive tax implications. an ETF is just a wrapper. It can be a mutual fund.

Starting point is 00:20:10 It can be any other sort of wrapper as well. But the idea is that it tracks some broad market index like the S&P 500, which is not exactly, but it's close enough to just tracking the largest 500 companies with sort of an extensive float, which is stock that's not held by insiders. And it's sized by market capitalization. So the biggest of the companies gets the most amount of capital.

Starting point is 00:20:32 And I think what your objective is to replicate the ESP 500 or the US stock markets, and that's a pretty good approach. The problem is that they do have these problems with them, they have these systematic errors built into them. They call them, and if you think about it for a little bit, you can see one obvious problem. If you're a value guy and you believe in value investing, which I do, the bigger a company gets everything else being equal.

Starting point is 00:20:55 If you've got two companies with $100 million in earnings and one trades at 20 times earnings, it's a $2 billion company, and the other one trades at two times earnings. It's a $200 million company. $20 billion company gets 10 times as much capital. allocated to it in that sort of market structure and everything else being equal, what you would try to do is maximize the intrinsic value that you're buying. And so you might want to buy more of the better company or more of the cheaper company.

Starting point is 00:21:21 So to the extent that everybody rushing into index funds distorts the market, when the money's flowing in, which it has been for quite a while, those distortions can't keep on growing and growing and growing. and often it's the investment strategy that looks the best over the recent history that is the strategy that's about to stop working really well. And I think it's been a great period of time to just be a long stock market investor index funds. So I had a follow up to the topic on index funds. And what I wanted to bring up for discussion is the recent moves in the indexes, whether it is Dow Jones or SNP,

Starting point is 00:22:03 All of them have broken new records. And recently, one of my friends shared a newspaper clipping from March 2000, where the headline on Financial Times read, if this is a bubble, it is sure hard to pop. And after this article was published, Dow went from 10,000 to 11,700. So it had just hit 10,000 at that point of time. And in the article, it says that the fund managers of the world's largest mutual fund fidelity bet billions that the bull market was over at the end of 1995. The Dow Jones Industrial average has doubled since then, and that particular fund manager is no longer at fidelity.

Starting point is 00:22:49 And it also goes on to say that Professor Schiller declared in July 96, we appear to be flying at the wrong altitude, and a correction could be substantial and lasting. that Dow Jones has risen 87% since then. Federal Reserve Chairman Alan Greenspan uttered the most memorable phrase of his career, Irrational Exuberance in December 1996. Since then, the industrial average has climbed 55%. Perhaps those predictions were right, just very premature, or maybe we have entered a new era of prosperity and profits. That's how the article ends.

Starting point is 00:23:30 And recently I saw an article in Wall Street Journal. It says reluctant bull says this rally isn't about fundamentals. And there they talk about how a lot of analysts are now throwing their towel and saying that, hey, it might be a bore valued market. But if we miss this, then we are going to miss the board. I mean, I love what you just threw out there because, I mean, if anything, that describes why these cycles exist. It's because everyone thinks, well, it must be able to go higher. And so then it just keeps going higher until everyone stops thinking that it can keep going higher.

Starting point is 00:24:08 I mean, it's a psychological thing that you're really describing here. And I'm sure when people go back and listen to this recording three years from now, they're going to be like, how did these fools not see what happened or five years or whatever it might be? Who knows? Now, for me, whenever I think about what you're describing there, we had the pleasure of talking to Bill Miller back in. December of 2016.

Starting point is 00:24:33 And for anybody who doesn't know who Bill Miller is, so Bill Miller's the chief investment officer at Lake Mason, he's managed over $60 billion in his career, fund manager of the decade back in the 2000 time frame. And so the thing with Bill Miller, when I was talking to him, he made this comment to me. He said, back in 2000, when the Schiller P.E. was at a, how high did it get? a 37 or a 35 or something like that, significantly higher than what we're. 44, okay, so it's way higher than what I even said, but drastically higher than we are today. He said, we got there when interest rates were at like 5 or 6 percent or something like that.

Starting point is 00:25:15 He said, so how in the world do you think we can't get there again when interest rates are at 2.4%. So for anybody who understands how, you know, assets are valued, it all comes down to interest rates. It all comes down to that risk-free rate. And you're using that number, the lower that the risk-free rate goes, the higher the valuation on the asset or security, the premium that you'll pay will go. So what his point was was if we're using 5% or 6%, which is a much higher number than we are today, and we were getting prices that were sky high at the multiple that Toby said, which was 4%. 44, you know, what makes you think we can't do it now? And that's a great point. And for me, when he said that to me, I was like, well, I don't even know what to say to

Starting point is 00:26:02 something like that. Like, how do you even argue with that? And that's because of his experience. He's seeing these things. I mean, it was such a profound moment for me to hear him say that. And I'm not saying that that's what's going to happen here. And to be quite honest with you, I think that this thing is just, are we at the longest credit cycle we've seen ever at this point?

Starting point is 00:26:20 Are we at that point? I think we are. We're getting pretty close to it. It might be number two by, you know, a little bit. But we're getting to the point where this is the longest credit cycle in the history of the market. And the prices are high, but that doesn't mean that they can't get higher. And just one more comment. I know I'm going on a little long here.

Starting point is 00:26:38 But we were just talking to Ed Thorpe last week. The guy's net worth is $800 million. Personal net worth, $800 million. And I'm talking to him about credit cycles. And he's just like, well, it's not like you can predict when these things are going to change. You know, I mean, he just said it's so matter of fact, like, do you actually think you can figure out when this thing's going to turn and start going the other way? And he's like, it's like an avalanche, you know, you can't predict when the avalanche is going to fall. You just know that there's a lot of snow there and it's probably due for a collapse and for it the fall.

Starting point is 00:27:08 But you don't know when that's going to happen. And so those two individuals, I think Bill Miller's net worth is 500 million and then Ed Thorpe is 800 million. When those two guys say things like that, it really makes you think, like, wow, you can see why they've gotten to where they got because they understand these things. I don't know what that means for the way that you should approach this moving forward, but I can't say this. You got to be on your toes because this thing could turn very quickly. The whole Trump rally and everything. I mean, this could turn really quickly in the opposite direction. But that doesn't mean that we know when that's going to happen. And I think that's really important for people to

Starting point is 00:27:48 understand. I've been strident in the past about the import of getting very overvalued on those basis. It doesn't really matter which one you use. Buffett's favorite one is gross national product, a total market capitalization. And then there's a Tobin's Q or equity Q, which are essentially the same thing. They look at the replacement value of assets versus the market price of those assets. And there should be a relationship between those two over the long run. When they get very far out of whack, then basically what that means is that you're incentivized to go and start businesses and sell equity. For a long time, they've been soaring above their very long run at averages.

Starting point is 00:28:24 And you can calculate these averages back to 1850. I think I've got data. You can pull the data off the internet. You can do it yourself. I've put it up on my website Greenbacked in the past. One thing that I have noticed, I have run Shillard P. Ford starting in sort of 1850 and then using it at each stage as if you only had the information that you had up to that point.

Starting point is 00:28:46 So I built these little models that how would you invest based on the CAPE if all you had was the data that you had to that point. So what do you find? Basically, the market from about 1850 to 1930, the market got consistently more and more expensive. So for that entire period, you were almost always in uncharted territory. You're almost always sort of getting to points where you'd never seen this sort of valuation before. And then from 1930 through to the 1950s, it was sort of undervalued. lead for that entire period, but all of a sudden you had a most expensive period to sort of look back on, which was the 1930s. And you could say, well, if we ever get back to that level, I'm going to punch

Starting point is 00:29:25 out because that would be a silly level of overvaluation to get to. And then, you know, what happens is that gets you to 1996. And I understand why the Fidelity guys were getting nervous in 1995 because they would have been looking back and saying this market, and Shiller would have been doing the same thing. This market is now as expensive as it was in 1930. And what? And what? And What happened is that it ran up for another four years. There was an almighty crash. And the market rallied for about five or six years through to 2007, June 2007. There was another almighty crash.

Starting point is 00:29:57 And the market has rallied basically. I think today is the eight-year anniversary. Today's March 6th. It's the eight-year anniversary at the bottom of the last crash. So it's rallied eight years. If you'd taken all of your chips off the table in 1996, you've missed out of it. an enormous period of growth in the market. And I've thought about that a lot, and I think you've got two options.

Starting point is 00:30:22 You have to embrace the fact that you are going to have these almighty crashes every now and again. We're probably closer to an almighty crash now than we have been in a long period of time. But I would have said the same thing in 2012, 2013, and I'd have been wrong. You just have to sort of accept that it's going to happen. And I think Buffett and Munger also say, don't put any money into the market that you're afraid to see torn in half, because that's a regular occurrence in the market. Let's take a quick break and hear from today's sponsors. No, it's not your imagination.

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Starting point is 00:34:07 All right. Back to the show. Yeah, when we were talking to Ed Thorpe last week, he said, just sell down to the sleeping point. Put on as much of a position that if you do see a 50% meltdown in the market, you're still okay with that. You can still stomach it. So for the people that are trying to enter the stock market today, let's say you came across a couple thousand bucks and you want to put it in the market and you want to get your feet wet, I think the best advice, because it is so highly valued, doesn't mean it can't go higher. it might go up to 45. How high did the Japanese market get? The Nikai got 100 times.

Starting point is 00:34:45 China was 100 times too. PE of 100. That means the market would go three times higher than where we are right now. So here we are talking about how overvalued is. Well, there's examples around the world where these things have gone three times higher than we are right now. Just to throw that out there. Not saying it's going there.

Starting point is 00:35:01 I highly doubt it's going there. But it could. So that's something that people need to be aware of. So if you are worried about that, get into the market to a point that you know you'd be comfortable with and then slowly, gradually build yourself into it more and more as you go along. I think it's a really interesting discussion we have about comparing different decades in terms of stock returns. It's very important not to be blinded at all about looking at the down numbers because it

Starting point is 00:35:30 comes down to fundamentals. So also to refer back to what Hardy was talking about before, not in the short run, but in the long run fundamentals are the most important thing. So whenever we're talking about fundamentally the market being overvalued in 1929 at 260, well, that's because that is what the fundamentals said back then. And now we're looking at what is the fundamental saying in Q1, 2017. And they're simply just saying that the market is overvalued. I think what Preston brought up early about the bet that he met with the hedge funds, I think that symbolizes more than anything why fundamentals matters, because it's not a...

Starting point is 00:36:06 only one head fund he's competing against. The way it's outlined, it's something like there's this guy and he was picking five other guys and their funds or something like that. And then they were comparing that to the S&P 500. Well, that's not the full story because it was actually fund of funds. So these guys were picking more heads funds. We are talking about 100 funds here. Basically, they're saying we have 100 people and they can beat the market, which kind of doesn't make any sense if you have 100 people because more or less you have someone like the market. And some of these guys even invest in asset classes that typically doesn't perform as good as stocks.

Starting point is 00:36:43 And still you think you can beat the market. That really shows you the strength or the weakness, if you will, of the large numbers. So how can you have a market? This is all the heads fund managers. How can you have some of that's close to the market that has really expensive fees compete with the actual market with very low fees? It just doesn't make any sense. And that's also why they lost the bet.

Starting point is 00:37:01 And just so people know what Sticks talking about there is for a little context is he's talking about this bet that Warren Buffett has with protege partners. And what the bet is is that they could pick a fund-to-fund financial instrument that goes out there and picks multiple fund managers and then they lump them into a basically a basket. So you have like double overhead with these fund of funds that Buffett was basically saying an ETF would crush. So he had a bet. It was a 10-year bet, right? The performance over a 10-year period of time. I think we're in the ninth year of it at this point. And he talks about this in the shareholder letters. And I think the closest performance of five different fund of funds was like, what, 30 or 40% off of what the index has performed somewhere around those numbers. Yeah. So the S&P index fund have done 85.4%. And I think the fund of funds, as far as I remember, that's close. close to 20 or something like that. Yeah. So he's crushing it.

Starting point is 00:38:02 And there's a huge write-up in the shareholders letter, which we'll put into the show notes. So if you guys want to read through this, you can see all the analysis that Buffett's done and talks about how criminal like some of these fee that the managers are sucking off these fund-to-fund type assets. Go ahead, Hari. Yeah, Preston, I think this is a great discussion. And this goes back to Buffett's advice to a no-nothing investor is best of doing indexing. However, I wanted to bring up one point that you made regarding making sure that you can sleep well when you're investing. That's a great advice. And a lot of people will eventually do well if they invest only sums that they can sleep well even if they lose 50% of it.

Starting point is 00:38:48 However, I wanted to highlight one thing. A lot of folks don't apply that when they're buying real estate or their homes. a lot of their net worth is actually tied to their home. And if their home price fall by 50%, I'm not sure how many people will be able to sleep well. I really like your comment, Harry, and I have a statistic about that, that I think I brought up once or twice in the earlier show,

Starting point is 00:39:13 but it's about how people have a hard time valuing their own home. So in this behavioral finance book, I just read, more than 90% of the respondents. And I just want to say this was just after, the great financial crisis. So after that, more than 90% have seen that there have been a lot of foreclosures in their neighborhood. And more than 80% was sure that because of the financial crisis, the general valuation of the homes in the neighborhood would be lower. Now, still two-thirds of the respondents thought that it wasn't their home. Now, it was all the other homes,

Starting point is 00:39:49 but their home hadn't lost anything in value. And I think it's very very very very, very much. very important for all of us, both as homeowners and as investors in the stock market, to understand how our brain can trigger us into distorting our own perception and valuation. It's really interesting how this can happen. That's because they're all in those neighborhoods where everybody's an above-average driver, which is every neighborhood. That's true. Yeah, there was another statistic. It was like 85% or something like that that said they were above-average.

Starting point is 00:40:18 All right. I want to go around the horn real quick. Anyone read a good book lately that you guys want to talk about on the show? I recently picked up a book called The Platform Revolution. One of my friends suggested it's an interesting book. It talks about the new dominant companies today, like whether Uber, Amazon, Google, Facebook. And he tries to distinguish between the supply side companies like the Marriott or the old economy companies, where they had to invest a lot of their time, energy, and capital in order to build up the supply

Starting point is 00:40:57 so that the demand will come. Versus the new platform companies where they don't have to invest in any fixed capital, like Airbnb not having any rooms, is now valued almost as much as Marriott because they work on the demand side of the economic. Anyone else have something they want to highlight before we wrap things up? well I was just going to say the one book I'm reading right now and I'm sure everybody on the call has read this book already is Seth Clarmine's margin of safety it's a heavy read but if you enjoyed security analysis and we're able to get through it I'm sure that Seth Clarmine's book would be a good one to check out as well did you pay the thousand dollars on Amazon for it I got a bootlegged copy I hope that isn't if Seth if you're listening right now just let me know and I'll send you a check in the man Seth, if you're listening right now, put it back in print, my friend.

Starting point is 00:41:50 Put it back in print. Create space. Make it happen, baby. That's all we have for you guys. I want to highlight our panel here so you guys have more information on them. So Toby Carlisle has two websites. He has the AcquiresMultipal.com. He has greenback.com.

Starting point is 00:42:08 You want to get some good reading in. You want to see some fantastic tools. Check out both of those locations. We'll have it in the show notes. Colin Yablonski, if you want to optimize your, business for search engine optimization online, especially if it's local in your local area. Colin has some of the best tools and best services. We'll have links to his service on our show notes as well.

Starting point is 00:42:30 But if your business needs that boost with the search engine optimization, he's your guy. I promise you. He knows this stuff inside out. And then Hari, he has a blog at bitsbusiness.com. I'm sure you wrote about the Charlie Munger engagement on Bits Business. Correct, Harry? Not yet. Not yet. Come on, man. You need to get with it. Well, by the time this airs, knowing Harry, he probably will have something written. But that's what he does. He goes out. He does these fantastic things. I know whenever I got my Christmas card this year and I saw your mug there with Charlie Munger. I was very jealous. But he does some really neat stuff and he writes about it on his blog, Bitsbusiness.com. So check those out and we'll have it in the show notes in case you guys forget in your driving. So the one thing that I want to highlight before we wrap this up is that we are going to

Starting point is 00:43:16 going to the Berkshire Hathaway shareholders meeting on May 6th. It's coming up very soon. It's about two months away. Toby Carlisle is going to be with us. Toby's smiling. He's coming, right? You got your tickets. You got your room booked, Toby. I've got the flights. I've got the room booked. I'm a total Berkshire virgin. So don't anybody follow me because I'll be going in the wrong direction. Well, we got the thing mapped out. Anyone who was with us last year knows that we have a special way of getting into the building faster than anybody else. And we get the best seats. So if you want to get the best seats for Berkshire and learn our secret sauce,

Starting point is 00:43:54 you might want to come hang out with us this year. Hari, you're going to be there as well? Most probably, yes. Oh, what's this most probably? You're going to be there, right? I have not booked my tickets yet. You'll just take the LinkedIn jet, weren't you, Harry? I hope so.

Starting point is 00:44:10 If you want to hang out with Toby, myself, and Hari, if he comes, which I'm sure he will, we would love to have you guys there. So on our website, we'll also shoot something out on email, but if you go to the website and you go under live events, it's under, I think, the About Us tab on our website. Go there, and then there's live events. You'll see a link for the Berkshire Hathaway. Go there. Sign up on the email list.

Starting point is 00:44:37 We email out the schedule where we're going to be. what to do, where to meet up, where we're eating. And basically, we just hang out the whole weekend altogether. We do everything together. And it's just a blast. If you guys want to listen to our episode on Berkshire last year, you can hear the stories about the pub crawl that we go on and all that kind of stuff. So go to the link, sign up.

Starting point is 00:44:59 You've got to move out. You've got to get your ticket sooner. You're not going to be able to go. The hotels are already booking up. You've got to sign up on Airbnb probably at this point. You won't be able to get a room. But you can still make this happen if you want to go. So that's all we have on that note.

Starting point is 00:45:11 We would really like to see you guys there. It's going to be a blast. Okay, guys, that was all that Colin, Hari, Toby Preston and I had for this week's episode of The Investors Podcast. We'll see each other again next week. 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.

Starting point is 00:45:31 www.com. Submit your questions or request a guest appearance to The Investors Podcast by going to www. Asktheinvestors.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.

Starting point is 00:45:49 This material is copyrighted by the TIP Network and must have written approval before a commercial application. TIP!

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