Germany, Denmark, Europe discussed on We Study Billionaires - The Investors Podcast
Let's say i was american only and tech only now you get down to other questions like well if the time for big cap and small-cap and intuitively in this period big tech has done better than small categorically so trying to fiddle around with little tech is kind of silly but on the other hand and once you get down into really big tech since really big is actually really big because dollar weighted average capital worlds like two hundred and thirty five billion dollars once you get to that point then. You're really talking about irrelevance. You've stocks to pick from now then. There's a time to apply stock picking to those relatively few stocks but you've just taken this haystack and winner to down on simple notions like one time to do big wants a time to do small wednesday time that tax should fit in the time that tex shouldn't fit fit in then. I've got my bias based on what i've learned in my life. It's the how i think that works and i ended up having those biases and after rethink all that stuff all the time the simple fact is the way i would think about the world always is take the whole world. Look what it is and look at how it breaks down into these categories and then say what are the categories is it should be working now and why and then once i've winnowed the world down to the categories. That should be working then. I do my stock picking their. If i'm dead wrong those is categories don't work what would be the parts. That would work really well. Let me buy them knowing that. I hope they actually lag there like my insurance. Policy always wanna to buy some stuff that does badly because if that stuff does badly it means the things that i thought would do well did do well. You've got to always have some counterbalance counterweight. That will protect you if you're wrong but you start with this top down view. What is the world. What should do well now. You don't have to be a genius obvious to know that traditionally bull markets as the bull market gets older and older and older fewer and fewer stocks lead the market higher that otherwise otherwise breath narrows so you say to yourself when you're at that stage were breadth should start narrowing. What should it narrow into you. Wanna be overweight there air but once you're getting into the area that it should narrow into if you think about it the stock picking is picking among fewer and fewer stocks. That doesn't make the stock picking any l._s. valid. Why do you want to go fishing in the whole lake. When you know that eighty percent of the fish or over in one part of the lake they might go to another part of the lake at a different time in the morning. They like this part of the lake and in the afternoon they like that part of the lake but you want to go where the fish are. You don't want to be fishing where the fish aren't on the hopes that you might cat one a big one out in the middle of nowhere. I'm curious about what you learn from this cycle with yulong experienced that you haven't really encountered before if you think think of this cycle which is now ten years old more or less slicing in time in half the twenty first century today that's also perfectly perfectly parallel to what you view as the global deterioration of the news business the news business really peaks and nine hundred ninety but it's going on gangbusters through the nineteen ninety s into two thousand really starts deteriorating after that tied to the internet since then the news news world as become much more what i would call stubborn hold onto false stories and that actually becomes a form of an arbitrage opportunity already these things start they start saying them they say them over and over again not all not always but sometimes blatantly the wrong and they keep going and keep going that keeps pushing people who don't know any better to keep believing that story and has had it goes on you can bet against that. That's something that i don't really think existed much in prior cycles in prior cycles. The news tended to follow reality. It didn't predict reality -ality it wasn't always right but it tended to adapt that term over time and now i don't think it does. I'm not really sure but that feature sure you can see this. I do a lot of things overseas. I spent a lot of time overseas and in almost every country. I'm aware of all the major countries of western europe. This function is very silo by country that is inside the countries spain italy germany little bit less germany mostly in germany france you you come from denmark with burson. Which is the greatest paper in denmark in my opinion by far this function of holding onto older ideas. He is once. You should have figured out just dead wrong. It keeps going and i think it's an rb crushable opportunity interesting so in continuation of that question. I'm curious yours about the biggest change you've seen over the years in the stock market and not just this cycle but just or your investment career. The biggest change has been the technology has allowed pricing bifurcated well. I was very young. You had new york stock exchange fix commission rates. Everything was very expensive today. There's there's things that are very inexpensive as a long term result of mayday but then you also have things that are very expensive so we've got the whole world of two and twenty stuff and then we've got the stuff that discount down to next to nothing and funds that you buy it very low basis points that world is just average fees. I don't believe <music> budget. All you hear a lot cheeser down. Fees aren't down fees just spread out from the middle and pancaked. You've got these very high fees on one end very low. Oh fees on the other end and in the middle there's less players but that all just come technology saying that technology has been the biggest change over the last forty years sounds. Don't try to me but it's true can have plenty of reading your book beat the crowd and we'll definitely make sure to linked to that new show notes fantastic book in that book you talked about. I widely as investors should think differently. That's not the same as thinking obviously the maga or at least it's not necessarily the same as thinking opposite the market. What did you mean by that. What will in its simplest sense stig. They conceptual framework of the market is it had pre prices all widely known information and i think probably all your viewers know that if you take all widely-known information and you agree with the consensus views on that you're agreeing with westbound pre priced and you can't possibly the notion of betting on what's been pre price prices kind of stupid then there's this other ilk that existed long long ago which would call itself contrarian. The fact is in in that vein can train as was often thought of as if everybody believes something will happen. The reverse will that also to me seems to be kind of stupid and by that what i mean is markets pre price but with a wide variance around that think of it more like the face of clock if everybody thinks noon will happen. It doesn't mean that it does mean that twelve thirty and eleven thirty won't happen. That's all been pre priced but three o'clock might happen and nine the clock might happen or the reverse. Six o'clock might happen if you were just a contrarian and you could see that everybody thought noone was going to happen. You'd be wanting to bet on sex ex but in reality three could happen nine could happen what the market pre prices. Let you know a band with of possibility spectrum that you i should assume won't happen in the marketplace because it's been pre priced but outside of that bandwidth anything else can happen. It helps you figure out out correctly part of the possibility spectrum to refute to repudiate and then think of out of all the other possibilities. What's most likely and that's where you go knowing again as i said earlier. You're going to be wrong a lot so you gotta be prepared for what to do if you're wrong. This is the reason why i don't that too heavy because if you bet too heavy and you're wrong you're dot you. Gotta say to yourself all the time. Here's what i think's going to happen so here's where i placed my bet and if i'm dead ed wrong and all that stuff won't work what would do really really well then and let me on a little bit of that. 'cause i gotta protect against being wrong because i'm going to be wrong a lot so keeping that in mind ken i know you have some very interesting thoughts on big tack and who's buying tobatek at the moment. Could you please elaborate for very the basic reasons. This is a very long expansion. It is the kinds of stocks that people by late and expansion or different than what they do early in an expansion mansion what they typically by late in an expansion is exactly what tech is at this moment in time you know if you think through the period after two thousand until two thousand and nine tech lag pretty much the whole way because it got too carried away before it's not as carried away this time as it is then but the fact is this category gory like all others will have its day in the rain and now it's having stay in the sun. This is a cyclical event. That feels like it goes on for a long time because this expansion goes on for for a long time and the expansion goes on for a long time because the average annual returns are low because the average annual growth rate of the world has been low in real g._d._p. There's a whole lot of reasons for that but we've had this longer grinding slow expansion which has led to the longer grinding joyless bull market get but late apple market things like this. The new entrance into the late stages of bull market are people who were too afraid to own anything before the things they buy by the push. The market towards final cop aren't the riskiest things in the world. They were too afraid. Don't anything before they're buying their initial stocks and they wanna buy things that they see as for the future leading names they know things they know will be around in case. They're wrong things that feel like even and if i'm wrong i can't go that wrong. So what do they buy. They buy the kind of growth the global names they know in some different cycles those could be parts of consumer staples. They could be a different cycle healthcare drugs but it's pretty common for them to be big high quality rowing tack doc because he's got that part where somebody can say i can buy it and put it away for ten years and i'll be fine which is exactly what people thought in nineteen ninety eight nine hundred ninety nine as they were buying the then mega cap tech stocks which actually were fundamentally sound companies pretty much a lot of hot air and a lot of a little tech companies then but not in in the big high quality ones yet over the next decade big high quality time on the little stocks and <hes> things that might be thought of as riskier as a category tend to lead is coming out of the bottom of a bear market and they do that coming out of the bond market because the kind of people that are buying men are exactly reversible the late stage buyer these are the people that are hard got steady as you go looking for big wins willing to do it among among companies that if the world was as bad as people once upon a time thought it might be in that recession and bear market if the world was really that terrible the company try gonna business and they get that big bounce if you go back to the history of stuff like were to bond stater innocent sink feld all all.