7 Episode results for "W. C. M"

Mobile World Congress 2019 #014

GNC Week In Review

20:35 min | 1 year ago

Mobile World Congress 2019 #014

"This week Rahm GNC week in review power by geek, new central mobile world. Congress twain nineteen apple want to track your sleeping A L E X a wants to help patients in hospital. Plus FedEx wants to deliver your packages by way of robot. Those are some of the tech new stories from this week and it's Friday March first twenty nineteen. My name is Kirk Corless N is episode fourteen of the GNC week in review podcast, a proud member of the tech podcast network. If it's tech it's here. Thank you so much for tuning in for this week's episode, and please be sure to subscribe to the podcast where he can find the right hand side column at GNC weekly dot com. Be an apple podcast, Google podcasts, your favorite, Android podcast app, or tune in Spotify, Stitcher. Get connected with GNC w I are on Twitter or on Facebook. At GNC weakling, lobby hair. Comments thoughts want to say hi at GNC weekly at g mail GNC weekly at gmaiLcom, Kate. We're going to jump in with the tech news from this week and Brum geek news central dot com. Not much tech news this week, but we are going to lead off this week with this last month in every January CB every excuse me, January not last month. I apologize. Every January is in every January is CBS twenty nine thousand nine where new tech was announced Brahma lot of companies from TV's to the obscure tack for example, machine that bulge, laundry, don't ask. However now in February every year, there is m Gubbio see stands for mobile world. Congress is held every Perry in Barcelona Spain worthy last phones are now. So somebody's bones. Somebody's bones are coming soon while others only are available overseas. And there are some things that are on the smartphone. Throwing this obscure side, I stop from h MD global. It's the new Nokia nine purview pure view. The nookie at nine pure view. Stand up each is offering five. Yes, you heard me five. Twelve megapixel lenses that shoot at different exposures three black and white to color. The phone also has an in the splayed fingerprint sensor and a face on face unlock system. Six gigabytes of ram one hundred twenty eight was storage. I six seven waterproofing a by point nine nine inch to KO L E all LED panel and eight thousand three hundred twenty million battery the Nokia nine pure of you will be able to buy both at best buy in store and online Amazon and being eight starting on more third to go at the launch HMD is also operating a special limited offer on the Nokia nine pure view that will lower the price by one hundred dollars off the six hundred ninety nine our price bringing it down to five ninety nine five hundred ninety nine dollars for the first week of sales. After March eleventh, the price will go back up. Also LG announced the l g g eighth in Q and the l g b fifty the LG the l g g has a Snapdragon ape defy processor six gig of ram one hundred twenty eight gigabytes of storage and a six point one inch fourteen forty p o o L E scream. Also there is a small notch up at the top. LG's? Other g feature is called the z camera. It uses an infrared beam of light so identify and track your hand, the Z camera can actually map the veins and your palm to unlock the phone, which the knee gimmick. But also clunky and much slower than basically every other way unluckier phone. The Z camera also enables touch us guess cher's like tune like turning virtual knobs chains volume. The the thin Q at that was announced that there is a there will be a snap. Dragon eight thirty five processor sickly six gigabytes of ram and hunt. Twenty gigabytes of storage, the there will be how also has a the will be this is a six point four inch fourteen forty P O L E D scream also a you'll get all. Geez. Quad DAC in four thousand million battery there will be five to support and LG added a second a second L A second and LG added a second six inch LED scream to a phone case panel to a phone case it connects to the fifty via pogo pins in some unspecified. Why protocol LG hasn't committed to specific launch dates on pricing, but the G eight available on all Carrozza next month. Or so the the the fifty will be a slow roll out that focus on five, gene. And now something up. Skewer from NWC twenty nineteen from Nubia. They announced a smartphone slash smartwatch. Called alpha. The four inch nine sixty by one ninety two all L E D scream as being tax shared by vision. Ox, a flexible screen specialist. The company says it's the largest wearable flexible screen in the industry, and is protected by a strong hate resistant polymer called polyamide, the it's also what our system one gigabyte of ram eight gigabyte internal storage and a five hundred million battery which Nubia says should last between one and two days. Single charge. It has bluetooth wifi and four g four G E sim and a five MacOS and a five megapixel camera. Also, the Alpe doubles as a finished tracker with basic sleep, exercise, and heart rate monitoring, all these features will be acceptable from a quote, unquote. Custom-made wearable OS that supports boys. Commands multi touch and finicky air gestures. The company also said in the press release, quote, all of your information is perfectly organized and within reach infinitely, customizable, intuitive and visually striking our new wearable OS, a whole new way to interact interact with what you care about most. It will be sold in three different versions and black bluetooth only model for four hundred forty nine euros roughly five hundred ten dollars a black four G E sim Nourian four five hundred five hundred forty nine dollars euros roughly six hundred twenty three dollars in the US and a four G E sim alternative coded in a eighteen carat gold for six hundred forty nine dollars. You're you're old roughly it's seven hundred thirty seven dollars US. At least one is models will have a staggered release worldwide in twenty nineteen. And finally I'll link up in the show notes for the best portable phones on the verge dot com. It has the the the best bones of. WBZ twenty nineteen. They have the best full phone the while way made X the best five G foam the Shaw Mimi mix three five Jane, the Prius phone L, G L, G, G eight and read. There's list few more here, and you can check it out in the show notes for the best phones of M W C M W C twenty nineteen in apple news. This week. Bloomberg reports at Apple's testing sleep talking punctuality and meet standards it plans to add to the apple watch by twenty twenty. You can already tracker sleep on the apple watch using third party apps. Apple promises Usery full day. Use from the watch before charging overnight. Bloomberg's Mark garment Mark Gherman notes that in order to keep sleep talking punctual. Pretty apple watch the company will need to increase its battery life or find a way to run sue talking in a low power mode overnight or if charging speeds increase it could ask it could just ask users top their batteries in the morning. A listing for the music service has been spotted inside the Google and the Google may start over eight listing for the music streaming service has been spotted inside the Google home app for IOS by a Mack. Rumors reader, though is currently not live the app date. The update contends the app date. Excuse me. These words l tongue-tied the updates include the update indicates that it could be intimate until December the home pod was the only smart speaker with apple music availability that change with its rival on the echo, and the and it's Google home debut would put it on all three leading smart speakers apple has also been pushing other services beyond its own devices. In addition apple excuse me. In addition Amazon confirmed that the app that apple music would come to more as yet unnamed Alexa enable devices to. And I didn't mean to get the Alexa to come on. Sorry about that Lexa. Stop. Sorry about that. I apologize and hope. Hopefully, no when triggers I apologize. Over one hundred patients staying at cedar, cedar Sinai in LA can now ask a L E X to control their TV's and called nurses for them. The hospital has launched a pilot program to test an E A L E X a powered healthcare platform called Eva or a a putting echo speakers over one hundred excuse me in over a hundred hospital rooms Cording to senior Sinai Abe is the quote, the world's first patient centered voice assistant platform from hospitals. Patients can use to call for help when needed specially if not mobile and unable to their hands brunson's. They can say, quote, A L E X say tell my nurse. I need to get up to use the restroom able will then notify the appropriate caregiver task whether it's a nurse or doctor by sending a message, right? Sending a message rates at our phone request. Prepayments will go straight to a registered nurse, for instance, while request or bathroom help would go to clinical partner. Peachy Hain senior, cedar Sinai's, senior cedars Sinai is executive director of medical and surgical services explained that the use of waste activated system. Voice. Activated devices can quote enhance patients hospital experience you also said quote in a hospital. Patients have a little to distract them from pain or loneliness in a way, Alexa, AL say, Alexa. Stop in a way. L E. X say, I apologize could serve not just as a convenient means to get a hold of the doctors and nurses. But also as a way to give them some degree of independence. Fedex is experimenting with robots for short range deliveries the company officially announce its new fed ex same day, but which it says could help make quote unquote, last mile deliveries more efficient the same day bought is berry powered as it hops via ten miles per hour. And as it HAMAs Meany, consider assault around pedestrians and traffic using a combination of light or sensors like those found and self driving cars and regular cameras. Fedex says it will initially use the to career packages between the company's offices and its headquarters in Memphis, pending approval from local government, but these trials are accessible they wants to expand the service to other companies and retailers, especially making robots standard part of it. Same day. Same day delivery service. The company says it's curly and talks with firms, including autozone. Lows hates target Walgreens and WalMart to assess their need for the sort of delivery on average. Has been more than sixty percent of customers for these retailers live within three miles of a store. So what do you think would you want? A robot sued deliver your packages love to hear what y'all think so in on Twitter Facebook at GNC weekly or at Jima or Email GNC weekly at Jimoh gmaiLcom from me, it's going to be a little creepy. Having a robot come to my house to Lorraine packages. But that's just me. Filings main with the federal communication commission may have revealed to a-coming smartphones from Google documents posted by the government agency today's show to new devices from the company the FCC filings don't reveal much information about the devices, but they do let credibility to the rumors about Google supposed- upcoming smartphones, according to nine to five Google the documents do show the model numbers assigned to each device. Jeez. Row two zero seeing and Jesus wrote two zero g respectively mostly fit within contention us for previous pixel models the pixel two series used models used model numbers Djezia one one a and g one c while the pixel three series used Jesus or one three A and G zero one three same. The filings also show that both the. Have the pilings also show that both? The bison have wifi blue bluetooth an emcee LT. Lt connectivity and run enjoy nine as the operating system. Any other details the FCC has about the pixel three light and pixel three X L light is not known as of yet as Google filed requests for confidentiality that will protect images and other information that accompanies appalling until all this twenty twenty-fourth. So stay tuned next up. How is in the how to tech block and on make use of dot com? Though highly list of the nine best free movie apps to watch best free movie apps to watch movies online skis me, and they are to be TV popcorn flicks. Yeti? Oh, y I o Sony crackle. Snag films. Pluto, TV Buddhu view Stor and big star movies on my heard of you heard of sling TV. I'm me sling. Pluto, TV I heard it's pretty pretty decent. And also who do so I will link up in the show notes that he can check out on that. Also on make us dot com. Now, we all know how to about security and privacy. So the next to I have for how to tech is on your smart home gadgets, like a LAX a echo. Google home devices, etc. On make use of dot com. As well in the show notes. It's how to stay safe how to stay safe and private when using smart home gadgets, and in the in the security and privacy theme on the how to tech continuing on on the verge dot com and link up in the show, how how link in the show notes on that known how to set up a VPN slows a lot of great tips and tools on how to do that. Five G news has really been coming in droves. We'll be deployed the smartphones carry it and so on, but no one mention of the prices were data usage until now where the with the upcoming team mobile team mobile sprint merger t mobile. CTO Neville, Ray made it a point during interview with P C MAG to underline the companies which in recent pledge that it will not raise prices for at least three years if it's merger with sprint is alternately approved by regulators and allowed to recede CEO John leisure will who is set to lead the combined company made that vow, and they let her to chairman a g pie or this month Ray directly confirm that leisures remorse. Ledgers remarks will also apply to five G data plans. T mobile will continue to offer unlimited data for five G race said once the carrier's network is up and running with the vices that can take advantage of the increased speeds and reduce latency of five Jay the company's current tea. T mobile one unlimited plan starts at seventy dollars taxes, and fees and other fees included. So that is presumably that's also where five G will start. If team will stays true to leisures word, the upgraded t Mobil one plus plan with HD streaming and LT LT hotspots speed starts at eighty five dollars a month. Earliest week t mobile set expectations were when consumers can expect can expect to see that five G go live in earnest. He also said Rayo said, quote, we can do stop in the first half. He also says we are going to have the prices, and we're going to have network, but how material is it? I don't think anything from AT and T or Reisen will be material until the timeframe supporting L. He also suggested that all carriers are still ironing out the Kingston. They're underlining five, gene infrastructure. Sprint has already announced a more specific window for launch of its own five G network. It always switched on switched on. This may in Atlanta, Chicago, Dallas and Kansas City before expanding to Houston, Los Angeles York, Phoenix in Washington DC, all in the first half of the sheriff from geek new central from geek, new Santorum. My comments week the Federal Trade Commission bureau of competition and nounce the creation of a technology task force task force. It is dedicated to monitoring competition in the US technology. Markets investigating any potential anti-competitive in those Mark anticompetitive conduct those markets and take and taking enforcement actions when warranted. The technology task force will have about seventeen staff turnings it will include intern as with unique expertise in complex product and service and market and service markets and ecosystems including markets or online advertising, social networking mobile operating systems and apps and platform businesses bureau director, Bruce. Off men says quote technology markets, which are rapidly evolving in touch so many other cement rapidly involving in touch so many other sectors economy raised a sink challenges by an anti trust enforcement by sensually by centralizing our expertise and attention. The new task force will be able to focus on these markets exclusively ensuring they're operating pursuant to the entrance. Does law antitrust laws and taking action whether they are not. Trending this week on GNC W. I R with Google trends. Google trends trending last week. Oscar twenty nineteen trending on Twitter in the US at number four Kardashian. And lastly on YouTube trending at number one with nine point four million views, the Jonas brothers and our video sucker. And that is the tech week. That is the week of tech news or Friday, March first twenty nine thousand nine again is very short slow tech. Newsweek, there's going to be I'm sure there's gonna be a lot more a lot more news that all give out send out in the next episode. Thank you so much for tuning in for this week's episode GNC we can review please be sure to subscribe to podcasts on your favorite podcast app. So you do not miss another episode of GNC W, I R till next time. I will talk you all sin.

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AMS 2020 Live: Jeffry Evans, NOAA/NWS/WFO

AMS on the Air

18:46 min | 7 months ago

AMS 2020 Live: Jeffry Evans, NOAA/NWS/WFO

"Thank you very much for coming to the plot. Best and I'm here today with the Jeff Evans he said. Am I see in Houston meteorologist. In charge a lot of people Akron acronyms anonymous. podcast saying it's not meteorology if there's not an acronym got one already so so tell us a little bit about yourself you start along where you know you know it. It's interesting march towards a little different than most. Because I spent a lot of time in the National Center you started with the Forecast Office National centre-back Forecast Office I grew up in western Oklahoma. So I just fascinated with significant storms storms tornados really natural disasters in general just fascinated. Me Seems kind of orbit but it just always very interesting to me So as you know the day to day weather was never my thing but reading about the Tri State Tornado or Krakatoa Ariz big natural disasters. So I went at some point in my life in probably nine ten years Zola. Come Watch those. TV weather and said I WANNA do that. Well just beat her all. They're doing and shortly after that. We had the April ten thousand. Nine hundred seventy nine Red River Toyota Truck Wichita Falls. We had a big outbreak in hit locked up in Oklahoma. And that was it for me. Just Kinda Kinda seal the fascination with with tornadoes so I pursue that went to Oklahoma got my degree and started up in Wyoming The shy shared in which is now closed. Cheyenne and My fascination with tornadoes and severe weather brought me into the what's now. SBC In nineteen ninety five. So so I spent about fifteen years. There was lead decided kind of wanted to scratch a different edge so to speak with my career Muslim nearing forty years old and decided to go into the W. C. M. Warning coronation meteorology role in Tallahassee. Florida took that and moved onto the meteorologist in chart job in Houston Two thousand fourteen. Anyway it's a great city that when I took the job it was in a drought so kind of hoping back at this point. So it's been been a it's been a very very challenging interesting last five years than in Houston doubt what was the biggest difference that you feel between the SBC they see it as a professional field meterologist between us and National Weather Service Office. You know one of the biggest things at the national center you really. I have a lot more opportunity to focus on science. And you're more You're not necessarily the Jack of all trades so if you're at the hurricane center you know l.. Your focuses hurricanes if you're storm prediction center your focus is going to be significant. Storms high impact storms So obviously at the forecast asked office. It's your the jack-of-all-trades so I mean we just this morning. I did talk on a Hazmat so you know you. You know you'll deal with those kind of the things at the national level and then what I loved about coming back to the WIFO is a species. A warning nation. Meteorologist is really getting out and meeting the people all that are making these decisions and interacting and finding ways to meet their mission better song. And that's something you don't get as much the national center either. So those are the two the biggest differences I I would say so. So you've been in Houston sends two dozen fourteen Kurosawa's 2014. Summer all right. So that was the trout coming out on twenty fifteen dollars a big flood in April. It was memorial night. Yes the the first big Houston flooding then. Of course everything from there on and just kept going just kept going you know we had the memorial night flood and then We had tropical storm bill shortly after that then. We had a big tornado outbreak in our in another flooding event on Halloween this twentieth so it just it just kept snowballing. In an all the culminated with harvey in two thousand seventeen. But between we've we've posted a super bowl yeah. People don't don't realize that that that's a big support for the National Weather Service. Even though it's a heck energy was a dome. Yeah but yet we're still supporting our core partners and that that's a multi title we support efforts You know highly visible worldwide visible support. Effort we've done world series series. That's right You know so you recently Salil and so these are things that we typically deployed to the city Houston in and support and then we just had the the deer park it. That was a month long support effort with that big big fire and that was the challenge in a slightly different way. Because you're the meteorologist so you're the subject matter expert word on something that you're not real comfortable because we're not Kim this yet but yet you kind of have to wear that hat and kind of trying to get your way through. That is a long challenges. I I broadcasting next year when I worked in Houston there was this bill I think it was a chemical spill knows road. Dan and I remember I had to get on TV. Say Okay. Well it's a tidy might react. You might not react. I remember exactly what it was but you have to act like that. Because you're you're it you're the scientists. Yeah so one thing that really strikes me even still not living in Houston at this point their resiliency of the city the partnerships. You know I was so happy when I worked in Houston to see the partnerships partnerships between the National Weather Service the media the local government and companies company where we don't have the divisions down there. I think it's because the threats are so intense. Yes and the magnitude in the in the the population is so vulnerable. We all get it. We're all wanting to do the same thing. We all have the same core mission. We're all in here together. We're all here together nest show and I truly I appreciate that. I mean I've come working other markets and I notice it more now that they're starting to anymore union more and more support more more partnerships and this fabulous. I think that's what it's about there's a little in I'll go back to the. It deer park fire from this last March one thing got kind of pushed us. was the me basically help us communicate us. Yeah give us something and as an agency we had never created a Kinda has matt public image yet. Because it's complicated. Either you've got a billion people don't know what all this means. So we we had to. But you know we needed to meet a need for the media and when we created what we call the smoke plume and Yeah they were able to go von Erlach show. We're the plume is how high it is where it's going to go tonight. Because that's what people wanted to know so I mean but both corner ships are there. They they have the trust to ask us and and we. We knew that what they need to do. We were able to meet that mission. All say mission now Houston is such a diverse sitting very dark. I mean it's again but his so they were taken Vietnamese. Yes what are the biggest challenges he does in that aspect and the diversity aspect of it. I mean it's Kinda obvious but it's just that communication level you know bringing in more Spanish speakers into our field into the weather service in particular so that's been an benefit. We have recently hired a Spanish speaker onto Dr Staff and that helped during Imelda was passed truck from Melville September So that that's a challenge but the the other languages you know it is difficult Toco. I know it's difficult for the media because the resources aren't the same a lot of Spanish speaking that TV stations. Don't have a team of five mets. No and you know. And so they're they're trying to get by on a Harvey Twenty four seven without that same kind of staffing but yet they have a huge audience and so we try to help them. The best we can on that. And that's something we're still learning. I think really isn't it as an enterprise as a whether enterprise yes Because different cultures they look for different people with already worthy. Yes and we're used to our traditional ways of a waiver authority that may not be the same way in in a certain other culture community. That's also found a home in Houston or other cities and the dialects. I mean your thoughts different cultures within east jerk diet ex and it's just this unholy. Another challenge is the consistency. You WanNa keep the the message Ryan it can get lost in translation literally lost in translation so that that that's definitely been a a large turtle for us and who have been really really good partners with that? Are the really the emergency managers because the emergency management community They've really adapted more to because they have to serve them so They do a lot of the translations for us to some degree so that But it's something again as the weather enterprise. We have to do a better job offers. But he'll what do you see changing in the city in the next ten years. Wow you know Anything yeah well I mean. There's a lot of movement for of more flood mitigation efforts. I think that's I think we're GONNA continue to see a lot of that. I think people are looking back at the initial plans and people don't realize they're not from the area. There are flood control reservoirs yen from the west reports addicks Barker typically. They're just green in parts. Yeah people didn't ever realize what their role was until recently they filled up and they start even flooding homes behind them. Yeah so But when those were initially put in there were other plans different canals in different ways. We're supposed to be another reservoir all those got next and they're seeing that need now so I I think in the next ten years I could see a lot more effort still going into flood mitigation. You know the problem that we're dealing with what everyone's especially with with the change in climate is. How do you engineer your way out of a sixty seven inch an hour rainfall? I don't think I really can so we're trying to preach people especially in that area. The importance of flood insurance you know. Almost eighty percent of Harvey victims did not have flood insurance. And it's sad because his one I talk to people I have personal friends. Also were in that group and they said why no one told me I needed it live near the coast so the fled lane yellow until we we are needed it and yet it's frustrating to me that we haven't adapted a better model for that You have to have fire insurance. Yeah so why I. Don't you have to have flood insurance and if you're not a flood plain it's good because it's cheaper quite a bit less money so I think I pay twenty five dollars a month for someone to fixed income. That's still a lot of money. But that's less than a cell phone plan at his chance and so we're trying to get through to people in this especially in the Houston area that even though you don't live even a flood plain year in a flood prone area yeah and the flood plains of driven off of Watersheds and not necessarily just urban flooding. Yeah yeah so it's you know we're we're trying to get that message out there. I don't know people tend to live in a bubble without really snagging thanked me. They don't WanNa see that risk USC So we're we're more flood aware than most communities got a long way to go. How do you how do you in? The city itself is adapted because I see a lot of green initiatives right in Houston energy city of the world in. I mean there were lessons learned after Alison. Yeah were they did a lot of buyouts along some of the Myers along Abrazen different buyers in the city in those buyouts for huge because it actually those would have been homes that would have flooded again conference they had purchased and bought out. So they're still those efforts going on the city they recognize is the risks and they're looking at different ways around mitigation efforts Won't we typically see an end. I empathize when people flood. They just WANNA a fix. Yeah they don't WanNA mitigate for the next time because it's more time more money and a lot of people are just want to get back on my kitchen. Yes to the east fix it. So that's that's a big girl. I don't really have an answer to that but to try to let people realize you could flood again. Under current circumstances we will never ask you know you gotta realize I'm just really kind of missed Metro Metro Houston and that was another forty inch rain. Yeah it was another that would have been another. Harvey like event had had been twenty miles west and it was a harvey lack of it and worse than Harvey for some Maria's between US Beaumont where the heaviest rainfall so you know these these events that we start talking feet of rain are not as uncommon uncommon as we would like them to be and I think the the obvious is right there in front of us. So so mitigation awareness throat. What can the regular Joan? The regular Jose due to to help out themselves their neighbors and you and I didn't the national key is this has helped themselves and I think that with people need a little more ownership and not expect another entity to come fix it so so look look at your risk in particular really honest look at your risk and what are some of the things you can do that. You can afford to do to to help mitigate that you know we're trying minded do better with the science and in predictability so if we could get to where we can accurately predict where these twentieth bullseyes are pronounce all then people could put their furniture of lung cinderblocks and they could sit. You know. We're not there yet. Yeah next step is inundation so one is thirty inches of rainfall all mean as far as flooding goes so that's the next modeling hurdle is taking the water out of the sky modeling. What is going to do on the ground? How deep is it going to be going to be relief top level? Is it going to be two feet you know and that might help evacuate premium getting to where we could actually evacuated along by so So scientifically we're going to do our part it but to go back to your your party question. It's really neighbors taking care of neighbors families. Take Care Families And and for Joe or Jose be honest with your Earth Year Risk Assessment. And and if you don't reach out to emergency management reach out to your National Weather Service and and we try to help you understand. What risky really have half okay? What's next for the National Weather Service in Houston Galveston? Houston you know. We're we're plugging along. I mean a lot of those efforts that are just mentioned with the Innovation and with more accurate predictability. Where we're we're doing our best on that We're we're going to start incorporating more of the convective allowing models titles Into our decision making and getting that more out to decision makers we've been reluctant to because They can be spectacularly wrong. And so you you have to be careful with that but we do think it can help more probabilistically to say. There are some models showing thirty inches of rain tonight. Um So I think that's a big that's an ex- except for us and then expanding as you've mentioned in the Spanish language and other other efforts like that so we we we. We still have hurdles. I just gave a talk This morning on a Hurricane Michael if that woulda hit Houston which we all know new bad but I was the united. We're trying to quantify quantify that In a in a way because I actually did the inland survey for for the wind damage for Michael so I was able to take pictures thirty miles sixty miles eighty miles inland and now I can bring that back to Houston. Say this is conroe friends would this is Katie and resonates with people more. And so we're we're trying to figure out the next time we have a big one thousand nine hundred type of hurricane which was the Galveston hurricane another Michael Type Storm which will happen eventually. How do we message the jet how we move forward with that You know right now. It's always run from the water and hide from the wind. We want to get the flood from people out but do we tell people inland in a substandard home. That's going to have one hundred thirty four wins that they're supposed to stay where she is. this media I can tell you we we always say well it. Every storm is different and restore Stephan but then we have to have a point of comparison. Absolutely men take time now. And how do we have to really careful with that. For Harvey for instance. We didn't I don't want to do too many comparisons to alison yes because Katie didn't flood an hour and it was that was the eastern part of the city yet so we had to be careful with that if you mentioned a storm okay. Then that's them. Yes so we have happened to me. It's not going to happen again. Galveston County Going into Harvey. You know the prior her four flash flood emergencies WE ADELE with all Houston so they were thinking. Oh Houston's going to get it again like this is us to this time Ryder Storm Barnes. Well I wanNA thank you I just. You've done an excellent job. The National Weather Service in Houston for shoot and all your team from there. I mean Dan Right. It's wonderful and I first hand participation and witnessed to do everything that you guys do and I really appreciate eight at night down there so the whole winter weather enterprise in Houston. We're all a family. We were together. And I think that's why we've had quite a few successes and you look at a Melda in Harris County only two days and that's not an accent. Yeah that's true. Well thank you very much. All right have a good thank you.

Houston National Weather Service harvey National Center Dan Right Oklahoma Jeff Evans deer park Red River Toyota Truck Wichita Alison Zola Akron SBC Cheyenne WIFO National Weather Service Offic Forecast Office Galveston County Houston Galveston Wyoming
11: Making Strides In LGBT+ Tourism with Ian Johnson

WTM Insights Podcast

28:29 min | 1 year ago

11: Making Strides In LGBT+ Tourism with Ian Johnson

"Hello and welcome to the wtmj insights be official puts cost of the world travel markets london the leading events troppled professionals i'm your host trouble janis lisa francesca nand bringing you the latest global trends expert speakers an analysis with envy travel and tourism industry to so so so let's have a look at some of the news stories have been shaking up the travel industry this month cia relaunches weekly flights to pakistan after ten years there will be three flights a week using the boeing seven eight seven dreamliner the service was suspended more than a decade ago after foaming at the marriott hotel in the pakistan capital to fifty killed more than fifty people and injured two hundred and fifty hopefully a symbol of the strong and growing relationship between the two countries building reports folks he pops on the wing potentially three hundred ashcroft about chip leading edge slaps tracks were improperly manufacturers and apparently could prevent signs of a wedge a lot of heat treatments bugging just been calling us racist replaced the parts of new ones before returning across to service the foreign office has moved the travel ban on flights from the uk sri lanka which is great news on the sixth of june the foreign office lifted that banta tropical sri lanka which with imposed after the terror attack in the uk agents rallying to promote sri lanka is the fantastic destination is courage people to visit so holding a big events in central london on the sixteenth of july to support sri lankan travel as well and trump impose it travel ban on cuba usa travelers the travel boundless imposed on the fourth of july which prohibits you as travelers from going to cuba under previous greek people to people travel author take cruise ships have had to scramble to change the newly adopted have on i ten race and that's used without we're very lucky today to be joined by the founder and ceo of out now now is the world's leading global lgbtq plus business development specialist i'm gonna stab list in nineteen ninety out now sports leading network and the understanding on connecting with lgbt people as colleagues customers has been described by independent industry commentators as the world's best often realize punt by leading global brands such as barclays toyota rpm so that professionalism and independence out now is the industry leader in lgbt plus tourism community and has made strides and grabbing the secta with an ethos of inclusivity and equity say an end does that sound about right to you that it'll summing up for easy i i i would like to say my middle name should be motos because i'm not quite sure how i should add so when you give me such a lovely introduction thank you yes we now has twenty i used worked in trying to better understand and make the needs of lgbt people is is customers is what colleagues and just as members of society i don't know if it's because we've recently had prior months the seems to be a sergeant so nice and growing acceptance around the lgbtq plus community with brands and i don't know part of me thinks maybe this is a cynical thing is that brands of subserve jumping only opportunity to sell us move staff or possibly one days it'll take what you think's going on that it's it's a really good question one of the disturbing pots about the would authenticity is how often you hear from people who wished they were 'em authenticity is not something you can really just announce a fake you you know when somebody is real and what we see over the years we we would assess the state of play at the moment like this there is everything to be thankful for in terms of the higher and higher and higher levels of visibility particularly during pride month we would be happier if we saw more support throughout the rest of the year but the visibility is fantastic and it is higher than we've ever seen and it's wonderful it does mike younger little chubby cheapest people feel terrific unsupported when i see that on the downside yes it is correct we know that we live in a capitalist society and we know the businesses are looking for an age or and advantage which is perfectly fine everybody knows is that accepts that but the question is support so i i spoke at the world's first and it's called the pink teleconference since nineteen ninety four and i remember making mild slides on bits of plastic but you do photocopying thing for another they had projected on older the listeners will remember the spit some we made the slot in and we will pioneering and we didn't know quite how we should position this market and we came up with two was which stay true today one of them is a recognition and the rainbow symbols that we see in prague mount a clear sign of recognition by more and more businesses is terrific so the recognition pace is well underway but the second would we set in ninety four holds true today nuts support we need to look at what you're doing as a business how well do you understand instead the needs of this customer and how well do you try to make them because that's the support pace which is essential to true success the project has been nothing that's been flying everywhere even area i laugh in southeastern then you've got flags will be the crossings it just sixty six a dramatic is sending a wonderful message but is there a danger that it's just a bit of a marketing ploy finale and it will happen so the rest of the year it's a really good point 'em lgbt people they don't leave a stereotypical life that they may choose to dress or act a certain way fool one notch fifty year during prideful posse doing the other three hundred and sixty four days of the year that they exist that they still have some concerns needs and if if your business and you're serious about trying to be a genuine supplier to lgbt plus people particularly in the travel industry which is a high service sector you need to be thinking of not just one month of the year together eleven months of the year of the most important portant pot of what you could be doing at if you're just focusing on pride month in rent by flags because that's easier for you to comprehend you are really missing out on being the winning business it could be meeting this markets and they don't say ferment very cynical points it's prettier isn't it have the rainbow flags rather than ordinary men and women going to work in the suits looking off to that show jen looking off to that you know just going about their business people off the rest of the year other than that in writing flags and dancing with those sorts it's a fabulous outfit surpri yeah i think i think pride has a great function visibility and it has bain they organizes prouder to be congratulated for the work that done and rising lgbt plus visibility around the world the whole bunch of different organizations sydney guys been monica and many many others around the world there is a difficult even on province because what we see is that a proud organizes like amy a person opening any organization in society they need cashed function so corporations i should have cash and corporations very interested in the visibility the pride event offers so they may well lock to attach themselves to prod events and said you have a patch dissonance between the interests of the corporations who are looking for visibility and styles and goodwill but there's a real problem on i read a piece with a real cover from university of west mystery about this topic and what we found when we researched it was it was a growing dissonance firm with any lgbtq plus community about corporations using rainbow i cannot graffiti or symbols simply to try to win goodwill absent of support and and we see it in london pride parade on in in twenty eighteen the london pride pride went to many many hours and was filled with corporate floats it's people were losing interest because they decent that exciting to get excited for another banker another accounting company the comes by it's quite finished off they put on a t shirt with the logan ryan by called his name out chilling region straight the actual people the lgbtq plus community and they allies laws in the crowds were losing interest it doesn't really connect yeah it's not as fun i've i've seen those parades he knows he the banking parades and everything sorry the banking flights and they're not nearly as fun i feel like the police people and rights and we always have the police people quite and i really love the they're embracing 'cause outside inside my real message i think you know hsbc or banking not so much what about be virgin atlantic flight from london to new i think it's it flew own version had a theme slights on the twentieth of june run by lgbt men of the village and stuff and special guests and if you i'm sure you saw i saw in the press less fabulous pictures and videos at look like a lot of fun do you think do you think it was a good idea it's a you could probably tell i'm a libertarian because i can see the pluses and minuses and how it unfolded on the visibility thought it was fantastic certainly as i flight heading towards a major events episode of major historical moments lgbtq plus community twenty of june nineteen sixty nine was the day off the judy garland was buried and the day after the not the full when the police moved in trying closed down this morning and that there was a trans woman she wasn't having this on that particular evening she literally followed the fish off at stone she threw a shot glass about her glass room had drink into a mirror and said no to the place i am not coming to you yet again as you closed down his spot that started this tunnel rights were being commemorated in that virgin atlantic take fiftieth anniversary flawed this is fantastic i do worry that that part of the reason for the flush the significance to the lgbtq plus community the historical nature of that fiftieth anniversary with not as well communicated to the flying guests and perhaps also to the crew crew in that particular flight who may not well happiness well informed about historical significance as they could say i think there was a missed opportunity they if what could have been done in terms of content so that particular from the oh the frick parade all nice might be in danger of creating a one dimensional stereotype that represents all lgbt trafford as and therefore my idea nights how this definitely 'em there is there is an example from just yesterday actually i was traveling from paris to london and you're a star were playing only in in trying i wanna say inflight but we under the water but i'd be underwater video the videos in in natural trying carriages showing i you were stopped stop pride video it was clearly a pride video and there was a sort of quickey text underneath and you could see what was being said and there was a drag queen or two and a couple of slide jokes and i thought this is progress that's plus 'em but then when i went back and watched it with audio when i got off the train and i could hear the and they already are worried me because we made a festive a guy commercial frequent us in nineteen ninety six in australia and i worry that we had more all relevant stomach creative connection in that particular paste and what we saw with the stereotyping the one dimensional and drag is fabulous and it makes me smile a but there wasn't they funnel polish in the creative that we think you could have had for example could we not have showing a lesbian couple and there's some coming back from a terrific trip to disneyland paris and high heading back to london for pride this might well have connected with a new audience in a way that doesn't take his only too obvious stereotypes but shows it lgbtq plus people just like every other people are corporate motto is lgbt spill people and so if we just take those out of rainbows and pride and think about people and then try to put lgbt people into the creative frame i think we could so you might even greater success among could says might think the furry in the rainbows and the glass that sells and creates more attention attracts more attention than they everyday stuff but i think that'd be wrong because if you look at advocates on tv for example you've got all sorts so people doing everyday things you know making breakfast to act taking their kids somewhat just like you said normal people doing everyday things and it'd be nice to have that representation as well and i'm sure markets he is actually wrong it's all about doesn't have to be about the slashing the policy actually could be about these everyday activities but some some people have done nice examples in the uk a nationwide building sashi had a great i would i would talking to a to a lesbian couple about the the housing needs a we actually made the first of a guy banking at the world floyd spank back in two thousand and ten leading up to the london olympics which there were sponsor of 'em you can you can do some great work 'em some of the keys really i mean i i i was resolve from using the word authenticity because it's become so inauthentic when people use it i i would probably this way more towards honest representation accurate representation trying to get agencies is sometimes there on west enemies creative agencies because you might get one or two people who could be lesbian guy and i might then dictate the conversation and everybody might decide we better defense to them but if you'll one narrow world view is that you represent on the creative screen that's not what ninety nine point nine percent of the people necessarily experience every diocese as a brand what we do is we used data we look at research we try to find out where is this market what do you need to understand about them and how can you position your product to better connect with some and that's especially true in trouble of course i a i did about resets recently a someone helped run a project called the black pound reports assessing how much money the black community bring you know if you generalize as a black community which with the research they did bring into business and how much potential money they spend on products that not necessarily being advertised to them and i think it's a very similar thing you know from amongst as for brands point today if you're not taking these books and then i mean in a very i mean you have to take these books is very 'em in a sales sort of sense brea today then you're missing out on a dose of money you know you know everyone at the table everyone has to be at the table from inclusion point to be able to say from business yes peop people in business i think too conservative way they should be anoc inside that confidently because i've done this for twenty years and i used to be the youngest person in the meetings and now the people i'm speaking with their often younger than me with that experience what we've seen is that the fees that brands have about a tribute to travel usually almost always unfounded a well we're also seeing as a huge trend into the twenty twenties is allies community days out they family members the work colleagues and friends of lgbt people this group is now i vast majority in most of the key markets in which brands and and travel businesses operate and so you are actually likely to lose small business by not being seen to embrace this market but the question is how you do it so if if you only knowledge rainbows and pride month and that's all you understand it's a shame because you actually missing out on the other eleven months worth of business that you should be positioning you're you're business for word of mouth i think he's one of the most influential marketing tools in the travel industry a grace experience the lgbt plus travelers will ensure that the message is passed onto their friends and family and could have a massive rich outside be community as well gauge bad experiences like and translate the other potential customers and affects overall business of course there is a case study where anti lgbt news with boston bruno i meant protests simply coats of the town of nice hotels across london you're at and usa what do you what's on the situation the bernard case it's a really good example of the power of allies 'em did did they were hotels around the world paris london elsewhere in a luxury collection the dorchester just a collection hotels and these these hotels a have great people working in them and many impact most of the employees and these hotels i genuinely supporters of lgbt people so the sultan a within brunei decided that a form of law would apply which meant that lgbt plus people particularly outside that but they real focus here's homosexuality and they're looking for gay lesbian people to be stoned to death as as a penalty 'em this being talked about some years ago but then when it was actually attempted to be enacted what we saw was i world wide coming together gainst that action and this was the power of allies this was not just the lgbtq plus community this was the many many millions of supporters who are what you could go allies of lgbt plus people globally and they actually had been changed the conversation in a material manner and that's the key point from that is that the lgbt community in a way become amplifies with the good work that you do if you can get a great piece of lgbt plus a product through training and education such as lgbt puke and then communicate that effectively through great marketing and communications work and the lgbtq plus community get a grad experience they will come home happy and they will tell the family members colleagues and friends and so they amplify your good efforts at this will bring you even more return on investment through doing a good job makes i say since may and hopefully to everyone else's well yes okay but badgen as early as it was recently in the news that they've said that stu it's male or female don't have to wear makeup uncon web what they like which is wonderful because in terms of makeup obviously they still have to wear the uniform and i get now i'm a big fan of new uniforms but these sort of situations you don't want someone trotting around in jeans when you need to find them and imagine say what do you think that's that's quite progressive considering how much focus is special and they aesthetic of line stuff in that way and do they valuable city industry i think it's a brilliant initiative 'em we first saw this trend happening in of all places before they perfumey a in paris where for some he is now by female and male employees some will be with with makeup somewhere that this is i am a function of being who you are and so the best thing you could do feel job ending your own life he's trying to feel who you're meant to they feel and no you have the freedom to be that person and my my my belief is the longest in society would not harming others without choices than a world in which people feel free to be who they would most likely to become is a great world and i i think that's a brilliant initiative it's a small initiative is extremely powerful in full members of all different kinds of pots of general society old pots of communities and we're all members of on not just one community we are all different pieces of diversity within each and every one of us but i think a lot of people will feel well supported by unemploy a lock that allows their employees to be themselves yes even if they don't want the guy makeup fray i mean as a woman i had to make up i think it's great fun but i left going fashion flights and see people in whatever they choose to put on their face whether that's not saying whether that's just a little bit gross in this car whether that said guy ways you know put on makeup i'd love to find those people on a flight i think he'd be fascinating and you know it's just the great representation of of who we are in in real life which could be a good thing not the lovely thing is is w c m and out now have sixty news of collaboration under our belt now anti lgbt tourism sector has blossomed in that time particularly in the lost decade and is intense feeding into the gray fifty tourism industry globally out now bringing out easily accessible online training programs but businesses to educate themselves on how to provide a great experience lgbt plus travel is why this is important and how they impact see lgbt plus sex at it it's it's been something that's been on outright off it quite some time it comes back to what we were discussing earlier this idea of both a recognition or visibility and support so supportive of your customer if you want to win brand loyalty you should try it in any lgbt plus sect one of the key factors for people traveling is chicken hotels room service restaurant stuff people in venue and you're staying in a combination how comfortable do you perceive them to be with you being yourself lgbt plus people don't look any special treatment in this regard but they really wanting is what all the rest of society types of grunted which she's just the chance to relax be themselves on holiday have a great rights die and go home with a lot of happy memories sometimes the little unexpected things make a holiday so what we're doing and we've been working with clients such as switzerland tourism we've been training hang on a massive amount of hotels across all of switzerland to becoming certified a program which will be a showing at the world travel markets fortieth anniversary show in twenty nineteen this is certifying those properties who are trained in allen dot lgbt be training program in will be announcing those sided with looking to make that from a widely available so the tourism industry have access to these resources it's the little things of of do's and don'ts what language should i use how should i described some buddies pot and then when i'm not quite sure if actual relationship what assumptions kind of should i make around chicken and what sorts of things should i void topically or phrases that i should avoid and these trainings proved to be really invaluable in places where we've where we've been working on it and so it's rolling out globally through a lender lgbt and how the lgbt is these certification program that will be announcing this year do you think people brands companies sometimes fatal crash in the right they don't know how to deal with the communique bt k necessary yes and it's not it's it's different than at once was when i started this business and not to not to 'em when some of the listeners might alive yet but it was a different world and so they consent back then was from all around a lack of knowledge and possibly in some people's cases perhaps lgbt phobia they were genuinely afraid and phobia doesn't necessarily mean hatred but what we find is when provide education when you give information most of the people who take the learned lgbt training sessions they report back to us and thank us they say thank you so much 'cause i now feel i have these skills any information on eight the dark and now used to do a better job in in meeting the needs of this particular group of customers and the customer picks up on the way that you interact in venue is really what makes the holidays for them g and i think this is particularly important in travel because often you dating people we see when we got the wbz am but with with people from all over the world and it's wonderful but actually in some of these countries gay people let's being persecuted even punishable by death you know it's such they very serious this training is is quite significant not just to us and you know instead of liberal europe in western countries but to other people as well yes we've we've had interest in the training the learned to be training from hotel is in the united arab emirates in pakistan places where it is extremely difficult coach to be openly guy homosexual 'em that there's an interesting fact which is that most of the laws that exist realized to conduct not to a person is or who they fall in love with so they they laws where light to actual physical activity and so therefore they ought to have two people cohabitating in a room is not the same issue now having said that you're exactly right there were some shocking penalties in the wrong places says lgbt people but what we're finding is this provides an opportunity in certain markets for accommodations to become an oasis if you will for these people to feel safe to go and stay in that particular location and that's what i love about travel as the fact that it opens people's eyes and how to communities they might not have necessarily mingled whereas and you see after a while the you know actually which just all the same where we're working with a swiss company into africa secure at the moment where there can be some very different a it's a real patchwork at the moment afrikaans can be some white house john environments including some of the death penalty countries with finding though is information is the best solvent a fool awareness and and acceptance and respect once people discover somebody that i know is lgbt plus themselves it becomes pests no it doesn't become abstract and it changes the world so working slowly surely we've seen a quarter over quarter century tree at out now doing this we see that the world is changing in ways that have made live special around the world lgbt plus people it's gonna be a very good thing so just to wrap it up wbz m is celebrating its fortieth anniversary this year we've seen a lot of change over the last forty years in every industry but especially in travel what changes have you seen in the lgbt plus sex i'm what do you think the key thing i've the next full he s and for me it's it's a pivotal question i'm i'm fifty three at the moment and a forty years ago i was thirteen turning fourteen i had just come to terms in my own life forty years ago at the fact that i had realized i was guy i understood it i knew what it meant and i knew that was my future 'em fourteen years ago was the beginning of a what was called guy reloaded immune deficiency i aids aids and hiv advent event of hr they changed the course of lgbt rights from that period at the beginning of wtn brought up until the mid nineteen nineties when a class of drugs go party as inhibitors came along and changed the narrative again so from the around just after we set up the business everything changed in relation to corporate engagement with lgbt plus people a gay people were seen a little more reticent wagering they used nobody was control what was happening it felt like being inside of wars on me as a twenty see something a guy man in sydney it felt very scary 'em thankfully we have a i mean we we we lost him many people during that time but we we have a wonderful set of options now lgbt plus people visibility being themselves their health is protected and supported going forwards i'll be ninety three so whether i'm here i'm not sure will make it that you and i will come back and talk in a nursing homes about how things went well what i what i see is well let's let's focus from the twenty twenties because we have the twenty twenties upon us and we are in a great moment for lgbt lost business development the travel sector where we think the travel sector can do good things is through education such as we spike up the lgbt training in the suffocation in how to lgbt opposite education said that this focuses on product make your product as good as it possibly can be to meet the needs of this particular group is consume is at think about your creative how do you communicate with this group and how do you then leverage that to have them become your ambassadors to amplify your message through the twenty twenties into the millions and millions of family members friends and colleagues who choose naturally just support

lisa francesca nand cia pakistan official boeing ashcroft forty years eleven months sixty four days fourteen years nine percent twenty years fifty year one month ten years one days
Muses: The Next Elvis - Barbara Barnes Sims

Rock N Roll Archaeology

1:03:07 hr | 3 months ago

Muses: The Next Elvis - Barbara Barnes Sims

"Hey sexy this is pleasant Gaiman Rockin. Row Witch and culture may even. You're listening to Pantheon. Podcasts are Pantheon. Podcasts PRESENTS FROM TORONTO CANADA. Muses with your hosts shanty and links. The podcast that celebrates the women are rock and roll interviews stories and fabulous fun. So grab those backstage passes and let's get to our show. Hi thanks Hey Sean t how're you doing? I'm good I'm sitting here. I have the most professional at by. Pat Narrowly longtime yeah. This is going to be interesting because it's our first full episode in so yeah not in. The same room is a very different experience and Yeah we have a couple already saved up from our trip from La and we had some nice interviews and yeah now I guess it's something you can't ignore house era self isolation going. That's fine. I've been really busy working at. I guess it was a good time to be an online teacher so I've been busy doing that and working on an online class and we've been updating the website so if you haven't checked out muses pod Dot Com awhile head over to it and see all the new stuff. We've added blog posts going now. We have some fun articles up. We have a thing about movies with that feature groupies shanty did a great top five books written by Rockstar wives. So if you're looking for anything to read right now anything to watch we got you covered and we got a whole bunch of fun new stuff coming up and look forward to everyone seeing our little twenty questions because we have some amazing women that we've previously interviewed there Writing out their answers right now and I think people are GONNA love it. So yeah keep keep an eye out on the website and since. I'm sitting so much lately doing so much work at the computer. I was looking online for a proper computer. Just been sitting at kitchen table chairs and they've been really hurting my back so Tj actually went and got me More comfortable chair so I'm sitting in is comfortable chair. I've got my notes in front of me and everything's hands free so I'm saying talking with expression. My hands are up in the area. Now because I'm hands-free I'm just going to close my eyes during this unlike picture you in front of me and your new chair and a telling us this story excited for this one. Because they haven't told a story in a while we've done interviews and staff so this is a book. I read a book and it's called the next Elvis searching for stardom at Sun Records by Barbara Barnes Sims. Yes A trip back to sun records. This is right it. Yeah the way she was describing the studio and everything and the street in Memphis itself. It really brought me back to our time that we spent there and just made me feel giddy again. With how much of a backstage pass we got into record and so. Do you want to tell them where we actually got this book? It was a gift given to us by. Daniel implies the two amazing gentlemen that we met at Sun Records or Sun Studio and Yeah they know how much we love talking about women in Music and day right away where like. Oh you gotta read this book and We both just devoured it pretty much right away like you started reading it in the car like when we left basically so Yeah and we put out that episode. Anyone who has listened to that episode we talked to Daniel Implies and That was such a fun. One they tell us some good historical facts about the place and we actually recorded in the same room that all of these musicians about to talk about got their start. Yeah and that was back in episode eight when we were at Sun Studio so for anyone who wants to go back and check that out fantastic. So I'm feeling like a businesswoman sitting here right now with my fancy chair in a fancy microphone and Barbara Barnes Sims. The woman who wrote this book is also like a really cool. Working woman the ashes so this book was written by one of Sam Phillips employees named Barbara. And it's about her time at Sun Records. She reflects on this time at San has a unique education and she was a witness to the sun studios phenomenon arriving on the scene just after Elvis had moved to RCA and then onto the army working at Sun from nineteen fifty seven to nine hundred sixty great. Great Time to be there. She worked with Sam and son in sales. Ooh Say that publicity and promotion so she observed from a woman's perspective on how the music industry worked during this time. She was one of seven employees and for those employees happen to be women because what people may or may not know is that Sam hired women And they basically ran. Sant- often run it but they had a really important role in in Many of the the happenings the goings on. Yeah he really trusted and women. The artist would that she would come to know and work with include. Jerry Lewis Right orbison Johnny Cash Carl Perkins those are some of the big names and then many many names that I had never heard before and learn a little bit about amazing. Barbara grew up in a small town in the mid South and WENT TO MEMPHIS. Like many people did looking for work. She had a college degree in radio. Tv In journalism and in Nineteen fifty-six applied for a reporting job at the United Press. There she works for a man named Leo and settled into a job in the sales promotion department at W. M. C. T. Television and it was actually Leo who recommended her to Sam Phillips Cool. Yeah so it's kind of like a recommendation word of mouth kind of thing. That's how I've gotten all my jobs from honest. Who were out. She'd been making money from her writing already for quite some time. Beginning at the daily Carinthian in her hometown of Corinth Mississippi. And this is when she was in high school she worked at the University of Alabama News. Bureau and the CA- F- TV station when she was just out of college so she had written commercials for coffee but never anything about music until her time at Sun records after agreeing to meet Sam Phillips and having him cancel many times the last minute he eventually showed up at her house when night to chat and as funny because this first meeting was her water. Heater had just broken so they got to chatting as they took turns emptying out the water out of the Pan under the tank so like I guess he was good vibes. You know like he didn't judge hurry didn't look at it. He just kind of like helped her and they took turns and they chatted. That's good he didn't ask for a resume and cover letter and she felt like she knew him in that he knew her and about her new job he said Barbara. You're going to be doing so many things from one day to the next will be surprised at just what you will be doing talking to these distributors disc jockeys writing about these artists hyping billboard and cashbox every day. There's going to be something different you're GonNa love. Don't get me wrong. I'm devoted to radio but it's nothing like this record business. And he was right of course of course nothing like that record business so she began by writing liner notes for Carl Perkins and Johnny Cash. She had so Sam had her listen to music and she was pretty much off the races she. I listened to Carl Perkins and the copy came pretty easily to her. She responded well to his music and wrote up. The lighter nodes adding some family background as well as what the listener would expect from the album. She mentioned certain songs she liked like matchbox and left out some of the songs. She liked the least then. It was onto johnny cash which didn't come as easily to her. She says caches music struck. Me As complex primitive in a way yet to penetrating to peg as just another country act. Besides there were no fiddles and she kept listening she liked it more and more and I thought Barbara was really cool. Like there was one part of the book where she'd like to congratulate herself on a job. Well done talks about just like cracking open a cold bottle of budweiser in like a cool. Like she's a cool person in a like really ambitious and amazing woman in one thousand nine hundred eighty s mid nineteen fifties. Yeah she's one of us. Have you ever heard Much Carl Perkins don't really know I haven't either so this episode really gave me an opportunity to listen to some of Carl Perkins music in some earlier Johnny cash stuff and I thought we play a song called matchbox by Carl Perkins. Great idea. Send him got a long way to go. Old Words bringing up all right so when she was finished writing up. These liner notes. She couldn't wait to drop off the fresh copy to Sam. At son she went to Sun Studios and he wasn't in however she was to meet some other important players. Who were a part of the Sun Studio family? At the time SAM secretary was named Sally will born a fresh and freckled young woman. Another woman was sitting at a desk. Sons Receptionist Regina Reese. There was also a man named Judd who happened to be SAM's brother. He was over six feet tall. Had a deep Alabama accent and a smooth manner sounds like a player son offices and studio were located three blocks west of beal. We went to. Be Alright. Yeah we did but we were like. I don't even think we enjoyed it. Not Because Bill is not an enjoyable experience it was just because we were on tender hooks waiting for that text to confirm if we were actually going to be recording on that night. The yeah you're right. But so I think you get to roam around a little bit and I remember Some locals being real friendly with you do you remember. I forgot we had fun but yeah we were waiting to find out if we go to Sun Studio and thankfully we did so. We didn't spend much time there. Yeah at seven. Oh six union avenue or automobile row was where son was located in an area where used in new car dealers auto part stores lined. The streets sons office was small and always seemed crowded in fact Barbara remarks. One of her first day seeing Sally Desk and surrounding her were a crush of young men sitting on the love seat or standing near the studio door. Heaven a blue NEON SIGN IN THE WINDOW RED MEMPHIS recording services cool and links genius people called Sun Studios. No what do they call it. A hole in the wall completely surrounded by cadillacs Nice. Yeah it is pretty big out of the way it is. It's not what you expect. When you build something up in your head you know you imagine it to be this like crazy place and it is really small and you kind of have to know what's there to to go. There seems like that area and yet a lot of the men and the musicians who arrived outside day. We're all driving cadillacs at that time. Of course Sam Phillips mostly got his work done at the cafe down the road since somebody always wanted something from him there so if he was there you know you can imagine the the amount of people that wanted to talk to him wanted him to hear their music so. I don't think it was too easy for him to really hold business there so they went down a little cafe. Barbara got to know Sam well during this time. Not only did he have this recording company but he had a wife and two sons a ranch house with a pool a Cadillac and a radio station and she says maybe more for all. I knew in Florence Alabama Nashville. Sam had originally been an announcer before he took the chance on opening up his own recording studio so I think that was a good move for him absolutely. Apparently he had wanted to be a preacher really. Yeah that's interesting. Yeah so Barbara. Says Sam got really wound up telling me how he felt and what he thought and getting his studio going. The wealth of talent from the Mississippi and Arkansas Delta's to be heard on Beale street the electronic advances in recording the expanding market for recordings and other favorable conditions at the time. Yeah so this company. Christened Sun Records yes and so she just missed Elvis but what had happened. That I didn't know was that well. I guess I didn't know the details of it or like y Sam would have wanted to sell Elvis's contract for forty thousand dollars but he told Barbara that gave him the capital to really get into business. It made him able to invest in other artists like Johnny cash and Carl Perkins and put Judd on the road with them that makes sense. And that's that's smart. You know speech using that to help other people I like that. Yeah you can't bank on just like one artist forever. I don't think and with his involvement with the colonel later on like who knows what repercussions that would have had for Sam anyways only being that he got away from Elvis before the Colonel Gautam Yep Yep so Barbara noticed that SAM had interest in religious matters and those early ambitions to be a minister and she wrote about Sam saying him to be an honest straightforward and even tempered and congenial. He called himself the simplest man you've ever met but to her. He seemed to have a complicated and calculating mind I think overall he was known as a really great guy but I think kind of working with him for all the years these years and stuff sometimes he could kind of go off and blow up and take things personally but she. She talked about him in a really favorable light. That's good Barbara would sometimes accompany the businessmen to their meetings with the CAFE. And even if she didn't say much at first she was learning the business almost like a fly on the wall being privy to conversations that not many women probably had back then These were the days where in some places women couldn't smoke in public. That's crazy woman that had come in from out of town maybe one of the musicians wives and she'd asked barber like it. Okay that we smoke in public. Wow so she picked up some new words from these guys some colorful language and she learned that sometimes in the music business not everybody plays by the rules and so when she was trying to understand this she said to Sam like Oh you mean like outgrew you first. So she said that to Sam and he had impressed by her ability to keep up with it and around this time. He told Barbara that he felt like she really knew him at a time when not many people did and he didn't confide in many people Yeah they had a connection they did. At this time women worked mostly in clerical positions. Barbara had been tired of being a copywriter and once had a professor tell her that there's money in sales and this intrigued her kind of piqued her interest interest. Which I think is cool. That a woman at this time was Enough to go after it and although she did want to get married and have children. Barbara was important to her to set herself up into pendant. Wyman what a boss. Another notable project that Barbara worked on was promotion for Jerry. Lee Lewis By motive in fun difficult. I don't know what it was that it was that was fun. Difficult Crazy Yeah. All of it. Yeah Barbara Ooh wasn't yet full time at Sun but John Sam. We're trying to convince her to leave her other job to join them and work on this. Jerry Lewis campaign full-time so just to begin with with Jerry. Lee Son was getting a lot of Fan mail for him since there was a huge reaction from a whole lot of shaking going on so they wanted her to start answering these letters and I liked how she responded responded to it. She agreed but the first thing that she did was ask for stationary with a picture of Jerry Lee on it and she got it so smart. She was comfortable like saying. I think that this is going to be good. I want this. I'll do it if they were like. That's what you want. That's what you want in an employee. That's that's the way to move forward to right so I hadn't ever heard too much. Jerry Lee Lewis because his reputation. How do you say this never preceded him or like? He just could never overcome the reputation of what we're going to talk about in a little bit but for educational purposes. Would you like to listen to a whole lot of shaking going on? Let's do it the baby DOE old. Bend only way. It is a pretty great song. Go around this time. She got a tour of the actual recording space curves and the ceiling baffles to make sound waves bounce. She said she noticed. A trash can overflowing with beer cans and green wind bottled. Guess not much as changed. Folding Metal Chair held a tray full of cigarette. Butts several microphones were scattered around. There was a small upright piano toward the back and of course the control room so she was able to go up into the control room and I think something that was probably one of the most special things about our trip to son. Is that when we had the tour with everybody? The one that you pay for you get to go in and you get to see the studio where all of these musicians recorded but the control room off limits YEP head. We got to see the Control Room. We did and it was great. It was exactly as I would have pictured it to be so she went up and it reminded her of being in a radio station with the real real tape tax and soundboard and honestly it sounds like not much as changed for the way she was describing and it was like. That's pretty much. What I saw from their door opened and she had a small office. It was part of her acceptance to the position to have a little space to herself and this set Barbara was learning by experience. Not knowing what to expect in trying her best to keep up with the pace of this very fast business. I thought this was interesting. But the fan mail she actually and it make sense. She imitated Jerry. Lee Lewis thin script handwriting. Yes she wanted to feel like it was him writing right exactly. Yeah but the signature. I'm pretty sure it was a stamp with his actual signature. Yep So sometimes she answered them at home or sometimes if the studio and in order to get into her office sometimes she'd have to wait in the receptionist at the front until the red recording light was off so she can walk through the recording session. Terror office so she was really impressed. By how big son was becoming in the entertainment industry. Yeah what a cool place to work. I know as Barbara settled in. She did some writing for. Call Perkins Sam bought her a new Olivetti Electric Typewriter so Sam sounded pretty generous with our kind of stuff cool. She felt as though she'd arrived in that she really was part of the record. Business now one thing. She didn't quite love though was the of the studio Click she really thought that son should have had more pride in their appearance I think Sam says something about like a cleaning company going in every so often but obviously wasn't enough and it was kind of like a boys club even with some of the women there so I can picture getting pretty sloppy totally another thing. That people's business life and private life seemed to be intertwined there so she'd always kept those to her business life her private life separate she valued her freedom and her private life but it was hard to knock it sucked into Sam's charisma allowing some studios to control your life all the time And speaking of business becoming personal Early on Barbara did notice something happening between Salmon. The secretary. Sally seems like it wasn't quite out in the open and it wasn't exactly a secret either one of those f. One of those. I've been there a making business personal a little work crash. Maybe once or twice I think back when I worked at a music venue in Halifax I worked at the seahorse and I was dating a guy and he worked there too but I can't remember if we dated before after men things are blur sometimes fisher. So kissed the sound guy. There too lucky him. Barbara was still freelancing and liked the extra income. This allowed her but deciding to move fulltime to son. She was asked about her preferred salary. She decided on and Sam agreed to ninety dollars a week which was more than she was making previously. And get this at the time the average woman was making fifty dollars week. Damn yeah that's amazing. Good for her yeah. She felt like she had real work to do and stimulating co workers like she genuinely liked it. Which is how many people can say that job. I used to be able to say that you used to be able to say that now. We love this job. We definitely love this job. I A stimulating co worker. Yes we have fun too. I mentioned before Barbara had never worked in music or how ever had plans to work in music until this time she decided to keep a backup plan in mind thinking about her long range future and perhaps eventually someday something more with more stability. Barbara enjoyed school and read that there would be a rise in college. Admissions soon and that colleges would be hiring many more professors. She liked the routine of set hours and summers off and did hope to be married with children. One day so. She began working on her master's in English on the weekends evenings. She's just kick ass ready for those baby boomers Yup. She hoped to work for Sun for several years depending on how her career progress there and was Sam what developed in her life. And honestly I think having that kind of a backup thing was a smart move for sure. Even though son had many women working there this was an exception in the music industry. Of course Barbara says that all the DJ's were male and mostly all of them were white at Sun. People were constantly dropping by a stream of hopeful. People wanting to be as the name of the book suggests the next Elvis. Yup So yes. She started traveling quite a bit later. And she didn't like that as much because she didn't like being the only woman in a group with these men because she found them quite vulgar understandable. Yeah Yeah so not always easy being the only woman I mean almost never easy but yeah so. Speaking of Elvis Barbra didn't or hadn't seen him drop by the studios just yet so barbara or as they lovingly called her at the studio does mentioned one incident at the studio at self where the men had become a problem. So imagine you know so. Building full of men drinking smoking recording and normally. It was fine but there was an incident where one of the female employees K. came into. Barbara's office crying saying that one of the men had been inappropriate with her and so barbara took no shit. She opened the door to the studio and she kicked everyone out. Good they all listen to her. They left so this is just one example of how Barbara stood up for others and learned how to be strong and stand up for herself. I love it. I love this woman. I know she was spending a lot of time with judd speaking to him. Almost daily and learning the INS and outs of the kind of corrupt sounds like record. Business single soul to bootlegs to illegal operations. Barbara was getting a schooling and sales. Perfect I loved reading about the office routines like how everyone went and had coffee together in the morning at the cafe and some of them even breakfast there every single day and like to think that having a job that you love with people you enjoy and you don't have to rush it like they were able to have breakfast together and it wasn't just like get to work. Start Your Job Yeah. Barbara didn't have a car yet. She saving up to buy one so for now she would take the trailways bus home to visit her mom and Mississippi or if she had to run errands for the studio she take the bus. She wouldn't one time when she went home. She even visited some of her friends at w. c. m. a. radio to tell them the good news about her job. She had done some unpaid training there in high school then in college. She reported local news for them one of her friends. There told her a story about something famous that John had done for Elvis. And you can tell me. I'm going to read it for you and you can tell me if you had ever heard of this ready. I'm ready. Give it to me. So apparently Judd Phillips started a riot at one of Elvis's first concerts outside of the south while he was managing Elvis. It was either Pittsburgh or Philadelphia. Forget which he said but in Pennsylvania L. This was booked for three shows and at the first one three hundred fans showed up in a ten thousand seat building for the second show. Judd took two thousand tickets and gave them along with two dollars to every young girl he found on the street. He promised that there would be a prize for the one who could steal the most of Elvis's close after the concert while you should have seen the mob. Elvis closed were shredded word. Got Around and the third show sold out the so. The Associated Press picked up the story and that was Elvis's I national publicity. Wow how clever and she said that she definitely could believe that he had done that. Based on like who she knew to be in everything. I can picture it happening to and I think that's so smart. He was on the ball. Poor Elvis but I'm didn't given a ticket and two dollars to see Elvis and then being told hey. Try to rip off his clothes. No problem I gotcha all right so moving on from Alvarez. We'll come back to him later. Enter Roy orbison. I Love Roy. So he played shows in the mid south with sons other artists and he occasionally showed up at the studio. He had success with his song. Ubi dooby and was impatient for another hit. Barbara said he'd come into her office to talk about his career aspirations. He seemed really focused on his success. Wanted Sam to be doing more for his musical career one day when Roy seemed like he was an especially good mood. Barbara asked him for a favor. She needed a lift to stop by the printers and the bus would have taken her all morning so he gave her a ride in his sleek Cadillac and even politely open the door for her. He called it his UBI dooby car because he made fifty thousand dollars. That one song. Wow Damn you. Do you want to listen to the song that made Roy orbison fifty thousand dollars and got a MINOO BE CADILLAC? Absolutely UBE JUMBLE DO. Do the dishes living room at the wall to. You're able to do the right. We do ooh. Wall over Roy. He's so sweet for anyone who doesn't know there's a new artist called Orville Peck who's amazing and he's like the modern Roy Orbison so if you love him checkout or OPEC has oh my goodness actually you had mentioned how much you like ova pack and then TJ started playing him a lot. And then I was like Shit. This is good so good. It is so good. And he's amazing live Canadian yes Canadia. Yeah all right so Barbara had some pretty interesting things to say about Roy Flake. How he wanted to be a star like Elvis but he didn't love are in B. That came out of the music of Elvis. Carl Perkins Jerry Lee. She said he was having a bit of identity crisis like he had the pump or the same of his Elvis but he was kind of you know but for lack of a nicer word on the Chubby side and she just said maybe he hadn't drunk enough the Mississippi water. Growing up Oh Roy in one thousand nine hundred fifty eight Barbara met Jerry. Lee Lewis in the flesh whereas Roy orbison had a bit of a gloomy air around him. Jerry Lee had a swagger. She was surprised at his height since seeing him sitting at a piano and photos made him appear shorter than he actually was. She said that he had barely entered through the door before he ran. Comb through his peroxide golden locks and she said he seemed more immature than he seemed young. Letting yeah it is interesting but when she saw him the next day he was in full character he was singing and playing the piano. Not a kid but a man roiling explosive package of Energy. And sound that might. I might have made a mistake. That might say rolling but is roiling a word Graham. Oh well maybe he was roiling then he probably was. Another part of Barbara's job was to entertain people mostly men who came into town on business. The sounds creepy. But it wasn't like Sam really respected Barbara. So one Saturday when she didn't normally work Saturdays. She entertained Jerry Schriffen. The Roulette records promotion man. Barbara told Jerry Chiffon the story of how Jerry Lee I came to sun in Nineteen fifty six. Sam was out of town but Jerry insisted that someone hear him so sally buzzed. Jack Clement in the Control Room and told him that Jerry had told her that he played piano like Chet Atkins Played Guitar. Nice Jack heard him liked and bill. Riley was there with his base tuned. Up to accompany the Audition Jack. Roll the tape. 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Lee Lewis Actually told Sam Phillips that he thought Sam had some bad women working for him like Barbara because when he was recording he said he saw Barbara shaking her head the whole time while Sam told Jerry to hold on and defended Barbara saying that she was just a big fan and she couldn't believe that any one person could have so much town and Jerry Lee seemed satisfied with this. Of course just stroke ego a little bit and all is well so cheerleaders great balls of fire had been riding high in the charts in February of Nineteen fifty eight and then something took its place. Johnny cash is ballet of Ballad of a teenage queen and that had actually been composed by the NRA man that I previously mentioned Jack Clement Ruiz. So things really started getting exciting for Barbara. Because what more could you want from working in music business beside hanging around with musicians all day listening to great music travel and so Barbara was sent to New York? For the first time that's she was pumped. Of course. She bought a whole new outfit. A jacket hat gloves amazing. Oh yeah she was ready. Jet Spent most of his time traveling there and then anywhere else and sure enough. Barbara was eventually invited to join. She had such little experience traveling that she didn't know that she was allowed to smoke on the flight but she was super excited to be there. Although she wasn't used to the strange sounds of the city and had a really hard time sleeping for the first time that she met Carl Perkins. She didn't know it was him. She describes him as a man with curly hair. A receding hairline and an air of profound dejection he was so thin as tola malnourished. A more experienced person would have known it was a look connected with alcoholism but didn't recognize that something about his sadness and humility reminded me of those stray dogs. That would come around our farmhouse looking for scraps. Yeah so he said a brief hi to her but her attitude towards the musicians. Where will if they don't speak to me then? I won't initiate conversation I got A. Barb became close friends with Jack Clement and one of her favorite things to do with spend time with him in the studio when he would sing and play the guitar just for her dream. She said the song she liked. Best was the best guitar picker in Shelby County which I could not find on youtube interesting. Barbara had been writing about Johnny cash for a year. But she had yet to meet him. It was April nineteen fifty eight when he finally arrived in his fifty six lincoln. She watched his Johnny recorded songs in the studio among them. Some that Jack had written for him one thing I wanted to mention. Johnny mentioned that the song come in stranger had been written for his wife. Vivian something she always said when she greeted him when he got home. Yeah so she ended up in the same booth as Johnny one day when all the staff went out to lunch amazes you had a little chat johnny cash. I love him so much. I've been listening to a lot of Johnny cash lately actually in isolation yeah. Yep He's yeah he's great see. Yeah have you heard the song come in stranger? I don't think so. Well let's play it right now. Come in stranger by Johnny Cash. A strange I read through calls. I knew it didn't hear that. Been Mayo you've been gone the Lone Ranger. I know you rip ball. Just sit right there in your easy chair and tell me all about places. You've been how long it'll be before you leave again. I hope it's a long long romance. Drain everything around a Ray. So Carl Perkins and Johnny Cash had both been offered contracts by Columbia when their son obligations were over for John He was guaranteed fifty. Thousand dollar royalty in the first year and he had the chance to do the gospel album he always wanted to do. They also stressed that they would give him greater possibilities for movies and TV so of course he ticket and Sam Phillips took Johnny Cash is leaving personally At hurt him by the way fifty thousand dollars in nineteen fifty eight. I looked it. Up is almost half a million dollars. Today is insanity. Wow Wow wow at this time. Barbara's job had evolved from much more than just writing fanmail. She's like into it. Now since what? She says my job at son had many facets but my chief function was to be a sales person my task was to get our records noticed and played in as many ways as I could devise using my telephone and typewriter a new means of publicity was launched in May nineteen fifty eight with the debut of Sun Liners a one page monthly new sheet that contained information about our current releases. Samba's always had given me a free hand with content saying I could include whatever I chose to feature including of other labels records. I laid out several boxes which one devoted to a DJ spotlight a couple mentioning new records. Cash and Lewis for the first issue and a calm of short news knows about our people the industry at large and whatever news I could find about. Tj stations and others in our orbit. I even mentioned Roy orbison student Claudette coming out on cadence row. That's so cool and like it makes sense. 'cause it's like a new platform. It's something new that they're creating it along. The and I love that. She had the freedom to be able to do that. Yeah that ear. Though had brought a momentous event that had enormous repercussions for Sam Phillips Sun Records and all of the people who were associated with the company. Can you guess what or rather who it was? What year was this again? Nine teen fifty eight. I don't know tell me told me. Jerry Lee Lewis. Oh okay had married his thirteen year old. That's reason yeah a story. Yeah here we go again. A story that was broken in the British press and brought the world of fun in music at Sun Studios to a halt. Yeah how do you explain that? One son never had a major star after this fiasco according to Barbara Dan When she got to work at eight thirty. Am The phones? Were already ringing. Helen Kolstad Apostle freelance music writer had gotten the news from London and she often wrote about sun artists and they were supposedly all friends all around but of course like she had two break. This SAM wanted to buy space in billboard to present Jerry in a better light. But Jerry wasn't really making things better for himself Yeah so like Jerry would go on. Tv shows or he would say things like on record like she may be young but she's whole lot a woman no Gee. I don't just know yet. So he told the reporter that he was in love with Myra and it was against his religious beliefs to have sex outside of marriage but like never mind he already had two wives. Yeah he's just a he's something else. Yeah he's still is something else he's like. He was a bigamist. Yup An issue that eventually had Sam in the Memphis courts. Jerry Lee's behalf man like while Jerry was making his supposed to be triumphal tour of England. Naso wasn't just the age. It was like the incest angle. There's just so many layers of grossness here. Yeah so Myers. Father J W Brown was not only Jerry's Bass Player. He was also a cousin. Of course they're all cousins. Yeah yeah in like Myra was like the babysitter of Jerry's no children. It's just like no awful. Yeah so Jerry. Lee was booed off stage and his his career. Can you say that it recovered not not the way it should have? I mean not not the way it would have if it weren't so messed up right. So Jerry Lee never seemed to acknowledge that there was anything weird about this marriage and he was even trying to tell people that like she was fourteen lacking a couple of months. I feel and he's like the Donald Trump of that time. Just like keep denying keep lying. Keep acting like it's normal. And hopefully you're you pray people will believe you. Barbara says he knew he was a celebrity. But he didn't know he could be brought down by popular. Opinion is banned on many radio stations and ignored by most Dick. Clark canceled future bookings and Jerry. Lee's personal appearances became infrequent and poorly paid So Audrey Williams makes an appearance in the book asking Sam so she went to son and she asked Sam if he knew anybody suitable to play her late husband. Hank Williams and a movie. She came into. Barbara's office and Barbara said I just couldn't grasp that I was sitting three feet away from the woman who had inspired all those wonderful Hank Williams abors. She wasn't old in her mid thirties at the time but her face showed many miles. Yeah we know we know all about that. That's right so they never really heard any more about the Hank Williams movie after that One day in June Barbara finally met Elvis been waiting. She always thought he was going to like stop by at nighttime because that's kind of how he rolled but there he was just like during the day and Sam made their acquaintance. Elvis shook her hand and said glad to meet you. Ma'am Oh this is what she said about him. That they exchanged a couple more pleasant Pleasantries and she would've liked to talk to him more but you know she just like the other part of her brain was like. It's not polite intrude but she's still. I fully took in what a beautiful sight to behold the real. Elvis Presley was that day. He no longer fit the stereotype that had been attributed to him sneering hillbilly cat with a pompadour purple jacket and teenager skin instead. I saw a fit and glowing specimen of manhood with a neat haircut and custom-tailored uniform that showed off his perfect physique look squarely in the face in a sincere manner as he said he enjoyed meeting me and I thought he had a lovely smile with some warmth and humility shining through. What a dish a glorious specimen of manhood. That's like that's perfect manhood. I love it. I love it sweating. Actually am where where we ever got her license and it was time to purchase a vehicle. Sam Did a test drive for her on her vehicle and checked out that it was good deal. You know. It's like very brotherly. Fatherly and while Barbara was attending school. She said she liked most of her professors except for her American lit teacher. Who ignored all of the women in the class and address the men as you bright young men who are going to be the preface the professors of tomorrow gross and of course there were no women professors among. Barbara's teachers at the time of course but spoiler alert she becomes one e she does she's awesome. Barbara's jobs at son was to cultivate the Trade Journal personnel. Who are responsible for reviewing records? They discussed how music was selected for Billboard magazine. She learned that the staff would listen to the recording and discuss what they did or didn't like about them and some funny weird stories that I thought were great Was how it was actually like men in. Barbara's life that were the ones getting cosmetic procedures because they were so concerned about their looks so like for example. Jack Lemmon got a nose job because he thought Elvis's subtle. No Shaw was so nice like another weird piece of insider info is that apparently everyone who run around who hung around at son who owned motorcycles were known for taking nude motorcycle rides when they were up to their shenanigans. God can picture it. It's great and then here's a cute funny story one Christmas. They wanted Sam to give them money for Christmas tree but I guess he was in a mood so he said to us the tree from last year which was in the storage room and by the way it was a real tree so it was Brown and falling apart so they did as he said and they got out that Brown tree and the tree with paperclips pink. Memo's cigarette butts broken forty five and any other trash from around the studio on top of the tree. Instead of a star they put an empty beer. Can Apparently Sam was disgusted when he thought and made them get rid of it immediately but he still arrived the next day with gifts for everyone and I think it was the following year he let them get a nice Nutri wrong after route. One I I get. Why so even though Barbara? I tried to keep her work life and personal life separate after year of working at Sun or a couple years. She felt like she had real friends there and she enjoyed going into work and hanging out with them. Regina for example. She could always count on for companionship and gossip at lunch. And this comes as no surprise to anyone. Barbara loved being among creative and endlessly amusing people but she felt like the musicians were big children and son record company. Was there playpen. Everyone at Sun was a character. Even the postman who resented their strange hours and amount of rejected packages that they would give back to him stomping around the office and slamming the doors. He left me so barbara was one year away from her Masters and Considering Joining University Faculty sooner rather than later at this time You know things were starting to kind of change a lot at Sun and a host of cute teen heartthrobs were stopping by such as Ricky Nelson. Fabian and Bobby Darrin with what? She called a type of watered down rock and roll. Yeah while Barbara sometimes got yelled at by men in the music industry. She is a pretty interesting attitude about it. 'cause you're like well? Why was she getting yelled at what she does at Sun? I got used to being braided. For late shipments refusals to take unreasonable return. Requests lack of an album on a singer with an hot single SAM's failure to return a phone call and any number any other number of problems. This was a part of my learning to stand up for myself because I knew Sam expected me to not for me individually but for his company it was not a skill I had learned before since southern ladies were supposed to be sweet and compliant and also. I was an only child so I had missed out on fighting with siblings. Yeah she says strange that strange though it may seem I was more grateful than offended by Milton in some guys like him. His manner meant he took me seriously in my job. I was important enough to be yelled at a negotiated with I appreciated this aspect of the record business. Chivalry was nice in its place but what went for respect and other jobs I had was actually condensation and if only a man could talk business. So it's interesting. She could talk business that she couldn't so wrapping up here in Nineteen fifty-nine son. Sales were off singles nationwide had declined in sales and it could have been due to top forty programming and transistor radios teenagers not needing their own disks. Musical tastes were changing to as the one selling Where Broadway scores and classical pop? The first wave of rock and roll was almost over. Yup Elvis was in the Army Chuck. Berry was in jail and Jerry Lee had been banned from radio. She says in essence rock was going pop and the top records. Were coming out of the East Coast. Hollywood in Nashville previously though and nineteen fifty-six Barbara said that it was actually the youngsters who made son so successful. The preteens and teens had more impact on the economy ever before with their allowances and part-time jobs. They liked cars fast food and above all they liked to dance. Yeah they did. Get up for those teens. And it's true these are the Fan Caesar. The groupies like the we are the ones that keep music alive. Where the ones showing up. We're paying for those albums. You know. Look the stuff that the teens are putting on Tick Tock. These days is way. Funnier than anything. Snl is doing. Yeah for sure for sure. So big shift at Sun especially when they moved to six thirty nine Madison. It was internationally regarded as a state of the art facility and it was built to fill the growing needs of the sun records recording label that the older smaller. Sun Records Studio was no longer able to handle but it was no longer crammed and Barbara felt it more loneliness she missed the Camaraderie and she missed the songwriters. The people stopping by she believed that in order to do her job effectively. She really had to be close to the music to understand it. And now she wasn't like Sam Phillips head made all this money. They said two million dollars without ever having a desk and that was kind of changing. Yup there's a new school opening in Alexandria. Louisiana and Barbara was offered a position for the nineteen sixty nineteen sixty one school year. She would have a step up in salary. She'd get to read books for a living greater security and benefits and those kinds of things. She didn't have sun perfect. She was worried about telling Sam but eventually that summer she told him he didn't even try to tell her to reconsider. He congratulated her and said you can always have a job with me. Even if this record business doesn't pick up I'll always have other places you can fit in but does her. Yeah so they had a rooftop going away party for her. She got sweet gifts and she had a few drinks and kissed everyone row. Yeah it sounds like something. Something do by Barbara. Taught at that school for three years after she left son is she married a man named Robert Sims and together they had a daughter they moved to Baton Rouge and she taught in the English Department at Louisiana State University retiring in Nineteen Ninety six. Yeah she frigging worked. Wow yeah she was a boss Lady. She kicked but oh she's like one two major university wide teaching awards and there's a scholarship named in her honor. Oh my gosh. She's added several alumni publications and published freelance feature articles and scholarly papers and she became an independent technical and business writing consultant for the state of Louisiana. She's and she gave lectures on rock and roll and literature at Continuing Education classes. Right God she she really did keep busy hopefully so this is what she said. This is how we'll we'll wrap up here at Sun at Memphis state. I was taught that a drama requires A significant theme along with enough conflict intention to make an interesting story at Son. I had witnessed three years of pure drama. Play out before my eyes. It was a small studio seven. Oh Six Union Avenue Tennessee. But such a big chunk of life What Anderson one of my favorite writers said that for him writing was love and words at Sun? Making music was love in sound. That love has echoed in my heart and mind wherever I've gone all days of my life. I Love Barbra my goodness yeah. She actually also said. I'm like accounts finished with this but also like she just regard Sam so early. She says that he gave me to myself. He was my final father. Figure who convinced me of my ability to meet the challenges of my life capably. Wow yeah he does sound like a special guy and It's so important to have mentors like that in your life to help you. And it's nice when you hear such positive things especially about like men in power positions you know realizing women's worth in the business places and especially in that era too like good on him. Yeah so that's the story of the next Elvis searching for stardom at Sun Records by Barbara. Barnes Sim so thanks so much for Barbara for like paving the way being such an amazing Alco getting strong woman. Yeah would an inspiring story and thank you for telling it and bringing me back to Sun Studio. That was so much fun and I'm GonNa go look through our old photos. Now I think and reminisce think he should and thanks to Daniel implies for the book keeping the gas this book and just a wonderful experience and amazing array will thanks. Thanks for listening links and things everybody else for listening. I hope you enjoyed if I kind of look back. Yes I'm working on my next one. And that's GONNA come out in a few weeks and we'll see how this quarantine we haven't yet interviewed someone quarantine. That's going to be interesting because we've always been together for interviews but we're GONNA test that out this week and will keep trying to give you guys the best episodes that we can. Yeah Right. Everybody thinks so much for listening. Take care we'll see next time. See you next time. Muses produced by SHANTANU and links O'Leary and is part of the Pantheon family a podcasts. Find all of our shows notes social and links at Pantheon PODCASTS DOT com. All songs can be found wherever you get your music. Please download and purchase these great important tracks. Come find us at Pantheon podcasts on facebook. Tweet US at Pantheon pods or see us at our an archaeology on instagram.

Barbara John Sam Sam Phillips Elvis Carl Perkins Sun Records Jerry Lee Jerry Sun Studio Johnny Cash Memphis Roy orbison Jerry Lee Lewis Barbara Barnes Sims Lee Lewis Judd Phillips Sally Desk Mississippi Barbara Barnes Sun Studios
Paul Black - WCM Investment Management (First Meeting, EP.05)

Capital Allocators

57:37 min | 1 year ago

Paul Black - WCM Investment Management (First Meeting, EP.05)

"Today's episode is brought to you by barings a global financial services firm that provides innovative solutions and access to differentiate it opportunities across public and private private capital markets in their podcast streaming income bearings dives beneath the headlines to find out what's really going on in public and private markets around around the world from fixing common equities to real estate and alternatives in the latest episode of streaming income elizabeth winrock a managing director within barings alternative turn it investments provides listeners with firsthand perspective on the challenges that limited partners face when investing in private equity today from increasing fund sizes to who an evolving e._s._p._n. Landscape why drug shares an insider's view on these trends and also discusses her personal experience as a woman in this traditionally male dominated dominated industry. You can subscribe to the bearings podcast by searching streaming income on apple podcasts or spotify. Hello i'm ted saudis and this is capital allocators. This show is an open exploration flirtation of the people and process behind capital allocation through conversations with leaders in the money game. We learn how these holders of the keys to the kingdom awesome allocate their time and their capital. You can keep up to date by visiting capitol. Allocators podcast dot com in my guest on today's first meeting is paul black of w._c._m. The investment management this show is a replay of our conversation on capitol allocators last year and has been one of the most listened to conversations with a manager manager on the show at the time w._c._m. Managed twenty six billion dollars and since then continued to perform and grow today today w._c._m. Overseas over forty billion dollars and earlier this year announced the sale of a minority stake in their business tuna ticks investment managers this past has for informational purposes only and should not be relied upon as a basis for investment decisions all opinions expressed by guests on the show or solely their own opinion opinion and do not necessarily reflect those at their firm managers appearance on the show does not constitute an endorsement our investment recommendation by ted or capital alligators with with so much of the institutional world focused on value investing including my own training. I was pleasantly surprised to learn about a large high. Performing in growth stock manager located in a nondescript building in laguna beach california. My guest on today's show is paul black portfolio uh-huh manager and co c._e._o. Of w. c. m. investment management a twenty six billion dollar manager of global equities that he joined when it was a two hundred million dollars boutique in one thousand nine hundred eighty nine calls early career included positions at wells fargo bank and bank of america our conversation in starts with paul's trial by fire entry into the business and turns to growth stock investing including defining great growth company searching searching for widening moats assessing a culture. That's tied to competitive advantage creating a positive culture within w._c._m. Learning i'm from mistakes identifying tailwinds and protecting the downside paul embodies the principles. He preaches an offer some tasty food for i thought please enjoy my first meeting with paul black of w._c._m. Investment management fall is great to be here with you. We've been trying to do this for a little while. Why don't we start with. How in the world is there. This twenty five billion dollar asset manager in laguna beach that i had never heard of before. Thank you ted. It's it's great to be here and we wanted the same thing. I think frankly you know w._c._m. Investment management who's heard of us and how is it that there's a twenty five billion dollar firm that most people people don't know about and my answer to that is i really don't quite get it because we don't even believe where we are right now. So how'd you get here well. I'd love to say it was a lot of hard work. It was a lot of good fortune. It was a lotta learning from past mistakes and making almost every single one one of them they could possibly make but using that as a source of strength to get better and better and better and better and anyone that doesn't believe that most of life is learning from your failures. Just it doesn't quite get it or they're too young to get it. So how'd you get started in the business well. I started interestingly even how i got involved with stocks. It's kind of fun. You know when i was younger. You've got a small inheritance from my grandfather when i was about eighteen years old and at the time i thought you know i kind of like the thought of investing investing i met an e f hutton broker and he told me to start buying south african gold stocks now. This is when gold was about three hundred dollars an ounce so i think i bought lot five hundred shares of a company called east fontaine south african gold mine and i was in college at the time and i'm not kidding i would open up the wall street journal every morning and when goal was going from three hundred to eight hundred dollars an ounce in those periods from seventy eight to eighty two i would literally look at the wall street journal and say you know i just made stock. It'd be up a buck a day. That'd make five hundred dollars a day. Owning five hundred shares of this south african gold a minor that was highly levered and so that kind of got me hooked. I knew nothing about it but obviously when you're making that kind of money in a short period of time it gets your attention and that's when i actually shifted my major from marketing to finance and ultimately went to work for bank of america up in san san francisco in nineteen eighty-three when b._a. Was the biggest bank and most successful bank in the world. It's a short few years later that it almost went bankrupt which is a whole different story but that got into the private equity group that private market group. The private banking group ran portfolios at twenty five years of age. I was put on a desk to run two hundred million dollars of other other. People's money is given the wall street journal bunch of research value line. I was said okay. Go to it which is terrific for me but it wasn't terrific for the clients because i really knew nothing about investing but over the next five or six years i learned a lot again again <music> by learning what would you learn in those early years and what mistake. Where do we think the key mistakes for the made back. Then i remember one of the trades i made in portfolios because i've always i've loved dubbed growth and growth investing at that time i liked growth for growth sake so i was taking people out of i._b._m. Stock in putting him into digital equipment because digital equipment stock was a much more rapid grower at the time well. We all know what happened to that story. So i learned very quickly. You know that the most rapidly growing companies please although they're they're kind of sexy and fund the ultimately they can be massive destroys of capital and really what i learned how much i really didn't know over for those five years and how much i needed to kind of educate myself to get much better at this point and was at the process where you educating yourself or were there mentors around you that you learned from you know. That's a good question because i always i've wrestled with that. Throughout my life really are the guys that i can point to that or mentors and there really wasn't one or two mentors from the investment side. It was really self off top. I spent a lot of time reading the classics stuff that buffet talks about common stocks on common profits fisher one of my favorites you know obviously read chapters on margin of safety and mr market intelligent investor but a lot of other books along the way and that's really how i've kind of wrestled through through the investment problem. Some mentors certainly on the business side that have been really influential just kind of keep me in the game keeping me accountable. It's been a big part of of what's happened over my life so what happened. After those five years after those five years bank of america was sold or the private bank was sold to wells. Fargo bank spent a couple years. They're are really just didn't enjoy the bank trust departments private bank world when you're one of ninety thousand employees. It's really it was very hard for me to figure out how i'm going to move the needle and i wanted to move the needle. You know it didn't matter if i did a brilliant job. I didn't do a brilliant job. I still got a three point two percent raise so i wanted to have more ability to control how i was compensated and you know how i grew professionally so i was fortunate enough to run into a gentleman named kurt win rich and interestingly like most things in my life. At least i think most people's lives was very much serendipity. My fiance at the time actually taught kurt's five year old son in preschool one day. I'm going to the zoo. This is interesting. I'm going to the zoo in the back of the car. His kurt's wife was driving with the kids and i asked her i said what's your husband do a portfolio. I saw portfolio manager and i'm looking for a job at that time. She said okay great kurt kurt then gave me this brochure fortunately for me hired me in nineteen eighty nine to join a two hundred million dollar money manager firm down in southern california and that that was really kind of the beginning of the journey that kurt and myself and our other partners have been on for two years the turn a little bit too growth investing testing. Let's talk about a lot of we all know. Growth in value all know the disciplines of value investing here about it a lot. A lot of the time is certainly the conversations i have. What is it about growth stock investing that works. You know i think in part it's a different perspective perspective on the world to be growth investor. You have to be optimistic. You have to be optimistic about the future. Value to me is a little bit more pessimistic. You're trying to by these assets at a compelling price based on their value today with the hopes that it'll keep plugging along and then ultimately it'll be a regression to the real value for growth investing. I i like it because i tend to see the world more positively. I think it's consistent with where i am kind of psychologically and to me optimists rule the world. I think optimists are the ones who ultimately get it right because if you look back through history buffett says it all the time never bet against america i'd say never bet against great growth companies with superior cultures that are highly competitively advantaged so so let's dive into that a little bit you mentioned great growth companies what constitutes a great growth company a couple of things for us and it's very different i think from what most people do and i kind of like one of the things that that we wrestle with a lot of people now are wrestling with whether active management can outperform. I think there's a lot of evidence to suggest that it can but to me. Most managers try to buy high-quality businesses with strong economic advantages are competitive advantage of selling at a discount to intrinsic value. I think one of the reasons that active managers underperformed consistently is because everybody's doing the same thing all approaching the market from the same perspective. What we have found is more times than not if you're just looking for high quality wide moat businesses selling cheaply today. You're gonna find yourself in a lot of value traps. The poster child al we always use in the firm is nokia in two thousand seven if you and i would've gone to wall street and met with twenty five different analysts that covered nokia and ask them hey is that a high quality wide moat business selling at a discount to intrinsic value they absolutely everybody had a buy recommendation. Two thousand seven what's not to like fifty three percent market marketshare in phones one of the great top three brands in the world. No debt really high quality returns on capital of probably thirty percent for the prior five-year selling sixty sixty cents on the dollar. We fast forward today. We all know what happened. Was you know in our question is was that really a high quality business. How do you define high quality to us. Yes it would not be a high quality business because the truth is while it was a wide economic moat that economic moat was clearly deteriorating. He was clearly losing. It's edge and being disrupted obviously by the i._r._s. from apple and then also from the operating system from android that allowed a lot of companies cheap china manufacturers to make phone so we've made the mistakes in the past buying high-quality wide moat businesses cheaply and what we learned because of our mistakes of significantly underperform the market is you've got to stay focused on the direction of the competitive advantage because everybody's business. I don't care who it is every organization you either getting stronger. Versus is your competitor. You're getting weaker and what you wanna do. Is you want to be able to make the case through pattern recognition and other tools around mode typologies is how we classify that the company that you're looking to invest in has a strong likelihood of growing its competitive advantage over the next five ten fifteen years ears and if you get that right by the way i will tell you that any valuation work you do is gonna look ludicrously cheap five and ten years out so that's a huge part of what we do. That's different around. How can we look at competitive advantages then the second one. I think that's really significant and very different. Is we put a huge premium on a corporations culture in that doesn't mean we just want shareholder friendly management teams which usually means they're good capital allocators what we want john is we want to understand the d._n._a. Of the business we want to know what the core values of the business are and how those core values relate to the competitive advantage because if you can buy a company where the core values of the organization are aligned with its competitive advantage you like for instance retail what the core values of great retailers need to be. It's gotta be about taking care of people we use the example of of costco versus sam's club those are two companies in the same industry stores. Look the same but you look at the financial metrics of costco. Go there twice on every metric what goes on at sam's club you know same store sales or four or five percent at costco. There may be one or two at sam's club sales per square square footage cost one thousand bucks five hundred sam's club employee turnover costco twelve percent fifty percent at sam's club are sees a twelve versus four for sam's uh-huh club what accounts for that to us. It has to come down to the culture and the values of the business wherein costco. They truly care about their people. They want happy employees employee's in retail. You want happy employees because you and i are going to go in there and we're going to get a great experience and we're gonna come back and spend more. It's reflected and by the way that whole value side comes directly from the top founder of the company. Jim cynical owned a lot of shares but never made more than three hundred thousand dollars a year. How different is that from companies other companies companies where the c._e._o.'s making twenty thirty forty million or in the case of some ceos where they get fired and they get a golden parachute a two hundred million dollars that doesn't bode well for the long term cultural success of the firm so to us the distinguishing characteristic any investment has got to be determining saying what those core values are what that what animates that culture and making sure. There's an alignment. Let's dive in on both of those so on the first on moats wrote. How do you define and then measure what the companies competitive advantage is. Lots of different ways first of all what what indicates indicates historically with money managers what indicates a mode is obviously some level of return invest cap so most managers out there always screening for some kind of hurdle at ten percent eleven percent hurdle on r._o._i. See over the prior five years. We've actually found more valuable than just the level of the are. I see is is the direction. There is a one to one correlation between the direction of the r._o._i. See over a five year period of time and stock performance. You know so if you if you break the market it down into five quintiles from the top quintile where they have the most rapidly rising r._o._s.'s to the bottom where they have the declining are icees. There is a one to one relationship ship between the best performing stocks on the top the top quintile and the poorest performing stock and that starting from a certain baseline absolute level of r._o._i. See from which you wanna to see growth after that and that that makes a good company or no no i mean we prefer a company. Frankly that would have <hes> the maybe five years ago had a four percent r._o._t._c. growing to five five six seven eight. That's a much better investment than a company. That's at a twelve percent r._o._i. See that might be stagnant over that period of time in not growing so there's is a huge advantage to getting that correct. There's a lot of other ways that people talk about moat buffet talked about brands when he went from being sort of a classic ben graham investor fisher fisher investor. How are the other ways that you think about what competitive advantages get incorporated into the kinds of business. You like though the obvious right disruptors low low cost providers ghazi amazon but we've actually developed the number of what we call typologies typologies that we think are a little bit difference won't one of them for example example is a is a an outsourced aren't d company. We have found when you look at various companies in different industries that we can classify them them in certain ways where you don't have to be specifically in one industry for instance. There's a company called core labs in the portfolio which is basically ultimately. Ah outsource sir of measuring the the core samples in gas wells in oil wells. They were once a part of an integrated oil oh company but they can because they weren't essential element. They got spun off on their own and interestingly so now what they do is they sell their services to all the integrated drill all the big drillers in an integrated oil companies and over time because that's an outsourced r._n._d. Process we can look at that company versus other outsource our companies and and maybe other industries for instance christian hansen which is a <hes> enzymes company that creates enzymes and biologics for the use in yogurts in jesus and very simple business that an analyst that's just looking at maybe the materials sector might look at christian hansen. It's really very richly priced but if you think in terms of it being outsourced r. and d. company argument would those types of businesses deserve higher multiples because what what they ultimately do they start the low in their very low cost part of the process but then they kind of climbed the value chain and they start adding larger and larger services to the point now our christian hansen if you look at the known or or you'll play or any of the other yogurt manufacturers. They're really branding companies now. In christian hansen is the company that that develops the taste and the texture and the caloric content. If you can kind of look at the world more in a general sense you can kind of see these relationships you know core or lab just looking at the energy sector looks expensive christian hansen just looking at the materials sector looks expensive but if you look at them really as outsourced r. and d. e companies like we do you can say that hey their margins ought to grow from twenty five to thirty so what most people will see as being expensive we can actually make the argument they're not and so you have these these businesses with growing moats and then you also mentioned you start talking about culture <hes> similarly. How do you go out and really assess a company's culture sure. I think that's one of the most fun parts of our job and because nobody does it. You know it's interesting you if you look at the read fill fischer's book common stocks and uncommon profits which again is one of the classic he it's interesting as i think he has a twenty five point checklist on how to analyze a company and interestingly of the twenty five point checklist probably fifteen points are all qualitative elements which is just the reverse of what most people on wall street we do most people spend ninety five percent of the time crunching numbers running d._c._f._s. models which by the way has zero competitive advantage because you have thousands upon thousands of people doing the same work where we can get a massive competitive advantage by doing the things that other people are not and so when you're trying to assess a culture really one of the best ways if i wanted to assess g._m.'s culture and get a you know one of the best things to do is not just talked to the c._e._o. Or the c._f._o. Jeff oh but it would beat. It's eight. Oh let me talk to people that have left on good terms. Of course you talked the suppliers and you talk to vendors and you talk to competitors. It's good to talk to competitors. Who do you respect back to denote respect but if you can talk to people that used to work there that have left on good terms. You usually get a pretty good picture now what you're doing by the way as you're building a mosaic saying when you're going after culture a lot of people don't do it because you can't quantify it right. You can't put in a box and score it in come up with a scale and a number ranking you. You really have to build a mosaic one of the things we've done. Is we actually have worked with a guy named james hesketh who was a harvard business professor wrote. A book called the culture cycle. It's actually one of the more interesting books we read on culture and there are a lot of them out there but he's really the the person that helped us understand that that when you're assessing a culture you've got to look for the strongest companies. I gotta beat companies where the culture as i said earlier in the values are aligned with the competitive advantage. We've worked with him. We've hired as a consultant. He helps us with a series of questions to try to ferret out what the culture is about because you just can't walk into a business eight. Tell me about your culture now. Now you can argue if somebody goes on for thirty minutes on cultured. It's important to him some people you asked about culture. You know what we work hard yea d._a. Okay you really haven't put a lot of thought into it but the series of questions you know the end where those types of questions one question that you and i were talking about earlier is what would you tell a friend about how to be successful in your company. And what are the three things. You'd tell them to be successful. What's really really hard for some new hires to get used to. You know what are some difficult scenarios. Tell me about your failures. Where'd he made mistakes. Most people don't wanna talk about the mistakes. They just move on as if they're career was just filled a success. I remember years ago real quick story. <hes> we were meeting with john mackey the whole foods the founder of whole foods who by the way i think is brilliant went into his office the austin texas and before we got to meet with him there there was just an increase there was this incredible energy and i hate to use the word vibe coming from california but there's this incredible vibe right and people you could tell people really happy. They were talking there smiling and asked machiavelli said you know i it's incredible. You know the field as you come in here. He said you know what that is. He said that's an absence of fear and i thought okay absence of fear that probably means that you can take risks here at whole foods and not be afraid of getting banged on the wrist but you're gonna be encouraged to take risks probably pretty good for somebody. That's selling a lot of consumer products figure out different ways to do it and you know over the long term. We'd argue that you know if you're if you're allowed to take risks in a business in a healthy way that's probably gonna lead to better returns and better outcomes and have you ever tried to map out whether are companies that you think have good cultures companies that have less good cultures and us in any way data to convince you that your instincts thinks a right that the companies with better cultures while perform over time a bit. This is our argument argument is there aren't that many any great cultures with alignment to their competitive advantage but when you find them you hold him for a long time ten years you know so when i look at our portfolio now i'd say we're not perfect on the culture side but i would argue there are probably right now five or six names in the portfolio where we really believe this perfect alignment between values and culture and they just so happen to be our largest positions and they've performed very well right and what does it mean begin example of culture aligning in with competitive advantage. I always talk about walmart forty or fifty years ago. How in the world and walmart compete against mervyn's j._c. Penney sears these big big successful department stores. How did they grow up in that period of time and actually come to dominate at the market to me and to our firm that was culture that was a guy gifted guy sam walton who really embraced the notion russian that you know what you gotta bring people along you gotta get people excited you. Gotta make people happy got in in those days different now but you got to pay those people well you got a time into the bottom line and he kinda built this culture where people just loved come into work and they had a lot of fun doing it and as a result they took on these old stale kind of bureaucratic bureaucratic centralized organizations and that works for a retailer but does that. Do you really need happy employees to run a railroad probably not right right. You're probably not all about hey. I want a bunch of yahoos running around throwing parties. You want people that are highly accountable probably think a certain way more linear in year because it's all about delivering on time product and inefficient cost effective manner so in canadian national or canadian pacific railroads. You're gonna pay people more more than you would in a retailer but you know high levels of accountability there's high cost of failure there so probably a lot more different stresses very different corporate culture. You need for that. Then you need for retailer. We've found there are different cultures for different businesses that are effective so let's turn both of those to that point on w._c._m. How do you think about your vote and your culture and how that impacts your business sa- a great question and it's something we thought a lot about can i go back in time a little bit sure. Let me tell you our firm was actually founded in nineteen seventy six and i kind how to say the founders still alive. He controlled everything in the firm. You know nineteen seventy six. I was two years after orissa that was when it was a brilliant time time to start a money management firm. <hes> you know you know you should be able to build a multibillion dollar money management firm just by showing up every day but he was tough he controlled one hundred percent ascended the equity he made most of the money most importantly he made all the decisions in the business and on the portfolio and i think issued guess what happens a lot a lot of talented people in this business you contract and do money management firm because it stimulating usually it's rewarding but there was this constant revolving door talent that would come in realized very quickly. There was no place for it to go and leave so for twenty years from dixie twenty two years from seventy six to nine thousand nine hundred eight. The firm never grew over two hundred million dollars dollars never in the perfect time to launch a money management firm. We'd argue that's because it was an extremely unhealthy culture so i've got some great stories. Let me tell you one that sticks out in my mind and i think it's just completely illustrates kind of the unhealthiness of the culture so i was hired to kind of help. Raise assets sales marketing and i was fortunate because i i didn't really know what i was doing because i had come from portfolio management about six six months into the to the job. The founder came to me and he said hey paul when we <hes> go to one of the local beanery is break bread and let's talk about the firm and where we're going said. Okay that's great. I love them getting attention from the the founder of love it so the next day we walk out of the building. He's got a brand new nissan n._s._f. The fastest production sports car in the world at the time ninety thousand dollar car. We get in that car. We drive around the block and down the block and pull into a taco bell. No kidding. I'm kidding. We get out of this nine ninety thousand dollars production sports car and we go in we get in line. Founder goes first bison tacos pays for him. I go next. I buy my own tacos and i pay for then walk out and you know and taco bell the seats are small and you're you're literally about a foot away from the person that you're sitting across from and in founder asked me said <hes> suppose what is it that you need to to really grow this firm to really make it go and i said you know it'd be great. It would be great if we had some investment performance because we are in the bottom dessau dessau for every time period so be great if we had some investment performance while you know you probably don't wanna say that the lead portfolio manager and found over company that meeting was over and as we walked out the door he said as he's getting into his ninety thousand dollar sports car hey paul you don't mind walking back to the office office to you said probably not walk back to the office and ninety five degree weather wearing a suit. He took off in his sports car and that was completely emblematic of some of the issues in the organization. I'm not a bad guy to say. He was a little bit out of touch. Were you surprised various that you that. The door wasn't locked on you. When you walk when you made it back to i i really was so it was it was just a classic example yeah every day. A founder would come in say hello go back to their office closed the door and never to be seen again in the only way you can communicate with the founder. He had a the mail slot in his door. He literally had to take a piece of paper and write a note on him. Put in the mail slot so not conducive to that's why we're so our offices. Offices are wide open. There's no hierarchy fun is a huge value because that wasn't fun and you know what you didn't get the best out of people because they they were not having fun. There were four of us at bought out the original founder in nineteen ninety eight and i'm not kidding not even tongue-in-cheek what we decided was. Hey what did the founder underdo. Let's go one hundred and eighty degrees the other way and will probably build a dog on good culture right. So what does that mean that means you know what i share the wealth and secondly we're gonna be transparent parents about pay. It's not going to be in third. We're going to hire this young talent and when we figure out that that town's really adding excess returns the portfolio it's gonna they're gonna own equity and they're gonna own a decent amount of it. As a result we've grown from two hundred million dollars to twenty six billion dollars in assets under management gray products products. I think we do something very different. In terms of how we approached competitive advantages work with you on culture but to me it's the core four set of values in our firm that were born out of a tough experience that come down to two things what are most people's core values. Oh integrity dependability. We're not gonna steal from our clients. The and that's kinda like that's permission to play you. Gotta have those right. That's obvious are we have two core values. One is gratitude and the others fun and those two core values really do reflect who we are and i'm convinced that those core values values and living those core values has led to our ability to make mistakes and be free three to analyze those mistakes not so that somebody can be punished but so that we can learn and get better gratitude against stealing from buffet. You're born in america. You won the lottery. I mean come on. You've got to be grateful for that and i've had clients asked me well. How's gratitude. Help us as your clients and i think what it does is hopefully with with gratitude. There's a level of humility to know how fortunate you've been your again allocating capital in this day and age and you get paid handsomely to do it not so maybe one hundred years ago if there's a level of humility. Hopefully there's also a recognition that hey we may not be the smartest guys out there. We may not work the hardest because everybody on wall street. It works hard and smart but you know we can do. We can care more about our people and to me. That's an enormous competitive advantage because the evidence is overwhelming again. That's small teams perform better and i think those small teams are healthy and they're grateful and they're having fun. You can have a better chance of getting getting great results out of that when you look at this landscape proactive management touch on it a little bit earlier. You said there's evidence that active management work. I've been the poster child that that's not the case. Why don't you talk a little bit about what you've done and what you see. One basic nick premise i have is that when you start in this business has everything to do with what you ultimately believe about markets. If you started let's say in nineteen seventy two and you ran portfolios from seventy two to seventy four. It's highly like you come out of their writing a book about how you can't beat the market if you started in nineteen eighty-three like i did you know even though we had a little blip in one thousand nine hundred seven you probably since you've had a pretty robust market in the u._s. and globally for a lot of years. You probably have a sense that active management can outperform went out recently went through a database and said said you know what's the reality here about. How many people how many active managers beat the market so we looked at all active managers in the database. There were two thousand that had at least a ten year track record and of those two thousand fifty percent of them beat their respective markets whether it's small cab bonds what was that time period goes ten ten years ten years ten years ending december of two thousand seventeen. Oh okay yeah tough ten years yes and tough ten years and fully fifty percent now. Okay people are gonna argue out there. There's despite <unk> survivorship bias absolutely but let's let's tone it down. Make it call twenty five percent. Do you think that most people that are allocating capital should be able to find and one out of four managers that has a good shot at beating the market. I think so here's the reality. The reality is on one hand. I get people going passive because for the most part managers don't do anything different to justify an active management fee most managers are they're all about protecting their assets so they're going to run one hundred stock portfolio. They're gonna buy the high quality wide moat business selling it at discount and you know what and and then they're gonna wonder why they don't outperform in frankly there is a big i know it's hard for the northeast ac- but there's a lot of group think in the northeast and there is beauty to being removed from that so if you kind of if you set the premise right from the beginning which is let's run a more focused portfolio thirty names that gives us the the best chance of outperforming you'd mentioned that firm over time has gone through some tough periods and a lot of introspection and learned from an they tell a few stories about those periods yeah one of them yeah firm found in seventy six and nineteen ninety four. I still couple hundred million dollars and there was a transition shing between the founder and the son who's my partner now where the founder of the firm just decided one day that he's done managing money and kind of told the whole the son kurt that he would take over the portfolio of the next day well having never run money before and all of a sudden having to run two hundred million dollars of it. I didn't really quite have solid repeatable process in place firm performed very badly for a year lost a lot of money. Probably we went down to about one hundred and fifty million dollars. If you ask her now he'd tell you that he was getting his resume out. Here's a here's a business owner right and what's hard about that. He's the son of the founder ernie any any feels like he. He's driving into the ground. As a huge learning experience in terms of you know one kerr came from an engineering background so he was trying to quantify a subjective active process and he saw everything through numbers and if you ask her now he'd say even though i'm an engineer and i get numbers and it's not about that the competitive advantages is all of us in our cases on the quality side that was a big lesson and then we were running in two thousand to two thousand seven a large cap growth strategy u._s. <music> and good solid companies. We did a couple things wrong one. We really believed in this wide moat stuff so we were buying these wide moat businesses and we really believed the valuation. You've gotta get cheap so we were buying yahoo instead of google and this isn't a twenty stock portfolio right yahu instead of google ebay instead instead of amazon and dell instead of apple why because they were wider moats and they were cheap and we thought how can we not loose where we we got murdered. Those three stocks murdered the performance of the portfolio very hard time we ultimately got fired from four billion dollars of money that we raise raise because people trusted we could do well for and you know it's interesting. What i find is that people don't wanna believe that money managers make mistakes and they certainly don't want you to learn innocent then want to believe that you didn't know before but now you know that we're supposed to be omniscient right and what we have found and and is that over over time there were there were few people that actually look they don't look at those periods of time where we almost buried the firm is is failures. They look at him as sources of strength and that's how we see the world to some people might feel shame them. We feel like man how about that for an education. How about that for learning a very different way of approaching the markets so again good humility which makes you grateful that you survived and and showed up to live another day and those periods of time have been huge for what we're doing now on the global noble equity side yeah so you spend a lot of time now in international markets. What are the differences in how you think about culture in other countries. That's a good question because it is different what we do think in part. We have a hard time being a growth manager finding a lotta great companies in japan in part because of the cultural issues. You know there's i. I think it's changing a lot but historically. It's been hard for us to find names there where we think the cultures are healthy. You know there's a lot of the still have the cross ownership of shares yeah you you still have a very paternalistic society and paternalistic companies. They're not very transparent so it's. It's very difficult for us to find names for that reason in japan we do you have a number of them but in general it's difficult in other parts of the world <hes> yeah interesting what i what i have found is when you look at compensation structures which there's another way of looking at culture. How do they pay people. I think it's great to outside the u._s. You don't see guys making thirty or forty million dollars while they're c._f._o. Makes five five hundred thousand you just don't see that you see a lot more reasonable equity. Payouts andrew are salary payouts in those companies which i which i like. I like a lot because i think ultimately that that benefits. Everybody benefits shareholders but you're right in emerging market you know people. Were you know we own walmart mexico about five or six years ago. I think it was there was the big new york times piece on kind of the bribery. The so-called bribery that walmart was engaging in to get space right now. Interestingly what we most people i haven't heard is the end of that story. Which is it was just big. You know just blew up and wall. Mex was on inflames. Nothing came out of it there. The nothing nothing was proved emerging economies they operate a little differently than a lot of european and north american countries and things that we would would see as being kind of under the table or normal so there is this part where you've got to understand that and just make sure that it's reasonable. She could turn back to growth stock investing as a concept in the e._t._f. World and other factor the blowing out of factor products. You hear about value products. You don't hear about growth products so the notion is supposed to be that value stocks work because they're boring and nobody pays attention to them and growth stocks. You do get the google or amazon every now and then but on average that grow socks on and perform because people are optimistic and they priced them too high. Where does that breakdown or or is it more that there's a subset of that growth stock universe that you've been able to identify because it's it's clearly worked for you guys yeah. I think there's a subset you know we're not buying fad names or high real high price names. We're not buying momentum. It's funny because you know how many years ago fifteen twenty years there were. There were a bunch of bunch of multibillion dollar momentum shops and i can't really think of one right now so that is still in existence so when you think of growth in terms of momentum i completely agree. We're all down here are so san diego nichols appleton nicholson turner turner investment vestment partners <hes>. There's a there's a firm great firm called <hes> duncan hearst victor that came out of nichols lap. <hes> actually came out security pacific bank yet. They're gone. They're gone and i'll never forget we actually one year when i met with a gentleman duncan hearst and he was telling you as a marketer and he said hey you know i'm so good at closing business now. He said i win. All these deals and i said does it have anything to do with the fact that in nineteen ninety-one europe ninety percent mainly maybe but he he thought it was about him and that gets to my point about humility your thoughts about him. I make no. Let's not confuse. The issues show a lotta times growth stock university and the way you investing your looking mm for certain tailwinds in trends and sectors. What are the things today that you're excited about. It's hard to bet against china. It really is now. We're not loaded up in china and we've got a couple names in the portfolio one of them's ten cent. It's really really hard hard to bet against china. I know people don't always believe the numbers that come out of china. I was there in one thousand nine hundred one as a student and in one thousand nine hundred one there wasn't a car in the street. There wasn't in one building. There weren't any hotels restaurants. People were driving black bikes everywhere you come. I'm back today. They buy more cars per year than the u._s. Does there are beautiful buildings across shanghai and beijing and other major cities so i don't know what the growth growth radius but it's extremely high extremely high and quick little story about one of our ideas around investing kinda globally as we really really liked own businesses in countries that are optimistic and it goes back to my earlier comment the optimists win. I was in china four years years ago and we met with a group of dr students medical students and i asked the question what motivates you what gets you up in the morning and they said you know what motivates us twenty year old students what motivates us is to be like america to be successful financially as america's and and i thought what a contrast to you i thought about twenty year old kids in the states and what are they wanna. Do they wanna figure out the next video game that they can be or win and i thought four four or five years ago i said that's that's a very powerful optimistic doesn't mean the gun but but i sure do like that energy and you go over. There's a lot of energy a lot of positive energy in china on the other hand. You go down to latin america brazil argentina not as optimistic because they've had years of corruption. They've had years of volatility in interest rates and currencies and interestingly a couple years ago. We were down there. We twelve companies. Ten of those companies complained about the macro. It's really hard for us to operate at this corruption. You've got the getting clobbered you know. Interest rates are rising inflation nations out of control we can't we can't make it happen a lot of excuses. There are two companies that never mentioned the macro what we do. We came back. We bought those two companies. Yeah they knew that they had a significant edge in spite of what was going on around them and those are the kinds of companies that you wanna own so so in general we are looking king for those those businesses where there's a obviously a agron competitive advantage but also a belief within the organization that it doesn't matter the external situations like we're going to run right through and then when you get down to the sector level of the sub-sector level. Are there particular tailwinds that you have as themes through what you're looking for. I think you're always looking for that. You certainly want to have tailwinds. It's just an acknowledgement that that's how life works. I think anyone that doesn't acknowledged acknowledged that it's just not being honest right. It's j paul getty someone asked me. How do you make a billion dollars oil so it's real easy. You know you get up really early. You work really hard and you strike oil and and there's this. There's this notion that he was fortunate. Yeah he drilled the well in the right places and he was fortunate so i think having tailwinds is essential to success. Obviously there are a demographic talents. I think i think a big advantage we have is that we tend to own businesses and the growth sectors like technology healthcare and consumer and if you think about the the emerging middle class throughout the globe this just one aspect of it but as people get wealthier in brazil and indonesia and india and china of course what are they gonna do with their money money. They're going to buy products from the companies we own so if you think about a beautiful big picture tailwind you can do jimmy rogers did which you said hey you know drove around china and in asia on his motorcycle and he came back and said oh yeah you gotta buy emerging economies and you do that by buying commodities. We'd argue to way you better idea to by companies that sell products as these people get richer. That's a beautiful tail and that's not going away for fifteen or twenty years. That's just something you can really take. They could vantage of how do you think about downside protection in the portfolio. That's really interesting question because i've i said a couple of things today. We're growth investors. We run thirty three stock portfolio first thing everyone's thinking volatility right while you guys. Must you probably capture after one hundred forty percent of the market when it's going up but you got one hundred ten when it's going down and interestingly that's not the case everything we do in this portfolios to manage on the downside for all the reasons we know about how do we do that. I think one way we do that. That's real important is being right more times than not on the direction of the competitive advantage vantage because in difficult period of time if you can own the company that isn't constrained by the financial markets in can allocate their capital into the spaces. Were there weaker. Competitors cannot what you find is that that really those companies hold up really well you know of course we do the basic portfolio construction diversifying or spying among sectors and industries and you know making sure we never have more than four or five percent at any one name those are obvious but at the end of the day everything thing we manages to do well in tough markets. I'm surprised frankly how well we've done in the rising markets where we really expected to wells and tough markets very very counterintuitive honor intuitive but to me it goes right to the heart of what we're doing differently around the issues. We've raised so the evolution of the business you mentioned going through tough period of time time and having four billion dollars of money come out and as an ala cater looking at something like that from the outside you say well yeah but at that point in time time as you said you guys. We're doing some things wrong. Yes what been the patterns that you've seen of what you would consider more a positive alligator behavior and less positive allocated behavior. You know unfortunately even the so called sophisticated. Capital allocators tend to do what everybody else does. Which is when they do a search for manager. They tend to find the guys that have done the best meal most recently with the argument it being because they've done well for ten years. They're gonna keep doing well well. You know lots of things can change to me a better way to look at. It and i know you've done. This yourself is to really really figure out the people in the organization and whether the right people to continue to generate the kinds of returns and then of course you need a process but the the allocation behavior still you know what most individuals still chase money. They still chase performance. We tell them all the time look. We've done particularly well. We completely understand you. Take money away from us. And why don't you put it into a strategy like maybe value strategy that hasn't done well but you believe in the people and the process that that's brilliant. It's so simple but nobody it doesn't and even today. Nobody does so what's going to happen now. What are the public funds are a lot of public funds. Now are moving to pass off right at the bottom of the cycle and you know it's just like seven years ago. Everybody had to be in hedge funds and long shorts with little leverage and now what's happening today. The you know they're getting fired time and time again again. It's probably a great time to build a long short hedge fund in so after ten year period of time a great performance and long only people load up on long only so their behaviors really. I don't think in general have changed and i don't think they will imagine when the questions you must get a lot now. Is your at twenty six billion not too long ago and years but you are a lot smaller how you managed the change within the portfolio at twenty six billion compared to when you were a few billion interestingly. We keep track of this. You know our average market capitalization today versus thirteen years ago go is about the same. It's <hes> seventy. Six billion dollars are media market caps about thirty five billion thirteen years ago is about thirty five billion so we never generate returns by kind of it was large cap stocks even when you were last month yeah and you know the the beauty of kind of owning your own firm and being a part of it and having a group of people as forty of us here is you don't have to run all the money in the world. I mean if we found out all of a sudden. We're sacrificing returns. We'd close the product immediately yeah. This is our goal. We love taken on the big guys who like you said. Who is this firm in california. That's adding five hundred basis points per year over any time period period versus all the big guys we know about. It is fun to do that so that's more fun than raising more assets and we wanna make sure we keep ourselves elves in a position to continue to do that part's great. I think we need to turn to some closing question. What was your favorite sports moment pat fan so there's been a lot of them but my favorite was with my son who's now thirteen so he was probably eleven being with my son john who kept asking me during the the atlanta game recently two years ago gadd. Can they win. I'm like no. I don't think so actually what i said to him. I said you know what yeah i kept telling them. Yeah jake they can win. They can win. He dad third quarter twenty eight to three deck and they win again. Jake they can still win and then they came back and and they want extorting. My son takes so seriously. I mean he was literally. You know weeping at the last part of the game and then c._b._s. They won embraced really one of the great moments course being a boston fan. I mean two thousand and four when they win the world series for his time phenomenal but sharing it with my i son highlight yeah what teaching from your parents as most stayed with you showing up never ever give up. I've thought about that a lot. There's a lot of times when i would have wanted to quit when we especially when we tried to bury the firm but you know what if we would have quit. We would never be here for this period for this right now. The so what does it woody allen said ninety. Five percent of life is showing up. I absolutely think it's ninety nine. Just keep showing up up. Keep doing what you're doing and you know what you'll be there. When good things happen it's huge. It's a huge huge lesson. What information do you read that that you get a lot out of that. Other people might not know about tell you a great one. I just just open at this morning. <hes> this gentleman named nick murray and he's actually kind of a <hes> an advisor to financial advisers. He writes a monthly newsletter but what i love about it is he's. He always his basic. Thesis is how negative the press is. How pessimistic oppress is and how really you know again. He's a big fan of the optimist wins over time but we don't see that out in the world we see only the problems so he keeps you focused focused on what's actually working and he always has great resources <hes> great books that he's read couple of blogs. I just went to there's a there's an he's funniest. I'm talking about optimism again but there's a there's an optimist blog. I just went today. That was kind of talking about the the short-term negative perspectives versus long-term kind of wealth creation. Those are two that are <hes> real real valuable and of course i read the wall street journal but those are two and then we have a lot of guys that have various podcasts that i listen to of course i listen to capitol allocators worse. I do my work and you get a lot of good information yeah. What life lessons have you learned that you wish you knew a latte earlier in your life. I think that notion of keep showing up. I wish i would've got that earlier because i think it would have been easier to endure door through some very difficult periods of time. I wish i would have learned that early in my business career because again. I didn't pull the trigger on moving or leaving the bank but i really wanted to and i'm glad i didn't because i wouldn't be where i am now. If i had pulled the trigger on any of those things so so i i would've if i would've liked to. Have somebody tell me paul. Keep showing up. That's why i kinda preach that all the time in this firm advise that your kids when you know when we were growing up it feels like there was a lot more stability in peoples career paths <hes> and now there's it seems like there's a lot more mobility so does showing up mean the same thing that it might. Have you know twenty years ago. That's a really good question. That's that's a great question. I think it does because when i say keep showing up i could've left the business i was thinking. I love camping. I'll be a camp counselor or something yeah. I actually was talking. I could have left the business but you know what. I always loved the business. I just didn't love the vehicle in the form of a bank. That was doing it in so keep showing up. Keep pursuing what you're passionate about in there. That's how i found <hes> when rich guy w._c. Investment yeah all right last one. What's what's your your waning days. You are at this point probably a camp counselor who knows exactly the camp counselor w._c._m. What what advice would you give yourself today. I'd probably argue that as much as you love. The business remember their other parts to life and make sure whether that's being healthier or whether that's spending more time with my family my wife my kids the problem for me. Is i just love of this business so much. You're not trying to run away from anything i love. It and i love the people in this business so i probably would say a little bit more balanced airport airport a little bit more balance because i think you know in twenty years. I'm going to say okay. I don't have to do all that. I can get other people to do that and just kind of as you know. Slow it down a little bit because we're running pretty hard right now. Great stuff thank you ted. Thanks for listening to this episode. If you know a manager manager you'd like to hear on the show. Please reach out or ask the manager to reach out to ted at capital allocators dot com. We greatly appreciate your ideas and we'll do do our best to help foster transparency and communication across the industry.

founder china kurt kurt paul black apple wall street journal sam walton walmart bank of america costco america portfolio manager barings yahoo manager manager john mackey google laguna beach california ted
LTAI 006 - Rocky Kewley

Let's Talk About It - Podcast

1:36:24 hr | 1 year ago

LTAI 006 - Rocky Kewley

"Alright rookie qb may not be here on finally yeah yeah no we had little messed up 'em last week you had that heckled the heck was that means in what city difficult sir what yeah but so am i not not just take it but if you're doing some a motivational speaker no it beach a beach grammar school a it was a dark few schools it also another was a sin bob's primary lobster later in the future of the reasons i snake a gain of some kind of lessons you pass on these kids on so i i prefer more the gift for life lessons of the duties yemen school you know about them both has about a lawyer for my main focus is what their ones out cheese board and you know that's that's the reality reach for the wendy's bid on these kids come from is america will get to over we scored or jack's or i'm what would you what we will escort home the rich you know for me i need bridge backs all streets what a speeding does goes in there and take it from me from the sensory yeah yeah and i got here already you know i i think it's fun and yeah you wanna know why they vinnie raspy might take or value what i what i do all my life you know for many many subsidy bus on you and you're just looking to elevate these you'd be done because it it's good to know is that must have been passing the life did a switch must've if i know which prompted us because when when when you get up you know and george she'd be goodies hops dominant everybody wants their only scooters mm on everybody's rents and then each in the past i know is oil industry just joined us on anything is children not born body and also noted that board by this thing out in the ones who get it done some have one common goal which is to be successful in whatever it is whether it'd be fought oh education for the benefit of once once i wanna come and go unity is stress other you do get a seal bach around and so this knows how therefore you're so i would any of you recently from my brother john you know yes 'em and i'll let me see you only twenty seventeen you won the bronze medal in dfw international federation of bodybuilding this was news full on what men's physique manzi get that'd be scott from 'em like men's a category in buddy better than you and nobody billing by marty is seen it but i just got trending no no beach buddy you know fitness mother kind of look when i was in highly countries in the world championships men's which operas it was shocking to me in on the way from the caribbean one point two million people here on international i told the guys around a bunch of people i know you man you know like i saw myself compose myself i do ask them for the because the company said yeah 'cause he did with these guys know you on their level so that lake this the see these guys you look up then you'll be on their level when everybody you're gonna see me real scary yeah it was like a wonderful jeevan voice well what causes manelli national color yeah he represented also there no i just wish i just wish more people knew about you're gonna you're gonna push out you know for people to find out who you are on stuff so is your journey like to be on duty twenty seventeen phoebe championship i it was it was difficult in terms of sponsorship because of the said no other people don't know about quite a bit in on kind of times we mentioned you know darn child sanchez every nobody's been a function that she renault in the theme of the only best samples of all time but he's done you know a great athletes trump turned out who the big industry i need your eyes out he's like and what time cc gold medalists fitness and if we have a kind this clock we have we have we have a lot to create something that you know you have a good president is on the hot rod ivy president switch onto beagle she's 'em another one easy prey the other eagle but she's a very young athletes a when they're going to represent their country boys causal easily among the strongholds emphysema fly drones and yet you know she's like i'm whatever whatever the nfl nation numbers forces degree because you've been great support me she goes because as i said i tried to get back to you on a on a on a needy i seven time oh yeah let me give me a happy hour domains mine judy coming under continue to represent my country so i tried to give bar also you know so why do you think bodybuilding isn't as popular as well actually i let me take a step back because i have been seeing sort of 'em rick rising consciousness of health and fitness you know i feel like a lot of stories that i think a lot of it might be from facebook on instagram and i wanna go pick just the stuff but still 'em buddy bill isn't something that is as promoted as other sports don't although we clearly have talent and so is there reason so that's on if there is how could we find a way to promote the you rumble yes i i believe that i just said otherwise he said buddy business trending you know that's a fitness is trending no you know there's two reasons reasons why fitness this trend in one i just said of social media i second vehicle in or a new foodies everybody wants money wants to be a doctor ford's lawyer who runs the you know is money but valor achieved lies i think i was dying and even feature into spend you know you went to lift the spend the money they find that the people you want to get their heads here on this this this dinner almost in strength i saw me just in twenty fifteen you know about four years or so i mean just you know after kind of odd unity detroit on silvana ease up on now is just like go for the divine for the people gyms foot continue being all year two thousand i other major difference so cd get any sort of help from the ministry of health because obviously it's fitness thing has held one of the leading causes of death insurance on to be as coronary heart disease and other diseases that are preventable and after do it you know overweight and obesity like high cholesterol we have we have diseases you have a heart attack those kind of things you got any kind of support from minister filter you have any collaboration with them at all no not that the services of a new john deere information i've been 'em trying to make contact with the fed ministries to get some multiple schools to go to a different sports in groups the soccer you get what a but when you're sean on dimes you know so we need had media system because i just said one of the leading causes of death and should not be talking with somebody this is a is something you ministry of sports need to look into somebody must have been some diminished she also said he brought up into a is very important because not only wendy economy yeah they health system yes they meant this sounds like a dentist will michael acre right after the guy goes do you still just over will offer a leash on one side lesson only grown in only growing up bad this constitutional being right now but 'em migrants coming inside the country 'em in even more she only had sex because it would have been you know so so we need we we need people to take better care of this absolute would end up in jail because it would be nice if enough of that right now on you light on saturday you hold me regions against a recent against taking care of like cleveland right now we have a a beautifully that's important because i know how many members of course he did not give up you know so so why on i i've been trying to figure out why on people taking better care of themselves now i think some of it might just be a lack of access to the correct information because there's a lot of information out there i have went through some of you clearly seemed wiccan and i think a lot of people also strapped ups the time so i think what people might need to get is maybe some clear concise information that you knew correct that easy to follow on a tight ship you know what i mean you just like some some small tips on guy goes on like waterfall to follow so we we do with e d i'm glad health advice like just stay away from sugar simple cobs about a mysterious from greasy food and depending on who you talk to spots isn't really a bad thing as long as they have healthy fats you know plus romano's on stuff here some did you do any sort of education on stuff as well yeah but i specialize in isis fighters in international what's happened to justify max evans he's number one in france quarter to france begin and i assume mean number one in america numberone caribbean finally got some good defense force on you yeah but these operation on a on a few others but what i've tried the focus on a much olympic enough in my training that's why i could see the best of the tree regimental america wrestle product so that's why oakland is you know and then they got a common thing is you've been busy keep it simple life like if you just don't see that duty those people you just keep it easy on them when they could eat dinner yeah yeah i just said saudi children you know every time you're buying something the company nutritional content even though when you could be on you you foods we get ready now cleveland property allow them to win city exact amount of calories in multiple might wanna cigars and stuff like that but try to eat it like something says 'em grams of sugar to go look and see how much do you possibly could manufacture yeah yeah like i couldn't tell and some cookies oxley to in a hospital in yes yeah yeah unless people you know via attuned to go i don't anybody gonna drink half of what local yeah yeah yeah that's definitely i think they will reduce these super size just so they could jumping on buckler either nutrition facts yeah that that around scott me but i mean something i think people need to be aware of other people doing the water on the other people don't know how much i should go to catch up yeah see condiments election yeah yeah well that's my goal was especially especially 'em this december to yes you could probably use it out yeah so i mean i think it would be amazing if ministry of health could not just support yo you know going into in education things but 'em maybe bond fund also at least one so things that prevent a lesson easy amongst like yo yo broadcom yeah you know does 'em halston duty of wisconsin yes once a week on a saturday morning from seven to nine pm a an unclean spoke recently change of venue is it could be you know you'd have fresh like even the ones in will now so something constructive on sunday with a chance of the stuff that really do botanical gardens sometime we do you border shutdown lots of china see sean teachers beach you mix it up a lot to keep alarm ones in more on we also have a question on the segment where we had question you have any meco this is all of the ongoing so i'm still just keep it in arkansas not only luton buddy buddy was also about touching each other like lost i lost ten for everybody stopped at the gym in my twenty minutes you know other people you know very motivational on it gives them something to do right having fun lose weight right having fun so it's other things you do do any good come he takes on somebody made exercises on stuff yes we do get a celtics you also do a people are doing like jumping on on the high end fought through canada in an easy money bt it'd be brutal like fitness level up by seven saturday and a devoted also t and people who have little bit slow ugly properties everybody would be but the boss button indeed indeed then something's everybody on their also have like a clear 'em progression that they could follow you could you could from you know absolutely no cannot fitness level on will kill we're going to build combined is a once a week every not as interested as he got a free assessment recheck you've been fucking body fat percentage subcontinent us five it'd be an ma you're water in blood pressure everything even have a kids like ninety has already unmanageable and we have a lady she's seventy three years or more the public's that's what sorts of the things you do we say they call us the next hour we do we do you know jealousy we do bonds coordination redo heinsohn intensity in the budget in the crowd you let the u m is on the street and then some people even when he finished talking about probably have a volleyball competition that's like a welcome sean football competition is on what happened financial results 'em does against me blondes hosea what each wednesday just also somebody man's good is he said he just sean oh that's my listener sponsors and a i believe i believe in their products decisions or i advise my clients who you sit in one of these people is that a look around is that in national international city for this supplement company anywhere near as universal either shit and i knew about upcoming nutrition these same thing with other the front in front of the orange sean just recently ammunition in a row since nineteen seventy seven before you born i grew up i'm a i'm a no penalties yeah yeah yeah that that arnold schwarzenegger you see the at this moment that the reasons why they're doing what like about him is forty vitamins but do you need what he did you might get kind of one of the top of it yeah and you know so do you have like a topic about yeah you know for sure he gets in you you quite amongst off dominic vitamins somebody needs to do you know this muller thing what they will not be made the joke yeah i mean probably better than nothing but i mean yeah if you really put anybody to recognize has definitely need extra vitality from those and then i was just too much i once i i i went one number one of these nominees tennessee rocky we kind of big donor west on the the suits you idea oneself whatever they do ones are big donor what was standing in on that we kept it like this policy this job because people one simple easy things but we know what the results but what it did however the meta powerful okay they have you fucking pull you up and say what touchy subject and a good seeing other small pockets i'm literally take auto park i drink like a whole buffalo starting to heat up they don't dig it was i have two kids so how how is judy been like so far like how did you get into the body building and building but you'll norma diabetic tom douglas a lot of people don't believe it because i look i know not just typed type one diabetic that means you need to have like a strict insulin yeah as well yeah the government the top not been easy wasn't that your 'em especially i mean when i was a kid i used to you know what's in my eyes on the way i see it no this sport you know as soon as i get all kinds of ice a breakdown in michigan lebanese it'd be kind of control because of these physical activity i do it even though i didn't know breakdown spit on my head on over to active our it depends on ninety normal size yeah you know somehow she did a little was when you come here you know i can't diagnose somebody wants to my mexican i like oh yeah you need to know when like washington just one thank you well you know what you're thinking why am i gonna make so easily like a whole new when this happened i wasn't teenager yeah so how did they know that that you would diabetic professional you wouldn't say stuff there yet but he's a few minutes you understand like if they did they look i love and it just like i'm rushing to watch somebody on moved it to me now for so i think that is a job you do not every single day yeah what somebody new thirty five percent after about that one seventy one now we've been watching like you don't need a like you you know what it looked like yeah yeah it was like a you know nothing something is one thing went in and do something always like and then forty by stories the humidity's my gosh oh my go absolutely no but it can give my mom no luck in the day back obviously that's all staying i run here that day it was a good thing vietnam diagnose was actually a really good thing for knows this better when you look down i'm gonna give you that i use the results like the breakdown spit on my head wouldn't middle or or anything but a science but no i i see that means it on this because she's a nutrition i study study that looked at the officers yell at the top of my class in anatomy and physiology man do i love the to know is i feel if you've got oh how much i don't ever before we will also be on tv interview michael lewis also sorry like what like was suffering from a friend like i'm if you know something from nothing diabetes diabetes adjusted montreal's mhm what is in charge of the incident is not pretty soon incident way but he's not recognizing incident on incident just a recognition he was talking about and it's just too much they got inside anybody on this incident the carrier dome so i said i once i getting of it and i'm gonna make veto on a on a after conducting interviews like you why you against any bras to diabetic so what so what is it that i think i said well i see but i ended up losing and they've you might hear the football white noise why why just keep property drinking water that taking medication so what what what i think is a key piece of began today talking about you know on any doctor doctor off you know that made you end up when he talked to me i wasted inside this confirming a meal yeah it'll be because you know grinding it will be rookie born issues member we put it on my mind we'll see mike when you're talking about ice so they don't before the automobile if lights we have you know what happens in school michael's young people recap guess what yeah remember there were or capital it just enough incident you don't have to do something minor league idea about a month and soon be ready in houston technology in the not too distant future would have one sorry like site he said watch when you watch i constantly telling and it was a local streets of hot i'll be happy when it does and because we do have some not even depresses backing you know what did he tell what else on the technology company excited yes they've got like a notification i gotta tell ya linnea press a button have not acted one thing when you go ahead and probably just like put bucket and you cartridge every night every weekend just knock on wood is very very soon oh that's going in for international recently when i went to england no other way to scotland actually knew how good the scotland then they're done scotland dancer oddly consciously pretty comfortable championship ship on although it's a combination i forgot the moment he showed who jeannot here doing had all sorts of the leaks out yeah i'm lucky butts that's the government occasional nobody right or just in case of an institution next to make it up i knew that she was mark 'em see me busy competition or get above them three day okay about you know the company cord or whatever we're at a point not me nothing i'm gonna tell you why like what are you okay okay okay medication that says you know what that almost like there's such a ball that something though using the word like two years ago by country from the tunnel down to the two countries yet they're still used that stuff's yeah i studies i i did some seventy you gotta yeah you know what do you know this is lord that you should be using medication nothing or use it on his i think you're gonna run into that yeah i could upset about x y you when i came back and i a rental property don't feel like yeah you don't have that see that's what you should pay enough that you should be using this if you have money by this one instead you're young and you you you should know local news analysis it all my gosh i see a huge difference serious huge difference there's a different type of incident yeah i think the more martin a set of like it shouldn't use a seventy two hour yeah so much outside in the street ministry of health that's why we have so much that you know we also use forty seventy two shots to be mhm got seventy which is how you do it and if you're not suzy you know somebody who's i seventy two nights they eat dinner oh the the using ready to show the you know the kyri dome but then it will be ninety nine ten eleven twelve again like eating but yes you've been on a single level go don't we're not um you unconscious and i go into like a coal mine yeah on a diet and how she is because you seventy two two weeks if somebody says anymore they say that kevin breakfast breakfast will see lodge but and what it means cdc i'll be i'll be back for them having some of the city fifty percent on the road pretty full breakfast and lunch time yeah you see good no constantly morning on you're good city yeah but then again windfall five o'clock which no you've watched that game if you need yet dinner but in what happened around two o'clock in the morning it'd be united slepian she you know we have a lot so that's not something another then i'm looking into you know and i says i i just i just like retirement speak about it on myself has ended up so you have this diabetes medication oxley 'em collection bc adult people yeah yeah yeah yeah so many needs i'll see the next when we have something called our which is wrapping which is i think some type of ivy tobacco may have already no way do it now you reputable ruby would take effect in about fifteen minutes and it could be like a number two hours if you're using their lunch i mean you just didn't have either use it but then into you guys of the jury to use that made some news out of one of those lawsuits when gio twenty four twenty four hours to give you all of this book sweating she also wants to eastern when he writes on he writes on music is like nothing to add up news we just read about me you wouldn't even against this is up one so audio audio blonde sort of look like you used a normal tributes a deal you would have like 'em do more portion control and i i i go into my activity so i noticed something i think it's the best because they can't somebody you just this stuff on somebody on the song there buddy somebody on the sidewalk timothy did do their duty on each according to if i do i do i have election goes any morning i also like the more you try if you forgive me for like minded about do i have electrical tomorrow i will eat a lot of calories did he get elected in stores says you know two days before when it comes the legacy morning i i go had i i grew ridi out and if i go dvd hot my sugar levels will drop my new i kind of a cause you any insulin that's what would you mentioned all of your food i don't so i think a little bit you know when i do my blood pumping blondie jumpsuit little you know so that's something people also be wary about him yeah typically what do you think one run a marathon half marathon i grew up with capriccio and i kind of want a big man he shouldn't have to adjust michigan never to was why did why did do that you'll you'll pass oh yeah never jumped to those who is but a diabetic patients given this sort of a knowledge from their doctor says well 'em or were they just let me take this and they're not this time of day another run them through everything like holy shit monitor how they feel and stuff as well where doctors i respect that does a good job just go in and everything of good ones the ones who not 'em who knows how that level you know who i go by the specialist a not give among the specialist doctors i specialize in 'em in diabetic just a general practitioners who are very professional 'em but there's also don't does that you know i wouldn't do you mind if i wouldn't go by you know some i'm just looking so that high dish into those sort of things yeah yeah yeah the in any industry you'll have good ones on both on you know if something doesn't feel about insurance will because you treat mizzou hi this is ridiculous just ridiculous had no idea that this is the medication with a nickel death yeah i mean i'm diabetes yeah a huge a lot of people did that with the cool you know a lot of people are calling into confident because i do all of a sudden now you're i'm confident really yes i did for psychology sports psychologists vp but i think what i call a sudden people message me on in bucks me and i'm like why did you could have more this is all sorts of rocky i have so much things i you don't see those are just little hot to me but then i realized something off to do something i after although he wouldn't be in i forgive by rocky i just when i just i just do the whole just started just need to be thinking about this i voted diabetes but i do have a lot of people it's hard on you because we competition on get myself in mind soon anti going all this again the todd and then do treating everybody told me different energy and i'm not just have somebody come out just one time wherever mood the in adjusting the deal would be in my own mood and mood hoppy energy adjusted their and there'll be a public figure go through you know every time somebody coming up how do you find it can be angry who is not a good combination of like i know about the comedy of what we're doing today is easy but you know the life yeah so what would you say is a good way for somebody to really start looking off of themselves when they get into get into account like what did they change it somebody should look at me consumers i think that the final exactly why was writing it see if i do i want to be on instagram model so i would just say all of a sudden my daughter and i wanna see them get all the incentives for them to be pretty a guy to me he wasn't even played myself signed kicker baltimore city board on are obese over we rookie a frightening right now suddenly a big loss of a good friend good friend oh my gosh good guy dobbin recently you know then you got the socks i knew or something unusual some because you begin simeon kind of girl he wants his unacceptable time working harder now these money not my business something school we could do boy the contract connects yeah they're doing that and watching you know me because i'm pretty boxy that his daughter and his wife on this in rocky point and dr dismantled to this comedian but then i i'll be time yeah i mean there's so much going on already using you know watching the news and a few guys were boys your fourth which is a jogger models in town free kim come whom i am you find that monitor monitor business i don't care whether you're why you get somebody demise herbalist negligent stop the walk you know i didn't do it like i don't i do not know how people are dropping off and all of a sudden i got only hold and we'll get back to them i don't give it back to about to go there you go yeah somebody has to do it yeah so you're not gonna talk about that so you so you need to do is probably get some into another motivation to keep you and yes you know the truth it's rudy's that you know you're not seeing results or you know you may know so we went to descend amani dabbagh up where i i would love to see some results for those people are going and it took me years before like you know after just gonna forgive give myself up you have to walk on yeah that's fine accept that let me just jump back when he walked out and start fresh from similar yeah you know i it's just stick to what some other good thing though 'em healthwise you know these these wgn chicago those kind of things voters would have some good good buddy we exercise is that people could do thoroughly get their their blood pumping on stuff like of the best time to vote for me i listen but depending on somebody do it will be in the morning you know a beautiful morning do some squad the logic which would be in yet bach chess and the legs small months ago when you biceps triceps these guys only fall out of the small most of the that wouldn't be enough calories because more combined point cited to disarm squats i will give pov because hammer sings about wanting their bucket lawfully in what the man who look someone we looked at some pushups which will be chat months to get their shuler's involved with doctor triceps it bach and they do look up to somebody who's you know like about forceps or seven the fact that makes sense for seven nights a newborn stranger small juggle experiments the boxer walker or you know it it must be too difficult simply simply not achievable twenty results admitted in some professionals will say oh my gosh that's a student there but you know deanna professionally i begin oh yeah but even this guy shouldn't know oregon you yes it is used to do forty five minutes will go on that four times a week a sea of green yeah he he was tougher the game for years and years let's keep it simple the oh is it as a gift so keep it simple simply be what is finds itself is you don't instagram and saying no in all of the people eating she was talking about this i think it would only do other thing i would afford and emily keep it simple simple basic so we think will cross it then m cross fit is something different a lot of fun something defensively but do you know much on the form of gets in is going to what you want that chief george we offer mhm on how explosive strength on it give it to you to give up exposition course it is great you know it it takes a little bit hot trees high but some me as a forty below in my sports might i wouldn't do it yeah 'cause you looking at putting only lean muscle mass yes learn so much from you gotta go is having the confidence of how do we did a skit immediate said i didn't see speed coordination it'll be fun 'em fitness 'em i think buddy billing is have ordered eminence in that so what what eleven o five countries did on six get so you have any speed on city you'd have be reaction time like that like you see both on the five bucks to especially box with john rees is anthony no reason the whole anthony on somebody better better body composition 'em by was on point oh walk for reason the demo reaction sometimes you see i thought for sure you 'em 'em sentiments of fitness but he also had you know you're gonna be obese lunch at the types of our so called said nothing about it because reaction time is very fast enough 'em as you mentioned my reaction time i've seen some national athletes in tennis squash after so many treatment options trading though yeah i like well i wouldn't be committed to a number one seed in in in in in england even though he on it because he shot the victim eighty yes thank you having me on border wall funding segments on seven as i'm i repeat adela yes some speed on tv a lot of shit i i really enjoy student athletes functionalities on anybody else 'em wonder what it would do is he's only girl like we're just sitting in a few minutes i should have you know that's a loon when i get about possible i'm gonna light on i wonder if you know i just i mean we just we you know sometimes how this one here reactions i am the bottom of it you you blew the whistle on myself ci boards in behind i read onto green not bad you but your box you you fees in this one i behind you when you see i read one pass yasser on gang green book nothing nothing reacted on you know on the three after you read off of it when i'm richard michael jackson upset me buddy just ready to know went through yeah you know what i'm saying is very very important but if you're in any sport would it be bumps in whether it be tennis young people about certain given name 'em kyri soon to be my thing is i'm what would it take off yeah we might think carey said only reaction time i went to my staff in the hip and is he who whoever react full this is one where it's like it's like oh yeah yeah sure you know it's a buck thirty thirty a m city eleven aspects of fitness yeah you have enough fitnesses is 'em very important but not for buddy below football all sports in buddy but then now we have eighty really much of sports all sports comes us weather is but if you're a basketball enough what's going on everybody come to the gym to buddy billows most but below the instructors in the gym everybody does instructors in egypt a mystery in everyone 'em cross whatsoever focuses on explosive fall and i've got so much of a chance here on defined if you're one you number one team by business gets injured thanks who fought i've never got the engine i've been competent for like ten years st francis on should i never got injured that's what do i do know what is i n g i do not get injured on the reason for that is preventative measure so would not i would not go run chide jump up on the bottom line i knew was my hip or knee district coming from a court on monday joined similar by us even doing scores you should never go viral of yes because it who is it comes offer was not a good any law by slow dominy hall come out don't anymore then offer them no like by by these operations operations i do i can't afford operators are similar to like m social depress yeah you know indie hosea typically bobby hang issue and i have it like on your call avoidance that yes you're correct on what you're doing is you're lying stuff like men that yeah they lined up segment these little segment conical he needs a hip hip issue lost shooters elible element to it than that even though they're not the needle which is i'm good sydney meaning you do once you pass any oncle when or is according to we you don't need both too much right right though coming like lunges on stuff yes then he needs a hip you do once you have a stunning need we need brandon darby pressure on any sure luck i limited next idea wants to be so you know shula edible i mean where do you even say once it showed no way the one that's mitt romney strategy because of the year distress little showed up my back door is the mets much that's it anytime i sure no oh right called off my chest almost just might not the stretch in a flex us stretching must have been yeah stretching muscles relax muscle if i come in how to relax it yeah yeah so you're doing the stretch when you're doing well wow so you're not supposed to bring you bought monte in new orleans literally say longtime curated we do a stretch muscles relax muscle injuries and his pay more attention right anyone is also that forty five seconds ten minutes on the attention yes you know last time i must have on the show is moments survivors who did what she has will be give me another lawyer wants to see any modified must've been about strong numeiri lacks in my mouth is nothing will get this is stretched i just destroying especially heavy coming off a monster year that's not sure if i look at follows the sewer disney lamented sure does develop let me check because this is what yeah i think i have a program 'cause i see my my show but enough automate yes you know you don't see like that made the transition beauty i may just on my show i might yes i think i'm doing this for years i've got you got forty which is just showed up in my left foot why don't you just yeah i agree is michael yeah you know what why ford is the international it'd be very the yes you just go in right when it come really focusing contraption not really wants to win the contracts in the meantime also chaplains up yeah yeah yeah listen more stretch a little bit more sort of inequality well however you stretch it is very important when it finished do i sat housing that stretch okay getting already fallen and that will be seeking lock on car insurance will be muscles and not only so now or not every reputable stretch time intensive pump it dan after the movie they don't lots of innocence don't get over it but i should say not secrets in a week giving all africa the logic key in injury prevention and i i read key or not because of the i i kinda got injured on also as a coach a tree enough without gina i can't enjoy athlete but i'm told me happy side chain engine dot com the fourth of july daughter decorate your own life i think that he's responsible yeah you might say will come to you and you and you diamond juicy by didn't nobody knew who you know yeah that that millions of dollars that you just you know i i i can't afford a lot so i just for deer routers international standards up my you may become tomorrow runs iraqi that it will donate or even a newbie i guess my phone when you found out for them because international sports science is like new or just scientists doctor especially the city would come together not organized the incident shows what type of seizure and that's who i'm defy under dc so pitches in my breathing a few boy i think sooner but yeah you know back then i'll go back to the cia trina no i just off the worst thing about this publicity mock seven being in front of us think about this for more than a dozen which they got all the money seeing pop you will be hired on summer rising so all right so we did you did they need need the they have a show that city officials what exactly you have to sort of be like 'em but what if there is a minute squatting you know some people try to score which i that's what leading who are sales people been discussed in the meeting like most likely not that the american league ben phone yeah when we have easy like i did when they come up did you try to score which is one of the union is it nick like in san antonio is my hip marshmallow dps i will mean for one under a lean back yeah i'll just keep speed you if i wish would have first of all it sure does keep that line of course you'd be like those like 'em who wasn't an exercise that keep you up to do anything like jesse semblance of other laws in houston and they seem played just issued a list of names embiid comp is if you wouldn't get that wrong it or something like that i know be be sure they know where would that coming coming pretty like 'em you just press income inequality we don't keep it in one ten so you're doing them we must be behind these shows a new oh yeah and stuff like what's wrong with this idea for don't yeah i i tried that once and not just my shula's more than anything and i was like you know i think whether in detroit terms of isolated in a rehab or middle like like three possible we get out there that yeah yes yeah that's from behind bach showed up press behind you know behind the normal range which is yes yeah on for what is good ending behind is what you call injury that makes sense 'cause you know actually 'em after he suffered some from some showed up he in from bench press on flights but i would go and i always thought he had the gophers will stretch and everybody told me just i used to do flies all the way into my handles pilot measurable yeah but my my full stressful associates my elbow behind my back backup you know even even with him benchpress going don't making sure you bought when the bulls on a combined yeah yeah so shit or going at the same ones overall it just goes injuring a m you see fishery yeah nobody thing is i did get problems from that because i did get some some show the central opean and i had to buffalo benchpress forbid yeah and i dropped my wait till like half of what has been pressing just okay i mean people have a muscle mass i had on stuff but yeah i mean nobody ever to be multiple that for every everybody atrium tuesday night school leaders not full range of motion in focus on that flurry wcbs a lot of people 'em does i'd be i said i mentioned before this trend in this this is a multi billion dollar industry yeah we find it's on track scientists not check contracting your just chalk dump truck these people these people get involved and nobody gets involved with the hookup or they're the only real life where you but my buddy before the caveman you have not everybody has to figure those or you need is a new book way who just chalk everything you gotta figure thoughts so yeah no these these these 'em really young people come in for a limited time the whole company stuff on eighty west virginia's wrong problem now is it also tracking a bunch of scum author says oh you know yeah people i just wanna come in and make a make a book and 'em guest oh yeah ghetto quick know who the forty new ways of people like you and me send you information odia new eight and you as you will have your clothes eucation based on on on international bodies just so i guess as a a good way to go so what what's that if you should somebody look for in that arena industry and i would definitely go which i ssd in south los angeles decision which isn't a recognition 'em recognized by most countries on especially united states 'em also deed mock seven is great rich in the system amazing it is very difficult to you know defense the bosses defense very very odd violence the system the system very good at i do too because the don't you know my my athletes like myself is very very hot about idee sometimes what you keep it off is very much every session yeah that'd be like you if you about their life you could probably be as i said that he keeps nfl so that but regular people would need a little falls off a combination coming up all pitches in the middle of amish oh man i'm wondering if it is a difficult decision dj is if you have somebody who's us but not justify said if he said if you don't need to my room as i'm or you know listen up like i wanna teach at the ninety percent of all the things i'm gonna just sean 'em concepts and fitness and i'll so you're looking for a little more deeply well i think it will be property why would you bass in collaboration with jesse because that will give it more scientific approach it maybe i to dj nudie naxi when true while you would you like on what six months of towns on everything be cheating is a lefty 'em could do any we can sing with guys if you're in or or this thing audience and that to have the colleges yeah yeah you'll be company morning five am and they kept don't see any reason you eat so they five a fucking forty five at any point win swimming opted to teach the students in north korea elvia clients scene when you tell them to come any morning on do seven laps or twenty laps exactly what if you gotta know what the get michael we need any of that i would undo nutrition after john cena to go under some bucks in jail is on the vox ninjas boxing classic going into concept that's not for me it is a very intense six months you know you might get sunday or sometime i talked to him only five deficient on the other six seven o'clock at night when you tell me go through this should be pretty a healthier salvia everywhere when it come on let me see just like just like in admitted they were negotiating food chain in about mvp doodle sunday i don't know if we look at small any more had everything back one a m or does very dark greece's i create some degree i think that's also good in terms of awesome guest motivating somebody to follow a tree and you know when you see your tree in a simple you type that you will will likely to achieve something like you know okay this listen have a good chance that they know what they're telling me to do because whatever they're doing clearly will confer them look like we have some information on what will you know so i think the fact that he actually making it do it hands on does yeah i definitely works in their favor so that's something good i knew exactly how hard it would be like if i didn't do it yeah i i wouldn't hold a fee but when i i i suspect that annoys you know when you've been there done that went thirty retreating motivate them to push them off the cliff pushups anthony c n n on agriculture off the glass will just grabbed him like i said i couldn't do it i know i know my new window guana photo feick and everything i tried i tried everything yeah action against utah few self i guy that got a thirty six years off you know like like it's about the volunteer for sunday to go out and do something on become a volunteer ducking ducking nothing will be like you really yeah i think you gotta come saturday on i think i'd be like okay do i start doing is looking for volunteers that what do you wanna come soccer there on sunday company this please please please new find somebody else if you if you like i did i did you teach you anything about tom stuff like a like steroids on thing as well yeah we did we did performance enhancement drugs pd's yeah my son down through deadlocked on a hold to recognize 'em sits in components in but supplements or or anything that supports improve their performance on wasn't new this is the changing teams will care it hard to keep track of that yes so we might new was painting of enrich sure will be fought a public adjuster when we did the tough stuff through but 'em you find window buying something you sinus in june janine some combo identified the two point same thing they might change one incompetence i give it a different name so you know when you look at what you'll find out to yeah and i think roby dislike change one component component that react with your body component that you're after detest yes that's not picking it up but still have you seen anybody do these athletes are responsible plus before anything that comes into our buddy fund ovada irresponsible spending in consumer use for this is why they leave about the truth of this idea that if you take a shot at all if it did some some some medication that will be under venus you responsible fits the motto even if you go by any of the on the on the physical kenwood wherever it ain't got are you responsible responsible anything offensive if you're buddy to athletes don't keep keep bomb abyss of of even if you don't know much about you just sean on on on camera and or just sitting in those goes on stuff still needs to former college yeah yeah yeah it also why depend on i depend on 'em white is i if i did because somebody sent i sent it to my yeah foundation final just this will be yuki right including right now is far north on i thirty or forty cristiano sitting things when they keep changing scientific name wanting to so what what is what is a load of i guess what person person will be allowed creates you know be allowed as well creatine is one of the most trusted supplement yeah reaching in on katina's is good decrease you know his viewpoints you want from formula at this you know what what exactly this creates into creating is the form of i mean it it doesn't look regina water will give you a sense if they must be made up of what they're not gonna make everything or what have you seen more also so okay okay increase performance strength on on of a routine most tissues 'em unemployment's put in but if you didn't sniffer three piano into the whole buns that's just use a higher also look for it needs stuff like that and then second legal secondly monsters and see what he wants other fellow who do country which you know the exercise and you but you would think you would see both internal and then see what the monster monster who am i don't think in self defense is unnecessary half to one time and no right about me but the piece it yeah which listen doesn't concern me right victim who did you need you to god's all supplements 'em is required you'll have to take supplements about something and just like a security like insurance so what other supplements a oh see if the typical good to take soil person is good and see if they're like weather though a good multi vitamin i think i think i think yeah which wasn't consuming writes i'm also required amongst the vitamins and minerals pretty you know like irish duct i ended up throwing needing any any school which i think how much potassium everybody needs to be wouldn't do it buddy need four thousand seven many comes up potassium anti donald trump says he went on those she but i'm not even not even a little evil you'd rather be you eat bananas in what six or seven 'em last fall the crowd who is the eyes of the us yeah well yeah good always africa renton 'em that'd be like you love co author wrote it but equal couple you know 'em somebody does anybody need i mean that you're like you know and i athletes we need that's just like we need after allegedly threatened not to perform at peak performance level you need you right the multiple times young an average person get like about she enjoyed a comforter potassium see i'm pretty deep she's on jury buddy running on whether you are now deficiency right you know you when it's both 'em in ecuador ecuador all blue and we were already double group on american championship when i when i was a blue the real and there were like there's like five or six your children when they're the military then line up the morning coming up on my phone my on who they were like oh man sleeping my knife and that goes on in terms of like number would be hard i'm paul popeye however the i forty pop off the hard 'em watermelon kambas ge book to achieve boiled eggs just stick to take me plan ministry this wasn't organizes ever coming up to the hospital in disbelief when have to become disorder have you just i just i in shock i couldn't you took a look your food fuel line you're watching a line like you go wash journalist is a monthly tonight right in with the internet or you know it doesn't turn left i i have a buddy with i give my food i went on by food or one of those guys disciplined they have the deacon you have a they have a nutritionist exactly how much a vitamin zinc in everything and they send up to didn't you buddy perform at peak performance they know exactly what inside their money me however i went to when you call nobody's chicken signature rap thing and you've done to this is nutrition is very important on oh no athletes get the new rights i'm also nutrition is very important so i knew icees even write it caught that that'd be i know what i had my vitamins but i make sure i got my chromium they come up with pacificcoasttermite vitamin but we feel but everybody pretty pretty natural stuff is not disciplines it gets in a minute anybody will 'em digested beth on utilize it might be a real food yeah i love the way they do have a time release off as well yeah lower body to really utilize it yes so what about stuff like 'em like siri so how exactly do steroids make somebody 'em like bulk up that north carolina too much about it but from what i've got a denim in in in school and that was i think we've done more with testosterone no no men have these are all joining nine of something that i remember as a longtime ago or a high end up as you get older no other job find teenagers the highest they find it i got one for what he fights not without nineteen you might get floating oh yeah they're young freshman fester and hire you you're you're jumping in on things other decrease after reach a certain age you also what some people some some rockets will do is increase would keep it but but in africa surely whether it'd be injected or tablets or wherever i mean the sort of keep that increase in muscle strength trends on like when you're a teenager redefined like i'm athletic secular running hundred yards on stuff 'em surmise football was a box because that's the only possible because those i don't look might look like a buddy been a look at how image wouldn't be wouldn't watch a quid was eight messy using this room kristin reason is because there's nobody better more looking about what i look back in different sports mom tried to get these within edge by any means but it'd be blood blood open yeah it'd be will do been whether it'd be anything any musical get anything to get the win you know would would try to use it you know but buddy billows no righetti should be enemies stick because i was sports is looking good yeah and it is wildly they body building competition like mr olympians about what's known as much size as possible yes so obviously there if you're doing something that's not true not giving you unanswered shoe yeah you know you'll get to these kind of things in yeah i have some people who are traditional genetically so i have a guy who does come yeah tiny tiny you won't even say protein for will be creepy wasn't that long ago so much of it would be like if he's of exercise job so while other lives on credit but he would ruin what to any event you know when you look at it you have to be using something not have any money i make my are protein saying you know what i believe you and also how people who have genetic genetical in other people do have is i mean i've been treating on consecutively for last because of the last ten years newer i mean the whole border just come in now i've been doing never let you expect it open reaching in since nobody seems to be like whoa you have something you try jennifer any as how's your life you know you look you look better life i think people think of it as balance it's myself i buy masuda as much as something so bony i'm very small companies or something on all the me but she must have development ship because no matter what she did it because he will look like well something like adult said he has an asshole then you got got it up but at least you'll have some good definitions cause your muscles get the fully develop level ending says yeah yeah that's when you oughta but i could get somebody looking better i mean a short time because you already been have already been written you know she just doesn't go into the chapter on a civilized any book it'd be somebody asked me to get somebody because i went to a lot and said china on trade is a similar titus exercise tried this program but no wise i don't know you know the word minoso not mark on on engineering now that a a forty eat you know what we see on tv it's public what i'm twenty nine nineteen you know i i honestly thought they were like like i said he it'll it'll do you know where she is you look good if you see something of course he will get to see them to do it i cannot michael seem automated oh yeah or like right when you just say yeah you should ask you hold if you if you yeah yeah i feel like twenty nine i feel like i have a good forty fifty years left you now yeah yeah that that's amazing and other means and so 'em you have any competitions coming up next up right now right now focusing knowing what opening on somebody mentioned something about what is something you shouldn't something any opening opening face off in a very difficult so giving people writing because i just says lots of bond market is jumping only fitness run on giving people wrong information you know in terms of nutrition on trying to get better looking good so people 'em get get fit quick check yeah on national they have on all of the people some mansi rocky you know we have another used just for that guy was telling you is on i ended up i was listening to you and we just going to you know you have some people that they would do something i look for them yeah because you might have just gotten lucky my genetics i think what they're looking this correctly and you know what i do and i tried to put themselves out there as a a fitness experts and they start treating people they have no real concept of how different bodies reacted different things a whole buddies react differently and thing as well yeah it is very true in my book for free you might forget up listen it'd be better to own it on annuity 'em different body types of subjective multi multi and the more photographer she is already over the last time they have them do sheep it's awfully yeah shape so i got a good jellyfish she wants he wants to the car organized and i told her nugent because it will be impossible you read my next year next year no sooner had on like yes yes she she just wouldn't go see shape shape throughout these x sheep or shape you won't be nice if you were not just the ships out to the street the one tips do exercise could give it up those moonstruck yeah where did you not to also be most other at the movie it's like a tiny tiny so and more fees ninety civil feces it'll just be yeah you get like i'm out of turn wanna get some don't make me what a fitness like a a fitness expert could probably tell you that you treated me on you'll get they eventually and they they keep you a tree and on pnn ten years and you know i may just a discussion as anyone for the instructor or the treaty of amity video because i wouldn't go buy a homeless person so i find that you're not like you know i wouldn't go buy a car mechanic who cows rican don't so i wouldn't i wouldn't go by a cop and medical advice so you got to watch i just said watcher all over the street treating this lions does it kind of gets in africa clinton did you know some questions see what's not seen order talking boat but it is good that he actually pointed out qualifications people should actually liberal yes because i wasn't even aware of what the conditions of tree i would need to have i thought you know i could go to the gym and they just wherever they tree and jim as you know they could just shoot me ropes on hosted new stuff on you could dream somebody off you there's a lot of loss loss loss in i mean i thought you know you you you you are deeply bookies have tv but i would not do you have any preventative bureau which will be ninety percent of liberation and others would i don't you know nutritionist that destruction physiotherapist massage therapists these preventative prevent things are happening that however many you want to see about the university that he dumped does you know i see these people who will keep if if inventive of anything bod from yeah and then they come to you you know what the killing of fix it and then if you don't fix it set nearby city revenge it yogurt on the board in issue really low pressure through high school bus by trina manji no title in blood pressure should not do this decision is make sure you get the right amount of nutrition make sure you're consuming of water and then after we have these yeah work or decor nuts when they're possibly doctor the times we agree with their coq on my misery right you know up she steps so we are what we think we had one thoughts on it you know people know by by the blue wants to be the tree in order the wants to run anything made up that underlie half to john about giovanni this operation on that operation the damaging need you want about any appreciable because you physiotherapist indigenous peoples not inventive what we might also you know what's what's happening as i think shifting ministry of health had like a hundred would come country and they pay for it yeah don't don't look at me before we knew exactly exactly so they would save money a firm you don't you tell people in also so you're not money they saved their you could spend it hit but the problem is you money they spent here a lot before they start saving money they at all yeah see i guess doing a hundred would come gonna cost us so we have so much in in in healthcare like that just opened obviously makes sense yeah but eventually eventually a lotta strange to me the difference in a short short short show too because a simple thing as i've been oxen especially schools of nothing 'em nutrition not knocking on average right now this is so you're judging soft drinks that's called c j c j he's one of those he used the chubby you say okay you're not sure we lost me about treaties one job as a gift ideas i let me see if i if i eat food on the streets open also be nice on season which i suppose it by company about cutting edge why do you think about this whole i just want this week yeah you're not under the influence of a lot of hospital he wants his the fifa this leave what no yeah a lot that i see it'll happen just because somebody give us something that'd be difficult to be holding you know somebody give you a routine like a big russian like even though he had yes i would just have rhody but he writes a book because enough i mean it was just me when he was upset after they split the real interest because some of the year with huge a huge yeah that's why you gotta wonder what do you want to get piece i take these multi she always wondering about the shutdown i almost said it if they have diminished is getting involved in education education is february fourth us it would have a knee jerk eason in m b expending of yeah but my my thing is not just not just education i think people just need to start actually doing something because you could we could talk on talking talking to this you know does what else thought this show for you where you need to get old did not start doing something you know like you would come out the other reason he got people coming over there and just doing something on i guess being together will probably be a nice more tv community that he will see everybody will get into it with you this you get you know it's like a like a a church but for fitness the off not people around me i like it i want the journalists that girl keep me with gump i like you know who like saturday evenings new saturday morning like like you never fucking morning like new like several hitting morning oh man i wake up seven seven o'clock on this fucking but no i mean just funny i'm seeing everybody get motivated cannot stand bombs like corporate naski yes i wasn't about to actually look us up that's how it fits if i throw into the log on to get going no i get motivated knows it only number one the art school because lynn lynn yawns guessing resorts mockus getting results everybody this lifechanging on did encroaching meet on being bringing in more people this is football get involved with the fun you know something not oh yes back to school sort of eastern no sir i know like a mummy housing for coca cola everybody she is a trillion also claiming she says she took a couple would say okay so that's all they should go to audi okay i will tell us the onset of searching friends who wants you one point five is you got to what she got us pretty okay this is why so i said okay if i take a glass of water on i mean she's one of those should go and sit up and drink it will be three cs tracy jonky okay but they got pockets on what she's gonna do it so i wouldn't be so you know so that was very i feel good so that's why you need a drink more water because most of which you but then a buddy she needs some some water inside no the movie to switch inside of a stomach and reduce on makeup on dispense insulin bring no one should go to prevent new venture firm getting diabetes well me what she's a diabetic see right so you knew why i want you all to know if you're doing a great idea digman what's up must be but it's i wasn't wasn't supposed to drink little boy in front of me josh away they ran intelligence is not all right good guy says anybody's i agree it lasted minimum and not only for us i mean i love us three because that's not that's not on glucose now dental caribbean people of south america people did it i told you in you america will shift you could be different types of ideas defense off me is city chiefs thirty four degrees in the caribbean is minus in in the senate also we need to call and there's minimum to whether you're right that there might be between twelfth even sixty got this could minimum equinoxes sickie imagine orthodontic yeah we had released right then we'd be washed away from skin doing the doctor named once a week absorb more i mean so we use it because you're much more so on i think come like everything she needs a forty five will be will be okay because if you check ticket or any caribbean or or diabetes diabetic very high yeah renshaw high old bc growing up you're obviously you know one of i think i think it might have been suicidal you study with lucky done in trinidad you're done alternate audience 'em i think somebody you know came down in the sixties or something and it would be firm that obesity study they concluded that obesity was not a with another case of eating too much food there's obviously upper malnutrition not getting enough nutrition ready research it too much but i think it's just if you're not getting enough nutrition able to new ways of looking at might end up or dm me toss up or look up on that but yeah 'em nutrition is definitely a week to go until they have this this guy took the juice on the phone book on type two diabetes and how to actually kill yourself over houston nutritional no medicine i think he's a big 'em he's a big advocate of stuff like fasting on intimates on sauce and stuff that you do any of that with your clients i know i do believe in him in any five diet not something we talked about on m b jaguars nutrition nutrition also 'em just said she must be pressed on prop thirteen cops micronesia with backups anytime they take all of those five diane or you remember that rocky so one more sports he presents on do what she engine names of only as coming on for june janine undefined hardy atkins before no agenda yeah yeah would die and then he miami beach diet is what a what a don't change one of them have when you turn quality kind of what that meet me to go to college lookout yeah nothing m w those what would you put those on someone engineers going the wrong people out and we have this somebody talk about his new york city when i don't know if he's still going but you end well yeah he did nothing but just meet wouldn't be good like just just be sure and he said he was healthy but i think 'em i think it's it's cholesterol's natural shut up we have seen physically mentally i asked you if you come together comfortably there'll be like yes you know do what he does is weak won five of six past civil suits you best that is a modern science will be a part time or be seventy s every as we be here for we if i'm enjoying life after life regretful will where every degeneres prepare for that whether it'd be in do with this christiane whoever it is it also bs our life on to enjoy it must be rather balance cowboy tree entire life just eating meat or just using apple's or just you know if that is your take wants we have you ever read about insides if you're a piece of mind would demand if you would you would you double double what it must have you must have about nutrition obese you know exactly how much would you buy new video musk what you wanna do and it just everything in motivation like using softening insulting i am i might eat when he talked about what is it like a bucket the ice cream in each one of those instead of four run they are still by learns because this is too far east west to east and the west and the one that he just wants to be balanced about life gets in the results on having fun doing it so what's so what what do you have coming up right now 'em any competition that's all i did it looks like i'm just shows you buy some of my my good was a so when suddenly joe combinations much eve dive out you've i know i went to fifty one a w c m yeah and i'm games yeah and you better be a diamond governor lubar 'em that was shot in the dark knight wants to do a dime for a while but wonderful bustle no is making shit my knowledge rhythm but i looked up coming out to the pike now lots of coming just coming up but i spent a lot of money represents he's engine a there is a lot and sometimes when i go down i come back i'll lose a few clients because i'm really for two weeks gb enron clients and he's a cheat you know i i need money me white i'm not here in right you're i knew i needed to be depending on sponsors only time i needed to do something the owner of what i would be i'd have come there's something there might be somebody that happened to me in twenty fifteen up you've been for the cc radio too hot out then time to companies and in that case was if they go on to get on that you wish all the shows with insidious you at northern nevada winston who shot international one not guadalupe i one dot martineau when dot dot just anything cosby to the loss of focus a hundred percent over the same city commission in you could even though many republicans couldn't afford if you would have never happened to me again punching machine on my house because you're cheating i wouldn't i wouldn't that time reaches associates comic it just like all my course if you don't need a high in italy you're just like and i do one i mean again so i need to put things in please do when i say one drug combination no matter what i knew i go into it and also right now is 'em just focus it no one gets in athletes ready for a comedy show or mood nutrition in oakland a lot of these other said potassium i think the the right nutrition inside the buddy ryan say a bunch of before my big before just like a car if you or you needed unia show humidity union in also does anybody know rights amounts of water foods in cobs a micro nutrients mike when the junk and so when i was couple of buddies nutrition is about supplements 'em lineup and coming up to a viewer assessment investments on wherever sports relive all is just see which ones they gain which newsbeat so when i you know i mean come to us and we organize a dealer near you learn how nutritional supplements the series out so that'd be that'd be next on the show now into right now after that might make some additional engine it will be a diamond already a new wizardy pano i think out of your nose yeah regardless oh i did i in in in brazil that's a first ever go what's it like oh six the main categories i gotta go yeah lou and you know it was whoa what do you best buddies any would ever see from magazines knocked off you know was a huge i mean think about these screens box of honor ensure that that is he is he already you know there's no bones about football something on a humongous a c m you thinking of making bodybuilding parts of their twenty twenty two lympics says well yeah yeah i would be huge any any plans to try another if the house means that i would definitely love the parts of the business but believed to be doing more fitness and it does like what need new seven times easy chunk like flippin non spin then on on those gonna shoot in a disease be effectively strength in one minute i did that's i mean i thought i thought the new not my perspective if he horrible right now is like oh news splits and i stopped breathing down suicides ineffective spit on my head on route twenty nineteen i would just not only yeah yeah yeah yeah that's next year on any f e b f e b is part of it yeah there were parts of the people i got this awesome but would that would be you have to do anything i'll be amazing because it's time for money into tickets right troopers a shuttle as a you need sports yeah because the people that competes minutes of elites in what they do yeah 'em but villainous embodiment of all sports a it is it's it's up on on wgn sports because most buddy but there's more side is like why do we need most labor this one come on that's coming from himself you know when i saw myself as a is a is not a team wasn't report brought by itself where they would have been controlled it comes together what did you what did you gonna spread yeah i guess bodybuilding as though like a very personal journey as well focus so much on yourself and had overcome your personal of those on yeah i'm sorry buddy belittling a radical one said another one thirty eight time for us nobody villain champion with what you said was this'll be voting what's up buddy been though some people might think oh it's like a buddy below slip up these every week inside some degree and all that yeah number four out of college students on strengthen side because he's used every single de come inside of a rule nfl something heavy extra heavy out to push yourself limit pushing the limits everything is not normal something that's something some insight you know sometimes if i in a good mood and i i kinda chain you know because oh butterflies ferries or some heavy doesn't look like watching it myself i mean what are we owns the property mock heaviest rain will quote that'd be fired ridge outside lucky like what do you do know what we don't inside of me it's not bumping region side of me reach my my my muslims enough give me rita upset stomach talking i'm just go one second whether this rose not coming in or this go back watch of medicines the boss or you know i noticed that he bought you nobody watching that kevin monsoon because we think we know that whole deal with some there's a ton of one hundred and twenty four so i'm press so it can be off minded did on comedy guardians tobacco but if we hold on past them she took who's my i spoke to one the debris and if they don't yeah so in four years ago but you know what good on his idea yeah you have to go to lay that on on on on his body to so i tried the tree an athlete say he's been treating a liberal this week one to the other ones they're laughing you could get injured focus n c plus focus after that like you only for an couldn't break in his mind body connection money for and they send a text and it gives me or anybody depressed i have you know you might not near as about focus on our sports psychology is focusing your insight into his name somebody might see man might be in this podcast on wants to see sometimes even if you're taking over and then you go under something so you know there's no no yeah and then sometimes like if i if i'm sure most people new new rocky road for the hot new load only on chinese food also then nothing nothing clean just a blanket people wouldn't talk to me when i hear them corn similar to i'll get a cheap up his condition but no are not true difficulties in the off season though everybody laughing out to a quick man that thing because another now to the north korean side as well they wanna play on foot all athletes in just a minute or people average many jim when a tree in in two minutes for you in just twenty minutes to students all over this twentyfour isn't idea take one of a ticket for everyone you know just always you always put your health is your ballots is so your strength and so you you know know new kids on the food just that's four one four forty five minutes is all about you focus on you you don't get resolved and let people miss new focus when the tree in lose focus you can keep you lead yeah to jump from one to two one forty to eat is somewhat intensely leads you could cause injury you know he didn't pull that have recently pressure in order to the backups going back in the gym people die fought back in the gym and they're doing my this is how i go tree and the tree and our own if if it gets hot the genome will be able to see these things have signed before you got the top you know you're you're cold sweats in you you you you you speech guessing lewd so that weighs about i might talk lines on a on a treadmill and i might wanna check devoid win i i have no idea what wait me ready wants to know what age or i do they still called everything that's going on her own then you know somebody that diabetic i washed away before i came here when i had nothing to eat and how their medications and then they're about to drink drink that's not a good himself the jinx they had nothing to you and they had their their medication or that the district and they were could also that will jump shooter foster on if somebody that i kinda struggling through how you doing i'm treating because you should go inside of blood going through all the or did on defeating undercuts the cosmo injury you don't see one district to be acceptable inge before the exercise other people in raleigh please focus on to be diverted center do not like yeah yeah i shows a lot more coming up on the testimony like if the guest in terms of the hospital and it's like when i go to the doctor said are pre diabetic there's no such thing as pre diabetic diabetes you have no such thing as free diabetes and those up to more look those you know pre diabetic sandifer diabetic you know it's on the court insulin resistance however the final score three diabetic is actually some people have high incident exist on you know if you're consuming so much shit goes or carbohydrates the defense you know the broncos defined kelsey decent lost a lot of insulin anybody for the incident a couple of insulin and they find that most of the university of biological keenan be undone died adopted the diabetic now because once yes heightened so they decided buddy buddy kinda lose five but yeah right that triggered this story joe yeah see if there's a lot of incidents anybody even needs to his country does ease up on these soft drink consumer what's up la the incident just done on pre diabetic wouldn't happen in one said which sitting highs will we're walking over the sugar level two hundred what she and you're not seeing this be diabetic i see we took it out of the youth under fifty i do pre diabetic needs watching this left npd vani we talked about i know so i respect all doctors in order to pre diabetic there's no such thing is i have a border without room yeah there's nothing like pre town so freaked out so dramatic is you know if you're not yeah like they are not so is if you've been it's a going on a lot of tests what most people do is eat chicken fingers and fixing anything if you don't think you brought up on on what do we need to do is be fasting steph that'd be one nobody by sun take a blood on the give it some sweet ready one to nothing free food for travel was or it'll it'll be more than any morning they wanna testify against almost two time to check it back on that one should be doing you you you ease up on that is what i think yeah i think they protested israeli more monetary policy i know i am right now you know yeah but yeah i think i think that one of the best the figure figure out where you a whole that's very important on people should be at least once a year or maybe six months theater says even though you're on top of it or insurance brokers have that one of them tests symbols yeah actually i wonder if i dunno yeah i think it is insurance those those why did i do when i do my insurance on the very important not just said it very very important especially men men doesn't like who am i don't think he's going to go i guess i guess he said that show yeah if something happened to me just like i'll give it to week yeah if i could limit after two weeks ago any doctor any amount m i think my car's gonna start cetera notice these just no recourse even after wrap this up but with a lot of fun anytime anytime you come up on yeah if you have anything else you know we didn't cover here today that he wants to get there we could probably focus on maybe get good more indepth into so many aspects of fitness you know yeah so anytime you already mind just give me a call and now a look back on anybody who are of any i'm questions on the new one defined don't do that stuff so many podcasts are invited did the comeback one yeah well not not just seaport costs 'em you on your instagram rookie buddies fitness yeah rock buddies official rep buddies officials on instagram what other social media you're going on a in on facebook has rocked buddies yeah look what he's on facebook 'em avenue you have any website a new website moments bundle you need will be what he's official rgb dot com all right nice nice well i guess once they get these supplements stuff it up you go up satan yeah yeah i suppose what what's what's up with this because i could have done it again

america jack vinnie raspy george six months twenty four twenty four hours seventy two two weeks seventy three years thirty five percent forty five minutes forty five seconds seventy two hour thirty six years fifteen minutes billion dollar ninety percent twenty minutes fifty percent ten minutes
The Best Investment Writing Volume 3: Selected Writing from Prominent Investors and Authors

The Meb Faber Show

5:37:53 hr | 7 months ago

The Best Investment Writing Volume 3: Selected Writing from Prominent Investors and Authors

"Welcome podcast listeners. We have a fantastic episode for you today. Last year when we published the best investment writing volume two we offered authors the opportunity to record an audio version of their chapter to be releases a segment of the podcast and listeners loved it this year. We're bringing you the entire volume of the best investment writing volume three in podcast August format. You'll hear from some of the most respected money managers and investment researchers all over the world enough for me. Let's get to our guest and let them take over for this special episode. Hi this is Jack. Book on the CIO of Alpha architect Alpha architect is an asset management firm based in Philadelphia. PA focusing mainly on factor investing such as value and momentum to learn more about us. You can find us at Alpha architect DOT com. I'm going to read a piece titled Trust The process. This is a piece I wrote in mid twenty eighteen gene and it goes back and talks about my belief as Philadelphian fan entrusting the process. So here we go trust the process as a native Philadelphian and huge basketball fan. I fully agree with the seventy sixers fans rally cry. Trust the process even the players players such as Joel embiid have echoed the sentiment of the fans. He loves a saying during the home games so for those not in Philly and not too familiar with the NBA Ba. Trust the process just explains the seventy sixers rebuilding process under former seventy sixers. Gm Sam Hinkie and if one simply simply goes to Google and types in trust the process. You're going to see an image of Sam Hinkie on the front page and so in Sam's mine as well as many who watched. Nba a valid Alad theories to win a championship. You just need a superstar player. Coaches can help superstar players are the most important you might say well. What's the evidence for this? So what I do as I say. Consider since the nineteen eighty. Three season happens to be the last seventy six championships. I list eleven players players who had multiple championships. It's Larry Bird Magic Johnson Isiah Thomas Michael Jordan Allies von. Tim Duncan Donkin Shack. Koby Lebron Steph and Katy the only three missing championships in from nineteen eighty three until now was the oh four Pistons. which again was a great defensive team with five really good players though eight Celtics had the big three of Cagey Pearson? Ray Alan and the two thousand eleven mavericks were Dirk Took Down Lebron in his first finals as a heat. So will you can notice. Is that all of the eleven eleven players that I just listed. They accounted for thirty two of the past thirty six championships around ninety three percent. So where does trusting the process come into play with regards to the seventy sixers right. So examining this from the seventy sixers perspective. Let's go through steps win. A championship is your goal right so your goal is one when a championship second. What's the process in logic? Well they're logic at that point point time was to intentionally lose essentially in order to increase the probability of getting a high draft pick will. Why would you do that while? Remember that ninety three percent of championships went to superstars and superstars generally get selected higher in the draft. So by doing this. It's giving you a higher chance of getting superstar and then the third part which is the rallying cry is trust the process right so the seventy sixers fan during this multiple multiple seasons of losing came up with a slogan of trust the process and kind of became a rallying cry so this is mainly an investing podcast. So how in the world does his trusting the process apply to investing. Well are there any parallels to as I outlined above. I'M GONNA go through the same three steps that the seventy sixers Jews. which is you know? What is the goal? So I need to outline a goal for your portfolio second you need to create a process backed by logic and then the third is you need to ask the really hard question actually. Can you stick with the process in my opinion the longer I've been doing this. The third question of can I trust. The process yields wildly different behavioral effects and conclusions when comparing building MBA team came to an investment process to. Let's consider the following trust the process questions in both contexts. Can you trust the process set forward by SAM. hinkie engaged to rebuild the seventy sixers. Pretty Quick Answer. Yes why because when you watch the seventy sixers and see Joel. EMBIID dominating games James. It's pretty obvious that was a good suggestion. In good way to move forward now it's turned towards investing. Can I trust the process Set forward by my research or adviser for my investments here the answer becomes a lot murkier and is not as clear cut as watching NBA dominate other opponents so belonging to go through three different investing examples of ways that one can invest and I'm going to highlight the same three things they talked about above. which is what is the goal? What is the process and then third? Can you trust the process. And and these are very common strategies that people have but we're going to go through and show you that trusting. The process is probably the hardest part so let's go into took my three examples example one invest in stocks. So funny look into invest. They I need to ask. What is the goal? So let's assume that the goal is the following achieved the highest returns possum. You understand and are willing to take additional risk but not some crazy unreasonable risk as measured by the standard deviation of returns. Let's also assume we have a home country bias and we'RE GONNA exclude real estate thus as an investor we're GONNA go and examine. I'm in three asset classes that most people look at US stocks US ten year bonds and US Treasury bills so pretty simple stocks bonds bills bills to remember given the goal of achieving the highest returns. Possible while being able to accept volatility. Let's examine the second step which is to call with with a process to achieve the skull rain so in order to do that. Let's examine the past and see what happens so in order to examine the pass. I show the annualized returns from Nineteen Twenty seven to nineteen ninety nine and what you see is that. US stocks returned eleven percent bent bonds return around five percent and cash turn around three point seven five percent so given average turns over a seven-year period period show that stocks did much better than bonds and cash. The process seems rather simple invest in stocks. Right so well. Let's pretend on nineteen December thirty first nineteen ninety nine. An adviser walks in the door with a nice suit and try to convince you to give them money to manage and what they do. Is You know with this. Nice suit they show you a table and they of course make non log scale just to annoy a lot of people and also answer to highlight that we don't understand the power of compound and what this charts GonNa show is the growth of one hundred dollars invested in the S. and P. Five hundred bonds funds and cash. And what you see. Is that one hundred dollars. Invested in nineteen twenty seven becomes two hundred nineteen thousand dollars in in Nineteen Ninety nine your alternatives bonds and cash would have only yielded you thirty seven hundred or fifteen hundred so this seems like a slam dunk right and then in addition to the chart above you hear through the news and from your neighbors that they made a ton of money in new tech stocks you've been primed to make the plunge into stocks and you sign up with your new adviser now. Let's say even a more conservative eiser comes in to try to sell you a stock portfolio however since they WanNa make sure you fully understand what volatility means they show you the annual performance a stocks. And you know that there's some big with massive losses since his nineteen thirty lose twenty six percent nineteen thirty one year down forty five thirty seven. You're down thirty. Six percent in nineteen seventy three and seventy four down on in total around forty percent so they do this in an attempt to be upfront and honest and let you know that stocks can be very volatile and you can potentially have very large large drawdowns. But let's say however given this information you knew that while stocks can be very volatile and have large drawdowns you have a longtime rising rising ten years so you plunge in an invest in stocks even go to vanguard you've read that no one can beat the market so simply invest in the the SNP five hundred mutual fund moving your portfolio out of cash and bonds. So going back to my three steps. Let's go through. I is yet to come with a goal. And here's the goal was compound your money at the highest rate possible second is what is the process and logic to meet this goal the process. Here it was to invest in stocks right the logic though even know the volatile have large drawdowns they had the highest rate of return in the past and people have told you about this thing called the equity risk risk premium third. Can you trust the process. This is the hardest one. So let's examine the next ten years of returns to our three asset the classes and what I show is the returns from January first of two thousand through December. Thirty first of two thousand nine. We're going to ask you. And there's no transaction costs for management fees. US stocks over this time period turned negative sixty eight basis points or negative point six eight percent. Meanwhile bonds returned it eight point two one percent and bills return two true point seven seven percent. These are all again compound annual growth rates so again next ten years stocks negative sixty a basis points bonds up eight percent and so I'll show you invested growth over the next ten years on a chart. What you noticed is that bonds go up to around two hundred twenty five dollars? Stocks are below one hundred assuming you invested one hundred. So what do you do answer. Dancer experienced a ten year stretch of horrible underperformance of stocks relative to cash in bonds question. And can you trust the process for some people. Unfortunately the answer might have been now right and for those who have stayed invested. I plotted in show. The returns from January first of two thousand ten through December. Thirty first of two thousand seventeen and what you see. Is that over this next eight year ear period. US doctor turned almost fourteen percent whereas bonds gave you three point. Six seven percent and cash gave you twenty basis points pretty much zero so luckily for stockholders the more recent returns were most likely in line with the original expectations higher ever turns than both cash and bonds. These results also highlight at the moment when one potentially would make a change or alter the process. This sometimes maybe a bad time to do so what then do show the results over the full eighteen years sample January first of two thousand to December thirty first of twenty seventeen and what we see is actually over this time period stocks still underperformed. They returned five point five five eight percent whereas bonds with much less volatility yielded six point one seven percent right so over this eighteen year period even with these very good returns up till the end of two thousand seventeen you notice that stocks still lost to bonds now that was not even a consideration consideration our thought process eighteen years ago. Going back to two thousand now. I did probably Cherry pick that example but the answer is yes and I did this intentionally. And given how long the time period examine right. There's a low probability that January first two thousand would have been the starting point point to invest all of your money into the market however. I did this intentionally to show. That stocks can underperform at some point and and it brings us back to the original question. Can you trust the process and better yet really. Did you even understand the process when you initially invested. You know the answer is probably not but it's always good time the learn first off. Why should anyone even expect stocks to outperform bonds? John's in the first place. This is actually a great question. And this is the so called equity premium puzzle which really is the inability of most standard economic miles to understand and figure out why stocks have outperformed bonds over the past hundred years and so without getting into too much detail. A reasonable symbol explanation is that since stocks are more volatile and investors are risk averse equities have rewarded the riskier investment with higher higher returns. Yes markets are pretty efficient one receives they hire reward for taking on additional risk so to the extent that stocks are riskier the bonds in the future we one could reasonably expect and demand a higher rate of return inefficient mark thus equity investors generally general continued to trust the process if the goal is a higher rate of return while you also do have to accept facility but what if one not not only wanted to invest in stocks but you WANNA be like Warren Buffett and tried to beat the stock market. Can you go about trying to achieve this goal we exam. I'm this blew up. So example. Too of reasonable processes is trying to beat the benchmark so once one decides rides to invest in stocks. There are two approaches invest passively in the market cap weighted portfolio or secondly attempt to beat the benchmark Chevy. Jeff you invest passively. This can be very cheaply using mutual funds and E. T. S. the charge very low management fees to almost zero nowadays for those that attempt a strategy to beat the benchmark. They can do this. However in two ways you can make your own stock selection or you can use? Ats or mutual funds that has some strategy but the goal here is actually pretty simple invest in stocks while attempting to beat the benchmark. Now given given that this is the goal. Is there a process. Our second step that we can follow in an attempt to be the benchmark. So we're going to start with the assumption which I think is accurate. That just randomly picking stocks is a bad idea so at that baseline assumption. Let's turn to the evidence in the past what Alex Strategies have been shown to work so after reading the journals in the Nineteen Ninety S. You can come away with the conclusion. Had A few strategies worked in the past I is value investing which is purchasing stocks that are cheaper on some measure such as the price price of the stock divided by its earnings the PE ratio the second is momentum investing purchasing stocks. That had done the best over the past year while exempt when examining the total return over the past year this is standard momentum portfolio. And then you say okay appears to work what is the actual evidence. And and again I'm GONNA plot the returns to top and bottom dessel sorted on value or momentum from nineteen twenty seven to twenty seventeen the state is taken from Ken. French's website and so I'm going to we're going to look at five four folios. The market just S. and P. Five hundred value which are the cheap stocks rebalanced annually growth which are the expensive stocks rebounds Danieli the fourth and fifth portfolios a high and low moment high momentum is basically the top dessel affirms ranked every month on the past total returns over the past twelve months in ignoring snoring last month low momentum. These are the losing socks they had the worst returns over the past year. And what you notice is over this ninety year time period nineteen twenty seven to twenty seventeen you see the SNP returned ten percent. The value returned around twelve growth. was eight point. Seven five percent. High Momentum was sixteen point seven and low momentum was negative one point three eight percent so based on the evidence there are few takeaways. I I think everyone would agree. Is never invest in low momentum. Stocks second is in the past value outperforms growth and the market get. These are all paper. Portfolios third in the past high momentum outperform low momentum and the market now definitely trading in costs are going to have an impact right and I have a link Which medical post to a detailed discussion on factor investing and trading costs? It is a true fact. That trading costs will eat away at returns and there are not unlimited scales on factor investing however hat whether or not there how long and how much money these strategies can take is an argument that he will have been having back and forth so for those interested. Munari that article. Let's assume one is comfortable. That value momentum factors are going to survive trading costs in addition you read some academic Leonard Answer says value worked in the past such as in French as well as LS V. You do the same for a moment. So based on the evidence you're process once again is pretty simple invest in value and momentum stocks so going back to our three steps we have the following. Your goal is to invest in stocks with an attempt to beat the benchmark goal beat the benchmark processing logic second step. You'RE GONNA invest in value and momentum portfolios. Yes what is the logic here. The evidence showed that in the past these portfolios outperformed the benchmark. And there's research showing these premiums appear her to exist due to either risk or behavioral errors. Third can you trust the process once again. This is the tricky Erkki part wisest difficult when someone simply examines summary Statistics such as what I mentioned above. They are just that that summary Statistics but the journey along is not a summary Statistic and the journey is just as important. So what do I mean by this. For example what I show you are the returns to value momentum and the market since two thousand eight January first a to us. This is the past ten years. Go into the end of twenty seventy exact same portfolios from Ken. French's website what you say is the market the S. and P. Five hundred returned eight point six two percent whereas value and momentum both lost to the market value return four point nine five percent and momentum returned eight point three six percent so over the past ten years are two processes value and momentum underperform the benchmark and not only that the benchmark lost next to nothing. It's pretty much free. So for ten years one would have spent either additional time running the portfolios on their own or you would have paid management fees all in exchange for a lower rate of return in addition this has happened in other ten year periods in the past as well not just the most recent ten years big question can. Can you still trust the process at this point. It's fine to ask tough questions. Why would want expect value stocks outperform in the first place so academics have been studying this for decades right and they believe it's due to two things either risk which is that value stocks are inherently riskier or behavior that investors are overreacting to accounting information? Potentially driving the prices too low for value and too high for growth this similar arguments are made for momentum investing however to be clear and a front investing in value is not the same as investing in index. There's is going to be tracking our and potentially the factor of might not work in the future even over ten year periods. However if you believe that that value and momentum stocks are inherently riskier than the market in general use could reasonably demand a higher rate of return in the future secondly if investors astor's appear to still be making systematic behavioral errors such as overreaction for value underreaction momentum? This would add to the returns in the future coach so we believe that momentum have a chance to continue to work in the future but again not everyone has to agree judge we plan on here. Systematic mannix factor investing can be simple but definitely not easy opposed by West which will send a link to and so my third example of attempting to trust trust the process and showing you. That can be really hard is trying to reduce drawdowns and volatility. And so of course. Yes I call this. The Holy Grail of investing high returns with no drawdowns. We get emails all the time from people asking they just just won a ten percent rate of return with no volatility. Unfortunately I have to tell them that that does not exist and I send them and make sure that they understand. Understand that anyone telling you that you should probably run away. So who doesn't want the holy grail of investing high returns no drawdowns so we have a third goal right. This is my third example trying to achieve stock like returns with lower drawdowns. But is there a way to achieve this school. We already stated that from two thousand to two thousand nine. US stocks had a negative return. In fact this was a horrible horrible time to begin investing in stocks. Now what if on January first of two thousand ten someone walks into your door and says the fine fine. My approach is really simple. I invest in stocks when the market's trending up and get on stocks when the market is trending down sounds reasonable but what are the results. Yes the person. Hey that sounds reasonable but you know how did this thing go. Luckily for you the advisor has piece paper show back tested returns from two thousand sales in January first two thousand to December thirty first of two thousand nine four portfolios are pretty simple S. and p. five hundred with trend trend basically if the price return is above its average invested. If not you go to cash very simple second is S. and P. Five hundred third is EFI or international developed markets with trend. The fourth is easy and what are the returns from January. Sorry I two thousand to December thirty first of two thousand nine. What you see is kind of amazing and it was a good time to be a trend investor the S. and P. R.? US stocks with trend was actually up five point six four percent while the S&P buy Bienne hold your vanguard portfolio was down negative six point eight percent this is annualised worse looking at drawdowns. The trend portfolio portfolio only had a MAC straw fourteen percent whereas the SNP went the fifty percent turning our evidence towards international we see that effy or international stocks with trend was up ten and a half percent with only fourteen percent audion whereas buying hold vanguard style eefje was only up one percent annualized with fifty seven percent drawdown so on the US you would have outperformed by six six percent international would've outperformed by nine percent gin given this information. This appears to be the holy grail of investing higher returns turns lower standard deviations and most importantly lower drawdowns. Where do I sign up so now again given given that we potentially had this holy grail we go back to our steps? Our goal which is our first step is to achieve stock lake returns with lower drawdowns second. We have to come up with reasonable processing logic. So we're going to our process years to invest in stocks but apply trend following rules based on human psychology. This appears to be logical as almost everything in Life Ebbs and flows. You'RE GONNA follow the trend and apparently it worked over the past ten years third. Can you trust the process so at the outset. Some people probably even dismissed that question. Can you trust the process Eh. Through through all this seems like a slam dunk. So after implementing the strategy on January first of two thousand ten how has a trend following portfolio. eleo done we examine this below the returns that show here from January first of two thousand ten through the end of twenty seventeen if we went to the end of March of Twenty nineteen it even worse the SNP with Tren was up around nine percent whereas the S&P SNP five hundred was up fourteen percent. You lost around five percent by using trend and your drawdown was about the same internationally. Early trend following portfolio was up around two point eight five percent whereas buying hold was up six point two five percent so one and gave up around three and a half percent annualized internationally so five percent of the US rain half percent internationally so so the results above highlight that over the past eight years at trend follower portfolio has underperformed this free vanguard benchmark and then to add insult to injury you probably also paid additional taxes because trend following potentially cause you to sell of course you could use his tax efficient solutions but that's beside the point question. Can you trust the process so once again then we need to sit back and say examine our process does it really makes sense to invest in a trend following portfolio right after all academics for for years of argued that trend following worthless. And it's a waste of our time. Maybe you should just listen to the ivory tower or at least get a better understanding as to y they say trend following is worth. So what exactly are they. Are they testing well. When academic compared trend following to buy and hold to examine whether or not the sequent the return sequence or sharpe ratios are statistically significant from one another in general? They don't find any difference which means you can just do buy and hold and you're going to get similar to trend and again this is depending on the way you look at the data you could also say. Hey you could also just do. It's pointless to do buying whole relative to track however the assumption is just buying holders your standard portfolio so to dig into trend following a little more. Let's look at some other asset classes. What I show are the returns to five main asset classes? US stocks international stocks responds reits and commodities. And while doing this on the podcast. Let me just give you the overview SMP with trend this is from January first of nineteen seventy-three to the end of twenty seventeen. And what ones fines is that over this time period again on paper portfolios no management fees no transaction costs however these are reasonable liquid portfolios. What you find is that generally over that time period a longtime period the returns on the trend portfolio are similar to the buying whole portfolio folio with lower drowns? Let me walk you through a few of the numbers. US stocks ten and a half percent buying hold ten point an eight seven percent. Trent drawdowns fifty percent for US stocks. Twenty three percent for Trent again. These are worse. Drawdowns international stocks point four nine percent for buying hold nine point eight five percent for trend drawdowns fifty seven percent for Oh by hold twenty one percent for trend. Bonds are pretty similar. Seven point seven five percent for buying whole trend seven point six seven percent slightly lower. The drawdown actually still gets cut in half from negative twenty one percent to negative eleven percent reits buy and hold eleven point nine. Four percent trend eleven point five seven percent so slightly worse however your draw down when from negative sixty eight percent percent to negative twenty one percent and less commodities yielded five point four percent while trend yielded eight point one onto percent however your drawdown using trend goes from negative eighty one percent on buying hold to negative fifty seven percent with so as I should annualized returns to trend follow portfolios over long time cycles appear to be not much different different than buying hold so this is why academics are going to argue that using against using trend falling because the two are similar right. Academics also generally don't care about maximum drowns. They prefer to focus. On volatility were risk adjusted return such as the sharp ratio. At one point I had had a paper sexually stolen. Sr in saying how maximum drawdown should be a measure. This was not accepted to well by the academic community now at a high level title if you believe buying hold is the best way to invest. That's great if you cannot accept. Large drawdowns trend falling is one approach to attend to lower the draw on tonight however as I show both and actually in more recent posts I have a following on. This is no free lunch. If you invest entrenched find portfolios during time where there's no large drawdowns it's probably going to underperform buying whole portfolios this is due to whip sauce where the trend trend following rules get you out of the asset class only to see the price rebound quickly so again trend falling is a decent approach. But it's not perfect. Indefinitely will not work all the time for more details on trend following. I send you an article with all the details on our systems as well as just simple rules and how they did so now I get to the conclusion so in our basketball example. It was pretty easy to ascertain whether or not the process made sense. Seeing Joel embiid dunk over someone or have a great rundown block is visible. It's right there in front of you. Similarly in life most most processes generate quick results that are visible for example. Let's say your goals to lose weight and your processes to eat better and workout more. If you do this for a couple weeks you're going to see results which can lead you to trust the process so when it comes to invest the answering the question can I trust. The process can be very hard. Sometimes sometimes the process will not work for long time periods which can make it even harder to follow so the three examples I give were not necessarily all the blue. These are approaches to investing. We believe in first stocks had higher returns than bonds in the past. We believe that the premium we'll probably exist in the future. This is a reasonable assumption. Second value and momentum are to systematic ways that one can attempt to beat the benchmark trend. Falling third is a decent attempt to lower drawdowns any asset class right so we're fans of equity equity as well as value momentum. Tran facts now. The goal of this article was the highlight that even though we believe these things trusting the process can be very hard so in each example. I tried to show you a bad almost the worst scenario for these three beliefs. We have in an attempt to give a better the description of what the process is upfront in an attempt to minimize regret in the future. So in general the best solution is probably to assess the information in mecom setting come to a conclusion about approach and then sit back and trust the process. I hope you enjoy the article. Hi Hi this is Paul Lavelle. I'm the CO founder and president of investing for a living investing for a living is the name of my personal blog where I talked mainly about strategies in quantitative investing also offered to subscription services on economic pulse newsletter which is basically a set of Ta strategies that combines rides trend following price signals with economic indicators to improve the results of those turned following signals. And I also run a quantitative individual stock service called convulse. If you're interested in those please check out the blog at investing for a living dot. US So today. I'm going to read to you. A piece called when models failed. So let's it's divided when models fail all models are wrong. Some models are useful. This is one of our main tenants economic pulse newsletter we know that are based model. DSP Wycombe System will fail hopefully not too often hopefully for not too long and hopefully not catastrophically in this post analyze the history of the espy. Y CON system is triggers and its failures. This is true of any active investment model including all TA malls and analysis of A.. T. A models failures and successes something. I would like to see discussed more in the literature. I think it would help. Investors set expectations on real time month-by-month performance and and the actual month to month workings of the models as opposed to only looking at long term results performance return distribution. Let's start out by baselining. Performance Formation's Table One shows the performance of various ta portfolios the green ones are. The full is unique in the economic pulse newsletter that based I on the SBY compass gone misc- off indicator that I will discuss in this paper and you can see in Table One the portfolios Leos. Em factor cop four. DM Competence Be Wycombe are the portfolios in economic pulse newsletter compared against other TA portfolios and and a couple of other buying whole portfolios like sixty forty in risk parity and the permanent portfolio. And in general I the other. Ta Portfolios is the economic pulse news portfolios. Do very well. In general offer a little bit higher performance in some of the other team alls but joe in the same ballpark so overall great results like other. Ta Strategies you get higher performance with lower risk but to get a better picture of what it's like to live with these portfolios on a month to month. Bases Aces I find it. Useful to look at the distribution of monthly returns in particular downside. Returns thing it gives you a better feel for the tail risk or maximum pain point point for portfolios so table to you'll see summary statistics on the monthly returns for two of the portfolios as. Py Calm and calm versus various suspension marks. So if you look down at the second part of the table used a percentage numbers have the distribution of monthly returns. I'm best the average return. Turn the standard deviation and the number of months in percentage terms that returns were less than zero less than two and a half percent less than five percent less than ten percent as you can nc the TA portfolios S. P. Y. COMP DM comp. And I use anthanetis. Gem also has the portfolio. Compare very well. All I see are way better than the buy and hold portfolios like espionage only sixty forty or just a fifty fifty split between Py and via the International Stock Stock Index. So in general you see the number of months with negative returns. Lesson zero are significantly less than the buy and hold portfolios. So that's one of the big advantages advantages of TA strategies so even if ta did not increase returns this reduction in downside risk would be a huge benefit but on top of that. Ta Propose increase results as well however the benefits of Ta models or any active management system. Do not come zero cost so this next section we're going to look at an example of model failures using the SBY com system as an example. But first let's define what failure means. I'M GONNA go look at it in three ways. I'll start with the most obvious since one of the premises of a system is to avoid drawdowns. which are the biggest during recessions? Let's look at how well as py comp catches recessions so since nineteen seventy one the SP white comp system has caught every recession Russian before significant market downturn I e no false negatives. That's fantastic but that isn't very difficult to do. If you're just fitting to historical data data therefore out of sample testing should be done with the same basic system that is fitted a shorter time period. Nineteen seventy-one through two thousand and two for example to see if the system would pick up the subsequent and out of sample recession. Two thousand seven did and it makes you feel a little better that you're working with a reasonable model. The next the question becomes. How many times did the system trigger outside of a recession? That is called a false positive since nineteen seventy-one there have been six recessions the ESPN Wycombe system triggered thirty one times outside of recessionary periods. That's a lot and it's one of the costs of an active system. But we're investors is not academic economists. What we care about making money? And the avoidance of large drawdowns. We need to look at the system in terms of that in other words. Did those triggers eggers hurt us. So let's define success as avoiding all monthly market drawdowns of more than ten percent. I think that's pretty reasonable. How did SBY SP Wycombe to relative to this market based measure of success since Nineteen seventy-one there have been thirteen periods of varying links with market drawdowns the nexus of ten percent the S. P. Wycombe system caught everyone again no false negatives more importantly the system only had five periods withdraw downs announced in excess of ten percent that compares to thirteen for example for the buying hold as py strategy even with the conservative sixty forty US stock bond buying whole system there were seven periods with drawdowns in excess of ten percent but the system also triggered eighteen more more times outside of those periods? So let's take a look at the consequences of those false positives. Given our definition of success and failure are system made paid eighteen mistakes in the last forty six years. That's an error rate of three percent in other words given that it could have triggered in any given month month. Over that forty-six year period. Only three percent of the time did espy Wycombe trigger incorrectly. Nonetheless these are true potential money-losing mistakes. How did the system suffered doing these mistakes? We can measure the consequences of this mistake or false positive in two basic ways number. Everyone whether or not mistake caused the system to fall behind the S P Y index number two whether or not the mistake made or lost money in in absolute terms in twelve eighteen mistakes. The system fell behind the buy and hold investment in the S. and P. Five hundred. And the other six instances instances it was head of the S&P Five hundred in the twelve instances that have felt behind the S&P five hundred. Our system lost money four times. The other eight instances while falling behind the simple buying hold. You still made money the maximum loss. In the four money-losing instances was less than two percent is important to point out that a mistake stake slash false positive in this situation is a switch to an investment in US intermediate government bonds for a minimum of one month. The this is not an extremely riskier. Wao Asset class so we should not expect the loss to be very large and that indeed is the case. Let's look at the recent history with some more concrete and specific examples since the end of two thousand and eight recession the ESPN APP indicator has triggered twice. Once in June two thousand ten for a period of one month and once in September twenty seven for a period of three months. I classify June twenty ten as a failure since we were out of the recession and the market was not off more than ten percent from its recent high despite the failure of the system outperform the py by five point nine percent during this brief period. The September twenty eleven period was a success. The drop in the market was steep but short lived by the end of the period. ESPN ESPN DOT. COM system was back invested and fallen behind ESP. Why my zero point eight percent over that three month period? I think these are the kind of triggers most of us. I can live with in summary even when the SP white comes system irs and falls behind the reasonable benchmark at some point in time the performance is still well within an acceptable range. I have found this to be true of most. Ta Models that is exactly the type of performance striving to achieve with a TA DA system as it makes it much easier to stay with an investment system when even during bad periods its performance is still pretty good. So let's summarize the analysis of system system errors so the system period one thousand nine hundred seventy one to two thousand sixteen so it's forty six years five hundred and fifty two months a total of thirty seven trigger periods of varying length from one month to seventeen months the system is invested in reset risk assets. Sixty eight percent of the time and thirty two percent of the time time in risk off assets. Six recessions caught all six. No false negatives thirty-one triggers outside of a recession thirteen trigger periods with drawdowns of greater than ten percent caught all thirteen eighteen triggers during periods that the market drawdowns were less than ten percent. I E mistake and twelve of those mistakes system fell behind as meinhold. The worst-case deviation from the index was seven point. Six percent. Only four of the mistakes actually lost money. The worst case loss was less than two percent the key takeaway is that historically the system only triggered incorrectly three percent at the time and only lost money one percent of the time yes. Py comb system has historically kept the mistakes small and as is obvious from the overall positive returns alone. Oh drawdowns shown in the table. The successes faraway the mistakes. This is true for most. Ta Models the point becomes clear by examining the base rates of the investment systems. which show in table three base rates? Tell you often. The methodologies have beaten their benchmarks over various periods of time. It's a good indication in how hard the methodologies are to stick to for example if the system you're using his behind its index eighty percent of the time over rolling three year period. Read even if it outperforms its index hundred percent of the time over rolling twenty year period. Who Cares the chances of ninety nine point nine percent? Ah sticking to such a system for twenty years is practically zero. The table below shows base rates for both comp in. DM COP over one year three a year and five year periods in eighty five percent of rolling twelve month periods espy Wycombe. Sixty two percents per diem. COM OUT PERFORMANCE benchmark that increases to ninety one percent eighty-three percent respectively for espy. WHY COMPAIN DM COM over rolling thirty six month period? Most of us can stick with a system that has that level performance. Jake economic data has agreed post. You can refer to on the behavioral and performance benefits benefits of Ta covering this topic and the current state of trend following versus buying. Hold the real cost of making mistakes. There are two cost of making a mistake mistake to real cost. The first is not making money in the short term versus your benchmark on an absolute basis that is undesirable in particular if it happens for an extended period but every investment system experiences. This there was no system that beats a passive benchmark. All of the time. Think of it this way if a system beat its benchmark for all of the time it's outperformance would be quickly arbitrage away why these becomes predictable. I if there's no variation associated with it then everyone adopts it but not making money or falling behind the benchmark in the short term. Isn't the biggest cost to investors at to adopt a reproach since as the data demonstrate straight in the long run you make money and experience lower drawdowns using a model like the SP Wycombe system. The real cost is the impact on your behavior when the system system mistake causes you to fall behind by hold approach. There's a tendency to abandon system and chase performance and then you bound to those money both in the short the long-term since you're banning system at the worst possible time fortunately as we've just shown ta models like sby calm and the methodologies. He's historically have not fallen behind their respective benchmarks very far and have not stained behind very long as a matter of fact in any rolling twelve of months the methodologies have historically beat benchmarks a large majority of the time and over rolling thirty six months. They've come out ahead more than ninety percent. Ah Eighty percent of the time is a system that most of us can stick with in summary. T models were really well over the long term as shown by the great returns and lower drawdowns. But they're not perfect they do suffer from periods of underperformance classified. Here's a mistake. A model there. I I think more systematic analysis of model errors help investors make decisions on Ta models and also helps that expectations has how historical periods of underperformance have turned out as shown here ta models like Sby. COMP have few and short lived errors of course then we need to look at the other side of the coin wind models win the successes of the models drive the outperformance overbuying hold portfolios. I'll turn to that in the next post. Hi this is Mike Philbrick. I'm co founder and president of resolve asset management resolve manages global systematic strategies harnessing a wide variety of factor actor premia coupled with the power of Trooper's Association and Risk Management Resolve Manages ETF's mutual funds and hedge fund structures both in the US US and globally to learn more about resolve. You can find this at. WWW DOT invest resolve dot com. And you can find our latest research and commentary on our blog at invest resolve dot com slash blog. I'm now going to read one of our popular blog. Posts entitled diversification what most novice investors I miss about trend following diversification what most novice investors miss about trend following trend following the masses in his nineteen ninety eight second edition of stocks for the long. Run Jeremy Siegel added a chapter called technical analysis and investing with the trend where explored the simple trend rules to time time the US stock market in the chapter. Dr Seagull revealed that the simple trend following strategy produce similar returns to strategy of buying the index and reinvesting besting the dividends over the very long run but with less portfolio volatility and smaller maximum peak. Draw losses to this day. Many novice investors sisters and advisors make use of this simple trend rule to try and time exposure to stock markets. The two hundred day moving average the doctor Segal explored Lord and many other market timers trend. Traders have been using for decades is perhaps the most closely watched indicator with the introduction of liquid. Et he asks tracking Major Equity Indices. It's a simple matter for any investor to own stocks when the major indexes trade above their simple moving average but cut and run when they break below while novice investors typically stumble onto the concept of trend following in the context of stock market. Timing professionals know that trend following hiring is not about using trends two time one or two individual markets modern professional trend followers often trade dozens of futures markets across equities blondes currencies commodities and more obscure markets. Even things like carbon offsets in fact professionals have long understood that the key he to success with trend following which most novice investors overlook is diversification in the preface to Michael Kovac Classic Book Trend Following Larry Height. One of the original market wizards offered this story about the importance of diversification in trend following in my early days there was only one guy guy. I knew who seemed to have a winning track record year after year. This fellow's name was Jack Boyd. Jack was also the only guy I knew who traded lots of different markets. If you followed any one of Jack's trades you never knew how you were GONNA do. But if you're like me and actually counted. All of his his trades you would have made about twenty percent a year so that got me more than a little curious about the idea of trading futures markets across the board although each individual market market seemed risky. When you put them all together they tended to balance each other out any were left with a nice return? With less volatility Larry's insight site was the only way to achieve consistent results is to trade markets across the board. At the time Larry was referring to the Chicago Board of trade which House trading for most of the major commodity futures markets now futures are traded on a wide variety of exchanges and investors are no longer constrained to trading commodity modern futures. But the same lesson holds true as it did four decades ago when Larry hite began his trading career. That is if you trade just one market you. You never really know how you're going to do. But if you're trading markets across the board you have a good chance of earning a nice return with less volatility trend following on a single equity index many novice investors and advisors choose to apply trend following concepts to time stock market indices more than anything anything this probably reflects the public's preoccupation with stocks but some analysts also argue that investors should focus on equities because they the largest risk premia. This completely misses the point. The highest risk premia argument only holds for small investors who despite overwhelming headwinds Winds insist on managing their own portfolios and for investors who do not understand the capital market. Line remember the goal for most investors is to maximize their return at a level of risk that they can bear. Investors have many options to achieve different rates of return typically as an investor seeks higher higher levels of return. He's encouraged to take on greater exposure to the equity risk premium. However this is not the only way to achieve higher returns the capital market line following on the work of Harry Markowitz and Jack Trainer Bill Sharp published in nineteen sixty four treatise titled Capital L. Asset prices a theory of market equilibrium under conditions of risk which described a method for investors to achieve higher returns without sacrificing pricing diversification? He proposed that. An investor with typical preferences regarding the trade offs between risk and return would prefer to hold inefficient diversified portfolio at all times investors who can tolerate higher risk in pursuit of higher returns would borrow money to invest in more units of this diversified diversified portfolio this preferrable to moving out the efficient frontier into portfolios with increasing concentrations of stocks. Consider figure one in the report which describes inefficient frontier. In this case. It's in dark. Blue and the capital market line in red derive live from the recently published asset return premium and correlation estimates from a major institution also referred to in the report again here emerging market stocks are expected to produce the highest returns while foreign bonds have the lowest expected return the portfolio that is expected to produce the maximum return per unit of risk. Ask I e the maximum sharpe ratio portfolio is highlighted with a red points on the chart and is found at the point where the capital market line intersects ax the efficient frontier. I will leave it to listeners to go refer to the report to see the actual chart but let's examine the case where a growth investor and which is to maximize his rate of return given that he can tolerate fifteen percent. Annual volatility consistent with the historical risk character of seventy thirty global stock high-grade bond portfolio under typical conditions. This investor would be forced to push out the efficient frontier here and take on a concentrated portfolio of equity markets figure to describes the composition of this portfolio given the capital Margaret assumptions above to achieve the highest return. Possible at no more than fifteen percent volatility would require that healed twenty nine point four percent in long treasuries eighteen percent in Asian stocks and fifty two point six percent in emerging stocks since this is the most efficient portfolio at at the fifteen percent volatility level this portfolio would be expected to earn four point. Eight percent annual excess return highlighted with the gold point on the efficient frontier in figure one now. Let's talk about leveraging the diversified portfolio now considering an investor who is liberated liberated from the no leverage tyranny imposed by the efficient frontier. He can choose to own. The more diversified mean variant optimal portfolio described in figure three and borrow with margin or futures or other derivatives to purchase more units of the portfolio using leverage until hill. He achieves his target volatility again given our working capital market assumptions. This portfolio would be dominated by emerging bonds long treasuries in Asian stocks figure three shows the maximum sharpe ratio portfolio leverage is a foreign concept for many Nov investors but readers with an open mind will recognize that by using a prudent amount of leverage to invest in the maximum sharpe ratio portfolio. They can now take advantage of investments that earn their premium during very different market environments and diverse economic regions that concentrated equity investor would only expect earn attractive returns during periods of sustained economic growth benign inflation and abundant liquidity however ever the maximum sharpe ratio portfolio in figure three contains treasury bonds which are designed to benefit during deflationary growth shocks thanks emerging bonds which would benefit from an increase in credit quality among emerging companies as well as a potential for currency tailwinds and equity markets. It's from around the world. Aside from the benefits of broader diversification the choice to leverage the maximum sharpe ratio portfolio and figure. Three provides is an opportunity to earn six point. Four five percent excess return a full one point. Six five percentage points more per ear than the investor can expect to achieve by moving out the efficient frontier. Disappoint is also highlighted on the capital market. Line in figure one to close the loop. Investors who focus their trend trading on equity indices because the equity risk premia is of a larger magnitude. Then other premiums are missing the point under reasonable assumptions about the general relationship between risk and return a diversified portfolio will produce considerably greater returns per unit of risk when scaled up the capital market line using prudent amounts of leverage this leads to higher higher absolute returns period than it concentrated position in equities of course the benefits of diversification grow in proportion to the number of alternative sources of return that are available diversification is key the more diversification the bigger the impact the key. He is diversification notwithstanding the benefits of diversifying into an correllated markets outside of equities many investors start their investment journey with a myopic focus on equities upon discovering the benefits of trend following. They often spend years applying the techniques to time one single major stock stock market such as the S. and P. Five hundred or their local market in this section we will continue to focus on equity market trend. Falling will examine the performance. Women's of the representative trend following strategy applied to fifteen global stock market index futures. I will observe the performance of the trend strategy when applied to individual markets then will demonstrate the monstrous advantage that is available from trading a diversified strategy of equity indices finally will expand our horizon to include assets outside of equity and unleash the true potential of diversified multi-asset trend and following trend falling on individual stock index futures. I we examined the distribution of trend following performance when applied to individual Equity Index Sutures relative to the performance that can be achieved by trading diversified basket of equity index futures. To keep things simple. We examined the performance Orman of a single moving average trading strategy based on the two hundred day or ten months look back horizon. The strategy will hold a market long when it's prices above the moving average an exit when the price falls below. Let's I observe the growth profile of our toy trend strategy when it is applied to futures tracking being several major equity market indices around the world figure four plots the growth trajectories for each equity index future market the S. and P. Five five hundred futures started trading in nineteen eighty three and other markets were introduced overtime to account for the fact that some markets have less time to compound because as they come into existence. Later we bring each market into existence at the current level of the S. and P. Five hundred strategy thus the terminal value for each strategy configure for offers a meaningful indicative and relative performance comparison. I leave it to listeners to check out figure for in the report. There is a large urge dispersion in results across markets Japanese investors trading the topics or the Nikai fared much worse than Finnish or Swiss investors trading. Being the exact same strategy in fact the worst strategy grew one dollar to just over two dollars in thirty five years while the best strategy turned one dollar into over over sixteen dollars perhaps surprisingly while the trend strategy improved risk adjusted performance relative to buy and hold strategies for the major equity indices investors there's in Commonwealth countries I U K Canada and Australia experience lower absolute and risk adjusted returns by following trends in in our toy example if the investor chooses to run a trend following strategy on one equity index. He has equity assets to shoes shoes from thus he must make a choice. Assuming the investor shows one equity index to trade random. The best estimate of of the investors performance is the median performance among all the strategies importantly is the median that matters to the one investor who chooses just one one strategy not the mean because the investor can only live one life in has chosen not to take advantage of the law of large numbers a diversified global equity index trend following strategy. What many investors miss is that absent absent extremely confident views about which market will outperform in the future investors are better off trading all? The market's at once again here. We're coming into the across the board. Let's consider a more humble investor that is focused on investing in equities but cannot decide which market or markets to trade instead he chooses to trade all of the Equity Index assets as part of a diversified strategy the portfolio quantity in figure five reflects the performance of his diversified strategy relative to the median strategy. That we just mentioned the previous is paragraph critically the diversified strategy benefits from the fact that the returns from each of the individual strategies are not perfectly correllated in other words. They diversify one. Another figure five compares the sharp ratio of the diversified trend strategy which trades grades all equity markets against the median performance of the trend strategies over the fifteen equity index futures. An investor search using a market to trade at random would have expected to experience a sharp ratio of about point four five while an investor who traded all the the markets as a diversified trend strategy system would have achieved sharpe ratio of point. Seven six the difference between the median and the portfolio performance is the bonus that an investor accrues from taking advantage of diversification astonishingly investors who choose to diversify would have produced a one point six nine times the return per unit of risk relative to an investor trading one random market this diversification bonus is so large that the portfolio strategy surpasses the risk adjusted performance of all but one of the individual strategies which means that an investor would have had to be better than ninety three percent accurate in choosing which index to trade in advance in order to achieve better performance than one could've generated from simply diversifying across all of them for those focused on US stocks. It's worth noticing that the diversified strategy dominated trend following on the S. and P. Five hundred with a sharp ratio of point. Five five one. The point seven six sharpe ratio of the diversified strategy dominates the S. and P. Five hundred trend following strategy by almost fifty percent figure five shows the marginal sharp contribution from diversified long flat trading across equity markets versus is the median performance for individual markets. Now let's move on to diversification in bonds currencies and commodities. He's we mentioned above that. The concept of diversification extends obviously to other asset classes besides equities. The fact is it rarely pays to focus your efforts efforts on any one market in any one asset class. Let's expand our domain of analysis to include six bond futures seven currency futures and twenty commodity futures figure six describes the diversification bonus from choosing to trade all markets in each category rather than trading trading any single one the commodity asset category provides a particularly interesting case study long flat trading based on a simple two hundred day moving average has not been particularly profitable strategy for individual commodity markets over the past few decades. The median sharpe ratio for trend strategies across twenty commodity. Marty markets is just point two four however commodity markets are generally correlated with one another which means that there is a large advantage advantage to running even relatively ineffective strategies across the board incredibly an investor would have achieved two point two nine times haimes the return per unit of risk relative to an investor trading in any one random commodity index market in figure. Six we show the marginal sharp contribution from diversified long flat trend trading across the major asset categories versus the the median performance by individual market within each asset category. Now we can demonstrate the full power of diversified supplied trend following now that we've quantified the diversification bonus for investors who are concentrated in anyone acid category we conclude by expanding the trend strategy trade all assets from all categories at once. This is obviously where the rubber hits the road. Since professional trend followers I use all of the instruments at their disposal to achieve the largest diversification bonus possible figure seven describes the Gargantuan Bonus available to investors who understand the power of combining trend following with diversification across all major asset categories it's shocking to see diversification channel loan can transform many individual strategies with low sharpe ratios on their own into a diversified strategy with long-term performance that rivals levels even the most successful markets and hedge funds figure seven shows the marginal sharp contribution from the diversified long flat trend trading strategy across across all markets versus the median performance by individual market. I leave it to listeners to go and actually look at the paper in summary for natural the reasons many novice investors and advisers. Try to harness the power of trend following to trade their favorite Equity Index. But this misses the point by trend trading creating a single index investors are extremely vulnerable to the probability of choosing an equity market with low four returns and unproductive trans or both the true benefit of trend following is only realized when investors take advantage of the extreme liquidity and diversity -versity of global futures markets to trade a wide range of markets across all major asset categories. Our analysis shows an investor would have achieved saved more than double the risk adjusted performance of immediate equity trend strategy by trading a diversified strategy across many diverse awesome markets traditionally many diversified futures funds were only available to qualified investors. This barrier has been lifted over the past few years years with the introduction of liquid alternatives as several private funds have been converted to trade as traditional mutual funds catalyst in rational funds a have been especially active in making top future strategies available to everyone even better gains on futures receive favorable tax treatment and futures there's funds are often extremely capitol efficient. We do cover capital efficiency in some of our other articles. Thank you very much. And this has been a reading of diversification the vacation what most novice investors miss about trend following. Hi I'M ROB are not founding. Chairman of research affiliates were the best known for our work in smart Beta and asset allocation with about a hundred eighty billion in assets managed worldwide using our investment strategies. We're a bit unusual. Were singularly focused on research and product innovation and we work with distribution partners to make our ideas available to the marketplace so we deliver solutions in partnership with distribution powerhouses like Pimco footsie. SSGI blackrock legal and General INVESCO and the more to name just a few these firms bring our ideas to their in clients through mutual funds. EPS separately managed accounts and and other vehicles. So as one of the pioneers in Smart Beta in two thousand five we introduce the research affiliates fundamental index also known as Rafi as an alternative to traditional market cap weighted indexes the fundamental index weights companies based on the size of the business not based on the popularity popularity of the company. Not based on how much the market value is not based on how extravagantly expensive the company is so we wait. Companies based on measures like book value cashflow dividends and sales thereby severing the link between the price and the weight of stock in the index Youkilis. He'll of cap waiting is that it links. The weight directly to the price so that the price doubles the weight in the portfolio also doubles and that means the you are inherently overweight all the overvalued companies and underweight all of the undervalued companies. Even though you can't know which companies are which Raffi offers a contrarian approach that underweights overvalued stocks and favors out of favour more appropriately valued stocks as such does have a distinct value tilt and it works remarkably well and most market environments in which value is winning which hasn't and been the case in recent years but boy values gotten awfully inexpensive lately so I think this is an interesting strategy for folks to look at today. We we also offer single and multi factor indexes we also do a lot of work in asset allocation to learn more about us and to sign up for research insights feel free to check our our websites at research affiliates dot com and Rafi. Rafi Dot Com. I've been asked to read you an excerpt from piece that we published a year ago. Oh entitled Yes. It's a bubble so what I wrote this with a colleague Change Shepherd and with Brad Cornell Professor Emeritus at cal attack back in April of two thousand eighteen. But it's still applies today in fact we've just written a follow up article bubble bubble toil and trouble which you can access on our a website again. The website is research affiliates Dot Com. Let's dive right in. The excerpt reads as follows the relentless rise in the US stock market market. Since it's low in two thousand nine has been dramatic. US Stock Market Valuations now exceed all historical valuation levels except for those hit at the peak of the DOT com. I'm crazy this raises an obvious question for investors is the US stock market in another bubble. The answer is yes. The more important question then becomes how should investors react. We recommend for actions that investors can pick in response to current bubble conditions which should allow investors to benefit if it from the bubble what constitutes a bubble dancer. These questions. Let's begin by offering a definition of the word bubble. We all hear the words thrown around carelessly asleep often but it lacks formal definition. We define a bubble as a circumstance in which asset prices. One offer little chance of any positive. How's the risk premium relative to bonds or cash using any reasonable projection of expected cash flows and to their sustained because investors believe I believe they can sell the asset to someone else for a higher price tomorrow with little regard for the underlying fundamentals notably their markets? In which few. If any fire's care about the discounted future cash flows to value and asset. The nineteen ninety nine to two thousand tack or Dot Com bubble is the poster child. Oh for a broad market bubble at the height of this bubble aggressive assumptions were required to believe that the entire US stock market would deliver a positive risk premium relative to then prevailing in cash shields for the tech sector in particular to deliver a risk premium. Compared to the six percent bond yields available at that time most tech stocks would have had to produce rapid growth far into the future even though few could have succeeded unless they're fierce competitors were also struggling in hindsight using our simple definition. The tech bubble was indeed a bubble in could've been identified at the time more importantly many observers in the midst of the bubble able correctly perceived. It for what. It was at the beginning of two thousand. TEN LARGEST MARKET CAPS tech stocks in the United States collectively represented a twenty five percent share of the S. and P. Five hundred Microsoft CISCO INTEL IBM AOL Oracle Dell Dell Son Qualcomm and Hewlett Packard didn't live up to the excessively optimistic expectations over the next eighteen years. Not Not a single one beat the market five produced positive returns averaging three percent of your compounded far lower than the market return and two failed outright right of the five that produce negative returns the average outcome was a loss of seven point two percent a year compounded or twelve and a half percent a year. You're less than the S. and P. Five hundred eerily similar to the New Economy Dogma of the DOT COM bubble. Today's crypto currency craze it. It boggles the imagination to hear people speaking of investing in bitcoin electric entity that offers no hope a future off operating profits or dividends. It was little used as a surrogate for money and transactions offers an uncertain longer term use case and has no objective basis to determine minutes fundamental value. How many investors are holding crypto currencies for any purpose other than the expectation that someone else will pay a higher price at some point in the future we see it bubble in the US stock market today albeit albeit less extravagant than the growing swarm of cryptocurrencies reasonable reasonable observers can disagree but we believe we are experiencing a tech bubble based on our relatively rigorous definition of the term at the end of January two thousand eighteen the seven largest market cap stocks in the world? We're all tech flyers alphabet apple Microsoft facebook Amazon ten cent and Alabama never before has any sector so dominated the global roster of the largest market cap companies. Now let's focus on how investors should react in response to a bobble. A reasonable for step is to sell her great really reduce or holdings OF BUBBLE PRICED ASSETS. The two most dangerous things about Bob. Oil One markets can go far beyond any objective evaluation measure and to investors investors can never know with any confidence when the bubble will pop and the market will turn whereas the bubble is not as hard to identify in real time as is commonly perceived just transforming a bubble into a profit even for investors who correctly discern. It is a tremendous challenge because late stage bubbles can take valuations nations into the stratosphere investors can actually provide their own most appropriate response to a bubble by answering a very simple question. How much shortfall can I tolerate for two consecutive years without panicking? Each investor has a unique threshold for maverick risk the difference between their manager's performance and the performance performance of the managers peers above all whatever bets we take should not be sized to exceed our our clients tolerance for maverick risk. We recommend four actions investor can take to protect themselves and even benefit when the bubble eventually bursts first an investor can materially reduce or eliminate their exposure to bubble assets if we cannot construct a reasonable scenario in which the bubble assets could offer an acceptable risk premium. The greater fool rationale. Someone will pay more for it later resembles picking up nickels in front of the steam roar at a minimum. We can underweight these assets second. An investor can seek anti bubbles in the market and invest in them anti bubbles sectors or markets priced at levels that cannot plausibly deliver anything but a large risk premium. Anti bubble cannot exist in a single asset because almost any assets price can drop to zero but considered junk bonds financials and consumer durables in early two thousand nine. These ethic classes weren't going to disappear each failure of a single company. Not that the survivors. In that sector had less competition higher margins clear runway collectively the sector itself couldn't fail to deliver a very large risk premium barring a handful of genuine armageddon scenarios emerging markets value stocks in early early two thousand sixteen where a similar example Rafi the fundamental index emerging markets fell to a Schiller pe ratio of five point six times earnings and earnings yield of eighteen percent in a world of zero yield bonds and cash emerging markets. Value was an obvious anti I bubble similar to the trajectory of a bubble an anti bubble continues to collapse until it doesn't until it turns therefore averaging into our positions with an eye towards not exceeding in our investors tolerance for maverick risk is a prudent way to invest. An anti bubble can be a rich source SUV profit for the patient investor third an investor can diversify into investments that are not in bubble territory for example as of early two two thousand eighteen emerging market equities and many developed country stock markets trading discounts to their historical valuations rather than the extravagant premium of the S. and P.. Five hundred as a paper by are not Kolesnik and Meisters. Oh entitled Cape Fear noted many arguments been and Vance to justify a schiller price earnings. Pe ratio also known as a cyclically adjusted P or Cape ratio of a thirty three times. Each of these arguments applies equally to the European emerging markets which both Sport Cape Ratios less than half as expensive expensive as those in the US market other markets offer better places to take on market risk seek them out fourth and investor can remember lessons learned learn from past bubbles such as the collateral damage done to the technology lead cap weighted indexes. Yes and P. Five hundred was savaged and the aftermath aftermath of the DOT COM bubble down twenty three percent over the twenty four months from March two thousand to March two thousand two on its way to an eventual forty-nine in percent decline just six months later today in the US stock market value stocks are trading at quite an attractive level especially in comparison to gross stocks. This is even truer an international markets and the growth value spread in emerging markets is very near an all-time extreme if investors significantly reduce use equity allocations away from traditional market cap exposures especially in the United States and into value based. Hi Hi I must fight the mother. I'm a professor of finance at the stone. School of business at Budokan versity and a Dabbler all things finance. I'm going to read a piece. I wrote titled Kraft Heinz Lessons From The edge on February twenty second. Two thousand nine Kraft Heinz shocked investors with at Tribeca bad news in its earnings report sub Bar operating results a mention of accounting irregularities and a massive impairment of goodwill and forward by cutting dividends push air almost forty percent investors. The company reacted by selling dishes causing the stock price. Dropped twenty five percent overnight. Why craft after neither the first nor will be the last company to have a bad board? It's trabant monopoly. I simple reason. Significant portions of stock were held by Belcher had the way with twenty six point seven percent and three capital twenty nine percent three G. Capitalism Brazil based private equity group butter had two ways. Lead Oracle is Warren Buffett venerated generated by some who track his every utterance and tried to imitate his actions. Three G capital might not have buffets name recognition but it's NEAT plans viewed as ruthlessly efficient and manages capable of delivering large cost cuts in fact an initial joining us to bring Heinsohn crap. The biggest names in the food business together was viewed viewed as a master stroke and given the pedigree of the to investors almost guaranteed to succeed as the promised. Benefits Fair materialized the investors who formed them into the indeed seemed to view the failure as a betrayal. The back story. You don't have to be like Ketchup. A process cheats that kraft and Heinz a part of American culinary history. Hi It's the older of the two companies trace. Its history back to eighteen sixty nine. When Henry Heintz started packing and selling horseradish and after brief bottom bankruptcy? Don't making fifty seven varieties of ketchup after century of growth and profitability. The company had of rough batch in the nineteen nineties and was targeted by an activist investor Nelson Peltz in two thousand and the deep shortly thereafter. Hines was acquired by butcher Halloween. Three G cap. For Twenty. Three billion becoming becoming a private company craft started life as a cheese company. Nine thousand nine hundred and over the next century it expanded first to other dairy products and then widened its repertoire. Wadan include other processed foods in nineteen ninety one it merged with DART industries maker duracell batteries and tupperware before it was acquired by Philip Morris in one thousand nine hundred yea after series of budgets. Parts of it was sold. The rest merged with NABISCO kraft was spun off by Philip Morris renamed autry and targeted by Nelson Peltz. Yes that's a very same gentleman in two thousand eight through all the mud just divestiture and spin offs manages made promises of synergy and New Beginnings. Do you make us make money. But little of substance actually changed and the products he do thousand and fifteen. The two companies brought together Berkshire hathaway three and three t playing both matchmakers and do funders as Kraft Heinz and the merger was completed July. Two Thousand Fifteen. At the time of the deal there was unbridled enthusiasm on the part of investors I is and market observers and party unquestioning acceptance of the new company become a force in the global food business was the pedigree of the main investors in the yours since the merger dope the companies had trouble delivering expectations of revenue. Growth and cost cutting the bottom line. Is that while much was promising. Dumpster own revenue growth expanding. Its it's global footprint and new products and increase margins from cost-cutting at the time of the deal. The numbers tell a different story. In fact if investors were surprised the low growth and declining margin the most recent earnings report. They should not have been since it has been a long slow bleed the only triple the onyx report that triggered the Stock Stop Press. Collateral Craft Times was released. February twenty-second contain bad news on many fronts. One flat lining operations revenues for two thousand eight. Were unchanged changed revenues in two thousand seventeen but operating income dipped before impairment charges from six point. Two Abedin in two thousand seventeen to five point. Eight billion in two thousand and eighty eighty the operating margin dropped from twenty three point five percent two thousand seventeen to twenty two percent in two thousand eighteen to accounting regularities in surprised surprised the company also announced that it was under. SEC investigation for a company regularities in its procurement area and took charge. Twenty five million to reflect expected adjustments aspirants to its costs. Three goodwill impairment. The company took charge of fifteen point. Four billion for impairment of goodwill primarily on the US refrigerated roots rated Canadian retail segments and admission that the pay too much for acquisitions in prior IOS four dividend cuts the company perennial big evident evident. Bear cut its dividend per share from fifty one sixty to prepare itself. Ford said we're difficult. Two thousand nine hundred while investors was shaw. The trump trae leading up to the report contained key clues. Revenues had already flattened out in two thousand seventeen relative to two thousand sixteen and the decline in margins reflect elect difficulties the treaty faced in trying to cut costs after the deal was made the only people who care about impairment charges. A pointless delayed admission on over overpayment and acquisitions those book value of equity as a proxy for overall value. The dividend cuts perhaps surprise. But more. And what they say about Pat. How panic management must be about future operations since the company disattached dividend cuts Disa- dividends? Cut some only as a last resort with the bad news and the earnings reports to fresh. It's considered the value X. Let's consider the implications of stock in the value of craft of all the news in the report the flat revenues and the declining margins as I see them apart long term trend that it'd be difficult if not impossible to reverse while craft hines may have a quarter of or two positive with positive. blips I see more of the same going forward in my valuation of forecast revenue growth a one one percent of your in perpetuity less than the inflation rate reflecting the headwinds accompany faces. The downbeat revenue growth story would be accompanied by matching she bad news story and operating margins with a company face pricing precious in its product markets needing to drop a small and gradual one in operating creating margins over time from twenty two percent two thousand eighteen to twenty percent over the next five years. The company's cost gap is currently six percent reflecting the nature of vicks products in its use of debt but overtime the benefits from the ladder will wear thin and since that is close to the average for the industrial. US Food processing companies own average cost of capital. A six point one two percent I will leave it unchanged finally the mistakes the past few years believe at least one positive residue in the form of restructuring judges that I assume assuming provide partial shelter from taxes at least for the next two years. The good news is even with a student at story. Craft hines a bed of thirty four point eighty that is close to the top brass. Thirty four point two three. The bad news is that the potential upside looks limited as you can see the results of assimilation that I did allowing expected expected revenue growth operating margin and cost of capital to be drawn from distributions driver than using point estimates the finding that the value falls within the tight-range training the footsteps on that about twenty six ninety close to forty seven should not surprise you the rangers the inputs and all of a sudden. Not Why as an investor you're the actions that folow from this valuation if you own Craft Times prior to the owning support night thankfully did not selling now accomplished little. The damage has already been done and the stalkers price. Now is that fair value investment. I know that three g sold almost one quarter of its holding in September two thousand eighteen good time and given the next report but any attempts to so now we'll gain them nothing if you don't own craft evaluation suggested Stalker fairly bad in today's bright but law price it would be a good investment. I've unlimit it by understock at a thirty dollar price. If it does hit that Bryce I will be at craft on shareholder notwithstanding the fact that I think it's future does not hold promise if it does not dropped opt love. There are other fish to catch and I will move on. There are too concerned so that investors looking at the stock have to have the first is when companies claimed that they have discovered accounting irregularities. But they're cleaned up their act there often dissembling and they're often shocks to cope with craft the magnitude of the irregularities small and given that they have have no history of being accounting games. I'm willing to give them the benefit of the doubt a case for the moment the second is the company does not does Gary thirty two billion debt and while the dead has no toxic side effects. Today that is because the companies perceived up statement positive cash flows if the margin declined at our forecast becomes a margin drought a deadly force a company to a clear and present danger of default. Put simply it would make the bad case. Scenario that embedded humilation was and perhaps threatened the company's existence existence their lessons in the craft ninth floor. But I would tread carefully since I risk offending some talk that he may view as not just incorrect but sacrileges religious one. It is human to her at the risk of stating the obvious warring be buffet and three. G's key operators. A human and Appro Denarlie only making mistakes like the rest of us but also of black blind spots in investing that Hud in fact buffet is open about his mistakes and how much they have cost him Berkshire hathaway shareholders. He also has been candid about this blind spots which included unwillingness invest in businesses that he does not understand a sphere that only grows as he gets older the economy changes as well as an excessive trust in the managed to companies that invest. Why needs for the most part? An excellent woman judge of character is investment in Wells Fargo Coca Cola and kraft and show that. He's not perfect. The Ford in my view is not with buffet. But with the legions of investors analysts agenda's treatments and investment. Dating Quoting Woods as Gospel in tarring and feathering anyone who dares to question to stocks and bonds in my poor son Data I look at how companies in the United States have moved away from dividends. Buybacks Waiver Tony Cash. That trend has not been universally welcomed by investors and then remains a significant subset of investors which tragedies but run buying stock that big dividends one reason that stock let kraft Heinz our attractive divided added conservative value. Investors is because they offer high dividends often much higher than what you've done. Invest in treasury bonds or even save corporate bonds in effect affect the rationale that investors use by buying the shares that in effect getting on with the dividends replacing coupons as well as price appreciation from the dog the Dow two screening based on bonded Indians. The underlying premise is an investing in comp. More dividends than on buybacks. Why did it is true? That dividends a sticky than buybacks with many companies maintaining or increasing dividends over time these dividend strategies become delusional when they treat dividends as obligated payments rather than expected affected once after much companies. Do not like to cut dividends and not contractually obligated to pay debts in fact when a stock carries a dividend yield. That looks too good to be true. It is usually almost always an unsustainable dividend and it's only a question of time before dividends are cut or even stop or the company drives itself into a financial ditch. Pitch three brand names last a long time but nothing lasts forever. A major lodestone of conventional value investing is the white technology cost efficiencies and new products are all competitive advantages that can generate revenue. It is brand name. That is the most tape par a game. That statement reflects a truth. which is that brand names? Last long often stretching over decades but even brandon benefits fade as customers J.J and companies seek to become global. The troubles at craft craft is a part of a much bigger story with some of the most recognized and valued brand names of the twentieth century from Coca Cola. McDonald's of finding that the magic is fading. Using my life-cycle Dermatology these companies are aging and no amount amount of financial engineering was strategic repositioning to make them young again for cost. Cutting could take you far but no further for the last few decades. We've cut a great deal of slapped. A those of us. cost-cutting is that pathway creating value with many leveraged buyouts restructurings restructurings built almost entirely on. Its Promise don't get me wrong. In first. Significant cost inefficiencies in blood cost-cutting can deliver significant gains in profits. It's but even with these flops. Those gates will be time limited. Since there's only so much fat cut up worse there for that find themselves in trouble to a myriad of reason that have little to do with costume deficiencies and cutting costs at. These firms is a recipe for disaster. It is true that three did a masterful job. Cutting costs increasing increasing margins. At Mexico's group Della the Mexican brewer. That they quite through bet. But that was because Mandela's PROMS lead themselves to a cost-cutting solution he. It may have worked at craft gyns initiative but at this point. The company's prompts have littered with costume deficiencies and much to the statement of products at less appealing to customers than it used to be. And cost-cutting is the wrong medicine for whatever it is conclusion. I hope that you do not read this as a hippies and Warren Buffett and and Autry Gee I admire buffets dear into a core philosophy and his willingness to be open about this mistake. But I think he's ill so by some of his devotees with system putting on a pedestal and refusing to accept the reality that is philosophy has its limits that like the rest of us. He has an eagle and make mistakes. If you have faith in value investing vesting. You should be willing to have that faith test by the mistakes that you and the people admire making its pursuit if your investment views dogma and you believe your path is the only correct want to success I wish you the best but your righteousness and rigidity will only set you up for this. More disappointments like craft Heintz. Hi this is Corey. Hafstein and I am the CO founder and Chief Investment Officer of Newfound Research Newfound research is is a quantitative asset management firm with a focus on risk managed tactical asset allocation strategies. We were founded in August. Two thousand eight and are based out of Boston. Massachusetts to learn more about our firm you can visit us at think. NEWFOUND DOT COM or our blog blog dot think newfound dot com or listen to our podcast flirting with models. I'm going to read a piece. Titled Factor Symbol Winter published in June two thousand eighteen summary value investing continues to experience a trough of sorrow in particular killer. The traditional price of the book factor has failed to establish new highs since December two thousand six and sits in a twenty five percent drawdown while price. The book has been the academic measure of choice for twenty five plus years. Many practitioners have begun to question its value pun intended ended. We have also witnessed the turning of the tides against the size premium with many practitioners. No longer considering it to be a valid standalone alone anomaly. This comes thirty five plus years after being first published with this in mind. We explore the evidence that would be required for us to dismiss other already established anomalies using past returns to establish prior beliefs. We simulate out Ford Ford Environments in use Bayesian inference to adjust our beliefs over time recording. How long it would take for us to finally dismiss a factor we find that for most factors? We'd have to through several careers to finally witness enough evidence to dismiss them outright thus while factors may be established upon a foundation of evidence. There forward use requires a bit of faith in Norse mythology thimble that they're commonly mainly referred to in English as symbol winter is a great and seemingly never ending winter it continues for three seasons long horribly horribly cold years that stretch on longer than normal with no intervening summers it is a time of bitterly cold sunless days where hope is abandoned and discord rains this winter to end all winters is eventually punctuated by Ragnarok a series of events leading leading up to the great battle that results in the ultimate death of the major God's destruction of the Cosmos and subsequent rebirth of the world investment mythology is littered with ragnarok styled blow ups and we often assume the failure of a strategy will manifest as sudden sudden catastrophe in most cases however failure may be more likely to resemble thimble vinter a seemingly never ending winter in performance performance with returns blown to and fro by the harsh winds of randomness value. Investors can attest to this in particular. The disciples of price to book have suffered greatly as of late with expensive stocks having outperformed stocks for over a decade. The academic interpretation reputation of this factor sits nearly twenty five percent below its prior high watermark seen in December two thousand six expectedly. At least a large number of articles have been written about the death of the value factor. Some question the factor itself while other simply argue that price to book is a broken implementation. But are these simply retrospective narratives driven by a desire to have an explanation for a result that has has defied our expectations consider if price the book had exhibited positive returns over the last decade. Would we be hearing from. Nearly as large number of investors stirs explaining why it is no longer relevant metric to be clear. We believe that many of the arguments proposed for why price to book is no longer a relevant bullivant metric are quite sound the team at o'shaughnessy asset management for example wrote a particularly compelling piece that explores how changes to accounting rules. Rules have led book value to become less relevant metric in recent decades. Nevertheless we think it's worth taking a step back considering an alternate course of history and asking ourselves how it would impact our current thinking often. We look back on history as if it were the obvious course. If only we had better prior information we say to ourselves. We could have predicted the path rather we find it more useful to look at the past as just one one realized path of many. That could have happened. None of which were preordained randomness happens with this line of thinking. Thinking the poor performance of price the book can just as easily be explained by a poor roll the dice as a can be a fundamental break in applicable. In fact we see several potential truths based upon performance over the last decade one. This is all normal course performance variants. Thanks for the factor to the value factor works but price to book itself is broken three. The price to book measure is overcrowded in its use and thus the quote unquote troughs of sorrow will need to be deeper than ever to get the weak hands to fold and passed the Alpha to those with the fortitude to hold four the value factor never existed in the first place. It was an unfortunate gotcha false positive that saturated the investing literature and broad narrative. The problem at hand is really twofold. I the statistical evidence supporting most factors is considerable and second the decade to decade variants factor. Performance is substantial will taken together you run into a situation where Amir Decade of underperformance likely cannot undo the previously established significance justice frustrating is the opposite scenario. Consider that these two statements are not mutually exclusive. One price to book is broken and to price to book generates positive excess return over the next decade in fact factor return variances large enough that the proof. If is not in the eating of the short term return pudding. The small cap premium is an excellent example of the difficulty in discerning in real time the integrity of established factor. The anomaly has failed to establish a meaningful new high since it was originally published rushed in Nineteen eighty-one only in the last decade. Nearly thirty years later had the tides of the industry finally seemed to turn against it as as an established anomaly. Potential source of excess returns thirty years. The remaining broadly accepted factors actors for example value momentum Kerry defensive and trend have all been demonstrated to generate excess risk adjusted returns across a variety the of economic regimes geographies and asset classes creating a great depth of evidence supporting their existence. What evidence then it would make us abandon faith from the Church of factors to explore this question? We ran a simple experiment for each factor. Our goal oil was to estimate how long it would take to determine that factor was no longer statistically significant. Our assumption is that the salient features features of each factors return. Pattern will remain the same. I E Auto Correlation Conditional Hetero Ska Desi skewness ketosis etc but the forward average annualized return will be zero since the factor. No longer works towards this end. We ran the following experiment experiment. One take the full history for each factor in calculate prior estimates for Menia annualized return and standard error of the mean to D- mean the time series three randomly selected twelve month. Junker returns from the time series and use that data to perform a Beijing update to our mean. Annualized Return Four repeat step three until the annualized return is no longer statistically non zero at ninety nine percent confidence threshold for each factor. We ran this test. Ten thousand in times creating a distribution. That tells us how many years into the future we would have to wait until we were certain. From a statistical perspective that the factor is is no longer significant based upon this experiment. Sixty seven years is the median number of years. We will have to wait until we officially officially declared price to book. HTML as it's known in the literature to be dead at the risk of being morbid. We're far more likely to die. I before the industry finally sticks a fork in price to book. We perform this experiment for a number of other factors including size quality low volatility and momentum and see much the same results it takes decades before sufficient evidence mounts to to dethrone these factors now it is worth pointing out that these figures for factor like momentum might be a bit skewed food to the design of the test. If we examine the long run returns we see a fairly docile return period profile punctuated by sudden sudden insignificant drawdowns often called quote unquote momentum crashes since a large proportion of the cumulative losses are contained in each of these short but pronounced drawdown periods de meaning the time series ultimately means that the majority of twelve month periods actually exhibit positive returns in other words by randomly selecting twelve months samples. We actually expect a high frequency of those samples. Have a positive return for example using this process just under fifty percent of rolling twelve month return periods or positive value size quality and low volatility factors respectively for momentum. That number is closer to fifty five percent. Furthermore if you drop the worst five percent of rolling twelve month periods for momentum the average positive period is one point four times larger than the average negative period taken together. Not only are you more likely to select a twelve twelve month period. That's positive but those positive periods are on average one point four times larger than the negative periods we pick except except for some rare less than five percent cases. The process of the task was selected to incorporate the salient features of each factor. However in the case of momentum it may lead to somewhat outlandish results conclusion while evidence-based investor should be swayed by the way did the data? The simple fact is that most factors are so well established that the majority of current practitioners will likely go our entire careers without out experiencing evidence substantial enough to dismiss any of the anomalies therefore in many ways there's a certain faith required to use them him going forward. Yes these are ideas and concepts derived from data yes. We have done our best to test their bus out of sample across time. geographies after fees and asset classes yet. We must also admit that there is a non zero probability however small is that these are false positives a fact we may not have sufficient evidence to address until several decades hence and so a bit of humility is warranted factors will not suddenly stand up and declare themselves broken in those that are broken will still appear to work from time to time. Instead the death of a factor actor will be more symbol winter than Ragnarok not so violent to be the end days but enough to cause pain and frustration among investors addendum. We received a large number of inbound notes about this commentary which fall upon to primary lines of question. We want to address these points. Eight point one. How were the tests impacted? By the Beijing inference process the results of the tests within this commentary are rather astounding. We did seek to address some of the potential flaws of the method we employed but by and large we feel the overarching conclusion remains on a solid all at foundation. While we only presented the results of the Bayesian inference approaching this commentary as a check we actually tested to other approaches. I A Bayesian inference. Approach assuming that forward returns would be a random walk with constant variance based upon historical variance variance and zero mean and second Ford returns were simulated using the same bootstrap approach but the factor was being discovered for the first first time in the entire history was being evaluated for its significance. The two tests were in effort to isolate the effects of the different components of Mark Tests. What we found was that while the reported figures changed the overall magnitude really did not in other words? The median death date of the value may not have been sixty seven years but the order of magnitude remained much the same decades stepping back. These results were somewhat of of a foregone conclusion. We would not expect an effect that has been determined to be statistically significant over a hundred year period to unravel in a few years. Furthermore we would expecting number of scenarios that continue to bolster the statistical strength just randomness alone point to two. Why are we defending price? The book the point of this commentary was not to defend price. The book as a measure rather it was is to bring up a larger point as a community quantitative investors often leverage statistical significance as a defense for the way we invest. We think that's a good thing. We should look at the weight of the evidence. We should be data driven. We should try to find ideas that have proven to be robust a bust over decades of time and when applied in different markets or with different asset classes still work we should want to find strategies that are robust us to small changes in parameters ation many quantum would argue including US among them however that there also needs to be a why why. Why does this factor work without the why we run the risk of glorified data mining with the why we can choose for ourselves whether we believe the effect will continue going forward? Of course there's nothing that prevents the Y. from being pure narrative fallacy. Perhaps we've simply we've two story into a pattern of facts with price to book. One might argue. We have done the exact opposite. The effect technically remains statistically significant and yet plenty of ink has been spilled as to why it should not work in the future the question we must answer then is when does statistically significant apply. And when does it not how can we use it as a justification in one place and completely ignore it in others. Furthermore furthermore if we're going to rely on hundreds of years of data to establish significance how can we determine when something is broken. If the statistical evidence doesn't support conclusion price. The book may very well be broken. But that's not the point of this commentary the point is simply that the same tolls we use to establish and defend factors may actually prevent us from tearing them down. Hi I'm Bob See right. I'm the chief. Investment Officer of Madison Avenue Securities which is an investment advisor and broker dealer in San Diego. California you can follow me at twitter her at RPC right and you may also read my website above the market and you may find that our pc right dot com this piece. This is called dear future. Me Dear Future Me Bob Dylan hit on a universal truth when he sang about his son and the attraction of remaining when young. May Your heart always be joyful. Mayor Song Always Basang. May you stay forever. Young Dylan's voice was best described ascribed famously by Joyce Carol oates as if sandpaper could sing. But he was according to Time magazine the guiding spirit of the the counter-culture and the voice of his generation today that generation my generation. The baby boomers is no longer young. None one of us is going to defeat father time. Either as Dylan's friend John Mellencamp Sang and longest days one day. You'll get sick and you don't get better for those of US lucky enough to live so long we'll see our bodies and minds slip and in many cases slip badly studies. Confirm what most of us have seen among our family and friends even if will never admit it about ourselves. Cognitive ability decline significantly with age that is largely why seniors loose thirty seven billion to fraud annually to put it starkly. The research suggests that Financial Nansha literacy declines by about two percent each year roughly after age sixty despite that decline are self confidence in our our financial abilities remains undiminished and may even increase as we age. I've seen it personally and tragically the aged and infirm drive too long by too. Many needless things from the unscrupulous and simply aren't as good at making decisions as they once were as cognitive impairment increases the aging. Remain certain that they're really okay and become belligerent. When anyone suggests chests otherwise we all like to think we're highly competent and desperately want to maintain our independence trying gently till it aging loved loved? Ones know that they need help can readily turn into an ugly confrontation in nineteen ninety nine. David Dunning and Justin Kruger published published. Paper that documented. How in many areas of life incompetent people do not cannot recognize? Just how incompetent they they are a phenomenon that has come to be known as the Dunning Kruger Affect subsequent testing has shown that people who don't know much ten grossly to overestimate ver- estimate their prowess and performance in a wide variety of areas including logical reasoning and financial knowledge aging makes that tendency see even worse thus for example elderly people applying for new drivers license overestimate their driving competence by a a lot this seemingly inevitable conflict between the aging and those who love them about the extent and nature of the mental decline. And what should be done about got. It plays out horribly every day among families of all sorts Tom Benson got his start. As a used car salesman. But came to own multiple simple car dealerships banks real estate television station the NFL's New Orleans Saints and the NBA's New Orleans Pelicans in two thousand thousand fifteen then eighty seven year. Old Benson was being treated for Alzheimer's and dementia when he was ordered to undergo mental evaluations. uh-huh by three different doctors despite his strenuous objections to decide if he remained competent to control his businesses and to make decisions John's as part of the litigation brought by his daughter and grandchildren who Benson had come to see as ungrateful. I found out. They didn't love me very very much. Trying to stab me in the back wanted to take over. Everything brought me to court saying I was crazy. He said not. Surprisingly the dispute centred centered upon a much younger third wife. Benson wanted to take over when he died and his abrupt decision to fire his daughter grandchildren from their long held positions musicians with his company's cut off contact with them and dysenteric them. The third wife helped her husband compile and maintain a list of grievances against his daughter and grandchildren so he could brute over and reference despite the decline in his memory and mental facilities meanwhile meanwhile his granddaughter cornered Benson when he was heavily medicated and recorded their conversation in order to try to demonstrate his mental incompetence pittance Benson prevailed over his progeny in the litigation. A subsequent new will made the third wife Benson's sole beneficiary Gary and specifically excluded the estranged family name by name. The family seems forever fractured to have your kids turn against against you. That's for the birds. Benson said adding that he would like to leave his daughter and grandchildren zero when asked why he replied well will. They tried to kill me for one thing. Benson died in March of last year. At the age of ninety his widow is now the sole owner of both the saints in Pelicans and runs the Benson Business Empire. Benson's daughter grandchildren have no role but have five years under Louisiana Law to challenge the new will. There's no indication so far as to whether they will right up until he died Benson maintained that he was still sharp and in control he may well have been his daughter and grandchildren said that he was not what he wants was and was under the sway of a much younger new wife who is not their mother and grandmother. They may have been right indeed they all may have been right at least to some extent. The sort of fight is all too common. The one certainty in these types of situations is that they are a major mess an ugly contentious and expensive mess of the sort. We'd all all like to avoid. I've spent a good deal of time thinking about what I might do to limit the chances that I will fall. Prey to this sort of dreadful declines blind scenario since I am fortunate enough to have this public written outlet in order to communicate my thinking generally I am writing this particular killer peace with this very specific purpose in effect. I want this article to serve as a letter to my future self to act as a commitment device since I'm blessed with children who are smart honorable and financially literate this is a reminder to my future self simply to listen to to them and to keep listening to them when they tell me. I need some help by way of this post. I am asking them begging them to show me this article if I resist them. In any way in this regard since psychologist how Earth Ner Hirschfeld has found found that those who most identify with their future selves to a better job planning for the future. This exercise should help even if I might be inclined wrongly to ignore this article in my children's advice in the future however more than that. I'm hoping and praying that this post post put in front of my face and read aloud if necessary will be enough to convince my future self to listen to the people who know I love me even when they I hope gently. Let me know that I could use more help than I'm allowing so bob when the kids tell you to stop driving. Give them the keys when they tell you to run. Major decisions passed them. Agree to a system that enforces your cooperation requiring cosigner on checks for example when they tell you to consider whether you ought to keep living without help look can be getting care or moving to an assisted living facility and take their advice as to which one is best when they Hara of horrors offer financial advice take it. You are beyond blessed to have three fantastic kids who have made you proud every day of their lives. Trust them to love you and to watch out for you even when you don't like it even if you are convinced that what they say or suggest is dead dead wrong dear future me as much as it made pain you listen to your kids and the people who love you. Take their their advice please. Hi this is West Gray and I am the CEO of architect of firm with a mission and passion to empower investors through education in order to develop sustainable investors are business focus is on delivering. Will we call focus this factor. You can always learn more about us at ALF ARCHITECT DOT com. We always share materials. Generally Educational Nature Ring learn about financial markets in quantitative. You've finance in general today. I'm going to read a piece. Entitled Factor Investing Fact Check our value in momentum dead ahead why do we write this. poche is for some quick background will as many listeners. Reply be aware a lot of factors really haven't delivered word much in the form of excess returns over standard market cap benchmarks like for example. The has to be five hundred. So that's really the context in the why of this post and so without further ado. Let's dig in to the stock market at least measured via the S. and P.. Five hundred has had an epic epic performance run especially relative almost all other asset classes really doesn't matter whether you look at the other asset classes by geography for example Apple. US developed emerging or style value momentum quality would have you or type stocks bonds or commodities. One one thing is perfectly clear. The S. and P. Five hundred is king and the S. and P. Five hundred is essentially a mega negga Cap Beta fun with US factor exposure. So below is a chart which explain on this podcast of what one calls the the ivy five. which is a concept popularized by mid favor and Eric Richardson? And it's a simple way to view asset classes and what it does is it consists of US stocks as measured by the S. and P. Five hundred international stocks as measured by the MSCI eefje Total Return Index. It's real estate is measured by the footsie. Alright index commodities which is proxy by the Golden Sachs Commodity Index and finally the Bonds Rhett reflect a ten year treasury bonds kind of five big muscle movements that capture a lot of the global risk premiums that are available to most investors out there without incurring too much brain damage in trying to access a particular exposure and so if we look at the five years and again these are all ending. two-three three two thousand eighteen if we added the last year or so here basis. Same story be told is the compound annualized return for the SNP is nearly fourteen percent which is obscene excellent return for international securities as measured by the index. It's around around four point four percent so almost a third of this and p reads around ten percent about two-thirds s and P monetize is re representatives by the Knicks down negative ten percent a year. Annualized so pretty horrific and then bonds up up around one percent a year on a total return basis over the past five s and P at fourteen and everything else much much lower than clearly early diversification was the losers game in investing all in on the S&P five hundred obviously would have been your best bet. Now what's interesting is the incredible recent performance of the S. and P. Five hundred especially relative so-called active strategies has caused many market commentators to make claims names that reflect partial truce. And here's some just examples. One is factors are dead value is dead momentum is dead active investing investing is dead. Apparently it's a graveyard of miss but everything seems to be dead unless you were owning mega cap. US stocks and of course the problem with all of these statements is that the S&P five hundred which again is from factor. Exposure is basically just a mega cap. US Stock Index has beaten essentially every investment style in every investment class on the planet earth. The past five years and for the most part the last ten years so clearly this is the king and so while these statements about things being dead or correct on the surface the implications are misleading. So in in this talk when I'm talking about is by analyzing the past five year performance metrics of of these common factor strategies that are out there claims to be dead. We're going to identify the falling for facts one the SP five five hundred gives you mega cap. Bid Exposure to mega cap stocks. In general were the way to go over the last five years so market cap weighted looked great relative to any other weighting scheme particular equal weight portfolios or fundamental weights. Or what have you momentum which using were just going to look at the common academic cross-section momentum to twelve momentum. It's actually worked in certain circumstances dances. So there's no indication that momentum should be abandoned and in value we're just GONNA look at the generic kind of high book to market cheap stocks. Docs certainly looked dead and large-caps but hope does exist for smaller stock. And the implication is that investors with large mega cap focused value. Alya exposures may want to consider a change one because in recent memory mega cap value stocks as measured by book market. I haven't worked and frankly over the past hundred years where we can get dade on it. They've never really worked so why people were doing mega cap value in the first place says says making sense but we'll dig into a little bit more as we go through if we consider that the S. P. Five hundred is simply a fun that gives you mega cap exposure and and not some magical pixie dust from the vestment. God's then the S&P five hundred's recent relative performances not surprising. Why do I make got statement? Well to to examine a little bit deeper. We can actually look at the performance metrics across increasingly small-cap exposed portfolios over the the past. Five years where the S. and P. Five hundred would have the lowest exposure to the small cap factor in clearly. If we back the ten percent smallest firms or the small dessel you would have the most exposure to the so called size factor and in particular what will look at to just move away from factor gig speak is would as compare the ESPN five hundred to the S. and P.. Five hundred equal weight or equal Kuwait is going to be tend to be more focused on smaller stocks because mark cap wait puts more way in the biggest equal weight. Ozzie puts the same amount of weight in both the biggest and smallest but the S. and P. Five hundred equally next still has the biggest five hundred so we're not dealing with small caps but definitely smaller than us five hundred and then we have the Russell two thousand. which is you know if you have the top? Three thousand securities Komo Market Cap. It's essentially the bottom two thousand so certainly smaller caps there in. Finally we will get a little bit Geeky here. Look at these small dead. Sil- of stocks from Ken French's website portfolios constructed by taking the whole universe of securities sorting them into ten percent buckets from big stocks to smallest stocks. And we're GONNA look at that bucket of the ten percent smaller so for all intents and purposes this would be the small micro cap bucket. And what are the last five-year return suggest about these. Four different investment styles will again Adam P. five hundred the king fourteen percent compounded annually. Not Bad now. The S. and P. Five hundred hundred equal weight which again gives a nod to a little bit smaller the compounded at twelve and a half dot bad but certainly a lot less than fourteen in his rookie. Moving down the chain Russell. Two thousand compounded at eleven so far cry from fourteen definitely less than twelve and a half of this five hundred equal Kuwait. And if we keep going down the chain and we look at this. Small Dessau Kinda micro cap portfolio. It's down at eight point. Four four percent almost almost half but almost half of this five hundred. What's the point? The point is systematically owning big stocks. Docs was a much better bet than owning smaller stocks across the board any strategy that place generic bats on non mega cap APPs. Stocks took it on the Chin relative the S. and P. Five hundred to summarize if you're not in mega caps you underperformed regardless of what else l.. She had baked in your cake. And so that takes us to our last question here. So are we in a new world. Where kind of growth in mega cab Beta have killed all the factors and nothing else is going to work or maybe we just in a in sample situation where premium? That usually doesn't pay off that great. I e the mega cap funds. Maybe had a good run one thing I wanNA do for dressing. That is we also want to look at the the interaction between size and the factors. 'cause we know that size as just in general underperform but it'd be interesting. I know how that interaction works with buy in momentum and the other kind of classic factors out there good places start here is is losing and his colleagues actually have a Risha paper called replicating anomalies and they highlight specifically that. It's important that one controls for size were interviewing various factor anomalies because size in the factors. Those performance tend to be co mingle so in really in order to really make a statement about factor. We we need to control for size because as we just discuss sometimes just by buying small stuff. You're gonNA look like an idiot but does that necessarily early mean values dead or does it. Maybe as mean that values stocks tend to be smaller and it was the size component driving under performance. Not necessarily the value. You performance So we really got kinda dissect this kind of what losing an and colleagues point was is it factors act very differently outside of the mega cap stock universe. In even though we've covered this before over the last five years we know big stuff has crushed about everything so instead of breaking down our investment universe by just size alone which we just discussed you know head of this were now going to analyze. Investment Universe spy large value in large momentum relative to the SNP so at least now we're kind of controlling for size and just saying hey assuming we're only investing in mega caps. How do the factors look for value and momentum and then just generic Beta because now may we make a statement achievement about factors? So if we do that we can generate this data again using Ken. French's website word is GONNA use again generic large value Alya growth. Those are just going to be the biggest security. Portfolios split on those that are the cheapest on book the market and the most expensive Yvonne Book to market which reflect value and growth respectively and then for the large momentum portfolios the winner and the loser portfolio again and using Ken French's data. WE'RE GONNA go look at the momentum portfolios sorted on size and we're going to only look at the large size bucket and they were going to specifically examined the large high momentum portfolio and the large cap low momentum portfolio in plot all these returns out and and so when we do that. What are we see well again? The benchmark hair the espy. Five hundred was around fourteen percent. And what's interesting is if we I look at the value factor again holding consistent size. Because we're only looking at big stocks here large value. You was around ten percent compounded so definitely less than fourteen but uh large growth or glamour or the most expensive stocks rashy eighteen eighteen percent so they actually crushed the sob five hundred so in some sense obviously the value premium was negative controlling for size. Not a great outcome so values certainly looks dead at least on this baseline analysis but now we can shift our momentum so if we take all the largest stocks in and then we sort them on those have high momentum and low momentum in we'll call the high momentum ones the large winners and the low momentum ones the large losers users well the big mega cap momentum securities action around sixteen percent so little bit less than the the mega cap growth but definitely better than the market whereas the large loser stocks or these negative momentum securities. They came in around eight percents almost half of the S. and P. so momentum she worked so momentum as a factor controlling for size chalked up a win value as a factor Controlling for size definitely definitely chalked up a loss last five years large cap growth and momentum have been killer Combo in so market. Commentators are correct correct if they say that large cap value has really stunk it up beliefs based on price book type measures which is very common out there as as value. And you know what. Maybe this isn't too surprising because large cap value has never really been a compelling factor when assess in different markets in different different time periods. In fact if you include a mega cap large cap value exposure in the portfolio. It's arguably a bad idea when considering the transaction costs the tax drag and the added complexity. It doesn't really a lot of value relative to just good old fashioned. You know. L. Mega mega cap market cap indices. But it does add a layer of additional cost because you gotta try to capture this whole factor thing and if look in general to reader at that point so what are just the general statistics over the long haul and how do they compare versus what they've done her last five years so for some context. What are kind of the base rates on these mega cap value? Momentum type factors well if you look at large value. It's around over the whole time period it's around Levin Point eight percent so better than the market but the last five years again. It's been around ten Tan which is a lot less than the market so not too far off Within the bounds large cap growth basically big stuffed. That's the most expensive offensive over the long haul is actually generally a bad bet in. It's actually had a great run over the last five years. Earning eighteen percent relative to fourteen percent. S&P so clearly buying expensive stuff was actually a good idea. This go around but in general. It's a bad idea if we look at large momentum mm stocks large momentum stocks overall generally tend to beat the market. I have a measure around thirteen point five percent here since nineteen sixty the three versus the markets around ten so definitely a big winner in sample. It's also been a big winner. Sixteen percent versus fourteen so momentum Menem certainly seems to be alive and well similarly if you look at like big cap losers or low momentum securities. They were really bad. And the most recent period eight percent compound versus fourteen but historically there around four percent versus ten so they're always bad and in recent memory memory. They've actually just a little bit better than they typically are but you wanNA definitely avoid low momentum securities even amongst the mega caps outs. It's over long. Haul mega cap. Value has beaten growth by a bit mega cap momentum or winners definitely be losers by a lot. The the Menem statement still holds the value statement is obviously been reversed here. The last five years thousand analysis amongst the biggest securities out there. How're factors doing controlling for size and the summary was momentum's working values? Clearly not now and we can do is we can flip this argument down to the smaller cap. Names were again. We can control for size. We're going to only look. At small caps we know in general as a group have underperformed significantly relative to large-caps but then we can lease ascertain how the factors there's are doing in small Kaplan relative to just generic market cap indices at the outset we mentioned at the S. and P. Five hundred from a factor wrestling rushing. Perspective is a Mega Cap Beta fun. And you could argue at me have small growth momentum type tilts but I think on average it's it's just Beta and it's it's just mega caps. We also know that mega caps crust the competition regardless of what fact he did. Or what have if you were big you you want. If you're small you lost is kind of the summary and so if you had growth or momentum exposures on top of mega cap exposures assures you were the undeniable King of the most recent market memory especially in the US stock market specifically so but again would what if we decide to look into the non mega cap factor world. So and. That's what we're GONNA do next so here we are. We're going to look at is the smallest securities across the board except we're going then split them by their value and momentum factor so we're going to look at a small value portfolio folio and a small growth per foil. What is that while small is GonNa be the the universes securities in the bottom twenty percent and then within those securities charities? We want to look for those. That are the cheapest based on book the market and those that are the most expensive based on booked market. WE'RE GONNA call those value and growth respect back and we'll do a similar exercise for momentum. We're GONNA soared on the past winners in the past losers amongst those stocks that are already small and if if you remember here the benchmarks for this analysis or is false. The S&P five hundred which is kind of your mega cap. Benchmark came in and around. Fourteen aim percent compounded last five years. Bet these small death style which is a benchmark for just generically. Buying small stuff came ended ended around eight and a half a little bit less than that much less Nessim P. and not bad you know eight percent compounds not terrible but certainly a lot less than the mega caps and so for this analysis the benchmark is not really asked him P it's GonNa be this small Dessau portfolio at around eight and a half percent so if we now look at value over this period while small value actions around ten percent so again got crushed by the SNP but relative to just generically buying small stuff it actually did pretty good tens a lot higher than eight and a half in contrast if we look at small Gross Stock Ocsar basie small expensive firms. They actually underperformed in line with their historical expectations so they earned around seven point. Two percent relative to that small Dessau portfolio around eight and a half so in small caps values actually still very much alive and actually worked for all intents and purposes but just relative to the S. and P. Five hundred or anything that over exposes into large securities it appears like valued at work. But it does. When twin consider size in so when we now look at momentum conduct a similar analysis will momentum is also in line actually with its historical store classmates where small momentum stocks came in and around nine point seven percent compounded versus eight and a half for the generic small cap you? uh-huh portfolio benchmark so momentum work in an again Azziz in line with historic estimates. These small losers stocks are the low momentum. I am stocks came in at a very terrible three. and a half percent compounded versus eight and a half for the benchmark. So it's interesting here and silent. In contrast to the discussion in mega caps were value is dead. Momentum was very much alive in in small caps once we control for the fact there were only playing around in smaller securities both value and momentum worked so they decided they were not debt which is interesting because it goes a lot against a lot of the arguments out there when says it factors dead. You know so great. We've proved factors. Actors aren't dead and they probably work but we've got to be a little bit smarter about controlling for size exposure ensure. We know what we're looking at is apples to apples. Comparison person and not an apples to oranges is a side note here this is all about. US analysis if one looks in international markets. I think it's also so clear. That factors aren't dead especially when controlling for size because they've actually done okay out there and because there's been less of a size effect back relative to the US markets. There's I think there's also been less confusion about the fact that factors are still working at the margin out there. So why don't go through all this analysis of of trying to break buckets down by size and then within size look at the factors and how they're doing well again. We did that because it's important to consider size especially in a market environment where just owning big stuff pretty much crushed pushed a system that owns smaller stuff and we will see that in the results because if you look at small value portfolios or small momentum uh-huh portfolios and you compare them over last five ten years relative to large growth or the S. and P. Five hundred. WHOA YOU'RE GONNA look stupid? And that's not because the factors weren't working. We already discussed that. Value and momentum actually worked worked fine in smaller caps like it helped you diff- differentiate those that were good and bad relative to all other small caps but decidedly underperform as a whole versus your large cap growth indices or your S. and P. Five hundred the final thing we can do just to reiterate this point elite. That size is definitely mattered. A lot in factors aren't really dead is we can look at value momentum across the five different different size buckets to see how they do on a relative basis when compared to the appropriate size benchmark so for for example we can have super small Micros we can have sh mid-cap mid cap large cap and mega cap. It we can control for this is groupings but then within those size groupings look at the performance of cheap versus expensive and look at the performance of winners vis versus versus losers. And so if we do that in the context of value to start what we see is that pretty much across the board to see the smaller the portfolios where they were growth or value the underperformed S. and P. Five hundred and in general value premium. Meon has been negative so holding consistent size growth portfolios generally stomped value portfolios albeit at a much lower level than in the mega cap stocks and the one area where that was different was what we discussed prior is in that small all kind of micro cap world. They're still did seem to be a premium out there but certainly value looked dead even when controlling for size across most of the different size buckets we can group securities into now when we do that. Same analysis on momentum were again we're gonNA take five categories stories of size small Schmid Cap mid-cap kind of mid large. and then you're mega caps a kind of break in the universe up into five different different sized buckets and then with in each of those sized buckets we're GONNA look at how high momentum did versus low momentum or basically the winners doctors is loser stocks pretty much across the board independent or of size momentum worked so momentum kept on ringing to register as it always has has obviously smaller focused strategies doing momentum underperformed anything that was owning. SNP type securities but with any any difference Particular size bucket. The momentum versions of the strategy definitely beat those had low momentum so momentum also worked whereas whereas values a little bit more shaky so inclusion the antenna. This piece is really just to give readers more nuanced view of the common on investment factors out there and how they fared relative to the so-called market which is often considered to be five hundred in to make a long story short. Sort everything in the world regardless if you're looking at factors Rasa classes or geography has looked poor relative to the SNP and the S. and P.. Five hundred has delivered exposure to Mega Cap Beta arguing with a growth tilt and we know over last five years is that the best factors in highest performing factors in the world are mega cap. US Beta growth. So that's some peas being everything however over once we control for different size exposures and then we look at how factors have done within different sized buckets. It seems seems to be the case that momentum is certainly not dead It's worked across the board and then value is Kinda dead but you do see some evidence that and it has worked in micro small caps and I think there's some evidence also you'd see that if we did this analysis in international on the other hand to summarize value are you might be dead momentum certainly alive and well but it's really important that when doing analysis on factors that one consider size in the analysis and we compare apples to apples as opposed to apples to oranges. Thanks very time. Hopefully this was useful. And if you have any questions feel free to reach out direct and in Or you can hit us up on our website architect dot com. Hi guys how are you my. Name's Justine Carbonell. I'm one of the partners at Bolivia. Bolivia is a a quantitative investment research. Firm we run over twenty different investing strategies some based on the approaches outlined by legendary investors. So that includes individuals like Warren Buffett. Peter Lynch Benjamin Graham Joe Greene Blat and others. We also run models that have demonstratable performance and been written about either in books or academic papers you can learn more about us at volition dot com. That's V. A. L. I. D. E. A. Dot Com or you can follow me on twitter at Jj carbondale now. I'm going to read my article ten reasons why it's tough to be a true intelligent investor. I hope you enjoy it. It's pretty amazing when you think about about it Ben. Graham's home the intelligent investor still sells over one hundred thousand copies a year as investors of all stripes look lorn value investing way but as Warren Buffett one said value investing is simple but not easy. The truth is the vast majority of investors will never be able to become value investors as defined by Ben Graham for for the reasons. We'll outline in a moment. This isn't a critique but rather an exercise in illustrating the many components of a value investing approach mentality while the list. We're going to walk through is by no means. Exhaustive captures the central tenets behind what Graham believed contributed to successful value. Investing number one on the list be an independent critical thinker. Graham encouraged investors to think for themselves in his mind and intelligent investor. Wasn't the smartest guy in the room. But instead the one that used the fact based methodology and was able to control his or her own Emotions Wall Street Journal columnist. Jason Drag who updated provide commentary for the third edition of the intelligent investor neatly summarises. This he writes quote. The components that are needed in the character of an intelligent investor are patients independent thinking disciplined eagerness eagerness to learn self control self knowledge and quote by being an independent thinker. There's a good chance you won't be influenced by the consensus and you will come to your own conclusion. Collusion based on the facts. The vast majority of investors rely on others to form their opinions. The so-called market experts are busy giving their daily market predictions. Graham Dan preach forming conclusions based on cold hard numbers and believe that following the advice of the forecasters was always a bad idea. Number two on the list maintain a contrary in mindset seth Carmen founder. The value oriented firm. Bob Host Group called value investing quote a marriage between a contrarian and a calculator and quote for granted most other devalue investors that contrary in ISM comes through and buying value stocks which often stocks and investors are negative on for one reason or another. I mean look at the top stocks driving driving the market today Google Amazon facebook net flex. These may be great companies but they are the furthest thing from the type of unloved stocks. That would fit the mold of being contrarian as a true contrary you have to have a chance to find opportunities that may be mis-priced were the market has potentially overreacted and become too negative on them. But if you are a true contrary in you will most likely under significant pain in getting there because the market may not agree with you in the short run number. Three on the list is because we have to accept the future is largely knowable former Defense Secretary Donald Rumsfeld once said quote as we know there are no knowns there are things we know we now we also know there are known unknowns that is to say there are some things we just don't know but there are also unknown unknowns. The ones we don't know we don't know end quote Graham understood. The future was largely unknowable and then investing in the stock market came with uncertainty and risks. He wrote quote the future itself can be approached in two different ways. Ace which may be called the way of prediction or projection and the way of protection by staying away from predicting and focusing on protection Graham gravitated towards stocks of companies that were so cheap that even if the future was worse than expected there was limited downside price and this plays into our next point which is finding stocks margin of safety buying shares of companies. That had a margin of safety was a central concept grams. Investment approach the margin of safety was intended tend to provide downside protection in the event that the future profits of the company deteriorated because grant believed the future was highly predictable and that earnings of companies were also highly variable Ariel. He favoured stocks of companies. That could be at or below their net asset value to determine this he would take a firm's current assets and liabilities. BILITY's this formula effectively gives you the price of buyer would pay in the event of a liquidation and the signs no value to long-term assets for companies valued would add below this level. It was implied that there could be upside as the business improved and also limited downside in the event that the business didn't improve number five on the list. You got to be willing to put in the work. If you've ever picked up the intelligent investor you know. It's a daunting book over five hundred pages in small eight type font. Security analysis grams first book was even longer at seven hundred twenty five pages. The thoroughness in the books. Reflect grams thinking that to fully. Educate yourself on the markets and value investing and it takes a lot of time a lot of work and a lot of effort. Todd combs one of the portfolio managers handpicked by Warren Buffett to manage part of Berkshire hathaway's public market portfolio. One said that his daily work schedule is quote literally just reading about twelve hours a day and quote the bottom line investing takes a lot of time energy and continuous learning. And it's difficult for many of us to have the patients an interest in pursuing what it takes to become knowledgeable on the markets and how to become a true value investor. Investors need me to think more like business owners and that's number six in Berkshire Hathaway's twenty thirteen annual letter to shareholders. Warren Buffett wrote about two small real estate investments. He had made one an investment in a farm in Iowa and to building New York City both proved to be good investments for buffet. But that really wasn't his main objective in sharing the information with us what he was trying trying to emphasize the importance. That when you're buying an asset such as a stock or piece of property you're actually buying into the business and you're entitled to the future cash flows generated by those assets. Buffet writes quote stocks. Provide you minute to minute. Valuations for your holdings whereas yet to see a quotation for either my farm or my New York real estate investment end quote the concept of looking at stocks as pieces of business with something grand emphasize continuously and buffet credits. Graham for helping him think of investing as a business owner rather rather than just the stock certificate holder in the intelligent investor. Graham wrote quote investment is most intelligent when it is most businesslike. He went on to say a corporate security may be best. Viewed in the first instance as an ownership interest in or claim against a specific business. Enterprise and quote although they should most investors don't take that business mindset when investing in the stock market coming in at number seven and this is difficult for many investors is maintaining gaining a disciplined and systematic investment approach Graham specifically promoted a quantitative approach to investing a quantitative method provided more protection and grams. Mind because offered a disciplined unemotional way to buy group value stocks over time have the potential to outperform qualitative investing approaches according to Graham involved all forecasts and predictions which he believed represented a speculative way to invest that would lead to poor results in chapters fourteen and fifteen of the intelligent investor Graham outlined two different investing strategies using specific and concrete fundamental evaluation criteria. The first was the defensive investor method and this is the strategy we run on video it includes things like looking at the size of the company whether or not the company has a strong financial condition. Its earnings record. And Lastly Multiple Valuation Relation Metrics. Many investors aren't wired to follow a systematic investment strategy but in grams mind. This was the best chance for long term. Success in the market market in the number eight slot is investor should realize that stock prices. Are there for your convenience. Only Graham wrote that stock prices were there to be quote taken advantage of or to be ignored end quote investors. He wrote should never buy stock because it has gone up or sell stock because it has gone down rather they should determine the price they're willing to pay for it based on the underlying value the business and then make rational decisions on whether to buy or sell a stock Buffa drove this point home with his famous saying quote prices. What you pay values what you get and quote the price dot com fluctuate wildly based on the latest headlines and the flow of money in and out of it but in the long run it's the value of the underlying business and the future cash flows of that business that will reward you as a shareholder as long as you bought the shares at a sensible price and didn't overpay for it? Number nine is simply invest. Don't speculate Graham considered himself in investor. He wanted to find companies with certain fundamentals fundamentals and by their stocks for the long run speculators as Graham labeled them didn't care about the value the business their only concern was whether the price was going up. Graham also believed that anyone anyone who is making a business that a forecasting either the market or company specific earnings was engaging in a type of speculation. And this would manifest itself in poor future returns in chapter. One gram differentiates vesting speculating. This way he writes quote on investment operation is one which up on thorough analysis promises safety of principle and an adequate return operations not meeting. These requirements are considered speculative and quote. Graham was obviously skeptical of all the predictions and forecasts from Wall Street. And that's the last point is although it may be tempting to listen to arm-waving Pun didn't than singing the praises of certain companies predicting where the market's going to go tomorrow. It's important to understand that it's impossible to predict the short-term movement of stocks in a video posted by one the analyst at the Motley fool they said build your portfolio around understanding that market drops will happen but invest in such a way that won't let those drops drops get to you so that you continue to stay focused on the underlying businesses behind the stocks in your portfolio because in the long term the performance of those businesses is in the end. What will drive the performance of the stocks you on so becoming an intelligent investor? Graham outlined may sound simple on the surface but but it's far from easy still think investors can learn and grow from all of these points and for those who recognize and overcome the many hurdles that the market and our own emotions. Throw at us. I think can only help in your long term investing endeavors. Thank you for listening. I hope you've enjoyed this. Hi This is Gary Anton- NASC- I'm author of the book dual momentum. Investing and the blog do a momentum dot net. I'm going to read a piece called extended back test of global equities momentum in two thousand thirteen I created my global equities momentum gem model it holds us or nine US stock indices when stocks are strong and uses bonds safe harbor when stocks are weak when my book dual momentum investing was published in two thousand fourteen. I had Barclays Bond Index data. Back to nine thousand nine hundred seventy three since one year of data is needed to initialized. The GEM model results went from one thousand nine hundred seventy four through two thousand thirteen in two thousand fifteen. I got access to Ibbotson. Intermediate government bond data. This allowed me to extend jam back to nineteen seventy the extra bonday it. lets us see how jam performed during the nineteen. Seventy three seventy four bear market. Jam was up twenty percent those two years while the S. and P. Five hundred index was down over forty percent. This was a short but impressive out of sample validation of my duel momentum approach I thought Nineteen seventy-one was as far back as I could ever take jam because Msci Nine US stock index data only went back tonight one thousand nine hundred seventy but I recently obtained long-term global financial data going back much further. We usually want as much data as winking get to confirm an investment strategy. But we also have to consider how realistic are results will be under earlier. Conditions Sion's global investing for example makes little sense during the two World Wars World War. One there were strict capital controls. That made it almost impossible all to invest globally these up a bit during the nineteen twenties but they strengthened again during the Great Depression during world. War Two two. They were strongest. They had ever been even. If you could've invested globally back then it would have made little sense to do so imagine as a US investor you went to a cocktail party and said you just bought German Italian or Japanese stocks. You would never get invited to another party already. As an institutional investor you would have lost all your clients even if you had invested globally. Then it would have been imprudent right after World War. Two German stocks lost ninety one percent of their value and Japanese stocks dropped ninety seven percent. Governments did not know how to manage their economies prior to World War Two in the US. The government made the Great Depression worse by austerity measures and by not having social safety net safeguards like the FDIC protect public. So what is a good starting date for global global investing the first academic paper to point out the benefits of international investing was by grouble in one thousand nine hundred sixty eight. There were similar. Papers in nineteen seventy and nineteen seventy four the first mutual fund to make global investing available to US investors was the Templeton Growth Fund that began in nineteen fifty four as ness Israel off and Lou in their paper. International or national diversification works eventually began their study of global investing in one thousand nine hundred seventy using global financial data. This seems to be a reasonable starting time. So jam results will begin. January nineteen fifty data sources we use the S&P five hundred index for US stocks for nine US stocks we use the MSCI all country world index ex us from its start date in January January nineteen eighty nine it includes both developed any emerging markets by using his broad indexes possible. We avoid selection bias before nineteen eighty nine we use the world index ex. US FOR MITT START DATE in January nineteen seventy and the global financial financial data world index ex us before then for bonds we use the Barclays US aggregate bonded x from. Its start date in January nineteen seventy-three three before nine hundred seventy three. We use the Edison Intermediate government index of Five Year Bonds Gem Model GECK's gay and Samsonov in two thousand fifteen show that momentum consistently outperformed by an hold back to the year eighteen eighteen o one momentum applied to geographically diversified stock indices outperform momentum applied to stocks bonds commodities lease currencies and sectors. That is how we use momentum when the trend of stocks is up according to absolute minimum applied to the S. impeach five hundred index we use relative strength to determine if we will be in US or nine US stocks when the trend of stocks is down we invest in bonds. We use a twelve month look back period for both types of momentum and we rebalance monthly a twelve month lookback was effective in the very first study of momentum by Cowles Jones in nineteen thirty seven. It also worked best in the Jagdeesh. Pitman Amon Nineteen ninety-three seminal study on relative momentum and in the Moskowitz two thousand twelve seminal study on absolute or time series momentum momentum a twelve month momentum look back soundly beat by hold from the beginning of stock market trading in the sixteen hundreds and when applied to other markets markets all the way back to twelve twenty three as reported by Grazer men and Kamensky in their book trend following for managed Futures Device Moskowitz a respected momentum researcher said momentum is a phenomenon that exists at six to twelve month horizons most most academic papers on stock market momentum. Thus use a six or twelve months look back. We prefer to use twelve months because there is more out of sample evidence supporting it. It also has fewer trades and has more tax efficient than using a shorter lookback gem results. We compare jam. Results to global asset allocation or GE benchmark a forty five percent in US stocks twenty eight percent in non US stocks and twenty seven percent in five year government bonds. These percentages represent the amount of time time jen spent in each of these markets it has also representative of a typical global asset allocation portfolio from from January nineteen fifty through September. Two thousand eighteen gem had a compound annual growth rate of fifteen point eight percent versus ten percent for the benchmark portfolio gems annual standard deviation. Was Eleven point. Five percent versus nine point eight eight percent for G. A.. The sharp ratio of Jam was zero point nine six the sharp ratio for GPA was zero point five seven seven. The maximum month end drawdown for jam was minus seventeen point. Eight percent versus minus forty eighty one point. Two percent for the portfolio results are hypothetical or not indicative of future results and do not represent returns returns that any investor actually earned the correlation and monthly returns between Jam and G. A. is zero point six and between Queen Jam and the S. and P.. Five hundred is zero point five. There were on average. Only one point five trades per year with Jim so transaction action costs would have been minimal. These results are updated monthly on the performance pages of my website. OPTIMAL MOMENTUM DOT COM relative versus absolute momentum relative momentum is where we switch between us and non US stocks based on the relative strength. I think it's still suffers from equity like drawdowns but for investors with a mandate to always be inequities relative momentum with jam. Am gave two hundred basis points. MORE IN ANNUAL RETURN THAN THE S&P five hundred absolute momentum had ninety basis points more or an annual return than the S. and P. Five hundred it's lower return than relative momentum is due to occasional whip saws and lags eggs in getting in or out of equities at. They're turning points. But absolute momentum gave reduced drawdowns there is a synergy and combining both types subminimum. The gold mine whole is greater than the sum of the parts. If you reduce bear market exposure using absolute momentum you gain more from relative Tiv- strength momentum in bull markets for example the average bear market loss of the S. and P. Five hundred since nineteen seventy has been thirty three percent. It takes a fifty percent gain to recoup that size loss and the stock market gains about ten percent a year so it can take five years on average to reach break even after a bear market if absolute momentum substantially reduces bear market losses than bull market gains become new profits instead of making up losses. That is why jam shows impressive. Four hundred forty basis point increase in annual return above the S. and P. Five hundred from nineteen fifty until now versus two hundred basis points for relative momentum am and ninety basis points for absolute momentum as with absolute momentum jam returns were achieved with considerably reduced downside exposure sure core versus satellite Pharma infringe momentum the premium nominally with a growth factor based investing and more investors are now willing to add momentum to their portfolios trend following has also been gaining. Traction academic research on trends friends over the past. Few years has switched from hostility to skepticism to acceptance more often than that those who invest with momentum or trend. Use It as a satellite rather than as a core holding. This may be due to anchoring or familiarity bias. There may also be strong home country bias that reduces investing in non. US stocks some investors may not fully appreciate dual the momentum as a more dynamic way to diversify others might have a long standing prejudice against timing stock market entries and exits for investment professionals. There is also career risk all strategies that diverged from the market will at times underperform. If you lose money when everyone else is is losing money you'll probably hold onto your clients but that changes if you were doing something different and lose money. When others are not ironically the biases they keep investors away from dual momentum are reasons why it works as well as it does? The behavioral explanation of Amenam Starts With underreaction to relative and relevant information for more details about jam or dual momentum. See my book dual momentum investing. Hi this is Larry Sweater. All I'm the chief research officer and a board member with Buckingham Strategic Doc. Wealth Buckingham delivers comprehensive wealth management solutions to individuals families and organizations throughout the United States. Over the past twenty years this firm has grown into a thriving organization of advisers devoted to helping people achieve their most important goals through you sound evidence based financial advice. Today Buckingham Works with a wide variety of clients who's needs range from. Core Investment the advice to multigenerational wealth. Planning to retirement plan management at the end of the day though. Everything is about building relationships APPS and understanding our client's values to learn more about US visit Buckingham Adviser Dot Com. I'm going to read a piece. Entitled Investment Investment Strategy in an uncertain world in one thousand nine hundred twenty one university of Chicago Professor Frank Nye wrote the Classic Book Risk Uncertainty and profit an article from the Library of Economics and Liberty described nights definition of risk and uncertainty as has follows risk is present. When feature events occur with measurable probability? I'm certainty on the other. Hand is present when the likelihood hood of future events is indefinite or incalculable. In some cases we know the odds of event occurring with certainty. The classic success is that we can calculate the odds of rolling any particular number on a paradise and because a demographic data we can make take a good estimate of the odds that a sixty five year old couple will have at least one spouse live beyond ninety. We cannot know. Oh the odds precisely because there may be future. Advances in medical science extending life expectancy. Conversely new diseases may arise shortening. This illustrates the concept of risk. Now compare that with examples of uncertainty. The odds of an oil embargo boggles such as we experienced in. Nineteen seventy three the odds of an event such as the attacks of September eleventh two thousand and one where the odds odds of Iran's blocking the Straits of booths or even the odds of a trade war with China for investors it's critical to understand the important the difference between these two concepts risk and uncertainty while investors. Much prefer to deal with risk where they know the odds are or at least can estimate them with a great degree of certainty. Investing is generally much closer to uncertainty and since there are no investment in crystal balls how should investors go about designing portfolios. What are the principles that should be followed? One strategy is to hire active managers. Those legendary gurus protect you from bad things happening to afford folio. Unfortunately the Eugene FEMME and Ken French study luck versus skill and the cost section of mutual fund returns has found that fewer active managers only about two percent are able to outperform the three factor model meaning market Beta size value benchmark than would be expected by chance and that is even before considering taxes adding to the bad news. There's no evidence that active manages value in bear markets. It's just when they are needed. Most that was the finding of a van. God study which appeared in the spring summer. Two thousand nine issue of Van God awed investment perspectives defining bear market as a loss of at least ten percent. The study covered the period. Nineteen seventy three two thousand thousand eight which included seven bear markets in the US and six in Europe once adjusting for risk or the exposure to different asset classes. Glasses van. God reached the conclusion that whether an active manager is operating at a bear market a bull market that precedes it or follows. How's it or a longer term market cycles? Combination of cost security selection and market timing proves difficult difficult hurdle to overcome. They also confirmed that. Pass success in overcoming this hurdle does not ensure future success van. God was is able to reach this conclusion despite the fact that the data was biased in favor of active managers because it contains survivorship bias. It is likely evidence such as this. That led William Bernstein author of the investor's manifesto to declare the reason the guru is such a popular word is because Charlatan is so hard to spell either that or as Peter drucker stated Charlatan is too long to us in a headline even highly regarded mutual fund manager. Ralph Langer in his book Zebra in Lyon Dan Countries stated for professional investors. Like myself a sense of humor is essential. We are very aware that we are competing eating not only against the market averages but also against one another and it's an intense rivalry each of us is claiming that the stocks listen my fund. Today will perform better than what you own in your fun and this implies that we can predict the future which is the occupation patient of Charleston's if you believe you or anyone else as a system that can predict the future the market. The joke is on you. The problem with active management is that the industry is focused on managing returns a losing proposition. So what's the alternative. Perhaps it's the strategy most likely to allow you to achieve your life and financial goals prudent strategy instead is to focus not on managing damaging returns. But I'm managing risk house. Should an investor go about doing that. The following are the foundational premises of what I believe needs to be the most prudent approach to managing risk the first premises to assume that the markets while not perfectly efficient are highly efficient Asia thus after implementation costs active management is a loses game with the odds of winning are so poor that it's not prudent to try. I just like the losers game of craps in Las Vegas. The surest way to win is to not play an investing not playing means using passive strategies that do not seek alpha only Beta or exposure to a factor or Asa Class A unique source of risk and return. If you believe that markets are highly efficient. You should also believe that. All diversified sources of systematic risk ask meaning unique sources of risk return such as major asset classes and factor exposures like size value momentum mm-hmm quality profitability in carry. Should have about the same expected risk adjusted return that leads to the conclusion that we should invest in strategies that broadly diversify across an asset class or factor instead of trying to determine which individual individual investments a likely to outperform and other words investors should be Beta seekers not Alpha seekers with Beta data being defined as a unique source of risk that brings us to the third foundational premise because diversification of course unique sources sources of risk is a free lunch providing higher expected risk adjusted returns the proven strategies to identify his many unique neak sources of risk. And return as you can that meet the criteria you establish for investment in your complete guide to factor based investing ask my co author Andrew Birkin and I recommend any investment. You consider should demonstrate that it has unique sauce of risk and return and that is the livered premium that has also been persistent meaning it holds across long periods of time and of course different economic on magazines it's pervasive meaning. It holds of course countries region sectors. And even asa classes. It's also were bossed. I meaning it holds for various definitions for example there is a value premium whether is measured by price. The book earnings this cash flow ourselves and it's investable meaning it holds up after considering all implementation costs and finally the premium. You must have an intuitive logical risk base or behavioral based explanation that provides the rationale for believing it should should continue to exist. Investment factors that meet all of the above criteria on market Beta size value momentum in both cross sectional and time-series profitability and quality and carry other investments that meet all criteria are the variance areance risk premium. which is the writing of puts and calls reinsurance and what is called marketplace or alternative lending which weaken we can define as fully amortizing small business and student prime not junk loans thus each of these should be considered for inclusion in a portfolio note that exposures to factors can be obtained need a long only along short portfolios and the cases of reinsurance mauka place lending and the variance risk premium exposures can be attained through investing what up called interval funds funds that that provide limited liquidity on a quarterly basis summarizing in a world of uncertainty where there are no crystal balls allowing allowing you to foresee the future if you believe markets are efficient? You should believe that sources of systemic risk and return have similar risk risk adjusted returns. And that should lead you to conclude that you should diversify of course as many unique sources of risk and return as you can identify five that made all the established criteria. The problem is the traditional sixty forty bond portfolio as almost all of its risk in one risk basket meaning market Beta and thus it is not well diversified across unique sources of risks. Let's see wide. This is the case instead of thinking of exposures as percentages. We need to think about them. In terms of how much risk is involved so while volatility is not the only type of risk their skewness in Ketosis and liquidity and other types of risk. It's a good one on the bus. We will use it to calculate the amount of risk points in each investment in a portfolio a typical well diversified survive equity portfolio has a voluntary of about twenty percent since equities Evan allocation of sixty percent in the typical sixty forty portfolio. Will they bring about twelve hundred risk points to the portfolio twenty percent volatility times the sixty percent allocation if we assume the forty percent in bonds is in a five year treasury it will have a volatile of about five and that brings bonds risk points to two hundred or forty times five now. The total number risk points in the portfolio is fourteen hundred of which twelve hundred or eighty six percent are inequities and that raises the question if you can identify other unique sources of risk each of which has about the same expected return as the stocks and bonds. We're holding. Why would we not want to include them? Increasing seeing the portfolio diversification and creating a more efficient portfolio. Why do we want to own? A portfolio which one risk factor market Beta comprises almost ninety percent of the risk that brings us to the concept of a risk parity portfolio now the risk parity approach to portfolio construction seeks to allocate capital in a portfolio based on a risk weighted basis this approach attempts to avoid their risks and skewness of traditional portfolio diversification. By considering the volatility of the assets included in a portfolio in addition the risk parity portfolio is the most efficient portfolio when allocating to systematic attic assets and factors that have similar expected returns per unit of risk one way to approach risk parity is to increase exposure to equities with higher than market returns for example small value stocks have historically outperformed the market thus owning more small value stocks than the market portfolio allows us to lower the markets exposure to market Beta without outlawing. It's expected return because the stocks we do own have a high of the market return that low is our exposure to market Beta while while increasing exposure to the size and value factors in addition the lower exposure to market Beta allows us to hold more safe bonds. John's increasing our exposure to the term premium. These changes move US toward more of a risk. Parity portfolio consider the following example example of two hypothetical portfolios and be that illustrate how to move portfolio towards risk parody. The period area is April Ninety Three Food December twenty eight eighteen. That start date was chosen because it was the inception of the first passively assertively managed small value fund the DFA US Small Cap Value Fund. I chose that fund again because it has the longest record vandy passively managed. US Small Value Fund for example the inception date of the Vanguard Small Value Index Fund is five years later later in April of ninety eight so portfolio will look like our typical conventional sixty forty folio owning a market like portfolio will use the vanguard Total Stock Market Index Fund to represent that allocation and then. We'll use vanguards into Media Treasury Jury Fund for the forty percent allocation to the bond fund portfolio. Ob we're only going to hold forty percent equities we can I used that lower percentage because the equities as I mentioned earlier have higher expected returns because we're owning the DFA US small Value Fund. So that's forty percent and now we'll hold sixty percent of the same bond fund the Vanguard Intermediate Treasury Fun. Don't we look at the returns and risk of the portfolio. Here's what we find portfolio away which owns the to vanguard funds. John's has almost the same return. And volatility as portfolio be which is only forty percent equity and using in the DFA small value funds for folio a return seven point eight percent portfolio. be a point one basically. That's the same number from a statistical significance standpoint and similarly they had very close volatilities portfolio a was nine portfolio be was seven point seven but in both cases the portfolio with less equity but owning small value stocks had higher returns and a little bit less volatility so clearly was a more efficient portfolio delivering a higher sharpe ratio the in addition the worst case return which is what many investors are concerned about covering the downside risk which were otherwise is known in addition to sequence risk for those in retirement portfolio as worst year was down almost twenty percent portfolio B.'s. The worst year was less than half that at down only nine on the other hand while portfolio a did have a better best-case year at up almost almost thirty percent portfolio be captured. Almost all of the upside at twenty four percent. How did this outcome come? I'm about the reason is portfolio be benefited from the allocation across more unique sources of risk portfolio port folio a has only two exposures to risk the first is market Beta a vanguard total market fund by definition shown will have exposure to market Beta one. And you own. Sixty percent of the portfolio equities so the loading on the Beta factor is going to be point six a one time. Sixty percent the term premium the vanguard into media treasury fund has exposure hoosier of about point four and forty percent you have then loading on the term premium point one six now if we take AAC the DFA small value funds exposure to those factors. Multiply that by the forty percent Allocation we have exposure to market Beta of only point four five versus point six for portfolio way the size exposure and portfolio as he's zero. It's point four. Four portfolio be the value exposure is zero and portfolio A. It's close two point. Three in portfolio be the quality exposure in a likewise zero. It's about point one in portfolio L. B. and the term premium exposure in portfolio. Way was point one six. It's fifty percent higher point two four four four portfolio be so in every case we have more exposure to the other factors offsetting the lower exposure closer to the Beta premium. And we see we get more of an equal weighting or a risk parody type portfolio. It's important to understand that at the annualized return information I just went through is provided to show you the benefits of factor diversification and does not reflect the actual actual performance of any portfolio that we manage and therefore the return information as hypothetical as it doesn't reflect the results sevigny actual portfolio and doesn't reflect any advisory fees or trading costs incurred in the management of portfolio some further observations nations portfolios can be constructed to add exposures to other unique sources of risks such as the ones I mentioned carry momentum variance cancerous framing reinsurance and others by adding unique sauces and risk and return them meet all the criteria we can improve the efficiency of vote portfolio that free lunch diversification adding those unique sources of risk can approve the expected risk adjusted returns by reducing the tail rest of the traditional sixty forty follow him and because all investors are risk averse this is worthy objective active. It's also important to note that by improving the efficiency of portfolio and cutting the tail risk. You improve the odds of not running out of financial assets the primary objective of most advises. You see the benefits when running a Monte Carlo analysis it's important to understand in order to benefit from diversification. You must accept the fact that your portfolio will likely underperform when the main component such as the S. and P. Five hundred index of the less diversified portfolio is having strong year or even decade the cost of the benefits that can provide the concept of risk parity is an important one for investors understand and should at least be considered considered as a starting point when designing portfolio however it doesn't have to be the goal of final result. The reason is an investors. May We now have an equal degree of confidence. In each of the unique sources of risk for example I have more confidence in factors that have risk-based space exploration than ones that have behavioral based explanations. That doesn't mean I don't include at least some exposure to behavioral base factors. His the evidence is strong enough to convince me that some exposure is warranted. However because of the greater confidence I have in risk-based factors actors have higher allocations to them as an example? I have more weight on the size and value factors than I do on momentum but I do include include some exposure to both cross sectional meaning relative momentum and time series or absolute momentum. The bottom line is the goal should should be to achieve broad diversification of course unique sources of risk that said risk parity is not the only way to achieve that goal Victor de Miguel Lorenzo go loppy and Rahman upul authors of the study optimal versus naive diversification acidification how inefficient is the one over 'em portfolio which appeared in the May two thousand nine issue of the review of financial studies studies examined fourteen different portfolio construction strategies including mean variance and minimum errands and found that naive one one of over end portfolios within being the number of unique sources of risk your identified for investment tend to be about what is efficient as any of the strategy thus instead of trying to achieve risk parody investors can simply build naive one over a an portfolios that have equal allocations to many different unique sources of risk while one over end might not be optimal as as you increase and you increase the versus vacation and move closer to the optimal portfolio. McCall that the traditional sixty forty forty portfolio where N is just to market Baiter and term has almost ninety percent of its risk in a single factor one over over an also has the benefit of being simple like market cap. Weighting strategies requires no information whatsoever about the investments under the consideration for those interested in a full discussion of the alternative ways to optimize portfolio construction. I recommend the White Paper portfolio optimization a general framework for portfolio choice as well as the follow up paper revisiting the portfolio folio optimisation machine by the team at resolve asset management. The bottom line is that when designing portfolio the main objective the should be to diversify across as many unique sources of risk as you can identify that meet all criteria you of established whether Lee choose to accomplish that objective virus parody approach on one over an approach. A some other approach isn't as important as simply achieving achieving broad diversification and then staying the courts remaining discipline. There's one more important point. We need to cover while there are still important. Diversification vacation benefits from editing international equities as the world becomes more integrated and technology benefit spread quickly correlations among among equity asset classes are rising reducing the benefits of global diversification in addition in crises the correlation of all asset classes tends to rise toward one the recognition of these two points increases the importance of adding other unique sources of risk. And return in your portfolio in order to reduce the potential dispersion of returns and cut the towers summarizing thing by diversifying. Of course you need. Sources of risk factors and alternative investments we can create more efficient portfolios we can reduce portfolio folio volatility and narrow the potential dispersion of returns dramatically reducing the tail risk inherent in traditional sixty forty portfolios folios. There's really nothing new here. Legendary Hedge Fund manager Ray Delio of Bridgewater associates has been using risk parity strategies. Oh Jeez for decades the endowments of Harvard and Yale have been incorporating unique sources of risk in their portfolios for decades fortunately eight today's individual investors now have access to such strategies without having to pay the traditional two and twenty fees of hedge funds which which leaves the fund sponsors with all the benefits nor do investors have to pay the high fees of active management many locals. ETF's now provide provide access to the aforementioned factors and the SEC's approval of interval funds has allowed such companies as stonebridge asset management to create funds that provide individual investors access to the variants risk premium and their fund av RPX Mauka Place Lending Fund Elian DX and Reinsurance and they're fun S. R. I X. and then the interest of full disclosure my firm Buckingham Strategic Wealth does recommend the funds of management and Dimensional Fund advisors there's in constructing client fallout. Hi My name is Scott Bell and I'm the founder of Gross Domestic Product Inc.. We're a financial planning firm serving people across the country to live the life that they value most what we do is called financial life planning and we believe understanding your why makes us a better guide for for what and you should and could do with your money. Of course the dollars and cents matter. Your money is here to serve you and create a life that brings you and your family true joy and peace of mind. And that's our focus with financial planning you can learn more about us at GDP inked dot Com that's GDP INC DOT com. Thanks thanks and I hope you enjoyed the reading. The asset of gratitude gratitude is not only the greatest virtues but the parent of all others CICERO. The more I learn about sustaining happiness in my own life the more. I'm convinced that CICERO is right. Here's the thing. CICERO didn't actually write anything. Thing that directly translates into this quotable the quote itself comes from his writings pro panico than what most scholars now agree on. Is that while this quote is at the heart part of what he said it was actually a bit more nuanced a current University of Chicago translation or accurately includes an original meaning lost but in many later translations that of not merely feeling grateful but also of showing gratitude real gratitude at least according to Cicero resides sides and being an appearing grateful his timeless truth is gratitude is infinitely more powerful as a verb. The fact is to almost two thousand years later later. There's real science to support the benefits of CICERO's action oriented wisdom regarding gratitude. Happiness is a state of mind. The Behavioral Real Science Behind gratitude tells us it's the bedrock of maintaining the state of happiness. We also now know that gratitude can provide tangible health benefits as well. Robert Robert Emmons. UC Davis psychologist and author of thanks. How the new science of gratitude can make you happier? Conducted Research on one thousand people from ages eight to eighty and found that those who practice thankfulness receive a number of benefits. These benefits include physical ones such as lower blood sugar and a stronger immune system an emmons goes on to highlight other benefits like compared to those who were not jotting down their blessings nightly participants in the gratitude condition reported getting or hours of sleep each night spending less time awake before falling asleep and feeling more refreshed upon awakening when People Report Feeling Grateful Thankful and appreciative. They also feel more loving forgiving joyful and enthusiastic. The benefits of happiness include higher income and superior workout comes for example greater productivity higher quality of work greater occupational attainment larger social rewards such as more satisfying and longer marriages more friends stronger stronger. Social Support and richer social interactions more activity energy and flow and better physical health for example a bolstered immune system lowered stress dress loves levels and less pain and even longer life we also now know through more silencing that there are three primary factors that influence. What's your personal happiness your disposition your circumstances and your effort? Each person is individually hardwired for uh certain level of general happiness known as the set point fifty percent of your happiness is hardwired some people are Winnie the Pooh summer tigger. Some are your and we can all agree. That piguet is annoying. I kid in any event. That's the way it goes no matter who you are. Fifty percent of your disposition is position. Is your disposition. Another ten percent is made up of outside circumstances money fame Fancy Car Nice House Etcetera era. Those are usually fleeting and short-lived yet. That's where many spent one hundred percent of their time chasing the ten percent. If I get acts I'll be happy if if I do or go to. I'll be happy your active participation your intentional activity and actually being grateful that last forty percent percent. That's the part you can control. And those who practice gratitude do regularly connect with being happier. That's where the acid of gratitude can NBA found in your active participation. Everything is awesome. And nobody's happy. Even though intellectually we can rationalize that gratitude attitude and appreciation go hand in hand and pay real dividends. It's not easy to maintain and there's a reason that's a case Rick Hansen. PhD and author of hard wiring. Happiness explains the human brain is wired to fixate on the negative instead of the positive. Why because you're Homo sapiens brain in an effort to keep keep you alive has been rewarded to learn more quickly from your bad experiences and remember them? Then you're good ones looking out for the alligators has been a good thing. You are evolved. Brains are thus wired toward negatively. It's what our brain does basically. You're never really happy as a default which is why we also keep pushing for more as a species or less happy than you would otherwise be if you actively participated and learning. You're happy dance. The answer is staring you in the face. The dictionary definition of gratitude is the quality of being thankful readiness to show appreciation for and to return kindness so so by definition we know appreciation is a core component of gratitude but what is appreciation in life. Appreciation is something we can express I appreciate you or I appreciate this awesome meal up but oftentimes like with love and gratitude. Words are not enough in finance appreciation refers to the the growth of an asset. This asset has grown. It has appreciated in value. That appreciation does not happen by offering thoughts and prayers are occasionally saying thanks to your portfolio appreciating. Your assets requires mindful. Care just like appreciating your world should to it requires perseverance diligence and attention. Enduring gratitude isn't about feeling appreciation. It's about readily showing your appreciation. Deborah Pryce founder of Money Money Coaching Institute explored the relationship between gratitude and appreciation. And I think she knows it. One distinction we found that is commonly shared. Is that gratitude. Attitude is the base from which appreciation grows and flourishes. If we're paying attention that is we can be grateful for something in our lives without really appreciating it. We're all guilty of it in relationships appreciation is used to declare you value. Someone I appreciate you. And those are such great words and heartfelt. I'm sure her but appreciation like its cousins. Love and gratitude is also more power verb. Now here's the crazy part Google has compiled all all the mentions of gratitude and appreciation. It's cataloged everything from the eighteen hundreds to date and even know there was a lot more. Toil in our daily lives lives as a society in the eighteen. Hundreds gratitude was mentioned a lot more often back then appreciation that peaked somewhere in the nineteen twenty s. It seems those were the good old days indeed or at least back then. People were more connected to being grateful and appreciating life. And it's kind of ironic that that here in this connected era where more disconnected than ever from the key elements of true happiness. Now here's the good news you can fix this and and as they say no man is an island. We're all in the same boat and if those statements are true and they are then fixing global deficit of gratitude and appreciation is actually quite simple. Investing in your happiness. mindfully is completely within your control. You can be ninety percent awesome one hundred percent of the time and I'll take that you can't do it alone though you're going to need friends and showing appreciation is most certainly what I learned in kindergarten play. Yeah well with others. It's as simple as that. Do those two things and you too can plug into the grab bag of gratitude. Otherwise it's you versus the world and and you're going to lose. Warren Buffett won't even bet against America. You think you're going to get better odds betting against humanity so those are your two basic successes when it comes to finding lasting happiness investing gratitude and play well with others or lose the chance for real happiness and all the benefits that come with it by being an island and chasing ten percent appreciate the health. You have actively appreciate the friends. You have frequently appreciate a stranger every every damn day. If you live in America appreciate that you can have. Your Voice heard by exercising her freedom to be heard as an individual and by assembling with others who appreciate she ate their right to be heard appreciate you can vote by voting appreciate you. Can Google anything you want and learn more daily. Appreciate your loved Ones Multiple Multiple Times a day. Appreciate our planet often pick up a piece of trash clean up a beach. Taking sunset photos doesn't count for much as far as the earth is concerned. And I appreciate that. We're all in this together and trying to figure out answers that none of us have by actively seeking the truth in everything you do if you do any any of the above I'm confident the asset of gratitude and benefits in your own life will grow and compound quite nicely. CICERO is right about gratitude. Hopefully we can agree. Yeah about that. I know I appreciate it if we could. Hi this is Jack Forehand. I'm the CIO. Of Lydia capital management. You can find out. More about us at Valencia V. A. L. I. D. E. CAPITAL DOT COM. You can find my articles at blog. THOUGHTFULLY DOT COM. I'm going to read a piece titled Titled the Case Against Value Stocks. This is a piece I wrote in early. Two Thousand Nineteen as a way to challenge my own thinking about value investing and whether continue to work in the future like it has in the past so so here it is my case against value stocks. Confirmation bias is one of the biggest problems in investing we all have a set of core beliefs and we tend to surround ourselves with people who also believe them and focus on information that validates them for me. One of those things is that value stocks will beat the market over time. There's no shortage of data to support value. The academic research shows that it has worked historically and the work of practitioners like H. You are research. Affiliates in O'shaughnessy Asset Management Does the same but there is a danger and following only the people in data who support what you believe it can blind you the other side of the argument especially when your belief strongly held and there is almost always another side as a supporter of value. Investing serves no purpose for me to pretend that the other side doesn't exist whether I believe it or not I owe it to myself and to those who follow models. I build to be able to make that case and understand how I might happy wrong in the way I am thinking so I'm GonNa use this article to do exactly that I'm GonNa make the case for why value investing may not work as well going forward as it has in the past. Here are some reasons that those of us who support value may be wrong reason number one the world is different. Ben Hunt at epsilon theory makes his case better than anyone. I've seen if you haven't in his work out recommend you read the three body problem where he makes his case much better than I can. But the general argument is that the Federal Reserve and other central banks have changed the game by engaging large scale asset purchases. Dave encouraged risk taking without consideration of fundamentals. And now that they've done it once they will likely continue to going forward and that's a world things like value and quality may not matter like they have historically historically at the very least they matter less and go through much longer periods where they don't work reason number two too. Many people are doing the amount of money chasing value stocks continues to is. I've lost count of the number of factories funds that you some sort of value system and large firms like DFA have deployed massive amounts of capital in value strategies in investing whenever anything works more and more people follow it since the publication of common French's three factor model. That is exactly what has happened with value that has the potential to degrade or eliminate value premium. Reason number three the capital following value has become more permanent. It is counterintuitive in some ways to think like this befollows Evalu- strategies want other value investors to panic panic during periods of underperformance. That bad behavior is in part. What makes it work permanent followers of the strategy? Who Won't panic no matter how long underperforms can reduce its effectiveness over time and is more investors become educated about the negative effects of their behavior? It is possible they will stick out the downturns more. The anonymous twitter user modest proposal made this point in his podcast interview with Patrick metrical Shaughnessy if he is right. That is bad for value reasonable before big data and rising computing power or leading more value traps. The more data that is available the faster it can be processed the more efficient market should become. That could mean that Moore chief stocks are cheap for a reason it could also mean that using historical fundamental information to predict the future will be harder. Let me give you a simple example. Say My value strategy really likes Walmart because a trade discount to the market based on a composite of metrics but if other investors have other data outside outside of those fundamentals the paint a different picture walmart may be cheap for a reason. I'm not aware of for example. They might have satellite images a walmart. Parking lots across the country indicating the customer flow is down or they might have information from credit card providers that indicates the total sales are falling either of those could lead to a situation where the historical fundamentals. I'm using don't paint a clear picture of reality. Forty and more cheap stocks can end up being value traps. Reason number five value is a bet against technology. unconstrained values strategies tend to make implicit sector us. Overtime disccan vary based on which value metric us but all of them tend underway technology. If you break down the underperformance value over the past decade you'll see that one of the major. The reasons for it is that it had more significant ways in the market in sectors. That have done poorly financials and below average weights in the technology sector which has been the best performer. This isn't necessarily a long-term negative active because it can work both ways. If you own value strategies in two thousand you were probably pretty happy that in no technology stocks but if you are a big believer tackle drive the market going forward. That isn't a good sign for value. It is also important to note that this issue can be addressed by following a sector-neutral value approach that keeps it sector weights close to the benchmark but if you follow unconstrained value models this could continue to be a drag on performance. Even value models are constrained to market weight and technology. They tend to avoid the high growth stocks that have driven. Much of the sector's performance value. Investors have been much more likely to hold the micron technologies and Seagate's of the world in recent years than the Amazon Netflix. So even value strategies with market weight and technology can significantly underperform the sector sector as a whole on that portion of their portfolio in addition to being an explicit better technology value can also be an implicit against it in recent years value strategies not only not own the big tech names that have driven the market higher but they have also owned the stocks that these companies have had the most negative impact on retailers whose businesses have been hurt by Amazon or a great example of this so if you believe the technology stocks will continue to grow at the rate they have and we'll put many of the old line value firms out of business along the way then. The outlook value investing is not a good one reason number six Value does better during recessions. We're having less of them is wasn't included in the original article was pointed out to me is another reason. Value may be struggling. Aaron Stanhope of Shaughnessy Asset Management Agent wrote an excellent piece titled a factor investor's Guide into the economic cycle which was published on his blog factor investor dot com in the PC look at the performance of the major investing factors during stages of the economic cycle. What he found? Is that if you look. At the performance of value stocks throughout the economic cycle they tend to shine in the periods before during after recessions they do not typically do as well during economic expansions in the past few decades recessions of in less frequent than they have been. Historically the result of this is at the economic periods were valued as well have also been shorter if discontinues the news that may be a bad sign for value investing. So are we witnessing the death of value does all this mean the value investing will never work again is its future just filled with buying a bunch of cheap companies in Washington continued disappoint. I don't think so. Although all these arguments have some validity to them there are counterarguments each of them that I think are even more valid. The point of this exercise it wasn't suggest that value investing is dead. The point was to show that there is another side of the argument and that is true of almost anything in investing it is true of investing in high momentum stocks it is true through buying high quality companies it even true buying index funds no matter what style of investing us it is very easy to get caught up in a feedback loop. That does nothing but supported put put by doing that. You lose the ability to question yourself. He lose the ability to figure out how you might be wrong. Whatever strategy you are following you should ask yourself whether you can do what I did hear? He should consider whether you've looked at the other side. Whether you end up agreeing with it or not the practice will make you a better investor. Hi This is Ray. MICHELETTI CO OH chief investment officer of Columbus Macro Elsie Columbus Macaroni and investment advisor registered with the Securities and Exchange Commission. For more information about us. Please visit our website at. WWW Columbus macro dot com in my current role. I help oversee the firm's investment activities with a particular focus on global tactical asset allocation strategies. Today I will be reading a piece entitled the Smart Money Indicator a new risk management tool which was posted on Alpha architects blog in February two thousand and nineteen. We have all heard the mantra. You can't time the market but in reality. Investors attempted to just add every day as part of their tactical asset allocation strategies which are nothing more than less extreme variants of the classic trend following risk. On risk off approach broach that many associated with market timing moreover numerous studies have shown that institutional investors routinely perform individual investors over intermediate time horizons. These results are deep and robust they across different metrics different markets and different time periods. And they're not terribly surprising. Given the inherent and persistent structural advantages institutions have have over individuals such as better information networks deeper pools of human capital and more advanced technological infrastructure in light of these studies. We hypothesized sized institutions are doing in the financial markets may provide predictive insights in that context in a recent S. R. N. paper entitled Once Smart Beta the follow the smart money market factor timing using relative sentiment. We presented real time. Cross asset positions base relatives sentiment indicator to quantify yeah exactly which side of the trade institutions are on derived from the commitments of traders report the indicator measures and novel way the Aggregate Positioning Inequities of institutional investors relative to individual investors for simplicity we refer to the indicator as the smart money indicator or SM. I as institutional investors are often thought out of is being the smart money. The main findings of the paper are as follows. One with respect to market timing institutional investors have demonstrated highly highly significant market timing ability over the twenty five year history of the weekly commitments of traders report or not report for short. This significance is both economic institutes mystical. It's evident in both house of the data set. It passes extremely stringent data snooping tests and it's exceptionally robust different primer combinations lags in the data and methods of computing computing indicator to with respect to time series momentum regardless of the state of the markets time-series momentum that is trend returned your significantly vacantly when the SMS is positive and significantly lower when the SMIF's negative. This effect is especially pronounced when the market has negative time-series momentum in such cases uses annualized market returns are on average plus thirty percent when the SMIF's positive and minus twenty percent when the SMIF's negative a spread of fifty percentage points points in annualized returns depending on whether or not institutions are buying the dip in other words the appears to be adept at identifying. When and when not to take equity market exposure during periods of negative time-series momentum? Three with respect to smart Beta equity factors while conventional wisdom tends to hold old that smart Beta equity factors are difficult if not impossible to time the polarity of the SEM. I appears to largely determine the general return outcomes for several fundamentally finally based long short equity factors in addition both the statistical and economic significance of the SMS based factor timing become quite strong when we further conditioned question the timing on the state of the factors time-series momentum four with respect to tactical asset allocation. We develop a walk forward. Tactical asset allocation allocation strategy using the SMI and compare it to several value and or momentum based alternatives. Here we see that over the last twenty years the SMI has been more efficient Chin and identifying higher yoting equity market opportunities than either value or momentum or a combination of the two that is the SMI base strategy has produced higher returns turns but absolute and risk adjusted with generally lower drawdowns while spending considerably less time invested in equities than its value or momentum. Counterparts five cross hedging pressure is the key to the SMS performance a paper by Dehradun at L. shows that futures risk premia depend not only on investors positions in the futures contract under consideration but also on their positions and closely related assets or so-called cross hedging pressure the key innovation of the. SMIF'S EMMA is it. It looks not only at investors positions inequities but also at their positions and long duration bonds and along the yield curve tests show that all three components are vital to the predictive power power the ESA mine data and testing details. We use data from the weekly C O t report to compute the semi data set spans the time period October Stober Sixth Nineteen Ninety two to December twenty nine th two thousand seventeen and encompasses eleven hundred and fifty weekly data points to account for the evolution of the C O t reports accessibility during a portion of the time period under consideration we incorporate a one week lag the COTR data for our primary results to administer the factor timing tests of which market timing is a special case? We use factor returns obtained from both professor Kenneth French's data library and from QR's data library the smart money the indicator the Sim. I is he added of combination of three institutional versus individual relative sentiment components these components it's include the following one equities relative sentiment a major abroad of sentiment in the large S. and P. Five hundred futures contract to long duration Asian relative sentiment a major relative sentiment in the thirty year. US Treasury bond three yield curve relative sentiment a major of the difference in relative sentiment between the tenure. US Treasury note and the thirty year US Treasury bond the first component is a direct measure of road of sentiment inequities the second component functions as an indirect and inverse measure of relative sentiment inequities given the general inverse relationship. Between equities and long duration bonds if institutions are relatively bearish long duration. That might imply they are relatively bullish. Equities and vice versa. This conjecture has empirical support as the ruined L.. Find Strong Cross hedging pressure between the S. and P. Five hundred and the US Treasury bond similarly the third component also functions as an indirect measure of relative sentiment inequities. The idea here is that if institutions are relatively longer shorter duration assets I e along the ten year note compared to the thirty year bond bond. That might imply. They're expecting long-duration assets to fair relatively poorly and given the general inverse relationship between long duration inequities that might correspondingly manningly imply institutions are expecting equities to perform relatively. Well we use composite scores to quantify the three of sentiment components. We then add those components together other subtract off the cumulative median value to arrive at the semi and test whether it signed his predictive. The paper provides details of the computation by its construction. Yes my ends up being a function of two parameters which we label N.. As in Nancy and M as in Michael and is the look back length in weeks of the underlying z scores and M is the look back length again in weeks over which we compute the trailing maximum minimum value of each relative sentiment component these extreme computations essentially essentially smooth out the directional signals of the semi and reduced whips us. It should be emphasized that the SMS purely relative indicator thus institutions could be next short lord equities in the aggregate yet still be relatively longer than they typically are and relatively longer than individuals are which would cause the 'em to be positive moreover given that institutions expend considerable resources attempting to ascertain the ongoing state of corporate and Economic Fundamentals. How they hedged equity and bond portfolio's in the futures market is essentially essentially there consensus opinion on the state of those fundamentals in that sense the SMI may perhaps best be thought of as an implied fundamental indicator statistical tests for factor actor timing to test the robustness of the we consider six different values for an namely thirty nine fifty to sixty five seventy eight ninety one and one hundred waiting for weeks corresponding three four five six seven and eight quarters respectively and thirteen different values for 'em ranging from one to thirteen weeks further we use use the same m value for each relative sentiment component? That is we make no effort to find either an optimal end value or an optimal combination of 'em values with six end values and thirteen m values their seventy eight pair wise. Smi Parameter combinations and thus seventy eight individual SMI time-series given our focus on the SMS sign each SMI time-series generates two sets of conditional returns the set of weekly factor returns when the prior week Smif's positive in the set of weekly weekly factor returns when the Prior Week Smi's negative moreover each smi time-series also generates to longer flat factor timing strategies. It's the first factor time strategy goes long factor F when the prior week SMS positive and is flat otherwise the second factor timing strategy goes long. Doc Factor F when the prior week SMIF's negative and has flat otherwise these conditional returns and longer flat factor timing returns service inputs to eight different. Different factor timing tests. The appendix of the paper provides the implementation details of these tests for example how we incorporate different asset pricing models. How we handle at a ROSCA DESTA CITY auto auto correlation out liars and so on because we use one particular factor timing test to account for auto correlation in three distinct ways these tests produce eleven evans separate P values of factor timing significance for each SMI bremner combination we compute the median of those eleven p values at each parameter combination the nation to arrive at a thirteen by six matrix of median factor? Timing P values. This maters conveys two things. One how broadly significant defendant any individual. SMS prammer combination is into how robust the SMI is across all parameter combinations. We further compute the differences in annualized is returns in annualized volatilities between the two sets of conditional returns described above at Jessica my parameter combination this results in two thirteen by six matrices. The the first the differences in annualized returns provides a measure of the. SMI's economic significance the second the differences in annualized volatilities reveals whether the SMS state with higher returns also has higher volatility as modern portfolio theory would predict lastly we employ test that controls for data snooping the bootstrap sampling based multiple hypothesis testing algorithm of Romano and Wolf. This test takes as inputs and Integer K representing allowable number of false positives and probability Alpha such that the probability that the number of false positives is greater than K is less than or equal alpha. We set k equal to one that is as we allow one false positive and consider Alpha values of zero point. One Zero Point Zero five zero point. Zero One and Zero Point Zero Zero One Romano Romano at L. State the typical values zero point one and zero point zero five however deprived Owen. Lewis show that values of Alpha less than zero point one five tend to be overly restrictive that they generate too many false negatives in this context the values of Alpha used in. This paper appear to be sufficiently if not excessively conservative -servative. The paper presents two sets of results from the multiple hypothesis testing algorithm one set corresponds to the raw on adjusted bootstrap samples. The other set corresponds to constraining the potential oversampling of time. Localized outliers both positive and negative in the butch samples in order to gauge the broad performance and the Sim I across all the aforementioned metrics we present tables at summarize the number of SSI parameter combinations. WHOSE MEDIAN P values exceed certain significance levels does the number with differences? Annualized returns and volatility is beyond certain thresholds and the number deem significant by the multiple hypothesis testing algorithm as a function have K- and Alpha within without adjustments for outliers. SMART Money Market timing to give one visual sense of the SMI's ability to time the market factor that is the market modest the risk free rate which we denote by M R F we I plot the cumulative compounded returns of the positive semi strategy versus the Negative Smi Strategy Gee recall the positive SMI strategy goes long the market when the SMS positive and his flood otherwise while the negative SMI strategy goes long the market when the SMI's negative in his flat otherwise here we set an equal seventy-eight an amicus five this parameter combination was selected because it exhibited the median performance from among a large large contingent of the more statistically significant parameter combinations over the twenty two year period from December Twenty Second Nineteen Ninety Five until December twenty. Nine th two thousand seventeen seventeen one dollar invested in the positive. SMI strategy would have grown to eight dollars and twenty cents while one dollar invest in the negative semi strategy would have fallen to fifty two cents at his one would have lost forty eight percent on an annualized basis. The difference in those two strings returns as twenty seven point. Two percentage points at the end of the period the positive S. A. my portfolio was worth roughly sixteen times the negative as my portfolio as a frame of reference. It took over sixty two years from nineteen twenty six to nineteen eighty-eight for portfolio representing the top quintile value stocks to be worth sixteen times portfolio representing the top quintile of gross stocks while impressive the performance Hornets of this particular. SMS parameter combination is not an isolated event nor is the general performance of the SMS fragile dependent on its precise method of construction to demonstrate straight this robustness we consider fifteen other computational variants of the SM I these various differ mainly based on the underlying Cotr data futures and options versus futures is only the lag of the CIT data zero one or two weeks and the time period covered the entire period. The first half on the second half however we we also consider other variants such as incorporating the S. and P. Five Hundred E. Mini contract into the computation or alternately subtracting off the rolling three year median or the cumulative fortieth eighth percentile rather than the cumulative median in the US construction further. We analyzed each of the Sim is relative sentiment components that is equities long-duration in your curve separately and in groups of two in the paper. We present a table. With a statistical summary of each of these computational cases for the baseline case case one on which analyzes the full time period uses futures and options commitment of traders data incorporates. A one week lag of the commitment of traders state of seventy two of the seventy eight s semi parameter combinations have median p values that are significant at the zero point zero two five level sixty four have median P value significant at the zero point zero one level and thirty eight have median P value significant at the zero point zero zero one level at the extremes we observe T- stats as high as six for certain SMI parameter combinations and certain factor timing tests in terms of economic significance in recall here. We're looking at the differences in annualized returns between the cases when the SMIF's positive in one in his negative forty nine of the seventy eight SMI parameter combinations have differences annualized returns greater than twenty percentage points and at twenty percentage point. Difference is also happens to be the average difference across all seventy-eight SMI primer combinations for case one further the differences in annualized volatilities returns when the SMS positive versus when the SMS negative are negative for all seventy eight ESA my parameter combinations indicating that the higher returns when the SMS is positive come with lower volatility lastly when controlling data snooping using the raw unadjusted bootstrap data sixty five parameter combinations are deemed significant at the Alpha equals zero point. Zero five level fifty are deemed significant at the Alpha. Go Zero Point. Zero one level in nineteen seventy eight or deemed significant at the unusually stringent off off echo zero point zero zero one level these latter results all but verify the market timing performance of the SEM. I is likely not the product of data mining cases. Two through seven also analyze the data set altering either the underlying commitments of traders data the lag of the commitments of traders data or the method of constructing the SMI each of these cases exhibits roughly similar levels of statistical significance as case one this robustness with respect to its precise construction method. Data said or lag period suggest the SMS polarity is somehow able to capture the inherent forecasting advantages institutions have over individuals along with the time horizons over which build ups and sentiment unwind wind note the average holding period of the more significant SMI primer combinations is approximately sixteen weeks cases. Eight through thirteen analyzed the the individual components of the SMS separately in groups of two across the entire data set however the statistical and economic significance of these cases pale in comparison to that out of cases one through seven. The obvious inference. Then is that the predictive power of the SIM. I must largely stem from combining the hedging pressure of equities with across hedging pressure from long duration bonds and from along yield curve cases fourteen and fifteen analyse the first and second house at the data set respectively thus they encompass half as many the data points and therefore have less power to identify extreme statistical significance nonetheless both cases have a substantial number of primer combinations indicating high significance for the first half of the data set case fourteen fifty five of seventy eight parameter combinations are significant at the zero point zero one level sixty two differences in annualized realize returns greater than twenty percentage points and fifty seven or deemed significant by the outlier justed. Mit Algorithm at the Alpha equals zero point zero five level so the second half of the data set case fifteen the corresponding numbers are fifteen thirty twenty two the relatively fewer number of highly significant parameter combinations. In case fifteen was a function of two phenomena. The first is that the second half of the data said covers the great recession and there was a cluster of slower moving SMS parameter combinations. I E he wants with higher end in 'em values that were vulnerable to incorrect forecast. During that time period the second is the two thousand ten launch of Ultra Treasury bond futures these contracts tracks have even longer duration than regular treasury bond futures consequently these ultra treasury bond futures absorbed some of the long duration positions that otherwise would have been expressed in regular other treasury bond futures when we factor these ultra treasury bond futures into the construction of the SM. I which we do in a separate case case sixteen noticeably more parameter combinations exhibit high significance. which once again underscores the importance of accounting for relevant cross hedging pressures in the construction of the SM? I smart money momentum. uh-huh timing in light of the SMS performance timing the broad-market it's natural to ask whether the SMI has any incremental information beyond that provided by the markets time-series momentum and what we find instead however is precisely the opposite in the presence of the semi time-series momentum adds no statistically significant information in predicting US Equity Equity Returns this clearly illustrated by the SMS ability to time negative time-series momentum. That is its ability to identify. When and when not ought to take equity exposure when the market time-series momentum is negative we begin by plotting the cumulative compounded returns generated by the following to longer flat timing strategies energies strategy one belonged the market when the prior week? SMIF's positive in the prior week times. Here's momentum is negative otherwise be flat strategy to you belong the market when the prior week is negative in the prior week timeshares momentum is also negative otherwise be flat as before we said N.. Equals seventy eight an amicable to five and the semi corresponds to case one above that is futures and options commitments of traders data with one week. Lag nope we use to differ from a mental indicators to identify the state of the US equity markets time-series momentum the first intermediate term total return and the second is a longer term moving average to check robustness. We consider three different day. Lengths for the intermediate term total return namely sixty three eighty four and one hundred and five days roughly corresponding three four and five months respectively and we look at three different data links for the longer term moving average namely one hundred and fifty two hundred and two hundred and fifty days. This leads to nine pair. Wise parameter combinations to quantify the markets time-series momentum Bantam the cumulative timing strategy returns that we discuss next for strategy. One strategy to described above are composites average across all nine time-series momentum menton parameter combinations over the time period nineteen ninety seven to two thousand seventeen one dollar investment strategy. One which were call as long the market when the prior week SM. I is positive in the prime time series. Momentum is negative in his flat otherwise would have grown to two dollars and twenty five cents while one dollar invested in strategy to which is long the market when the prior week is negative and the prime time series momentum is also negative and is flat otherwise would fall into forty eight cents a loss of fifty two percent this latter result highlights the potential danger of being long the market when both it's time series momentum and the SMS negative in the paper we present a table that summarizes horizon the timing performance of the seventy s primer combinations conditioned on the market having negative timeshares momentum for each time series momentum parameter combination from the table able we see that for each time series momentum parameter combination upwards of several dozen ESA parameter combinations are significant at zero point zero one level likewise several dozen SMS parameter combinations are deemed significant by the outlier just at Mit Algorithm at the Alpha Equals Zero Point Zero one level. which isn't especially extreme threshold? In this case. As because periods of negative timeshares momentum represent only about twenty four percent of the entire sample of eleven hundred and fifty weekly data points but perhaps the most interesting result of the paper neighbor is the economic significance of the SMS ability to time. The market's negative time-series momentum to demonstrate this present a table that shows the average difference in annualized returns it's for each SMS parameter combination when timeshares momentum is negative averaged across all nine time-series momentum parameter combinations that is we look at the annualized returns when the SMS positive time-series momentum is negative. Compare those to the annualized returns when both the SSI anti-matter is momentum are negative. We do this for each of the seventy eight. SMI parameter combinations and for each of the nine time-series momentum parameter combinations taking the average across all of those parameter combinations to get one composite the difference in annualized returns we get an average return. Spread of fifty percentage points breaking this down when timeshares momentum is negative but the SMIF's positive the market on average returns thirty percent annualized when timeshares momentum and the ESA Meyer both negative however the market returns minus twenty percent annualized thus thus the SMI appears adept at defying when and when not to take equity exposure during periods of negative time-series momentum as one of the weaknesses of momentum as talk to us at allocation indicator is that it tends to maintain reduced zero allocations to equity as well after the market has bottomed momentum based investors are perpetually susceptible to missing out on the often substantive returns the tend to occur right after significant market troughs as they wait for their momentum indicators to turn positive the foregoing results suggest that by monitoring the F. M. I. Momentum based investors might be able to participate more fully in those post rebounds smart money factor timing next we examined the SMI's ability thirty two time the following smart Beta factors one S. M. B. small minus bake to html I minus low three U. N. D. UP MINUS DOWN FOR OUR MW robust modest week investment five CMA conservative minus aggressive accounting six Lt our long-term reversal reversal seven. STR short-term reversal eight B.. Betting against Beta and nine q m j quality minus junk. We observe three types of factors the first group one those that do better when you ask them is positive. Examples include S. M. B. S. T. R. Group to and those that do better when the negative examples here include Hmo arm W. C. M. A. L. T. R. B. J. and Group Three those that exhibit no evidence of Smi Tom Ability such as you MD.. The results for group won her only weekly significant. Thus are focused here will be group two factors to get a visual sense of Yelm is ability to time group two factors we plot the cumulative compounded timing returns for selection of these factors namely HMO are in w. w. b. a. b. and CWM J for each figure the semi perimeter combination corresponds to the one with the median median p value from among the selection of the more significant ones from the figures. We see that group. Two factors tend to drift sideways or higher when the prior week. SMS is negative and sideways or lower when the prior week Esam Semis positive. In the paper we present a table with the summary Results for the group. Two factors in the table factor symbols followed by a plus sign indicate that the factor timing thing was further conditioned on the factor having positive time-series momentum based on the data snooping results the SMI by itself has moderately strong timing ability for group two factors and and strong to exceptionally strong Tommy ability when the factors are in a state of positive time-series momentum for example when timing HMO high modest low unconditionally early twenty seven parameter combinations past the outlier adjusted M. H. T. Algorithm at the Alpha equals zero point zero five level when we condition on Hmo having having positive timeshares momentum fifty three parameter combinations register significant at that same level while twenty five or now deem significant at the Alpha Equals Zero Point Zero one level level and four at the Alpha equals zero point zero zero one level arm w really stands out in this regard when arm w has positive time-series momentum virtually the audit SMS parameter combinations significant at the outlier justed Alpha Equals Zero Point Zero Five level and twenty three bremner combinations are deemed significant at the Alpha Equals Zero Point Zero Zero one level group. Two's results appear to agree with observed market behavior as group two factors based on fundamentals or proxies for fundamentals for for example value versus growth or quality junk. They're short portfolios. Tend to consist of expensive low-quality Glamour Stocks Risk on markets I e when the SMS positive tend to reward these glamour stocks which Causes Long Short factor performance to suffer in contrast risk off markets. Are you in the semis negative. They tend to penalize Glamour stocks and reward quality which leads to improved long short factor performance. Smart Money Tatas allocation in the paper we develop a walk forward tactical asset allocation strategy based on the SM. I where we include estimations of transaction costs slippage and management fees and we compare it to the following alternative strategies. Angie's won a passive sixty forty portfolio consisting of US equities and bonds rebound quarterly to the ten month moving average strategy which is one hundred under percent in equities when the market is above ten month moving average and one hundred percent in bonds otherwise three a very of the ten month moving average strategy. That looks at both ten month. Moving the average and the four months total return if both are positive the strategy is one hundred percent equities if only one is positive strategy is fifty percent equities fifty percent bonds and if both their negative the strategy is one hundred percent bonds for the Cape Plus Trend Strategy. This is the value of momentum strategy presented in as news et al which combines the inverse of the cyclically-adjusted price to earnings ratio with a twelve month trend indicator note the equity allocations in this strategy range from fifty percent in two hundred and fifty percent rather than from zero to one hundred percent has with the other strategies five we also present results for Cape and trend a standalone strategies. The time period of the back test is nine hundred. Ninety seven to two thousand. Seventeen to better simulate real world portfolio management conditions for each strategy we average the results from three different execution variants for example for the SMI strategy one variant trades on Thursdays one trades on Fridays and one trades on the following. Monday's for the month and strategies one variant trades on the second to the last day of the month one trade on the last day of the month and one trades on the first day of the following month. The trading bugles we use are the broad. US Equity Market represented by returns from professor. Ken French is data library. And in Agra Bond Index represented by the Bloomberg Barclays Aggregate Cricket Bond Total Return Index. We assume four basis points of detrimental slippage relative to the closing prices on the day of Execution Commissions. A four dollars ninety five cents portrayed and a fifteen basis point management fee with the exception of the sixty forty strategy which has no management fee in the paper we show results across the entire back test period. Nineteen ninety seven seventy two thousand seventeen as well as starting one third and two thirds of the way through that time period from the figures and tables we see the bay strategy over all time periods generated higher returns with Higher Sharpe Ratios Higher Capture Ratios and generally lower drawdowns whilst many much less time invested in equities in its active counterparts this suggests the SEM. I may both more powerful and more efficient at identifying higher-yielding equity market opportunities than either value or momentum or their combination notably over the two thousand eleven to two thousand seventeen time period a period during which equity markets rose strongly and it was generally detrimental not to be fully invested in equities the Sim strategy outperformed its closest competitor. The trend strategy by seventy five basis points per annum while having a time average equity exposure. Sure of only sixty one percent compared to one hundred and one percent for Trent the efficiency of the SMS strategy does come at the cost of higher average monthly turnover however this turnover can be mitigated somewhat by rebalancing yes in my strategy at month end similar to the other strategies with little change in performance updated tattoo asset allocation Asian results through two thousand eighteen. Given that we now have a full year of out of sample data. We present the full period result extended through two thousand eighteen in two thousand in eighteen the SMS widen its performance relative to the other strategies largely due to the fact that are rotated completely out of equities in August two thousand eighteen and subsequently sidestepped the twenty percent market selloff in the fourth quarter Razz. All the other strategies had significant exposure to equities during that time comparison with cross asset strategies. One not in the paper APOR. We recently ran. Comparisons between the M. I. Strategy and Various Cross asset tactical asset allocation strategies found in the literature the cross acid strategies we examined include Won The Canary Strategy which has recently written up on architects blog. This strategy looks at the month end fast weighted moving averages e. m. and BND to determine whether it be in equities equities bonds for the following month if both fast moving averages are positive the strategy long equities otherwise astrology as long bonds to the lumber to gold strategy which looks at the lumber to golden ratio if lumber is opera forming goad over the trailing thirteen weeks the strategies long equities for the following week otherwise it has long bonds for lumber and gold performance performance. We use roller just a continuous front month futures. Three the ten year two thirty year strategy which looks at the trailing much return of a ten year. US Treasury note relative shift thirty year US Treasury bond if the tenure performs the thirty year the strategy is long equities the following month otherwise strategy is long bonds we use role adjusted continuous futures for the ten year and thirty year bond returns for the S. and P. Five hundred utility strategy which compares the four week return of the S. and P. Five hundred to the four week return of the utility polity sector if the S. and P. Five hundred is up performed over that period the strategy is long yes and p five hundred over the next week. Otherwise strategy is long. The utility sector in order to provide vied an apples to apples comparison across strategies however whenever this strategy wants to belong utilities we invest in an aggregate bond index instead five vitae as a benchmark we consider a buying whole strategy on the vanguard total market index vitae as before we consider three different execution variants moreover we use the same assumptions with regards trading vehicles transaction costs slip and fees below. We present the back test results for the entire time period. One Thousand Nine hundred seventy two thousand eighteen and for the last third of the time period read from two thousand and eleven to two thousand eighteen from the chart and table. We see that over the full period the SMS Canary Strategies were quite similar in the performance and risk characteristics both solidly outpacing the other strategies as well as the broader market vitae over the last third of the time period however from two thousand eleven to two thousand eighteen. Yes yes in. My strategy appears to begin separating itself from the pack returning twelve point three percent annualized over that time period compared to seven point nine percent for the Canary Strategy. Additional no results. The following results are also not in the paper but were generated based on suggestions and inquiries from Alpha Architects West Gray. We I look at the SMS ability to Time Equity the index ETF's other than the S&P Five hundred namely EFA EM Q. Q.. I W M Dia and he w j the underlying indices of which will have their own commitments of traders data. The following table displays the summary results using both the original. SMI and Index Pacific Smi's found by substituting the indices sees own commitments of traders data for the equity relative sentiment component of BMI for example when timing Q. Q. Q. Substituting the Nasdaq one hundred commitments of traders data in place of the S. and P. Five hundred commitments of traders data and so on we denote the specific results with an asterisk after the t.f symbol for each index to such a resolves odds using the original essay and the Index Pacific variant are computed over the same time period but the time periods differ between indices based on the historical availability of the index specific commitments of traders data for some indices the original. SMI has more predictive power for example q while for others such as em dia their own commitments of traders data adds value both E W J and EFA whose large allocation has to Japanese equities exhibit little or no statistical significance but do show some signs of economic significance that is the differences in their annualized returns. I am also shows low statistical significance but fairly fairly strong economic significance note the Kotei data for FAA em in WM have relatively short time. History is going back only to two thousand and eleven when we next examine the same equity index. ATS when they have negative time-series momentum to see whether the original sl or the index specific variants can time those indices indices during such periods the results presented in the following table as before we denote the index specific results with an asterisk notably both the original Smi semi and the Index Specific Smi's all show strong economic significance when timing the the seized during periods of negative time-series momentum that is several dozen parameter combinations with differences this is an annualized returns greater than twenty percentage points. The data snooping significance is also much higher across the board and now even registers for EFA e W J in Wm thus appears the SEM. I may be capable of timing negative momentum for indices beyond the S. and P. Five hundred. That's not too surprising. Given the correlations among equity indices next we look at the cross sexual behavior of the here. We compute the SMS for each of the six indices listed above plus the S. and P. Five hundred substituting and the index specific commitments of traders data for the equities relative sentiment component of the. Smi We then ranked the SMS each week and record the subsequent weekly returns corresponding to each of the different positions along the ranking hierarchy. We can can nate the respective returns each week to form time series corresponding to each of those ranks. We do this for n values of fifty to sixty sixty five and seventy eight and for 'em values of five through nine roughly the sweet spot the SMS predictive power and we average resulting time series of returns across those I am values at each ranking position. We take those time series of average returns and compound them to arrive at a total return for each ranking position. Below is a plot of these total returns turns corresponding to the different ranks along the cross section from lowest to highest the returns roughly a monotone increasing function of the rank further looking at the frequency. What's the indices appeared at the top or bottom of the rankings? We see that the two indices with the highest returns since two thousand and twelve. That is the date. When all indices jointly have commitments of traders data available salable namely spying Q. Q. Q. appeared at the top of the rankings with the highest frequency likewise the two indices with the lowest returns over that Timespan e F am appeared appeared at the bottom of the rankings with the highest frequency? These preliminary results suggest index Pacific variants the SM. I might be helpful. In predicting relative equity returns two thousand eighteen gene out of sample factor results. Lastly we present the performance of various smart Beta factors during two thousand eighteen. The returns are generally in line with what the SM I would have predicted. Yes semi was Bush equities from January first until August third embarrass him August third until year end based on the desired equity allocation of the SMS based Taiko Asset Allocation Strategy discussed just above below. We present the factor returns from each of these two periods alongside what one might expect given the polarity of the SM I when the SMI was bullish seven of nine factors actors behaved as Yes am. I would have predicted when yes am I was bearish four of nine factors behaved in such a way of the five factors at the SM. I predicted incorrectly. During the bearish tame three had negligible returns are MW S. T. R. and B. A. B. The biggest myths during the Berisha regime was with the long-term reversal factor lt L. TR which was predicted to generate positive returns but fell eight point nine percent instead the biggest hit during the bearish regime was with the market factor. M R F which fell twelve point when eight percent from August third until December thirty first smart but not perfect despite the strong economic and statistical performance of the SM. I it is not without its limitations and there have been multiple instances which smart money institutions were on the wrong side of the trade including recently the smart money largely exit equities and mid nineteen ninety nine but the S. Some five hundred and not stop until March two thousand almost a full year and about fifteen percent higher after institutions had become relatively bearish on equities in the midst of the financial the crisis. The Smart Money missed out on the twenty percent rally during October. November of two thousand and eight at the market bottom in March two thousand nine institutions were seemingly. We caught by surprise by the changing gap accounting roles that precipitated the vigorous rally off the lows. The smart money was still short. Equities when the market bottomed and did not turn lung until several weeks slater missing out on a good portion of the initial rally the smart money was also bearish equities leading up to and well after the two thousand sixteen election. They did not turn turned bullish in the aggregate until mid two thousand seventeen again missing out on a decent rally however when they did finally turned bullish the market began rising at a significantly faster rate than it had been prior to their getting long. The smart money was very long. Equities leading up to during and after the February two thousand eighteen selloff inequities the market. Did recover however over and went onto make new all-time highs in September two thousand eighteen but as the equity market was rising to those new highs. The smart money was selling getting out of equities at approximately twenty eight forty on the S&P five hundred in early August about six weeks before the eventual all time high. The smart money was bearish equities in December two thousand eighteen when the S. and P.. Five hundred bottom at twenty three we fifty and they did not turn long early February. Two Thousand Nineteen so as one can see the smart money indicators timing abilities proven imperfect over discrete intervals in general general however it does appear that institutions as measured by the SM. I tend to do reasonably well at identifying the broad market trends that play out over intermediate time horizons conclusion we construct a real time cross asset positions base relative sentiment indicator that measures how institutions are position equities and closer to late at assets relative to individual investors upon application of a wide array of statistical tests including ones that control for data snooping. We find the indicator appears to exhibit one highly significant again and exceptionally robust market timing ability to the ability to time time-series momentum particularly negative time-series momentum three the ability to time fundamentally mentally based smart Beta equity factors four more efficient predictive power than either value or momentum from a tactical asset allocation perspective. Five the potential to select equities ladies from along a cross section and six out of sample results that are consistent within sample results the SMS performance although perhaps extreme in many respects is consistent with numerous prior studies that show institutions routinely outperform individuals over intermediate time horizons is also consistent with the study of Durant at L. which knows the effect of cross hedging pressure on futures risk premia taken together past and present results lead us to the seemingly inescapable conclusion. If you want smart Beta it may pay to follow the smart money or as the adage advises the race is not always to the swift nor the battle to the strong. But that's the way to bet. Hi this is todd. Trust sitter the founder Financial Mentor DOT COM. I'm tired of present mebs request. My article bubbles bubbles everywhere how to protect yourself published right at the peak of the stock market bubble in just one day after the risk adjusted high on January twenty seventh twenty eighteen. This is part web series on the best investment writing and I'm honored to be included in all three editions of the series as a little background. Financial Mentor DOT. COM provides advanced retirement planning and investment strategy to build wealth. I published six personal finance books with the seventh coming out soon. Titled Risk Management. How to make more by losing less? I also provide a course teaching advanced wealth-building building strategy. So you can achieve financial freedom at any age rather than waiting around for retirement you can learn more at financial dot com now. I'm going to read the article. bubbles bubbles everywhere. How to protect yourself and again it's important members you listen that this was published January twenty seventh twenty eighteen? So you have a context for everything you're about to hear. The stock markets were marching relentlessly higher with hardly any corrections volatility was an extreme low. BITCOIN was all over. The press. Is The hot new thing. I want you to remember back to those heady days and how the bubble felt at that time as you listen to this analysis. bubbles bubbles everywhere. How to protect yourself all major asset classes are crazy overvalued? It's time for risk management. Richemont key ideas in this article. Discover how identify a financial bubble before it costs. You money the truth behind Bitcoin. How it's a key? He indicator of a market top the missing ingredient for historic final market top of epic proportions. And why being a smart investor means knowing knowing how to manage risk. It's time to get concerned. It's not natural for the. US Stock Market March relentlessly higher into extreme overvaluation relation with almost no volatility. It's one sided. It's abnormal a healthy market rotates up and down within an overall trend because there's there's a balance of buyers and sellers it's not natural for bonds to trade negative interest rates in many parts of the world with US interest rates approaching zero. It's also not natural for the yield curve to invert. That hasn't happened yet but very close where the short end has higher interest rates than the long end. A healthy credit market pays interest for the use of money and charges a premium for the extra risk of lending over long periods of time. It's not natural for people to exchange the equivalent of a new car for bits and bytes in the Internet ether. Otherwise known as CRYPTO currency created out of thin air by some unknown guy in the the dark recesses of his computer nor is it natural for any sound currency to rise by thousands of percent in a year or for common citizens to mine and thousands of new currencies in the year to cash. In on the CRYPTO mania. Even worse I can't show you what a healthy currency looks like. Because because all currency today's Fiat explaining the unhealthy economic backdrop to give rise to bitcoin and all these other financial bubbles I could add had real estate to this list is speculative frenzies because certainly qualifies but everything else is so crazy extreme that it makes the real estate bubble pale in comparison. Obviously that fact isn't healthy either. Something's wrong today seriously. Wrong as Warren Buffett said be fearful when others are greedy and be greedy when others are fearful fearful. Greed isn't a major asset classes. It's time to be fearful. I didn't want to write this. But this bubble bothers others me more than the last three the stock market in two thousand real estate in two thousand seven the Bond Market from twenty thirteen to current. This one is bigger here. It's better and it's disturbingly different. I provided written warnings to subscribers about each of the last three bubbles prior to bursting in the past I welcome the government manufactured buying opportunities for smart risk managers. But there's something wrong with today's bubble that makes me more cautious than usual. Not that asset bubble should be usual. But that's the reality of government manipulated markets. We live with today until now. I've been passively observing the escalating overvaluation in all the major asset classes enjoying the increase in values like other investors. It's been amazingly profitable ride. I even ignored. The bitcoin speculative mania. Ania an interesting sideline a curious. Little pet bubble if you will until I had a disturbing realization during December as prices pushed the twenty thousand dollars per coin level. All the prompted this article and yes. I've been sitting on publishing this article for two months because it bothers me so much. Something very important is happening. Bitcoin is a symptom and the conclusion is not what you expect. Let me explain how identify financial bubble as it peaks. I get interviewed by various media channels a couple times a week for the past three months. Every interviewer asked my opinion about bitcoin. Also my coaching clients. Of course clients are all asking me about bitcoin. This is only happened twice before in my career. The first time was the two years leading up to the two thousand final valuation top in the US stock doc market every client wanted hot stock tips for the DOT COM bubble companies with no business model clients were being valued in millions. The Nasdaq sold for an insane. Two hundred times earnings everybody involved in tech stocks was getting rich and it was a new era because the Internet was going to change all valuation relation rules for business sounds a lot like the blockchain and crypto currency. Today doesn't it. I started getting cautious in one thousand nine hundred eighty eight two years too early sold. My Hedge Fund investment management business to manage risk exposure and wrote public warnings before the site was a blog had had a newsletter typical of all true mania mania. The emotion was so strong and the beliefs so deeply entrenched. The people literally can't see the obvious in this case the canary in the coal. Oh mine was when one of my early coaching clients who built his fortune in tech stocks. Fired me and frustrating anger. When I had the gall to advocate risk management enjoyment to preserve his fortune in preparation for the bubble bursting? He believed tech stocks. Were in their infancy and disliked my message so he killed the Messenger Singer. Unfortunately he suffered life changing losses when that bubble burst. The second time it happened was during the two years leading up to the two thousand top in the US real estate market every new. Coaching client wanted to get rich in real estate. People are so blinded by the consistency and reliability. The gains that the conventional mentioned wisdom. was that real estate. Never went down seriously now. Nobody believes that today. My wakeup call for that bubble was when tenants for my Z.. Class apartment buildings with credit history. So bad they didn't even qualify to rent a six hundred dollars per month apartment. We're buying three hundred thousand dollar houses with with no down payment loans. They were called liar loans back then I began the process of liquidating investment real estate in two thousand five to manage risk and it took two years to unwind the portfolio before the eventual decline. The Canary in the coalmine demonstrating the emotion driven blindness of the time was when I was publicly Likley ridiculed for my decision to sell pay the taxes rather than ten thirty one the gains to newer bigger properties on never forget the verbal abuse by certain real estate professionals calling me stupid with one in particular so emotional that he was yelling at me with spill coming out of his mouth. The subsequent declined cost many of his clients their entire life. Savings the bubble does your I share those stories so you can see what investment bubbles look like as they occur and how people invest in those bubbles emotionally react to warning signs of problems when the bubble is in late stages the setup in order of occurrence has been one extreme valuation sets up the condition for extreme downside risk to next a speculative mania causes a final price acceleration phase resulting in an emotional peak. Is participants get rich. This attracts media attention in crowd. Psychology results three third participants. Who are financially committed to the bubble becoming mostly irrational and aggressive two contrary opinion four and finally certain technical indicators breakdown specifics depend on the market that is bubbled but that signals the decline has begun? I've been getting progressively passively more cautious over the past few years based on cycling overvaluation extremes in different markets since all the major markets except commodities are overvalued now but I've continued. Continue to dance while the music played because the other three warning signs weren't in place yet. My first of caution came the article. I wrote back in early. We twenty thirteen announcing the bond market bubble. I declared in that post that there was no positive. Mathematical expectancy net of inflation remaining in the bond market and the only sensible decision from an expectancy investing framework was to exit the asset class entirely while some embraced the idea others ridiculed it because it violated firmly held tenants of asset allocation diversification. They were blind reality. Even though the math behind the conclusions was obvious provable and stood the test of time overall. The response to that article was muted. The negative comments were rational indicating no emotional extreme had been reached even even though the math was unequivocal subsequent market movements. Have proven the thesis so far with interest rates remaining in the range where they were back on publication date and the bond on market providing the lowest five-year returns in all recorded history. The supporting the best case scenario conclusion in the article improving investors would have. I'm better off to reallocate two competing assets and away from bonds the longevity and depth of this credit market bubble reaching a five thousand year extreme is the key to understanding standing why all asset classes or price extreme now the credit boom is what's driving the equity and real estate booms because investors are forced to chase risk assets in search jeff yield resulting in risk being priced. That's why the stock market has continued marching to new all-time highs with the most amazing record low volatility as of this writing the only time the US market has been more overvalued as measured by the Cape Ratio is the narrow window of months preceding the final two thousand top other measures evaluation besides caper reaching all time highs worse yet valuation levels lower than today's comprise a WHO's who of the worst time to invest in stocks stocks. Not only that bonds as already stated are an uncharted territory. After years of zero percent interest rate policy this is is important because conventional asset allocation relies on bonds moving opposite to stocks during the decline as the Fed lowers interest rates in the face of economic turmoil but what that may be difficult to achieve from the currently low interest rates. Additionally real estate has risen to extreme bubble valuations but remains beneath at the two thousand six two thousand seven record valuations finally commodities are hitting record low valuations relative to equities. This is also extreme and rare but in the opposite direction of all the other asset classes. The point is that all major asset classes this is our at or near an extreme valuation at the same time. That's important three ways. devalues you any asset to understand the implications of that statement. Let's first establish a common base of understanding by looking at the three ways to value any asset one the greater fool theory in real estate they call it comparable sales and paper assets like stocks and bonds. Its most recent transaction. The implication application is the current market price represents fair market value. Because it's the price willing buyers and sellers are trading at the problem is it's absolutely useless for indicating bubbles bulls. Because it really only tells you what other fools are willing to pay for something to assets in real estate this would be replacement cost most analysts. or how much it would cost to rebuild the structure net of depreciation in stocks. Its book value or curation show as a measure of the underlying assets per share her. This is a very important measure of risk because it tells you the premium or discount you're paying relative to what the underlying asset is worth extreme in premiums are associated with periods of irrational exuberance delivering high risk an extreme discounts or associated with periods of fear lower risk and higher higher subsequent investment returns three income in real estate income is measured as an ally or net operating income them or in retail residential. It's often measured as gross rent multiplier in the stock market it's the PE price earnings ratio commonly measured through cave or cyclically suggested price earnings ratio. Income is my favourite valuation measure for indicating risk because ultimately the value of any asset is the discounted present value. Hi It's cashflows. That's fancy economic jargon for saying an acid worth what it earns it measures present worth based on the future benefits of ownership up each of these three methods separately provides a different objective measure evaluation for any asset interesting conclusions develop when you compare and contrast all all three valuation measures together there are two key points to keep in mind with valuation analysis. One extreme evaluation provide the most information value strong statistical significance occurs that affects mathematical expectancy at valuation extremes. Like today to the second important point is that price and investment value or two separate and distinct things that should never be confused failure to make this distinction will eventually cost. Did you money now. Despite the academic rumblings about efficient market hypothesis and other theoretical frameworks supporting buying hold philosophy. Statistically statistically valid investment opportunity occurs when price and investment value diverge in an extreme way. This is occurred at selected times throughout history and more importantly and and the reason for this article. It's occurring again now. Today's investment bubble revisited. And so that long winded analysis evaluation methods sets the context for understanding our current asset bubble. I safely called an asset bubble because none of the major asset classes stocks bonds or real estate make any investment sense when judged against the only to valuation criteria that matter assets and income as described above. They're all priced at or or near an extreme risk premium relative to both underlying assets and income implying several important conclusions one expected returns over seven seven to fifteen years will be lower and more volatile than historical averages. That's politically correct language for saying something unthinkable to buy and hold crowd we. We have entered a period where the risk of owning the stock market over the next seven to fifteen years does not justify the reward over that same time period to the the only thing supporting the current bull market in the major asset classes is momentum and greater fool theory valuation metrics as described above as long as momentum prevails. The mark can still rise dramatically over the short term momentum is a powerful force however mean reversion ensures that all short term gains between now and the final top will be given back abruptly and then some three a smart investor should be on the lookout for the remaining bubble conditions as described hyped above to be satisfied thus indicating the final turning point because valuation and anecdotal evidence are very blunt edge tools. That can be wrong for years. His overvaluation is necessary. Precursor for a bubble. But it's not sufficient notice how each of the previous bubble top descriptions in two thousand and two two thousand seven discussed to your window. The same is true with this analysis so while I don't want states unequivocally that we've already entered an unfavorable intermediate media term investment horizon of seven to fifteen years items two and three tell us the short term remains indeterminate until the remaining factors narrow the time window stated another way. We're close to the end of this historic bull-run resulting in an asset bubble of epic proportions that will ultimately result in life changing losses to investors but certain puzzle. Pieces have been missing until recently the window is getting much closer in closing. There was no mania until now the most disconcerting aspect of this entire bubble has been how comet is. That's that's not. How bubbles blow up most bubbles finish off the overvaluation phase with the rapid price acceleration phase the causes enriches for investors resulting resulting in mass media attention in polarization of public opinion however this final acceleration phase usually begins from lower valuation levels than we have today day and usually occurs in a single market not all major markets simultaneously? It's where all the symptoms of excess appear usually usually in other words even though all three major markets have relentlessly march to record price highs in record low yields creating historic overvaluation. There's been no clear. Indication of speculative fever to create a vacuum underneath prices resulting in a collapse instead. There's record low volatility. No no animal spirits. No asymptotically growth curves no crazy stories of sudden riches in short until recently. We've seen none of the circumstantial evidence supporting insane. Animal spirits taking over the markets in a fit of speculative greed every bull market has its poster child of Irrational Exuberance Uber Ins- were proven economic. Commonsense was tossed out the window because this time is different. The seventy three seventy four bull market had the nifty fifty. The the two thousand top was marked by the DOT COM bubble in the Internet revolution. The two thousand seven Top had insane real estate valuation supported by belief that real estate never went down which brings us full circle today. Bitcoin and the reason for this article warning you that we've finally entered the window of time to take risk management seriously. bitcoin fulfills the speculative mania criteria. There's a long history of bubbles being marked by the issuance of a new type type of currency the catches public imagination resulting in feverish trading John Law issued shares of the Mississippi Company Dutch Tulip Mania included included futures trading to capitalize on speculative fever when underlying transactions were difficult similar to the bitcoin fever. Today Bitcoin has finally delivered livered on one of the key indicators of important market tops and irrational speculative fever based on this time is different. BITCOIN hasn't asymptotically product price. Climb stories abound of ordinary people getting instant riches from bitcoin. bitcoin is everywhere in the financial press. I can't be interviewed without being asked. That's my opinion about it. My friends and clients are all asking me about it. bitcoin completely fails the two primary valuation criteria listed above for analyzing an investment investment. It has no intrinsic value and yields no income therefore bitcoin is purely a speculation not an investment just as tulip bulbs and Mississippi impeach shares. Were in years gone by it. Could go to a million per coin or it could go to zero. There is no intrinsic value except what human minds decided to give it. BITCOIN is rallying under this time is different. Moniker it's a new currency free from government manipulation limited in supply and part of the digital original revolution. It's different this time because every bubble is always different every time. But there's one problem with this analysis the important overvaluation we need to worry about is in stocks bonds and real estate however the bubble has occurred in a totally unrelated market cryptocurrency. That difference bothers me if the claps were current stocks than the normal order of events should be to inflate the bubble in stocks to set set up the vacuum under prices for the ensuing decline. That hasn't occurred yet which makes this particular bubble so disconcerting in other words get bubble valuations relations in stocks bonds and real estate right now again. This was January twenty seventh twenty eighteen but no final price acceleration phase the polarize is public emotion. Listen the extreme overvaluation levels sets up the necessary condition for the subsequent price collapse but historically that hasn't been sufficient alone also the fact that all all three markets are extremely over valued at the same time as unusual and risky. The point is there's usually an acceleration phase in public mainly in the market that collapses. We've we've seen it in Bitcoin but not in the other major markets. What scares me about? Bitcoin I- bitcoin is a symptom of the real problem. It won't the cause. Let me be clear. I believe the blockchain is one hundred percent the revolution that proponents claim it to be. It's going to change life in ways. We can hardly imagine Agean. Just as the Internet was one hundred percent the revolution it was claimed to be back in the nineteen nineties. That part of the story is likely real but just as investors in the DOT com bubble got wiped out despite the Internet fulfilling its destiny. Investors in the CRYPTO currency bubble will face similar fate despite blockchain fulfilling its destiny Eh. So the scary part is not the CRYPTO currency bubble. That's too small too obvious and two disconnected from important economic fundamentals. Anything more in an interesting distraction. What worries me is the premise? That's driving the CRYPTO currency bubble. It's anti-government the speculative fever is driven by. The masses says distrusting all government economic manipulation and Fiat currency. If you aren't clear about this premise then just try to imagine. Bitcoin gaining speculative interest in hard currency CONC- world backed by gold where no inflation existed. A dollar would have the same buying power three generations from now as it has today governments balanced their budgets budgets. And there was no looming debt crisis when you wrap your head around this strange world order. You realize there'd be no crypto mania because there would be no problem album for crypto currency to solve stated in another way the string of financial asset bubbles over the past twenty years all other underpinnings to Fiat currency and government policy manipulation the economy the current cryptocurrency bubble is the most overt example. The fact that the current bubble jour is is a new age. Currency outside of government policy delivers a disturbingly poetic reference to all that is economically wrong today with government policy and the resulting mass psychology college driving the animal spirits in a perverse way. Bitcoin is become a positive bet against continued government. Success at a fabricating stable economic growth through financial manipulation. I say perverse because the normal loss of faith bet would be to sell risk assets and ordered the domestic currency itself which is the dollar. But today's speculative bubble is so persistent and pervasive across all asset classes that it managed to create a new long long speculative bubble. That's essentially a short position against all. Other speculative bubbles happening at the same time worse yet the public gets it disbelief in our Fiat. Financial system is now so widespread that it resulted in an anti-government speculative fever among the masses. Meanwhile risk assets relentlessly marched. New Highs like lemmings to the see. I've never seen anything like it. This time really is different. Sort of I've but in all the wrong ways it's not good the other missing ingredient another aspect of bubbles that I've learned to expect effect is being personally attacked near the top for advocating contrary opinions that include prudent risk management. It has happened every time and marks. The emotional peak peak were public opinion is so one sided that the idea of managing risk evokes an emotional irrational response until a few weeks ago. It was missing from in this bubble but that changed as well. I was recently interviewed for a podcast. And I'm not listing the name here because nothing is gained from pointing fingers and that podcast is targeted at the fire or financial independence. Retire early community in that episode. I pointed out how the Convention Investment Approach to fire which is low cost passive passive index asset allocation in paper assets lacked adequate investment mismanagement for the current market environment. Surprisingly it was the most controversial polarizing interview in the show's history garnering more comments in the facebook discussion group than any other show listeners. Either loved it declaring it the best episode Passover or they hated it. I was called a scumbag. My professional reputation was questioned and I was personally attacked. People were so emotional that several said they had a hard time listening and others commented how it was a sucker punch to the gut seriously. It's an audio interview where I discuss discuss financial topics including risk management. What gives I've been on more than two hundred podcasts? It never got a reaction like that. The normal responses listeners appreciate an interesting conversation. We're different ideas are shared after all. It's just a conversation. Her of this interview is different because I made a crucial mistake Jake. I failed to reconcile the fact that the market had reached an extreme. Overvaluation does polarizing sentiment with the fact that this community was fully invested in this bull market. It with no serious risk management discipline their own survey shows the vast majority hold ninety percent or more of their assets and stocks. Many have recently gained early financial independence or expect to retire soon based on their stock portfolios. In hindsight it's obvious they'd respond emotionally ocean aggressively to alternate viewpoints dough turf financial security and future life plans depend on buying hold working in the future like it has in the past as it turned turned out. This polarized emotional response was identical to other market tops. Where in nineteen ninety nine? My coaching client that made his fortune in tech stocks. Got Aggressive and fired me. Because I advocated risk management to protect his fortune and the real estate pros in two thousand six cuss me out and called me stupid for cashing out. All my investment real estate and paying taxes to manage the downside risk in each situation the key point is these people were invested. Their financial security is dependent on the bubble. Does you're continuing that. Makes their emotional response. A key contrary indicator the final missing ingredient and so that leaves is this with everything in place almost for historic final market. Top of epic proportions measured in terms of a decade or longer. Except except for two things. One we have extreme over-valuation worse yet. The overvaluation is an all major asset classes at the same time except commodities. He's which are the polar opposite to we have a speculative mania that has captured mass psychology. Worst yet the speculative mania is anti currency and anti-government he government implying loss of confidence in the system that supports the bubbles in all the other asset classes three. We have an emotional peak demonstrated by aggressive aggressive behavior. To contrary opinion advocating risk management. And so the only question is where's four. They're still two things missing to make this analysis rock-solid solid the first factor missing for the major markets to actually breakdown analyzing the breakdown is beyond the scope of this already too long article because it encompasses market internal it'll indicators like credit spreads divergences between equity indices. You'll curves investor sentiment price momentum quality indicators economic indicators emanate an IPO indicators and more however it's worth noting that this article was published on January twenty seventh two thousand eighteen rather than months or years ago when valuations were already high implying the market internal indicators are getting warmer but warm is not rolled over yet so until the various internal indicators fail we still lack clear evidence of momentum failure that means the animal spirits remained in control. The clock is ticking. But it hasn't struck midnight Eh. Quite yet the second thing that's missing is how the acceleration phase causing sudden riches resulting in mass media attention occurred in an unrelated related market cryptocurrency. None of the major markets stocks bonds real estate have gone through the sudden price acceleration phase. That typifies a final top up yet. That leaves open the possibility for that sudden acceleration phase to still occur however your key takeaway should be how all the other evidence makes it clear how this party can only continue for the short term from now to less than two years on the extreme high side probably less were now at the point where this is a bubble looking for a pin any continued rise just gives further to fall in any new gains should be rapidly we reversed once the downturn begins. This party is on borrowed time. Which is why I wanted to give you this warning? Yes it still possible possible for one or maybe more of the major markets to run through a final price acceleration phase to cap things off which is what would cause the longer time horizon pushing two years but overvaluations already high enough and there's enough anecdotal evidence in place that it's prudent to ring the warning Bell Bill and call on the defensive team risk management to protect against excessive loss Howard's management works risk risk management acts like insurance. It's a complete waste of money when there's no problem but when disaster strikes it'll save you from suffering a life changing loss. You intuitively understand how this works with homeowners insurance where you hope that every renewal is a small waste of money but when that rare fire strikes insurance assurance will be the only thing that saves you from Financial Disaster Smart investors who practice management have been renewing their policies without so much as a spark I e market volatility not to mention a fire a bear market for years. It's been a complete waste. That's about to change inge. Nobody has a crystal ball so I can't tell you exactly when mass psychology will sober up or if we'll go through a final acceleration phase in the major markets before they collapse APPs but mean reversion assures it's far closer and we'll be far uglier than any investor wants to endure on a buy and hold basis. There's enough evidence in place that it's proven to get cautious yes it would be normal to experience price acceleration from here first before collapsing which could extend the timeframe up to a maximum Aksu two years but the breadth and depth of the overvaluation is already abnormal. This isn't just one market that's overvalued it's all the major ager markets except commodities and the cryptocurrency mania reaching mass consciousness is a warning possible loss of faith in government economic policy solutions nations. I e the Fed put which is particularly worrisome because belief than the omnipotent fed policy is the only thing that shortened each of the prior collapses lapses resulting in ever increasing bubbles. For these reasons it now makes sense. To Err on the side of caution but getting your risk management strategies in place properous properous management will allow you to still participate if the party continues but give your portfolio downside protection when the bubble bursts. Why can't explain all the risk management strategies? I just covered in the course. A few actual ideas include one deep diversification where he diversified strategy and source of return not just asset asset class by identifying sources of return that inversely correlate with the stock market to diversify certain business in real estate assets where the outcome driven by I am micro-economy three diversify into alternative assets for switch to investment process that includes an exit discipline. Five diversify into favorably valued assets like domestic value plays certain emerging markets commodities and commodity producers and. Much much much more there. Many risk management strategies to consider that can help you protect your wealth. But you can't wait until everything rolls over before you put them in place. Once the tide goes out everyone can see who standing naked the current extreme evaluation and the other antidoto evidence makes it clear that an equally equally extreme meaner version is a fatal comple-. It's only a question of when not if you don't have to predict the final outcome to benefit you just have to to prepare in advance. I hope this warning has helped you. Think through the issues so you aren't caught by surprise and so without a big. Thank you to Med for graciously handing me the microphone in Lima to share this information with you. I hope you got great value from that article and if you'd like to learn more than please visit financial mentor Dot Com. We'd love to have you as part of our community where we give away a ton of free resources to help you attain your financial goals. Thank you hi. This is is Ben Johnson. I'm the director of Global. ETF Research with Morning Star Morning Star is a global research organization dedicated to empowering investor success excess to learn more about us you can find us at Morningstar dot com you can find my teams work on the ETF TAB of Morningstar Dot Com mm-hmm and you can find me personally on twitter at M. Star Etf us. I'm going to read a piece titled When Markets. Let's get tough. Don't look in thinking. Fast and slow Nobel Memorial Prize in Economic Sciences laureate Dan economist adamant summarizes decades of work. He has done to better understand the way that we think. The book title alludes to the two speeds are in Commons terms systems that we use to process information system. One is fast system to is slow system. One allows us to respond quickly. We to external stimuli with limited information system to is more pensive and calculated. Each has its own benefits and drawbacks. And together they can help explain the various cognitive biases. The conon in his close collaborator. Almost taveras key documented. We we owe system one and immense debt of gratitude or not for our ability to react quickly. We wouldn't be here system. One kept our ancestors from being mauled by mega-fauna and while system one is still very useful to us. There are many modern day applications. Where can do more harm than good? Investing is one of them. The markets have been fairly placid for most of the past decade but they will inevitably get roiled once again and pain will be pervasive races during those times. When there's nowhere to run and nowhere to hide it's important to be aware of how air conditioned to respond to these situations and think of ways we can avoid succumbing to our instinct? Here I'll revisit. One of the seminal works from the field of behavioral finance which explores how investors investors respond to and demand to be compensated for taking risk. I'll also share my thoughts on one way we might be able to better cope with tough off. Market Environments nearsightedness in their paper myopic loss aversion and the equity premium puzzle Slum Open Artsy Z.. and Richard Thaler introduced a concept. They called myopic. Loss aversion myopic loss aversion is an attempt to marry to pre existing lines of research search. The first of these is the equity premium puzzle. We know that over very long periods stocks have outperformed bonds by a lot according to data from Ibbotson. SBB I a dollar invested in us. Large cap stocks in one thousand. Nine hundred twenty six would would have grown to seven thousand three hundred fifty three dollars by the end of twenty seventeen. If you invested that same dollar in treasury bills it would have become twenty one dollars. Stock should offer higher returns than bonds. Because they're riskier but the magnitude of this out. Performance is puzzling. The second can party in this marriage is loss. Aversion investors. Feel more pain when they lose money than they do pleasure when they make money so they demand high compensation compensation for taking chances. Loss Aversion also leads investors to check their portfolios regularly. Benard seeing failure claim that these two who effects can help solve the equity risk premium puzzle. They found that investors who checked in on their portfolios once each year behaved as though they had a planning horizon is in one year even though they're planning horizon a measurement of how far away were from their long term goal might have been many decades away but the odds of losing money in risky assets with positive expected returns like stocks declined with time. BANARDI failure argued that investors perception of risk increases is they check in on their portfolios more frequently so they demand a large equity risk premium to compensate for the greater variability of returns. What's this nugget in the others? Own Words is most relevant to this discussion quote the longer the investor intends to hold the asset the the more attractive. The risky asset will appear as long as the investment is not evaluated frequently and quote the further we remove who've ourselves from the inexplicable day to day gyrations of the market. The less risky we will perceive our investments to be this in theory. Should help us stay. The course a picture is worth a thousand words. The exhibit have included in. My article is intended to help frame the potential value you of longer evaluation periods. I hope it will keep things in perspective. During dark days in the markets the top row shows calendar year returns for or the Investors Share Class A vanguard balanced index. Which I've chosen? As a proxy for a broadly diversified portfolio subsequent rose show annualized returns for that fund over the ensuing two to twenty five year periods where applicable there have been bad years during which investors have suffered offered big losses but the pain of these losses is temporary returns for the Vanguard Fund were negative in just five of the twenty five calendar years included. Here it's returns. were positive in each of the multi year periods extending beyond for years the longer the period the narrower the range of returns and the higher the median return markets have rewarded investors who can tolerate temporary discomfort. Don't look talk is cheap and charts like these are two suffering through losses is far more taxing than any picture or a thousand words can capture most investors reaction to market malaise visceral many may be permanently scarred by experiences like the global financial crisis their memory of these events can have a lasting effect on their willingness to take risk. So how might we be able to use what we know about. Myopic loss aversion to bypass system one to avoid responding to the markets troubles in a way that will later regret. I think the simplest this way though it's far from the easiest is simply stop looking. How often do you check your portfolio once a month more less as the exhibit lays bare the more often you check in on your portfolio? The more likely you are to be disappointed with what you see. I think that the less often when we look at our portfolios the less likely will be upset in tempted to tinker tinkering. Rarely if ever helps us meet our long-term term goals it more likely results in costs both directly measurable and implicit the measurable costs include commissions in taxes axes. The largest implicit cost of tinkering is opportunity. Costs missing out on tremendous market returns. Because you've been parked in cash for the past past ten years. Still Shell shocked from the last bear market. That's an opportunity cost over the long term. The market will do most of the heavy lifting lifting for us. Assuming were along for the ride so if you have a long enough time horizon stop watching. CNBC forget get your log into your brokerage account your ignorance of the day to day. Fluctuations of your portfolio will likely yield blissful results for those that have more the immediate spending needs retirement a large purchase. And so on. It's more difficult to to now. That said positioning your portfolio. More more conservatively can help I. It will boost your odds of meeting. You're spending needs and perhaps just as importantly raining in volatility will curb. Curb your urged Pete. Hi My name is West Gray and I am the CEO of Al Franken Tech which is an asset management firm with an impact impact mission to empower investors education and without further. Do I'm going to discuss an article. He wrote called academic factor portfolios. Those are extremely painful. Unless you're an alien imagine you're an alien and you land on planet Earth in one thousand nine hundred eighty seven which is when did is that starts here and you're given a mission. You're told that you need to solve the simple problem. These humans need to you make money and grow their wealth. And you were told that you need to compound a million dollars and the goal is to compound your extraterrestrial terrestrial faceoff and your present with a few options you I head over to Ken French's website because apparently invented the Internet back back in the twenties. And you can do that and you. The reincarnated Ken French and become alive in one thousand nine hundred seventy two but fantasy land aside. You have this data data and you're like wow. Let's do this Pharma. French value concept breeders by the top ten percent cheapest on book to market in the rebounds it and market cap weighted and then let's check out this momentum thing. They got on their website. Where apparently just by the top ten percent highest S. momentum stocks are the highest rose strength securities rebounds and every month and market cap? Wait that and then there's this thing called the S&P five hundred reaches own basically the biggest five hundred stocks and market cap. Wait that and then there's this other thing called bonds were look at. Let's get the ten year treasury treasury bond in Manassas but they alien has some special power and the special power is the ability to see the future with perfect foresight. So that's obviously a great capability if you're GONNA try to compound a million dollars in compounded at the highest rate possible over the next hundred some odd years this situation as alien as the going to do a little factor investing analysis and so the Aliens GonNa decide to look into the future and identify the results which is to be gross of costs and fees? Because you don't know what those are on your Liga this period from nineteen twenty seven to two thousand seventeen and you're gonNA pull up the charts in what you're going to see. Is the compound annual growth the threats on the S and P's essentially ten percent from nineteen twenty seven all the way up until this analysis here to two thousand seventeen not bad tenure bonds around five percent. This whole value thing is interesting. It's around twelve percent to get about two percent kicker on Ashby ask five hundred in this momentum thing is really crazy. It's almost seventeen percent so you get like a much bigger comparable growth rate versus the the SB five hundred. So deleon sits back and thanks well. He's momentum things definitely seem more interesting than as the five hundred and certainly more interesting than this ten year. Bond thing if my goal here is to try to compound my wealth at the highest rates possible along all and so you know they in is going to look at the invested grow charts type it into their supercomputer technology. Don't even know. Oh about and they're going to walk away and say wow Jesus value momentum things sure seemed pretty interesting options conclusion. Let's do momentum that's is clearly the highest compagno growth rate available out there. If we got a second option. We'll do this value thing. And of course because as an alien alien and he hasn't been thinking to hardy those think about combining he's focusing on one at a time so he goes with momentum the issue though is asset managers. Anders are not aliens right. They're going to take a different look at the data. Then this avian that we drop onto the planet or two dozen data analysis Ossis so now imagine you're not alien but you're an asset manager and you're also living on the earth in nineteen twenty seven and you have an incentive to compound wealth but also to keep your job and you're specifically endowed with an amazing power equivalent to the alien. You have the ability to see the future with perfect foresight not a bad capability to have a feared asset manager. And the ASA mayors. I told the solve the same problem as the alien compound million dollars as best she can but the goal here is not necessarily Acerra compound. Your face off the goal in the back of the mind of the asset manager is to not get fired because you can't charge fees on zero a M and have a lot of W. Two income which would not be a good situation so unfortunately this asset sit manager lacks would is truly the most amazing powerful and that's the ability to distract their own attention or her clients from focusing on short-term relative performance which means that this asset manager needs to Kinda simultaneously. Solve two problems. They need to to make their clients money for the long horizon wealth creation but they also need not lose their job along the way so they do the sandler similar analysis as alien and look at Ken French's website they look at value. They look at momentum they look at five hundred and look at the ten year treasury bond. Aw and the acid manager does her houses same researchers alien the acid magic comes to very different conclusions and she says is Whoa ow value and momentum or certainly the most interesting from a compound in perspective however she also recognizes that her investors are anchored on the S. and P. Five hundred as a benchmark and she knows if she underperforms for a five year period she will almost certainly certainly be fired by your five any underperformance. There's going to be a hundred other competing asset managers out there lining up to tell her client that it's totally unacceptable to underperform by five years and that that they have special powers to do much better and they can beat the S. and P. Index so the asset manager has her research analysis do some additional analysis not just on the absolute returns in hard stats stats like alien. But also do some now says on relative performance and in particular. She looks at the rolling five year. Relative compound annual growth rates of these various strategies generic value strategy generic momentum strategy and the bonds all relative Tiv- to the S. and P. Five hundred pulls up the now's and unfortunately it's not pretty. There are multiple five veer periods when value and this momentum strategy drag on the SBA five hundred by large margins which in effect guarantee you heard a pink slip in fact the generic value Shejie outperforms SB five hundred over five year periods. Only sixty five percent of the time. I'm which means there's about a thirty five percent chance that if she goes with this generic values strategy. She loses her job. Momentum definite looks a lot better header over five years stretchers winning about you know nine out of ten times. So she's GonNa Focus on the momentum approach dig a bit deeper because you only have around a ten percent chance of losing your job but like the Alien Dea that upside is is pretty compelling what the asset manager does next is she wants exam. Am and a hypothetical portfolio. That's going to go ahead and invest dollar in this generic momentum portfolio in shorts the S. and P. Five hundred because even though the momentum portfolio in general over any five year rolling periods tends to be destined p. They're certainly a chance of getting fired along the way. Let y'all wants understand the dynamics of this role to performance over time so she looks at the draw. Downs of of essentially being long this generic momentum strategy in short the market the kind of map out. How much pain in English? From a relative performance standpoint she would have to endure over this proximity hunters year period from nineteen twenty seven all the way up until essentially the present a day and while the results come back and they're not pretty so while the five-year rolling hit rate is high in the sense. That ed over any five year period in general momentum's will have a winning record relative to just buying the Jaren Nerik market. There are certainly plenty of opportunities to get fired whereas maybe you didn't have over the five year period you one but there's plenty of two and three ear drawdown periods. Where just bomb the chart? She sees Darnall six or seven times where she's underperformed by anywhere from thirty to fifty. The percentage points on the S. and P. Five hundred obviously not a great thing to present to your clients if you plan on staying in the best. She does analysis on value. Hoping that maybe it's less intense because it doesn't have as much upside. It's certainly got not a great hit rate over the five years in. There's about thirty five percent chance that it's not gonNA outperform but she does the same analysis and looks at this portfolio that's long as generic value strategy in short short the market to get a sense for the dynamics of the relative performance not only over five years but over varying windows unfortunately is it's not looking good. Either she identifies multiple periods where again being under the generic index by thirty to fifty percentage points. This is not rare in fact it happens fairly often so the portfolio manager quickly refers back to the junior analysts. Who done all this results results just confirmed the results? Like what's going on here. This is not gonNA work. We need to stick to this. Be Five hundred and not do any of these value or momentum the things that we just generated off akin French's website because they are simply too dangerous. Why does this matter? Well what this stupid example example in stupid thought experiment of identifying how an alien would assess the marketplace and the data With the goal of their face off and an asset manager who also wants to compound face off but not lose their clients is pretty pretty interesting and it really highlights how careerists incentives play out in the acid measuring. Streep it in the simple portrayal above this tailings. Well equipped to make an investment decision with very limited baggage short-term relative performances even really consideration because it doesn't help alien insist solve its problem where the alien once stick compound. It's extra terrestrial face off and who cares what s and p's doing because it's clearly early subpar to achieve that goal however for the Non Alien this relative performance my matter a lot like would you do a job that you knew with with perfect foresight would get you fired. Thirty five percent of the time. I don't know probably not you know. How much does this matter? How is career a risk premium priced in the marketplace in? Can these so-called anomalies In particular we're looking here at value. Momentum factor strategies could these be easily walked away by machine learning algorithms instant data access in commission free trading. Well maybe not Cypher. From vichy. Didn't think so over twenty years ago when they wrote a paper about this this incentive problem here between the alien and acid measure. And I really don't see why. This incentive misalignment has been vanquished in today's world so perhaps the aliens biggest biggest superpower hair isn't the perfect foresight ability but really the ability to invest in strategies. They're frankly no normal investor could reasonably Hundley deploy and as has been pointed out on twitter. And many other things it'd be. I would be remiss if I did not point out that advisors who have a passion for client education can possibly help their clients capture. This career risk premium and the hope is is if there's products out there that are meant to specifically exploit this career as premium and advisers could get their clients to be more alien alien like in their ability to do things different and participate and sections of the marketplace. Were presumably they have an edge. It might actually help the adviser and their client achieve different. You know client outcomes that maybe couldn't be achieved by simply buying this five hundred and doing everyone else does so in short. Thank I can alien try to avoid thinking like everyone else Best luck out there. Investing and look forward to hearing more from the listeners out there you always find out what we're up to it. ALF ARCHITECT DOT COM. They very time appreciate listening. Hi Hi this is Fraser Rice. I'm the author of wealth. Actually I focus on intergenerational wealth transfer issues and family offices I can be easily reached at Fraser Rice Dot Com. Tom and wealth actually DOT COM. I'll be reading an abridged version of chapter two of wealth. Actually this focus is on the communication issues around wealth and the next generation. I hope immune joy it. When is the best time to communicate your plans around your wealth? Good communication is the foundation for a good organization and his unromantic as it sounds a family's families and organization when communication is poor or nonexistent it ultimately leads to mistakes distrust in pain. However when it comes to communicating your wealth planning dear loved ones there are appropriate times in stages for people to receive the information telling a child too early can affect their ability to develop a strong work ethic or create future self esteem issues news? If you tell your son that he's worth thirty million dollars. When he's only sixteen years old he may not have the ability to process or manage the information the way an adult could when when it comes to the goal of developing productive motivated children? I'm not against parents. Who decided to withhold information until they feel their child is ready for it? However ready is a subjective label? Will the parents will have to decide when their children have the ability maturity and mindset. Take that information and use it productively for most families. My preference is to withhold this information information from children until they are out of high school or College. There's some high school or college kids who can handle that kind of information but most can't many college students are dealing with their own challenges challenges and personal development and identity the figuring out what they've been put on the earth to do and exploring what they're good at adding money and potential entitlement and self esteem issues to the mix only confuses the issue as a prerequisite to communicating with their children about their wealth. It's common for my clients to want their child to demonstrate the ability and and desire to roll their own boat. Rowing your own boat can mean different things to different people but generally means having the ability to be financially independent understanding the value of a dollar and having the motivation to make their own way in life when any or all of those ideals are achieved. It's often a good time to begin explaining the resources available for the current and future benefit offit which can allow the child to use these resources in the planning of their own lives in many trust structures wealth is distributed regularly. At certain ages. It could be one. Size will distribution every ten years. Starting at the age of twenty five this distribution scheduled won't diagnose someone's readiness for the wealth but it tends to align well with future life milestones uh-huh at twenty five years old. Hopefully the recipient is out of college or finishing up Grad School in a distribution can help them land on their feet at thirty five. The odds are they'll be married and have families at forty five. Their families may still be growing or the oldest children might be heading to college. Regular distributions can ensure resources or. They're for for children throughout their lifetime. But what if your child is the next Elon. Musk and needs five hundred thousand dollars at the age of twenty to start the next text. Tesla do you want the once. It's a decade distribution structured hinder their access to resources there are ways to get around that issue and structure wealth accordingly. If the flexibility is important to you to finding your goals for your children will lead you to the best rupture for distributing wealth into finding financial goals for children and determining wind to communicate your message about wealth. It's important to consider each child's maturity level and the unique issues affecting their ability to manage themselves and their wealth. If they're not ready their motivation level or self esteem could be in serious serious jeopardy and a sense of entitlement will take root worse yet from a financial standpoint. Those kids could develop extreme spending habits and be governed by structure that they don't understand stand or ironically trust. I find that it's good for children to have an appreciation for how the wealth was created. People become worse public citizens when there's no connection connection with the wealth it's been generated and no sense of the history of their families. Success many of my clients take great pains to educate their kids about the family's legacy where the the money came from and who currently works to manage the wealth in appreciation has gained for the family members who manage and drive the wealth as well as the employees who work hard to keep. The family trusts healthy and funded. There is no perfect scenario because every family will have members who make mistakes however when everyone in the family has a baseline level of respect for where the the wealth came from it helps them become more involved as family members as well as public citizens within their own communities. What of the children aren't interested? What if you have a solid plan and well-timed communication but upon presenting it to your family? The kids are more interested in their iphones. Perhaps one is trying to become the next Wayne. Gretzky in the hockey world and another wants is to become a social worker. They're not concerned about the family's legacy where the wealth came from or managing it. That's okay kids will be kids. I wouldn't lose hope in the education process. Interest in the legacy will come when it comes. Keep the door open and continue communicating around your legacy plan and goals because you never know when it will click with your children children later in life. Maybe it will be a change jobs. A recent engagement or the birth of a child triggers. The interest patience is a big part of communication. The recipient isn't always always ready to receive the message. Even if you're ready to send it with patients your family will end up in the right place. Even if it doesn't go according to your original plan and schedule patients this will be a key part of conveying legacy because it will also be a big part of creating a culture around. The wealth lasts over generations. Ongoing patient. Communication enables your children go to go out into the world find themselves and experienced life in their own personal journey. They can come back into the fold with the benefits of wisdom and life experience and decided and of their own accord to contribute to the larger family legacy that you've been developing and enjoying over time it's most useful to have family wealth conversations when everybody everybody is in the same room. If you tell inconsistent stories to two different family members it's going to create conflict and undermine the goal of good long-term communication. I've scene wealthy families use a third party advisor to lead these family wide discussions. It makes sense to have an experienced expert in the room to answer questions and address common issues arise during families conversations around wealth. This is valuable because it's difficult for anyone in your family to be the expert at conducting the conversation and fully understand how you'll chief the goals goals perhaps more importantly if the message comes from a third party. It isn't a message that's been dictated from above the family. Values can and should come from the top but not the full planning and communication around the strategies and tactics when a third party adviser is in charge of facilitating the conversation an answering questions. It removes internal family. Pressures Assures and promotes healthy questioning in communication. Usually everyone in the room will learn something. Having a third party. In the gathering to moderate the families communication and manage the proceedings allows the family to observe the strengths and weaknesses of each family member. Understand the values held by each person and ultimately learn something from one another other this creates a higher level of initial buying and will lessen future conflict family members will have an understanding of how the wealth was structured and distributed and why it was done that way away. An entire cottage industries popped up around this service. It is common with most major financial institutions and most sophisticated wealth advisers and attorneys to have access assist this expertise. Some families may need only to few initial sessions to discuss their planning with the family able to exercise the discipline and organization to handle the maintenance of the culture from their others. Run like a business with the help of outside advisers and schedule ongoing quarterly or annual meetings. Either way a third party facilitator can provide significant significant value in the communication of legacy wealth plans who are my happiest clients. The happiest people worked with do not place their self esteem in what the numbers in their checking king accounts say instead. They focused on enjoying their experiences as well as impacting the people in communities they care about. I've seen some patently. Unhappy Billionaires who despite eight having unlimited resources seemed to flail around in life with little purpose the happiest people on the other hand have clarified their goals and are focused on enjoyable experiences and impactful legacies. They take the time to enjoy themselves. Help others and be global citizens. A person's unique personal beliefs and goals can also drive their strategies around philanthropy and taxes. How much of your wealth would you like to give to your family and your philanthropic interests? And how much would you like to give the government a common illustration shows that if you pass away with no type of tax planning once your wealth creeps over the federal estate tax exemption. He can simply divide your wealth in half one. Half of your post exemption wealth will go to the government and the other half will go to your family. Alternatively other examples show that with charitable planning the tax bite can be minimised substantially in favor of charitable causes. That are important to you that said trying to minimize taxes. Further can be more trouble than it's is worth. I've seen plenty of unnecessary wreckage caused by people trying to play reindeer games with taxes. Certainly we should have the right to structure our finances to avoid the unnecessary payment of taxes. But being extremely aggressive tax avoidance structures can be expensive and annoying for future generations the administration of aggressive planning can be burdensome in if changes you need to be made in the future they will be costly and complicated to unwind people who go through the exercise of clarifying their goals often find. They have enough wealth to accomplish their goals without needing to push the needle on tax avoidance. It's perfectly normal. The cut out wide swaths of taxes but at a certain point administrative complexity causes diminishing returns if you're advised to set array of legal structures that provide marginal tax benefits or cost more administration than the tax benefit. Then you're likely just paying for the accountant speedboat or the lawyers Camaro getting the wealth prepared for the family there to prisons of wealth planning and management. The first is the focus on building protecting structuring and distributing your wealth after defining. Finding your goals for your current wealth and legacy wealth. You'll then look at the technical aspects of accomplishing these goals. I are the asset sufficiently placed for example if you decide to have trust funds set up for your grandkids benefit and you'll likely want long-term growth assets inside those trusts compared to assets needed for current income on the other hand. If you you have a fund set up to provide the down payment for house in five years you'll want that investment to be less risky and more liquid when you're ready to close in the house you don't want to wake up to thirty percent decline in the stock market and have to show up at the closing saying I'm sorry. Next comes the determination of the best structures to maximize the delivery of wealth to your family focusing heavily on tax considerations considerations and investment goals. If there's a good understanding of the legacy goals in the values behind your plan and you have input and buy in from the beneficiaries it will help the process awesome getting the wealth into the best structure from there. You need to decide how future generations will access the wealth without abusing it which leads us to getting their family ready for the wealth. We've seen that it's possible for small fortunes to become big fortunes and then get squandered back to small fortunes in three generations or less lack of communication can be one of the main drivers of this shirtsleeves to shirtsleeves phenomenon. Family members rarely do a great job of making decisions together when communication is poor or nonexistent siblings may fight if they don't understand how the estate was divided and why it was done that way. It's valuable to have dialogue with your kids about why and how the estate will be divided. It's also valuable to the third generation to have communication an interplay with the first and second generation as it helps in transmitting your values and discussion points. The impact of not working together. It can be particularly harsh as each generation develops its own identity. Take the example of three siblings who inherit equal amounts of wealth. One single one is married with eight children and one is married with two children. Those three beneficiaries will likely have different dynamics and how they spend their money from an investment standpoint the assets should be allocated according to the different needs of those three situations. What's the impact of not working together by not communicating well in sharing experiences? The siblings will lose the benefits of collaboration and and scale the lose the benefits of brainstorming solutions to problems and the benefits of understanding the different perspectives. In needs different family members. Finally the lose was the mutual understanding of how where the wealth is generated and the shared sense of family values in managing that wealth establishing solid communication now will help help. The beneficiaries be more analytical and confident in their future decisions regarding the wealth additionally if there's a family wide understanding what constitutes fair access to the wealthy. It shouldn't be any surprises or hurt feelings between siblings in the future or at least they'll be minimized they'll remember the values behind the decision making process and understand why tough decisions were made to maintain those values and reach goals in the future. It will create a support network within the family and prevent shortcomings and disagreements. That's a great situation for her family to be in now and in the future is the family grows in new members are brought into the fold. What does the importance of values in growing that wealth healthy level of communication around your goals values can also help and growing the wealth to combat the shirtsleeves to shirtsleeves phenomenon? Growing the wealth is necessary. There should be an understanding. That resources are finite while resources may be bountiful. For the first and second generation the third generation grows and the number of mouths to feed house educate and entertain pain increases geometrically. The family must understand how to grow the wealth to keep up with that increase in spending in the second and third generation of wealth. Each person will have different Brin interests. Not everyone will be entrepreneurial or financially motivated but success may come in different forms. One may choose to be a social worker and advance the human condition through their work. Work if that's a respected family value and I think it should be. It should be equally valid and Endeavour venture capitalists even if it doesn't generate more financial wealth L. for the family again conflicts here will be mitigated by clear understanding of the values behind the legacy wealth and a clear understanding of what needs to happen for the wealth to be maintained ingrown understanding strengths and weaknesses similar coach understanding the strengths and weaknesses of each player on a team and building a game plan around them. There's a benefit understanding the strengths and weaknesses of each beneficiary. Involved in future decision. Making if your son is terrific with numbers interested investments and your daughter is empathetic and empowered with communication skills. There's an advantage to understanding how those two skill sets can work together and lead to a better outcome than if each one is managing the wealth decisions independently. The son who is numerically. Talented may not be sufficiently empathetic toward the siblings affected by the wealth and the sister could help greatly in the facilitation of communication and agreeable decision vision making all. The empathetic person may understand everyone's feelings in need and how to distribute the wealth accordingly. They run the risk of spending the wealth too quickly. That's where the the expertise of the financially savvy person can be tapped and the two different strings can be combined and used for the collective benefit of the entire family. How does one think about structuring during teamwork to prevent family conflict in poor decision making it's important to have a structure around your wealth discussions and decisions whether it's a quarterly or annual meeting? It's good to revisit issues. Learn from other's experiences and communicate regularly this necessitates a procedural and organized approach to decision making and gently forces the heirs to communicate with the beach. Other it may not always be fun meeting but it will accomplish a greater good and maintaining wealth if each participant feels heard and understood regular meetings also provide the opportunity for learning to earn and retain buying from all constituencies involved. Everyone needs to understand the decisions being made around the wealth. This will help to build and a sense of community toward problem solving in the future. The famous boxer Mike Tyson once said that everyone has a plan until they get punched in the face when that punched in the face comes and it will come that sense of community and family wide buying will be critically valuable. Stressful challenges may not emerge until the death of the first generation or until. There's a significant bringing change in the family's financial situation. Maybe the family business tanks booms or is required prior work and prior communication will bear fruit in those challenging situations situations. It helps when everyone is able to access the same toolbox of knowledge in the management of wealth. This allows for more efficient administration and understanding when it's time to make decisions. It's in making group decisions. You'll be seeking a consensus among people while from the same family may have different opinions based on different experiences in life and work when a high Level of financial understanding is shared by all participants their differing experiences and opinions can be used to make better decisions instead of becoming as unproductive as sheep ramming their heads against each other. It's difficult to have a conversation regarding wealth decisions if some of the participants don't know the difference between stocks and bonds or don't understand why it's not prudent to invest half for the family wealth in one volatile penny stock. A lack of shared financial knowledge can lead to unproductive debates with comments. such as I heard from a friend at a cocktail party that we should be buying pork. Doc Billy's or we should put half of our assets into bitcoin if it's not possible to get everyone up to the same level of education or even get everyone in the same room. It's a good idea to ensure that someone in the room represents the interests of those family members who are not up to the same speed when everyone is represented. The differing opinions of family members can be productively. Used in decision. Making thing as opposed to becoming counter-productive obstacles some parting thoughts Oscar Wilde once remarked that anyone who lives within their means suffers from a lack of imagination. Well it's fun to have characters and outsize personalities in your family you can really set yourself up for problems. If future generations develop caviar taste far too early in life. You'll need setup fail. Safes to ensure spending stays under control and help protect future. Generations from external threats to wealth financial predators divorces and other external events can change someone's balance-sheet quickly and permanently. He can't save all the puppies in the pound. However you can try to avoid general mistakes while also building a structure? That won't detract from your family's ability early to enjoy the wealth you've created. You have weathered the hurricane will be able to enjoy the future and Kane continued using your resources to build your legacy.

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