The Exchanges

Q Well, I'd love to dive into Some of the stories and some of the chapters, and we can just sort of go through what you learned along the way. So why don't we start at the top with Ben Graham?

A The point of that chapter was just, there are limits to value investing. You could be the best business analyst in the world, and you might have a great long-term track record and things might be okay, but there are limits to value investing, obviously. His returns were good, but they were not like extraordinarily good. Now, he did beat the market by almost two percent a year for a decent amount of time, so they were very good. Don't get me wrong, but they weren't like, oh my God. And he got crushed in the depression like everybody did. But what was interesting about him in particular is that he was positioned pretty conservatively going to the crash, but things got so cheap where businesses were worth more dead than alive because there was a real question like, were these businesses going to exist in a year? So he went in early and he couldn't resist the values and he got destroyed.

AI assessment note: “The point of that chapter was just, there are limits to value investing.”

Q And what do you see of the impact of this presence on social media on the business now and in the future?

A So on the plus side, it's, it's amazing that people come to us because they read what we write and they're fans first and foremost. And then, uh, you know, nobody comes ready to open an account. They go through the process with the financial planners and they're either good for it or they're not. You know, we certainly are very careful about only bringing on like-minded people, but they're self-selecting. Now that's amazing. A lot of this is done over the phone site unseen after going through, you know, a pretty fairly rigorous process. But on the other hand, these are people that are reading financial blogs and we're not the only people that they're reading. So it's not easy come easy go, but we might have to work a little bit harder to keep them focused, to keep their eye on the ball, to remind them of why they hired us in the first place.

AI assessment note: “people come to us because they read what we write and they're fans”

Q And how did you think about the process?

A I had never done anything like this. I was kicked out of college twice. I don't, you know what I mean? Like, I don't have, I never had the attention span to really put my, my head to the grindstone. I'm pretty sure I butchered that line. But So, so it was tough. It was just me going to the coffee shop every weekend and my baby had just been born. So, I mean, I guess that was like a convenient excuse to get out of the house, but so it was probably like almost a year and a half just every weekend and maybe halfway through, three quarters through, I started to get frustrated because I was starting from scratch with every chapter and I was rereading books that I had already read and reading with purpose, not just skimming, but like looking for facts. And then I would have 10,000 words of notes that I would have to cut down to a 3000 word chapter that was entertaining. I knew at the time that I would look back with fond memories and I will and I, and I am, but it was, it was work. I looked at this book through the lens of the average person. So I can't teach hedge fund managers anything. You know what I mean? Like they know far more than I ever will about how businesses are valued and stuff like that. But I always have the average person in mind whenever I'm writing.

AI assessment note: “I would have 10,000 words of notes that I would have to cut down”

Q Were you trying to do that? I mean, how do you, I've actually, with grade inflation, it almost seems like you were short yourself.

A So I have, honestly, I have no idea what happened. I look back at the period of time, and I don't recognize myself. Was I rebelling against, like, my parents' divorce when I was young? I don't know. Was I pissed off because my mom was, was sick, maybe? Or was I just You know, having fun and enjoying my life and being an immature kid, maybe. I don't really know what was going on in my head. Not much. So I came home, and I did okay, and I got my grades up at a community college, and then I went back, and then I dropped a class, and I was on academic probation, and I got kicked out again. And that one really hurt. That was, that was tough. I felt like I let down my parents, myself, and it was just humiliating, of course. So I went to Queens College, and I got a degree in economics, and I graduated in The world is going to hell, and I said, oh, this is why people pay attention to school, and why they take their education seriously, because now what do I do? And I was lucky enough, if you want to call it lucky, to get a job right away, but it was at a insurance company that I, I had no idea. I didn't know the first thing about anything, and I see people in suits, and I was impressed, and there's a lot of action going on, and I thought all was, all was well. You know, I landed on my feet, but it was A horrible experience.

AI assessment note: “honestly, I have no idea what happened. I look back at the period of time”

Q Yeah. You've written the book, causes you to really think about all these lessons. How do you apply them to what you're doing for your clients?

A Yeah, it's a great question. So we understand how hard it is to beat the market, right? I think like we're pretty familiar with that. Decisions need to be made, obviously, what, you know, where you're investing in and what you're choosing to get your exposure. So on the one hand, we want to do as little as possible. The reason why it's so hard to beat the market over the long term is because if you're trying to get market returns, well then, like I said previously, you're going to have to experience 15 years of no returns. And oh, by the way, in that 15 year period, how's Two 40, 50% drawdowns for you. So it is supremely hard to beat the market. It's also really hard to just match market returns, even if that's all you're trying to do. So with the bulk of our clients' money, we do strategic asset allocation, where we're just trying to get, you know, global market returns for the most part. But then on the other hand, we have to be behaviorally aware, if that's like what we're talking about all the time. So how do we come up with a portfolio that will de-risk in the event that we do ever have a bear market again, which will, in theory, allow them to stay invested with the bulk of their money as it's experiencing the painful drawdown? And are those at odds? I don't think so. I don't think that investing is black and white, or it has to be all active or all, all passive. I think t…

AI assessment note: “with the bulk of our clients' money, we do strategic asset allocation”

Q So how have you, how do you guys decide to implement?

A So, okay. So we do use primarily indexes for, for the core. And then for the tactical model, listen, we're not a hedge fund. We are an RIA and we manage money for people that are going to retire and, you know, normal everyday people. And so we don't, I think the, the, probably the most important thing that we do there is set realistic expectations. If we could really, really shrink the gap between what they expect and what they receive, then they're going to be happy. So we don't over promise. This is not an alpha strategy. And this is You know, behavioral more than anything. I, I fully expect it to underperform. I know all of its limitations. We show people the monthly returns and we show there's a lot of red and there's a cost, right? If you want to miss a 30, 40% bear market, guess what? You're gonna have to pay for it in one way or the other. So I do my very best to communicate to the advisors to throw as much shade as on the strategy as possible. Because when you show, you know, the back tests, which I think are, you know, back tests are bullshit. This looks amazing, of course. We're not, nobody's going to implement a strategy with a bad back test. Now, we have, you know, years now of live results, and it's been fine, but again, I think just being extremely transparent about what this is going to do and its limitations. So, you know, I have stats up the wazoo of how hard t…

AI assessment note: “we do use primarily indexes for, for the core. And then for the tactical model”