The Exchanges

Q What happens when we cut rates and markets are at all-time highs?

A It could become a situation of where you sell the news because everybody was moving the market up In anticipation of it happening, because the belief is, as we, when we cut rates, we provide more, lower cost capital to companies, they put that capital to work, and it generates return. Every company is only as good, or as stable, or as strong as its customer base, and if we're seeing that the customer base of, uh, you know, let's call it the average Joe, and I call that Joe Sixpack, uh, he's a buddy of mine, We all have a buddy, Joe Sixpack. And so if Joe Sixpack is struggling, then ultimately how is everything going to trickle down and create growth?

AI assessment note: “It could become a situation of where you sell the news”

Q Uh, why don't you give me some of them?

A The number one rule, and I borrow this from, from Warren, and so if you ever, you know, it's not going to Pay attention to listen to me, but I did reach out to him. His number one rule is don't lose money, and my concern with don't lose money is any investment requires the absorption of risk, and so if you're not willing to take some level of risk, which means potentially to lose money, you won't make money either. So you don't want to invest with a, from a, from position of fear. You want to invest, I think, so my number one rule is avoid embarrassing loss. You want to avoid the loss of a company potentially blowing up. If the company might, you know, if it looks like it's a little bit expensive and it might, and it might potentially go down five percent or something or 10% or 20, okay, you can deal with that. But if you're investing in a company where if something goes wrong, you could wake up one day and it's down 20 or 50%, That's the one you don't want to have in your portfolio because investors will never invest with you again. And you'll also be scarred because people make investments. This is why it's so difficult to be, to be a long-term sound investor because emotions get in the way, which is one of my rules. Emotion has no place in investing. Another rule is, uh, don't trust management. I'm sure there's many management teams and I run my, you know, we're a operating …

AI assessment note: “my number one rule is avoid embarrassing loss”

Q But he wasn't paralyzed. Why could he act and other people?

A To me, it's, it's, uh, it's, it goes back to something we've already touched on, and that is the natural agency issues related with money management industry. My investors Give me their money so I can make a return that is hopefully better than they could make investing passively. If it doesn't end up being that, they decide to take it away from me. And then I don't have any money. Buffett has built a business that generates cash. So he has operating businesses, Geico, Prudalum, etc. These generate cash. He takes that cash and invests it when he wants to invest it. In the way that he wants to invest it. You know, the average portfolio manager can't do that because they're tied to, they have to, like today in the investment management industry, portfolio managers are measured like on a daily basis. If you're investing in my funds, you can look right now and see how we're doing versus the index every second. Why are you down today? My, you know, my partner that started the business with me says, I don't know, because there was More sellers than buyers today. I don't know any number. And, and someone that tells you they can know exactly why, unless there was some announcement. And even when there was an announcement, it was the interpretation of the announcement that led to the stock price falling, not the announcement itself.

AI assessment note: “Buffett has built a business that generates cash... takes that cash and invests it”

Q just from my, like how I sort of approach things, you have the greatest investor of all time, Who has built up, uh, I don't know. His largest cash. What's he at? Four hundred billion by now, or three hundred and fifty billion. His largest cash holding as a percentage of market cap, I think, ever. I struggle to reconcile all of these things into some coherent view of, like.

A The, the thing about the markets and companies is they'll continue longer than you and I will be alive, and so when You're investing. It just depends on your horizon. And I think what's happening today is investors have learned, and rightly so, that every time the market falls, it rallies back. And I like the comment you made, Shane. I'm not here to predict markets. Uh, it's a fool's game. Uh, I don't know, you know, I, I wish I knew, then I'd just buy futures and make tons of money or short them. But what instead I know is I'm looking at the underlying companies, and except for some of the Mag-Seven that are growing their earnings, the smaller and mid-caps are not. When Walmart is telling you that there's a problem with its sales forecast, and Target is struggling, and Lululemon can't sell the same number of pants, and Starbucks is considering to changing some of its pricing and some of its, its business model, You know, this is Joe Sixpack and, and Stevie Winebox that stepped up from Joe Sixpack. You have Stevie Winebox in the middle. Um, and I think they're the ones that are struggling. And so it tells me that this can continue and, and markets can continue going up for, for, uh, any number of amount of time because it's a function of how much liquidity is in the market as well. People have, or if investors have lots of cash, They'll continue to invest. The people that you'r…

AI assessment note: “it tells me that this can continue and, and markets can continue going up”

Q Do you get to a point where things are, like, too complicated? People don't even know what's going on? Like, it always starts with, like, this one thing makes sense, but over, you know, 3040 years, you end up with this structure that nobody even internally probably understands.

A You know, they, they interviewed, um, Fast, Andrew Fastow, who was the CFO of Enron, and he's done many an interview on this. Also, I, because when we do our training, we have a few of these interviews that we, that we quote, and it's, Companies don't start out as being crooked. They have to convince someone to buy a product, ok, or a service. So money comes in to the company in some fashion or time, and then gets converted into something that adds value. The problem becomes outside stakeholders come in and say, well, I need you to make X because you want my money. Well, I'll give you my money so long as you give me this return. Well, that works until there's a problem. And now there's no CEO that wants to disappoint. So it's very simple. The CFO comes to talk to me. I'm the CEO. And he says, look, I know, uh, Anthony, we were going to make a dollar, but we're coming in at 95 cents. And I say to him, you get back to your room and find me five cents.

AI assessment note: “Companies don't start out as being crooked. They have to convince someone”

Q And I wonder about these things, like when you're right, it's great, but what about when you're wrong?

A And that's one of the things, uh, You know, we're celebrating our 25th anniversary this year, and, uh, I developed 10, uh, rules, investing rules, and they, they relate to life as well, but, uh, one of them is being negative sounds intelligent. Being negative typically is looking at facts. It's looking at numbers. It's presenting them to you in a way that says, wow, that seems really compelling. If I want to sell you something, That is, you know, so that's the negative side. If I want to sell you the positive side, well then, I gotta sell you the dream. AI is gonna change the world. People are gonna be, are no longer gonna need to work. It's gonna replace jobs. Margins are gonna go higher. There's gonna create, you know, it's gonna improve healthcare services. All the phenomenal things that could potentially happen. And so you'd see that, and then you're willing to invest. You're buying a dream. But if I tell you, yeah, but a lot of this is based on all these intricate transactions where there's no disclosure about, you go, ah, that doesn't matter, Anthony. Look, we're changing the world, buddy. I like to say, none of these things matter until they matter. And then when they matter, they matter a lot. You know, with great power comes great responsibility. You're right. This should not be interpreted as I'm telling that something's going to blow up. I'm just saying that there ar…

AI assessment note: “one of them is being negative sounds intelligent. Being negative typically is looking at facts.”