Articles

How ETFs Will Make the Next Financial Crisis Even Bigger (w/ Grant Williams and Steve Bregman)

November 12, 2019


Grant Williams: He offers ways to avoid getting
trapped in what he calls the ETF Vortex. Steve Bregman: Jack Bogle, the founder of
Vanguard Group, who as– I don’t know his precise age, he might be near 90 now– is
very active. And he speaks and writes– Which is ironic
in itself, I guess. Yes. He speaks and writes daily. And Jim Grant invited me to debate him this
past– at the Spring Conference. And even he– you can’t find a more committed
proponent of long term buy and hold equities, use a broad index like the S&P 500, than he. Yeah. When I prepared to debate him, I had a challenge. I had two challenges. One challenge was, what if I beat him in debate? What’s your upside here? And if I lost, well, I don’t look good either. So I wanted very much to read what he’s written
and to listen to what he’s said recently. But as I did so, I began to realize, I agree
with 95% of what he says about the market and how to invest in the market. And he’s gone through some figures. We’ve gone through the same figures. And even with that 5% differential, I found
if I thought a certain way, I even agree with most of what he’s doing there. Because here’s the difference. I don’t have to think the way he thinks. I have clients who can afford consultative
services. His constituents are the average American
saver. And I looked at some of the statistics. So based on the US Census data for the average
household in the United States that has savings, because many of them don’t, for such a household,
with a 34-year-old head of household, do you know the average savings are, financial savings? I’ve looked at this. It’s lows. $20,000 maybe? Yeah, $24,000-odd. And given the expected rates of return from
bonds and stocks, they might not make it, given the average savings rate, which is about
5.5%. So those are his constituents. What he calls the little guy or gal, or Main
Street. How are they to possibly know what we’re talking
about? Forget choosing an individual security. How can they choose an ETF? How can they choose a manager? He knows that. They are vulnerable. They’re vulnerable to the predations of Wall
Street products. Yeah. And that business model. And he understands what the implications are
of current valuations. But he wants to give them the least risk approach. Sure. Just buy and hold. And if you can at least get them to hold on
when things are down, because you just buy and hold, he’ll have done them a good service. So from Jack Bogle, here are his expectations
for the return from the S&P 500 for the next 10 years. He’ll say, yeah, you might get 4% or 5%. And I’ll run through the numbers. Everybody kind of works it through differently. We come up with lower numbers than he does. But it’s very basic math. Look, you’re starting with a 2% dividend yield,
not 4% or 5% any more. And you can’t really count on corporate profit
growth being 6% anymore, for reasons we can talk about but we don’t need to do here. And then you have to choose an ending PE. It maybe should be 15. And you run the numbers, that’s what you’re
going to get. Yeah. Well, Jeremy Grantham’s similar. Jeremy Grantham’s talking about declines over
the next 10 years for the S&P. And he’s lost a billion of assets under management. Because what happens is, here’s the problem. So you’ve got articulate people, like Jeremy
Grantham, or whomever, talking about Jim Grant. And we sound– we sound like hysterics. Because look, everything’s fine. Yeah. But that’s the way it always feels during
a bubble. And the problem is you can’t prove it in advance. All you can know is that you’re wrong, and
you’re demonstrably wrong, every single chord that goes by, while that which we say is irrationally
priced gets more irrationally priced. And therein lies the problem. So I’m trying to educate people. I’ll give you some more titillating examples
of– now, we had this discussion. I don’t want to say– I don’t want to cast
stones. Because certainly, you get into that frame
of mind and everybody can get stoned. So what I’ll say is this semantic issue, some
more examples of what you think you’re buying is not what you’re buying. So pick an ETF and evaluate it just the way
we did when we started with the QQQ. The PE is not the PE. Yeah. The diversification is not the diversification. So if you look at– I think it’s the Spain–
the iShares Spain ETF. Let’s say you didn’t know much about stocks,
but you’re reading. And I think Spain’s been oversold. It had its crises. It was a deep crisis. But they’ve recovered. The market hasn’t come back. And it has its dynamic spots. And you kind of think, I’d like to buy some. All I want is exposure to Spain. Right. Diversified exposure. So you buy this Spain ETF. And first of all, nobody tells you that the
top 10 companies account for 70% of the weight. It’s not diversified, number one. So now you’re actually buying individual stock
risk. OK, I’m willing to live with that. But nobody told you that six of the top 10
holdings get 74% of their revenues from outside of Spain. So buy Spain. You’re investing outside of Spain. Because these are multinational corporations. You’re exposed to risks everywhere, whether
it’s REITs, or Spain, or emerging market bonds, or emerging market stocks, or large cap growth,
or small cap growth that are not what you’re being told they are. But there’s a reason it’s down having to do
with fundamentals. But now there are stocks that are low simply
because they’re not in an index. Yeah. It’s an amazingly interesting world. And it’s important not to be in the index,
not have exposure to the systemic risk that all the index centric securities have. That’s what you need to do. It could well be that in the new world as
it develops, that in order to be effectively, not semantically, but effectively diversified,
you’re going to want to have fewer, not more, securities, but securities that are truly
idiosyncratic in how they’ll behave. Meaning whether they do well or not, or how
well they do or how well they don’t, meaning it won’t be a function of the systemic risk,
like interest rate manipulation, or the flow of funds by institutions. It’ll be on its own. That’s what we mean by proper diversification. It will correlate differently. If nobody owns it, no one can sell it. Yes But the implications of this are extraordinary,
because I mean, if you think this through, A, it doesn’t really matter what a company’s
performance is anymore. Because to your point about McDonald’s, it
doesn’t matter if the company has a bad announcement. Who’s going to sell their shares? They’re not going to just sell the basket. If you’re a value investor, it’s never been
a more lush environment for you to go find these stocks. But if you find them and you pick them, who
else is going to buy them to make them go up? You can pick– make the smartest stock picks
in the world– Well– –but to your point– There are value traps, but there are companies
that are actually growing. So let’s say I find a company that’s below
liquidation book value. That’s a PE of eight. Eight times free cash flow. But it’s actually growing. Has a nice ROE. It has a business. So unless the PE is going to go to zero over
time, you’re going to always stay You’re just going to buy and kind of wait. But you’re going to underperform the market
while the market is doing this. That’s the conundrum. That’s the business end of investment management. The thing is that there are so many things
one can do, including income. So we went through that income exercise, right? It applies there on that people need yield. They really need income. Like it’s important. So I think that’s a yield crisis. It’s a real yield crisis. You have a million dollars saved up. You did it. You were a dentist, you were a lawyer, you
were a plumber. You did it. You saved a million dollars. You have a million dollar portfolio, and you
put it all into 10-year Treasury notes. You want to be safe. At 2.1%, so you have $21,000 a year, and then
you pay taxes on it? You’ll starve. You can’t live. That’s a crisis. OK, and you look around, 10-year Treasury’s
at 2% and the high yield bond fund is 5% and that’s a risky investment. Sure. OK. That’s when you look through the index centric
lens. The same dynamic applies. If you go below the ETF divide, where the
price is not being determined by pure liquidity, I can find you a dozen– dozens of different
securities of different types– some are straight bonds, some are not, some are pure equity,
some are quasi– that will give you a yield of 5%, 6%, 7%, 8%, 9%, 10%, 11% with varying
degrees– some could be very, very modest and some could be quite substantial– of either
direct value optionality or kind of intrinsic, modest growth. But they have to be individually selected. Yep. You’re not going to find them in a basket. And they’re around. And when I apprise people of this, I say,
let me give some examples, they’re satisfied. Some people might not want pure equities. They decide, I want to stick with something
that’s more like a bond, like a convertible bond, or a preferred stock, or maybe even
a closed end fund that has some certain kind of securities in it. That can be done also. And something I didn’t, I wouldn’t have brought
it up at the Grant’s Conference, but there is a developing asset class. Now, in the indexation world, they use asset
class in the financial world very loosely. As if utility stocks are a different asset–
they’re stocks. It’s an asset. They behave not much differently than other
stocks. But there is a new asset class developing. And a year ago or more, a year and a half
ago, we started writing about it. We wrote about it in terms of pure optionality
of an extraordinary magnitude. But tossup. It could go to zero or it could go up 1,000
fold or 5,000 fold. That if you could buy the minimus amount,
like 25 basis points in your portfolio, it could permanently and meaningfully improve
your financial life. Meaning if you have a 25 basis point position
in $100,000 portfolio, and it goes up 1,000 fold, you now have a $350,000 portfolio. Do you know what I’m talking about? I’m guessing it’s Bitcoin. OK, cryptocurrency Bitcoin. Without going into details about it now, because
it’s a whole other set of discussion, but the idea is that cryptocurrencies are genuinely
a new asset class. And for the first time, again, in recorded
financial history, there is a method to escape both government or fiat currency or coinage. And the inflationary effects either governments
wreak upon holders of currency or the market does. So throughout history, anytime a government
of some sort had control of currency, they would inevitably dilute it. If you read certain books, like History of
Money or the Story of Money, like Roman Empire, if you read the sequences, generation by generation,
of all the different leaders and how they would debase the currency, they would put
alloy into it. They would make it smaller. They would do various things. Even just change the weighting system. You can see, it’s almost mind-numbingly boring
after a while. It happens over and over and over again. And the commonality is they all did it until
the point where it collapsed. Till the point where it collapsed. But it’s meaningful, because over someone’s
working life, you have coinage, and you originally put $100 into it, and by the end of your working
life, it’s only worth $20. That’s debasement of the currency. It happens right now. So last year, M2 growth, money supply growth
in the United States was a certain number. And real GDP growth was another number. And the difference between them was the increase
in the money supply in a way that is basically diluting, basically, inflation of your currency,
of about 3% plus. That adds up. The yield crisis problem is that we had a
3% inflation rate for most of the century, on average. Your Treasury bills, on their own, if that’s
where you put all your money, or your dollars, your dollars were diluted by 90%. But it was OK because Treasury bills gave
you a higher yield than the inflation rate. But that’s not happening anymore. OK, so that’s government intervention or manipulation. But then when people would flee, if they could,
if they live in a place where they could, they lost confidence in the government monetary
system. So they bought something else, like gold. The problem, though, was inflation. So you buy the gold and it helps you for a
while. And the value of the gold begins to go up
because more people are buying it. But if it goes up enough, you have a supply
problem, because more supply comes on from any number of sources. And then you get a collapse. So a cryptocurrency like Bitcoin is the first
time in history we have a currency that is not dilutable, because there will only be
21 million bitcoins, 21.000 bitcoins in the year 2140. Right now there are 16.4 million. The average annualized inflation, if you will,
between now and then is like 0.2% a year. But it can’t go any further, number one. And number two, it solves the authentication
problem. It can’t be counterfeited. So for the first time, people can have, hold
a form of currency that’s not dilutable. That could be a store of value. So by the very fact of holding bitcoins, for
the sake of argument– prices are wild now. It’s not accepted yet. But there are 3 and 1/2% more dollars in existence
on a real basis. That means my bitcoin, by just standing still,
is worth 3 and 1/2% more. So this is a kind of seminal event. Now, a year ago, even six months ago, I would
say, 50-50. Goes to zero, goes up 1,000 fold or 10,000–
and I can tell you how to calculate that at home all by yourself. With that, why don’t people– most people
don’t know about it. If they do, they’ve heard so many wildly diverse–
They’re not understanding. It’s complex. You walk away from it. But you really shouldn’t. I actually suggested to my clients, I went
through an experiment with them, a thought experiment, to see why it would be imprudent
of me as a fiduciary to not buy them some. Right. And let me explain why that is. So we’re not accustomed to thinking about
anything that can go up 1,000 fold. If your sister-in-law, brother-in-law calls
you with some special business they’re doing, and they want you to contribute, you now have
a headache. Because it’s a social problem. Yeah. But you’re not really going to invest a lot
of money, because you understand it’s probably going to go under, right? So you’re not going to put too much money
in. You put a little bit in. So socially, you can get away with it. And if they surprise you and it goes up a
lot, so what’s it going to double or triple or quadruple? When people think of a wonderful stock, a
winner, it went up threefold or fourfold. But that’s not going to change your life. You’re not going to put enough money in for
it to change your life. That’s the model we’re accustomed to. It’s natural that we would poo-poo Bitcoin. Except we’re not accustomed to thinking of
a 1,000-fold return. So with a 1,000-fold return, what you can
do is how do you game this? You game the risk by sizing it. You can buy a size that wouldn’t, in any other
normal circumstance, be worthwhile bothering for. So if you have $100,000 portfolio, the cost
of taking your in-laws out for dinner, not even a great restaurant, $250, 25 basis points,
that you forget about it. If it worked, you have that result. Or if you have a million dollar portfolio,
and my business partner Murray Stahl likes to talk about the vacation you never should’ve
taken, right? It started off when you got in the cab or
the airport. And it never got better after that. That’s what we’re talking about. Now, how do you get to these numbers? By the way, it’s the reason I’m talking about
it. I’m not talking about this as a stock idea. Hey, it’s a hot stock. If you want a defense against systemic risk,
this exists outside the system. What the central banks are doing, for the
first time in history, you have coordinated, massive, multiyear attempt to artificially
bring rates to zero. In with whatever risks come from that. This exist outside that system. This is both an independent, diversifying
investment. And it’s also a natural hedge. Think about it. It’s a hedge against all the world’s currencies. They’re all trying to depreciate their currencies,
but you can’t depreciate currencies relative to each other if you’re all doing the same
thing. So a year ago, I would have said, heads or
tails, zero, it might get market acceptance. That changed. That equation changed, I think, in terms of
probability, just quite recently. So as of April 30, I think, April 30, in Japan–
do you know about this? Yeah. OK, so you know about this. They changed the Japan Banking Act. And they recognized Bitcoin as a medium of
exchange, as a transactional currency. Not a full currency, but they accepted it. They legalized it. And in mid-June, I think there were 5,000
stores in Japan that accepted Bitcoin, including kiosks, like an ATM for using it. I don’t know the scope, in the context of
Japan, if that’s a lot or a little. I don’t know whether those are mom and pop
shops or the great big chains. I don’t know. I will tell you, though, that when I learned
about this, I tried to get some articles about it. I did a five minute word search on Google. It’s not exhaustive. Every combination of Japan, banking act, Bitcoin,
cryptocurrency, Japan. Cryptocurrency websites aside, I couldn’t
find mention of it in the Wall Street Journal, the New York Times, The Washington Post, Forbes,
nowhere. You know where I found a reasonably good article
about it? In the Shomiori Shimbun. Yeah. Yomiori Shimbun. Yeah. OK, it’s a Japanese paper. It’s the largest circulation newspaper in
the world. I think they have 11 million subscribers. That’s where they describe it. Now, you might infer that the Japanese government
is doing this because they would like to encourage some of their savers to part with their yen
and expend them to help their economy. OK, you can confirm that, because as of July
1, in a few days, Japan will also remove the 8% surcharge on purchases made with Bitcoin. And also on July 1, I believe, Australia has
recognized, is recognizing Bitcoin as legal tender and is removing a 10% surcharge on
its use. That, I think, is a seminal event. These are two major banks approving cryptocurrency. And I think that you can’t– this is intellectual
content. You can’t put the genie back in the bottle. You might recall– I don’t remember if it
was in the ’70s. Probably the ’70s, not the ’80s– of a Princeton
undergraduate, for his physics term paper, wrote a detailed, comprehensive guide to building
a nuclear bomb, including costing it out. It was like $12,000 or $20,000, including
the price of plutonium if you could get it. The CIA, or NSA, or whoever, was all over
him, wanting to know where he got his information. And I think his response wasn’t much different
than probably Tom Clancy gave when he wrote the submarine novel, Hunting for Red October. He said, guys, it’s in the library. It’s not all in one place. You have to do a little work. Now, they permitted him to publish that paper
exclusive of two critical pages. The point, you can’t put the genie back in
the bottle. And this really is a different asset class. And it’s new. It has its complexities. But it’s important for anybody talking or
thinking about long term investing in asset allocation. It’s not going away. You know, I hate to keep you any longer, because
I’ve taken up so much of your time, but I have to– there’s so much more I want to talk
about. Yeah, we could talk for a day. Yeah. But– And I’m not even Paul Isaac. Right. I mean, we have to finish this at some point. But before you go I have to ask you, for the
people sitting at home, and there will be a vast percentage of them who are up to their
necks in ETFs, how should they think about this? How should they think about it? What should they do about it? Or is– I mean, is there an escape from this? Well, it’s a little bit of a conundrum. Yeah. There’s a short term answer, a long term answer,
and there’s a proviso in the middle. One proviso, which is always applied in investing,
is I can have a good idea. I find a certain niche, a certain inefficiency. And I can do it. And my firm can do it. And we can make good money for clients for
a long time. But then other people find out about it and
they start doing it. And then it will cause its own collapse. Yes. Or at least the inefficiency will be bled
out of it. Yeah, absolutely. So that proviso is people who are listening
or thinking about this and want to go to different places that are a little safer, they can do
it. But not everybody can do it. Yeah. Fortunately, not everybody will want to right
now, because they don’t believe it. They don’t see it. Exactly right. So one thing one can do is you might not be
equipped to buy individual securities and analyze them that are not in– I mean, that
are below the ETF divide. I say it’s cheaper If you don’t have the tools,
how do you know? You can find a fund or fund manager who has
a particular specialty, who’s got a long history of doing this. And their performance, like as not in the
last 5 or 10 years, since the financial crisis, relative to the indexes, don’t look great. Like the names I mentioned. They can’t go by that. Sure. In broad terms– so for instance, Chuck Royce. He has mutual funds. Buy his stuff. He’s got small cap and micro-cap mutual funds. He’s a value manager with very consistent
standards and very disclosed approaches. And there’s no reason he shouldn’t do well
over time. And he has done well over time, just not as
well as the market lately. Yeah. There are even closed end funds that he has
where you can buy the same as the mutual fund except at a 12%, 13% discount to NAV. OK. Or people like Mario Gabelli, or others. So there are active managers out there with
an operating history and a reputation who are more outside. Don’t have overlap, as much overlap, with
the broad market. I think if you look at Chuck Royce’s, even
his small cap fund, the holdings in there, he’s only about 10% or 12% of the– let’s
say 15-odd percent of the holdings, are in the index he’s benchmarked against, like the
Russell 2000 or something like that, OK? So he’s not really exposed to the same On
a longer term basis, I think there will be a– it might take decades to happen– an evolution
of asset management. So indexation is not going away. That’s the default. Yeah. I don’t think the whole market will collapse
because there’s no place for it to go. Doesn’t mean sectors can’t It might happen
sooner than later that maybe there’s an asset allocation away from these REIT indexes. Well, that’s the thing. Now that these institutions are in these–
if they reallocate– If they reallocate, you can find sector by– certain sectors can collapse. So over time, what might develop is that active
managers have their own faults. And one of the faults is that they, too, very
often acted not as investors, but they began to degrade into asset gatherers. You want more assets. You gather more assets. There’s a limited supply of what you can buy
that you know. So either you buy those and you bid them up
and your new investors don’t do as well. Or you started buying securities outside your
circle of competence, and your new investors don’t do so well. And they are part of the fault. So what can happen, though, is managers for
the future, active managers, they should focus on that which they do well. It might be a certain type of security. It might be a certain industry or two or three. It might be a certain style. But that’s what they do well. And if they’re wise, they will not continue
or desire to continue collecting assets, more assets, if they do well. They’re going to cap it, so they don’t invite
competition. And they don’t dilute what they have. And for asset allocators, the way it might
evolve, perhaps, is they will look for managers who are doing something very specific. They have an expertise in, I don’t know, forest
products. And even though forest products might not
be doing well, the 10 companies they buy do, right? And so because of that definition, they will
clearly not have– they will not be able to be measured on a relative basis to the broad
index. They’re going to have to be measured on some
absolute return basis. Can you get 10% a year over a five year period? And if they don’t measure up, then they’ll
be dismissed. And then the money will go back into index
as a default. But there’ll be a constellation that they’ll
start looking for from managers with a particular specialty who hew to their strong points. And it might develop that way. I don’t think we spoke here on the camera
about the relative impossibility of any significant part of the existing equity market, and that’s
indexed, of course, finding another indexbased approach. Small cap stocks, as defined as, I think it’s
under $1 billion or $2 billion, something like that, they only represent like 4 and
1/2% of the $18 trillion of US equity market value. People can’t go there en masse. They just can’t. So some people can. So unfortunately, it’s not the kind of advice
from a policy basis that Jack Bogle could give. Right. It doesn’t work for everybody. No, of course. So it depends on your audience and who they
are, and if they have enough understanding to be able to use some of the steps I’ve talked
about. Now, even– and the problem is, to give somebody
advice from a distance is very dangerous. Oh, yeah. No, no, no. And that’s not what I’m looking for. I say cryptocurrency, you can’t just go out
and buy Bitcoin. You have to learn about it It’s complex. You have to learn these things. If one learned about it, if they were an easy
way to buy it that was safe and secure and so forth, let’s say just existed, everybody
should own a nominal amount. Nominal meaning that if it goes to zero, it
doesn’t affect your life. You won’t even know till a week later. It does not affect your life at all. But it could actually, over time, benefit
you to the degree that it changes the safety profile of your financial life. I mean, it’s funny, when you talk about this,
and we talk about solutions, they all point to one place, which is active management. Whether it’s your own responsibility for it,
or it’s finding those managers. Actually, it doesn’t have to be. We’ve been talking about indexation as practiced. Yeah. Here’s a great flaw with it. But indexation can be improved. It’s just there hasn’t been a motive yet for
them to improve it. Overall, we’ve made some early attempts. So the flaw with indexation now is, first
of all, the market cap weighting system. That’s one problem. The other is that it is essentially a descriptive
system. They have descriptive attributes. So when you talk about market capitalization,
or industry sector, or historical price variability, all of these things, they describe it. But they don’t tell you how will you do in
the future. Yes. So the notion of predictive attributes, are
there attributes you could look for, create an index, that is indicative of a certain
degree of performance in the future? And we’ve taken a hand at developing some. I’ll give you an example of one only. We could have one more, but I’ve already overstayed
my welcome. So within the S&P 500, there have been owner
operated companies. So what do we know? Microsoft. Walmart, Sam Walton. Andy Grove with Intel. Hewlett and Packard, as Messrs. Hewlett and
Packard. They solve the agency problem, about which
so many academic papers have been written. And people talk about, how do you align management
with shareholders? How about these kind of options? How about those kind of options? How about delayed? how. About restricted stock? But here’s the essential difference. It has to do with incentive system. Yeah. Jack Welch, no knock on him, his intelligence,
his integrity, his creativity, his dedication. He’s got it all, let’s say. But the reality of it is that his path to
true wealth was through his compensation system The stock price going up. Which is a highly– no doubt, a very thick,
highly negotiated document, right? When you have Steve Jobs or Carl Icahn, where
80%, or 90%, or 100% of their wealth, virtually– take a CEO who’s worth $500 million, and $450
million of it is in his stock, or her stock, their path to true wealth is through capital
appreciation over time, long term return on capital. It solves– actually, what it does is the
decision making process for them is entirely different. They become stewards of their– yeah, exactly
right. First of all, they have capital at risk. It’s the most important aspect. You can have $50 million worth of stock in
the company that you were granted, but it’s not your capital at risk. And they make decisions that are entirely
different about expansion, or acquisition, or costs, or risk. And over time, those accumulate. So you’ll find that if you isolate the owner
operated companies out of the S&P 500 over time, while they’re owner operated companies,
meaning Walmart, from the time it went in, had, I think, a 25 basis point weighting,
to the time Sam Walton died, when it might have been a 2% weighting– think of that,
but not afterwards– and you just look at the annualized returns from those, it is like
4 percentage points a year. A year, average, in a rough way of calculating
it, over the S&P 500. The true entrepreneurs, the true value creators. So we created a weak form of that– but I
like it anyway, because it’s an index. And you can’t start making choices in an index. They have a rule set– called the wealth index. And it’s private labeled as a mutual fund
by a company called Vertus, and it’s called the Wealth Masters Fund. And it consists of companies in which a control
party– doesn’t have to be the CEO. It could be a director– has a certain amount
of money in the stock. And that’s how that– so they’re wealthy people. They have a certain influence on the stock,
direct influence. And they have to have a certain amount of
money. I think it’s $200 million or $100 million
in the stock. And that’s one way of doing it. And just to give you a little more flavor,
maybe there was something special about the US market culturally or geographically that
made this, or that testing work. So we chose a market that was far away culturally
and geographically as we could get, which was Japan. And over the last 10 and 20 years, we created
an index for Japan. And not only was it up in a market that was
down over a decade or two, it actually outperformed the US market. OK. And it seems bizarre. It does. The capital at risk tells you. So here’s an example. It’s actually a real company. Let’s say you have a company that’s making
diapers. Japan. Founder owns most of the stock. Why would this fellow put more money, more
capital, into a new factory unless he thought he could get a good return on it? Yeah. He wouldn’t do it. He might– if he thinks it’s getting worse,
he might withdraw his capital little by little, look for something else to do. But let’s say he found a new niche, the aging
population, adult diapers. And he thought he could get a good return
and put the capital in. So it makes sense, because they will withdraw
capital if they’re not going to get a decent return. They don’t expect to get a negative return. It’s entrepreneurship. That’s all it is. It’s good, old fashioned entrepreneurship. So that would be an example, something like
a wealth index or an owner operator index, of an index with predictive attributes, as
opposed to what we have, which is simply descriptive attributes. So there are ways to do it. Steven, I have no idea how long we’ve talked
for, but every second of it has been instructional and educational in the extreme. So I’m not done with you yet. We’ve got more to talk about,

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