Long-Term Investing Ideas in a Volatile Market
Simon recently spoke with a $35 billion global asset manager about how they're navigating the market volatility. The key takeaways are to think long term, tune out the noise...
July 25, 2023 – By JT Street
Hold onto your cannolis! It’s another globe-trotting episode of No Limit with Krzysztof & Luke!
In this episode, we check in on Krzysztof’s adventures in Sicily, discuss the value of getting rich slowly, and some of the basic principles of financial education, including what steps you need to take before becoming an investor.
To get more insights from our lead advisors, subscribe to 7investing today!
[00:00:00] Luke: hi, and welcome to the latest episode of No Limits with Krzysztof and Luke. Today’s episode 22. It’s Monday the 17th of July, and Christoph, I gather you’re still enjoying the glorious weather in Sicily.
[00:00:58] Krzysztof: You, you mocked me. We spoke before pressing the record button that I’m in a fryer. No matter where I go, I’m either cooking in Austin or, or baking in the hot sun in, in Sicily. However, I am eating cannolis on the regular, so that more than makes up for it. For the, uh, spicy temperatures.
[00:01:18] Luke: Can you, uh, can you cook the cannolis on the, the hood of your, uh, rental car?
[00:01:22] Krzysztof: I can, I can though though the shell is, uh, crispy. The inside needs to remain nice and tender and moist, so it’s a complicated balance. ,
[00:01:31] Luke: it sounds exactly like, uh, how you just described yourself in our pre chat, running up that 11 degree hill just outside your window, crispy on the outside and moist and hot inside. You are a cannoli.
[00:01:46] Krzysztof: That’s right. How’s the, uh, I, I, uh, I spy a little bit of your part of the world yesterday via the Djokovich. Alcoraz, right?
[00:01:55] Luke: Alcaraz. Yeah. Superb, superb tennis. Yeah. I lost a fortune betting on Jovi. Throughout
[00:02:03] Krzysztof: I was this close to messaging you to, uh, to make a bet and I would have put my
[00:02:08] Luke: Yeah.
[00:02:08] Krzysztof: on, uh, on the Spaniard. So that fortune, are you telling me that fortune could have been mine?
[00:02:14] Luke: It could have been yours, it could have been yours for sure. I wasn’t even watching the damn match, I was at my, uh, it was a lovely sort of family occasion, my mum’s birthday, and so a big group of about 20 of her friends and family members got together, we had a fabulous, uh, big Sunday lunch up in Norfolk, and then my brother and I were quietly watching the tennis on our phones, sort of as discreetly as we could, and then occasionally cheering, and then we got told off, we were like kids, we had to put the phones away.
So, yeah. I was trying to avoid all social media on the way home so I could watch the match on, uh, on, on delay when I got back. But yeah, I saw my bets did not come in.
[00:02:52] Krzysztof: Okay. You know, I, uh, I thought I thought a little bit about the comments I read after the first set, which Djokovic won 6 1 easily. And everyone was saying, you know, like, good luck, young lad and Djokovic, like he’s, you’re great, you’re good, but Djokovic is next level and all that. And it did make me think of some of the investing wins that That blow in one moment and then they’re gone the next, you know, like how quickly things can change Even when they look like using your own two eyes like oh Obviously he has no chance and then you wait ten minutes and it’s a whole new, you know It’s a whole new thing and it’s just it just astounds me how it doesn’t matter how long you’ve been doing this we get We get suckered into the moment as though that’s how things really are.
So anyway, great match. But I bring it up mostly because, you know, I I waspy the weather, uh, on your side of the pond, actually, it’s not your side of the pond, your side of the channel. in this case. Right. And, uh, you guys, uh, you, you went to the matches, right? You caught a couple of them.
[00:04:05] Luke: Yeah, I saw Alcaraz play last Saturday in uh, in one of the round three matches, yeah. It’s uh, it’s kind of breezy and wet and windy here actually, it’s been uh, torrential rain on and off. So I’ve been, I’ve been trying to go for a run all day, and I think I’m just gonna give up. Every ten minutes it’s like hell, well, bucketing down.
[00:04:24] Krzysztof: Oh, we, right, you’re wearing a, a, a. Uh, jumper, right?
[00:04:30] Luke: I’m trying to look a bit smart, I’ve got like a running top underneath. It’s a bit of a scam actually. This is actually my wife’s, my wife’s Katrina’s finisher top from the JP Morgan chase challenge last week. She just gets the t shirt for me. I didn’t actually do this run, I’m just still, I stole the
[00:04:43] Krzysztof: and you wear it. So, so that’s right, dear listeners. Take your investing advice from Luke who, who can’t even be bothered to do the thing himself.
[00:04:56] Luke: Hey, look, I’m always happy to, uh, leverage the wisdom of others. Hey, you know what, uh, to take us into our chat schedule for today, I was leveraging the wisdom of others in real life. Uh, just last week, I managed to get together with a chap on Fintwit, and we kind of follow each other, and uh, we’ve had some great conversations in the DMs and on Twitter over the years, and we had a cup of coffee when he was visiting from Hong Kong last week.
He’s Sloth Investor. And, uh, very charming guy, great conversation, it was a good two hours of my life.
[00:05:29] Krzysztof: Tell me more.
[00:05:30] Luke: He’s, he’s an interesting guy. He’s writing a book right now about sloth investing principles. And, he’s sort of targeting a similar audience to us, but Uh, maybe with our podcast more, perhaps the investing curious and kind of savers and people are looking for like a simple way to generate wealth in the longterm.
And his principles are rock solid and very aligned with a lot of the stuff we talk about. Um, but, uh, you know, perhaps what we’re doing at 7investing is maybe more at the other end of the, of the scale, perhaps more for, for investors at least to aspire to be a bit more sophisticated, but there’s a great need for, uh, you know, this content at both ends of the spectrum.
[00:06:13] Krzysztof: Yeah, that just his name makes me think he has the correct foundational principles. In fact, I would urge this on on anyone listening. Uh, I’ll talk about this a little bit later because I’m getting into, I’m starting to investigate the other end of the spectrum, the, the, the quick and easy in quotes, uh, the more of the, more of the trading stuff, but I would, I would say, uh, without question, if you’re starting, you need to, to develop the, um, the slow and steady fundamentals.
Something that it seems like Sloth Investing teaches, right? Only then should you be bold enough down the road to get into the, um, the more short term stuff. Is there any one principle from your conversation that stands out to you?
[00:07:09] Luke: Yeah, his principles are good, and actually, it’s a little bit hokey perhaps, but he’s kind of spelled out the word sloth with his five principles, Simplicity, Low Fees, Owning Owning the world, time in the market, and headstrong. And so, uh, you know, those are, those are all pretty aligned to, like, common sense principles that we’ve talked about in the past around, you know, don’t overcomplicate investing, sometimes just finding great quality companies and owning them for a long time.
Um, you know, low fees, try to make sure. If you’re investing particularly in say ETFs or those sort of indexy type products, you’re not paying the investment manager a fortune to do that for you because they’re really the only ones making the money in the long term. You’re, uh, you know, you’re sort of giving away value there.
Um, owning the world. I think he’s talking there about, buying big, broad indexes, you know, different to what we do at 7investing where we’re actually doing stock picking, but. That owning the world is absolutely the right answer for the large majority of investors, right? Unless you’re really going to turn this stuff into, um, you know, a passion and a hobby.
Um, so yeah, you know, I, I, I just like these foundational principles and I think they’re a good basis really for anyone to start to invest. And, um, you know, if you want to keep it real simple, this is the right answer for the large majority of folk.
[00:08:33] Krzysztof: I Love the name Sloth. I mean, uh, Slow and Steady wins the race, Sloth Snail. One of my favorite characters in all of literature is named Slothrop. Uh, for all you Thomas Pynchon, Gravity’s Rainbow fans. Uh, Luke, one other point that, that comes up for me with this meeting someone from Twitter in real life.
It will make a world of difference to invest in career. If you get to know other investors, I would say beyond a handle, beyond the digital , acquaintance level, and begin to find people whom. You can rely on or trust, I guess, as much as you could rely and trust on anyone.
Sure, there are always con artists that are very good at manipulating people, but let’s call them the exception rather than the rule. I would say, in general, there are many well intentioned, good people who do the work and who are willing to share what they do with others in finding your community.
Like the way you met him for coffee in real life. My guess is, right? My guess is that now when you look at his content, you will have a greater degree of assurance that he’s worth listening to. Not for confirmation by his purposes, right? But because you have a better sense of who he is as a person, right?
And that, that, that… As opposed to some random fintwit person, right? That’s saying, buy X, sell Y. Well, sure. Can you trust them? Can you, have they earned a right for you to evaluate their claims more deeply? So this matters, right?
[00:10:20] Luke: It’s useful and it’s not, it’s not probably scalable, um, and I think there are other benefits as well in being part of this community, you know, just, you know, being a bit selfish when I travel, I’d love to meet more fintwit posters, I’d love to meet more 7investing subscribers, um, just kind of makes the world a bit more of an interesting place, but, um, you’re right, you have to apply like a healthy dose of skepticism to anything you hear. I think, you know, I think if you get a sense that someone’s trying to sell you something and they’re, you know, they’ve got some kind of incentive to sell you on that idea, whatever it might be.
Maybe that’s a bit of a red flag for me, but when someone’s essentially selling just solid wisdom, and in many cases kind of giving it away, um, that’s great. And, you know, an exchange of viewpoints is incredibly healthy for both parties if you come at it in a constructive way.
[00:11:13] Krzysztof: Yeah. Right. I guess I’m approaching my one year anniversary at seven. Actually, it was sort of mid July when I had my eye on NVIDIA. Last, uh, last year. Before certain someone, uh, did something horrible, which shall remain, remain, remain nameless. But in my year of being A seven analysts more than ever.
I’m finding immense value in the discord chat. So I think starting out, it was the value for me as an investor came from our. Obviously doing the due diligence individually, but then from our analysts, you know, channels and conversations on Slack. But curiously, that’s shifted, uh, more so toward the larger community because of course there are more perspectives and more experiences and more variety there.
And over the year, I’ll speak for myself, have found… members of our community that repeatedly post things of high signal. And then so therefore anytime I, they post, I mean, I’m not saying anything earth shattering, right? But it’s almost so simple as to be easily ignored, right? If you surround yourself with a community of people that over time you begin to trust the value of their posts, that’s a very lucrative way to be as an investor.
As opposed to the other way, just going on it alone with kind of high frequency.
[00:12:51] Luke: And, uh, you know, having. Having kind of enduring conversations now with a broad range of folk, you do develop trust, you know, you do start to see the same voices over and over again and you, you know, you get a sense of who actually has real expertise in a particular area. You know, we’ve got a number of members who are very active on our Discord now, um, who really know a lot about the energy sector or AI or, you know, other topics that we talk about and I get a lot of value from reading their commentary.
[00:13:20] Krzysztof: Right on, yeah, so it sounds like it was a good experience, the meeting in real life. Awesome.
[00:13:25] Luke: 100%. And if you, uh, if you ever hear me talking about one of my random travels to, to some overseas climb, if you’re there and you want to grab a coffee, let me know. I’ve actually, I’ve got beers planned with our subscriber Jeff when I get to Park City. Sounds like he lives out there. Looking forward to that this winter.
[00:13:41] Krzysztof: Oh that’s right, cause you go every year will Park City be a new destination or similar?
[00:13:47] Luke: First time skiing Park City for me. So I’m doing a couple of months out there, January, February. Yeah. If you’re passing through, put me up.
[00:13:53] Krzysztof: Okay, sweet. Tell us about, uh, becoming that one person.
[00:13:57] Luke: Uh, that is really interesting, actually, I don’t know if you, you’re not on threads yet because you’re still in Italy, um, but I saw just a really fabulous post by a guy called, I think, Josh Rincon, so giving him a shout out. What did you say, he threaded, tweeted, God knows, I don’t know if we’ve got the lingo down yet, he tweeted, he threaded, uh.
It only takes one person in your family to think about money differently, to build generational wealth, become that one person. And that’s quite powerful, I think. We were actually chatting about this on the subscriber call, uh, just a few days ago. And, um, you know, my reflection was, we’re a couple of thousand members of seven investing, and if you go out to kind of wider twin, thin to it, and maybe, you know, regular listeners to this podcast, um, you know, a few thousand more, um, We’re kind of these weird beasts, perhaps, who’ve, I’m not saying we’ve kind of figured out life, but I think we have all discovered, um, arguably, you know, the best and simplest way to compound your wealth and build, you know, long term returns.
The power of compound interest effectively magnified. Particularly with what we’re doing by ideally, hopefully picking incredible individual companies to invest in and having sort of stumbled into that knowledge. Um, and, you know, potentially being a bunch of folk who are a bit geeky and maybe actually enjoy doing this, some of this stuff, um, maybe it’s our responsibility to become that one person for our own friends and family.
And I’m not saying go out and like pump and dump cryptocurrencies and things, but Maybe just trying to bring some of your close family and friends up the learning curve a little bit. Sharing your own knowledge and perhaps, uh, you know, some of your good and bad decisions you’ve, you’ve made yourself, um, to hopefully at least get everybody you know becoming…
That sort of sloth investor, perhaps, you know, passive index trackers, low fees, dollar cost average every month, like in the longterm, that’s almost a foolproof, you know, don’t hold me to account, not an investment advisor, but that’s almost a foolproof way. To build, um, market equaling returns, which are what, eight to 10% year over year, over year, over the course of a lifetime.
That can turn a small amount of money into a very large amount of money. Certainly, you can secure your own retirement. If you can get it right and you can secure the retirement of family members as well, then fantastic
[00:16:37] Krzysztof: Yeah, I like the connection you made between that and our previous segment, be the one person and do it slowly, but consistently. And it made me think of this, uh, there’s several, there’s many of these stories floating around in the lore of investing. Uh, but the archetype is the, the secretary who works a normal job, you know, shows up to work every day, but lives, uh, minimally or lives frugally.
invest consistently. No one knows about her finances. They don’t even notice her in the workplace. But when she dies, her will, uh, has an obscene amount of money going to some charity that nobody knew about. And it sounds like a miracle, but really what did she do?
She became that one person who Emphasize the fundamentals and did it slowly, consistently over time. So, it’s not out of reach for anyone, really, truly. It just kind of sounds miraculously because humans are so impatient, right? That, that’s the, uh, we want to be rich and we want to be rich now, but, there’s a different way of doing that.
So, you too can become that one person. I love this. I love this quote, Luke. Yeah, it’s
[00:17:54] Luke: it’s really good, isn’t it? And actually, maybe this is a lovely segue into a topic I think you wanted to talk about, which relates to our educational system.
[00:18:02] Krzysztof: I’ve been writing a newsletter for, is it four or five years now called character by design. And each week I look for things that have to do with cultivating one’s character. Uh, and so, so anything that, that shows up to me that has to do with, Improving who we are and how we live, I kind of mark and two weeks ago, I came across this, I don’t know where I found it, but something about how our educational system is set up and the things that we don’t teach in on that list, as far as I could tell, are all the things that are truly important in an adult person’s life that I as a person who is still in education have never been taught even once.
For example, taxes, right? It was shocking. It’s shocking to me to consider. That not once, not for even five minutes, at any point in my education, did I have a class that says, Hey, taxes are a thing. Like, do you know, like, it’s shocking to even have these words come out of my mouth. Like, there’s income tax, and state tax, and there’s such a thing called property taxes.
Right, and all the, right, and, I mean, it’s just wild. Anyway, point being, that, um, Uh, our educational system simply does not teach us about what I would call fundamentals of being an adult and that goes with it, obviously, anything having to do with investing, anything having to do with index funds, anything having to do with insurance, anything having to do with basically what we teach.
So that main point. Uh, maybe, uh, maybe it’s sensational. It’s just to say like, how can this be right. And I don’t know what your experience is in the UK system, uh, with the seemingly crazy, no,
[00:19:57] Luke: and like a… It’s identical, and maybe I’ll add one to your list, which I think is like a super dangerous one that we should learn about as a kind of cautionary tale, and it’s the risks and dangers of credit. You know, you can have a credit card and you can use it responsibly, but so many people, unfortunately many young people, end up getting over their head in credit.
You know, buying stuff that they just can’t afford, using credit to do that, and get themselves in like really serious hot water that can potentially last for decades where they’re paying off unsustainable interest rates. Um, and, uh, you know, we have a kind of culture of credit, which isn’t helping that, but just a tiny bit of education, um.
would mitigate, a lot of these situations, these sad situations, if you just really understood that, you know, sometimes if you’re taking out kind of bad credit for the wrong reason, um, you’re not helping yourself, you’re, uh, you’re basically selling your future.
[00:20:59] Krzysztof: right. Okay. So, uh, and I guess that’s what we provided at seven, uh, more than I would say Fintwit and more than other services is the, uh, foundational research on individual companies. But in all of, uh, Interim conversations, we keep reiterating over and over again. Here are the basics, right? Take care of credit card debt first.
Only once you have that taken care of, do you take your extra money, surplus money, and then you invest that so that you’re not losing sleep at nine and stuff like that. I mean, it really matters. The second, I guess, segue to this conversation is that,
I’m really trying to embrace the principle of shifting and changing styles or having more as much flexibility as I can, in other words, continuing to learn and not saying that just because I’ve done things a certain way for 20 years, that’s the only way available to me as an investor. And so. I’ve personally seen what feels like a massive change in how investing feels and looks like and is done over, I don’t know, the last, call it four years, three years, right?
The swings are higher, more frequent, the tools available to us are more instantaneous, things appear to me, feel to me like happening at a much higher pace, a much quicker pace. And for somebody who was born and bred as a long term investor, uh, I’ve explicitly pooh poohed and rejected a bunch of these new fangled tech tools and charts and, uh, you know, mo mo fomo stuff, right?
And so I’m now challenging myself. To actually, uh, how do I say this, uh, politely, not, not politely truthfully, but, but, um, without insulting anyone, including myself, I want to learn more about the things I don’t know. And most of those things I don’t know reside on the spectrum of the short term trading realm.
So for the last , few months I’ve been deliberately watching tutorials and learning all the fancy lingo and charts and stuff like that. And I expect to go sort of be more public with some of the stuff that I’ve learned in the near
future. My guess here, so before I turn it over to you that you’re going to sink into me. I think I have the capacity. at this point to be objective and more flexible and I hope to be able to use what seems to work, discard what doesn’t, and not be dogmatic in terms of this is the only way. So if you see me in the future going forward using, in addition to the fundamentals, the long term fundamentals, a little bit of the chart stuff.
I hope it’ll be for the, for the benefit of, you know, members, including, uh, you know, some of our buy, hold, sell positions. And yet not to be blind into thinking all of a sudden I found a crystal ball. So I see you, I see you gleaming, ready to, ready to say, say nasty things to
[00:24:50] Luke: Right, so let’s start off, right, I applaud your desire to, like, step outside the little box a little bit and, you know, learn new things and experiment a little bit and expand your processes and, you know, the way you operate, because we could all be stuck in this kind of, you know, false maxima of how we operate, and it’s only by experimentation we realize there might be better ways.
So that’s awesome. Um, this approach though. I mean, I don’t know how to, I don’t know how to caveat my language, right? Okay, if you’re doing it for entertainment purposes, if you’re doing technical trading for entertainment purposes, I’m going to take a hard line on this, then have at it. I started using options.
I haven’t got a bloody clue what I’m doing and it’s as much entertainment, and I almost consider it part of my poker bank role more than part of my investing, uh, you know, proper investing, you know, being diligent and just kind of playing with options at the moment. Um, This technical trading stuff is bullshit, surely.
[00:25:51] Krzysztof: Uh huh.
[00:25:53] Luke: It’s nonsense. You, like, you know all the arguments I’m going to make, so I won’t reiterate them. But, uh, um, you know, cups and handles and support levels, and I don’t even know the lingo. It’s just such a load of garbage. Like, as investors, right, we have a thesis and we preach, study the company, not study the share price.
And, um, you know, what the company is doing, the, the, the, the intraday swings and you know, be the swings over a week or a month, tell you nothing about what the company is doing. Um, You should be studying the company. I think you potentially put yourself in a difficult position if you start looking at this weird magical stuff.
Um, as opposed to what’s really going on
[00:26:39] Krzysztof: I know that line of argument very well because I’ve lived it for the majority of my investing career. So, and I’ve thought those same exact things. So this is what I think makes it, makes it really interesting. I see a flaw in your argument. However, because you said something like, uh, oh man, uh, something like the fundamentals.
Of a company are what’s really happening or, or maybe conversely, the short term intraday stuff is not really what’s happening. And I think I would amend that to levels are really happening. It’s not that one is not happening and the other is actually happening. It’s both are happening. However. If you apply the wrong lens to the wrong level, you’re going to be screwed.
If you apply a long termism to the short term stuff, you’re going to get your, your boxers handed to you. If you apply short term intraday stuff to long term investing, you’re going to get hosed. So my rebuttal comes in this point, I know there are successful… short term traders. It’s not that, uh, they don’t exist.
And I also, at this point, from my, from what I’ve seen, uh, feel pretty confident that those who are successful have done it repeatedly. So it’s not a one off kind of thing. Which, curiously, Is, uh, to make my argument hopefully a little stronger if, if you’ve ever read the stats on, you know, the hedge funds of the year, you know, the stars in the, in the, in the big institutional polls, it turns out that most of the time they have one good year, get their star underperform.
And I imagine they’re mostly doing long term ish stuff. So even that has elements of luck, right? Or you can’t really judge success by, uh,
[00:28:51] Luke: let me, let me jump on that one a bit because, um, Like, I think the individual stock picker, like you and I, and Seven Investing subscribers, we’re doing something, we’re playing a different game to the big hedge funds on Wall Street. And our incentives promote exactly the behaviors that drive long term compounding.
Because we don’t, we’re not incentivized to take short term decisions, which some of the big, you know, funds are. So actually the game is rigged against them. So I wouldn’t, I see where you’re going with this argument, and let’s carry on, but I wouldn’t necessarily equate the fact that a fund performs one year and underperforms the next to saying, you know, the majority of investors will do the same.
If you get it right, there is a method to being an investor in individual companies that gives you a significant advantage over the market, I believe.
[00:29:44] Krzysztof: yeah, absolutely. So I think the crux of, here’s what I’m saying, uh, I’m still in the exploratory phase, but, but this conversation has given me a interesting idea that I didn’t have before we started recording, which is I’m going to make an actual trading account. I’m going to put some coin in there.
Let’s call it a thousand bucks. And the whole purpose of that account will be to track, like we would in poker, my success starting whatever date I’ll pick, maybe August 1st, maybe September 1st, when I feel ready, right? I’m going to do what I do, uh, In the very short term and keep, keep, keep good records and I’ll be very curious to see how those numbers compared to what I do in a long, my long term account, uh, starting at the same date and I, here’s my, here’s my hypothesis that a year, let’s say a year from now when let’s say we look or says six months when we check in on my results, I’m going to predict, uh, that the numbers we see in my short term account will be surprisingly good
[00:30:59] Luke: Whatever the result though, it’s going to be, it’s going to be highly anecdotal, right? It’s going to be, I mean, it’s, I suppose, does this maybe boil down to, is technical trading like poker, or is it like roulette, you know, the odds are slightly skewed and different, but you know, is there, to what degree is there skill and luck, and in something like roulette, it’s 100% luck, right?
And then in poker, maybe it’s, you know, maybe in short term results might be 10% skill, 90% luck, long term results might be inverted, you know, 90% skill, 10% luck because of volatility.
[00:31:35] Krzysztof: Yeah. And you’re making the case, right?
[00:31:37] Luke: well, I don’t know if it’s, I don’t know if it is maybe technical trading is roulette, right?
And because you’re on any bell curve, if you take a hundred thousand roulette players, some of them will be long, you know, winners in the longterm, but they just happen to be the guys and girls at that end of the bell curve.
[00:31:50] Krzysztof: In that case, I, I’m pretty sure there are no long term winners in roulette by statistical odds. You can’t ever win roulette over the long term. So I think what we’re both, here’s the, here’s what we’re saying. You’re comparing the short term ism stuff to roulette, and I’m saying it’s gonna be more like poker.
And of course, this does not guarantee I’ll know what the hell I’m doing, or maybe the fault, if there is one, of course could be that I’m just not good enough. But, we’ll find that out later. I’m just saying, I think this is an interesting… New, uh, approach that I’ll be undergoing and I’ll be happy to talk about this stuff openly with you and the rest of our subscribers and sharing what I learned along the way and hopefully, you know, if it’s, if, if you’re right, we’ll know in one way or another.
[00:32:45] Luke: right, right, let me, can I make a suggestion, which you don’t
[00:32:50] Krzysztof: Yeah, yeah,
[00:32:50] Luke: but maybe it’s interesting, so, um, maybe you should, by design, pick like a totally different set of companies that you’re using for technical trading versus the same companies you’re, you’re long term investing in.
And that might seem counterintuitive, but perhaps, well, let’s test the idea. Um, I’m thinking on the fly a little bit, like. Is there any, I don’t know, Is there any kind of analysis of the fundamentals when you do technical trading, or you’re literally looking at like the shape of the price graph?
[00:33:21] Krzysztof: this is where I think my approach. Is not an either or approach the moment you said, like, what if you just take a bunch of companies that are not in your longterm portfolio? I had this nasty feeling inside because that would put me purely in the technical side. And that, first of all, I don’t want to be staring at squiggles and lines all day, right?
In that kind of way. So My approach, I think, has to be and.. I need to have a deep fundamental understanding of the company so in both portfolios, that will be the case. I don’t see myself picking rando companies and trying to try my hand at this. But given the fundamentals, I’m going to trade with higher frequency in the technical portfolio than I would in the long term and see if there’s a difference that way.
I’m not going off the deep end yet, ignoring fundamentals that, that makes no sense to me.
[00:34:19] Luke: Okay.
[00:34:20] Krzysztof: if you could see Luke’s face right now,
[00:34:22] Luke: yeah,
[00:34:22] Krzysztof: it’s, it’s entirely, it’s, uh, it’s like that very contained, very, very contained, subtle, like, uh, like, uh,
[00:34:32] Luke: Nothing, no British subtlety here. I still stand by. This is nonsense. , there’s no, no subtlety, , uh, like I will just say upfront, like if you are successful in six months time, that tells us nothing about the, uh, uh, you know, whether this is a more profitable approach that just tells us. You know, you were somewhere on the bell curve, in my view, it’ll take more than, uh, one person over a six month period to convince me that this stuff
[00:34:57] Krzysztof: how long would it take?
[00:34:59] Luke: are, well, multiple lifetimes, like a controlled study of a thousand, say, investors, right?
[00:35:05] Krzysztof: Okay,
[00:35:06] Luke: You, know, you take like a large population and you control in some way and then, yeah, but you’re right. To be fair, you are right. A bit like there are professional poker players, um, there are professional technical traders. I think we have one of those in our discord, um, who do seem to, uh, use this stuff, uh, effectively to sort of maximize their returns.
So maybe I’m, maybe I’m completely wrong to poo poo it. Maybe the danger, uh, is. You know, if you, and this is why I was almost suggesting keep, have like two different sets of stocks, but you’re right, I sort of understand why you shouldn’t do that, but maybe the danger is if your technical stuff sort of bleeds over to your long term stuff and you end up damaging your long term returns because of sort of short term decisions you’ve might taken.
I think that’s a real danger for a large number of people. Um, which is why this stuff must be approached with great caution, perhaps.
[00:36:01] Krzysztof: a hundred percent. A hundred percent. That’s why the idea I didn’t have that I have now, which is so obvious, is that I need to set up a separate portfolio so that, and contain it, especially in the initial periods where, um, a at my most inexperienced. So, uh, but I would push back a little bit on the idea that there is no time period.
Which would give us enough evidence. Yes, I’m one person. Uh, but, uh, six short three months might be too short. The time six months might be too short. Even the year everyone, you know, even the losers get lucky sometimes. But if I keep tracking this and On the assumption that my skill continues to accrue and we’re having this conversation again a year from now, two years from now, and that short term technical ish portfolios keeps, staying at pace with the long term stuff or outperforming it, then, you know, everyone can reach their own separate conclusions, but I, I, I don’t know.
Uh, at the poker table, I don’t really need that long. a time to figure out who knows what they’re doing and who doesn’t. I’m wrong. I mean, you know, that’s a whole nother conversation, but time, there are timeframes. I think that makes sense.
[00:37:21] Luke: Yeah, to be, to be continued, I agree, but it’s good to use real money, not like play money, because then, um, You know, you’ve got slightly more motivated decision making, and you know, the spread and the fees and everything else, like it’s a real experience as opposed to a lot of these paper trading accounts delude you into thinking you’re better than you really are, I think, depending how they’re sort of set up.
Um, so that’s good. Um, and look, you know, frankly, I’m doing the same thing, right? I’m going to talk about options very briefly, because I want to, I want to sort of call you out from last week. You offered to, um, do a bit of an options, not masterclass, but, you know, teach us a little bit more about it. And I’d like to learn more because.
I’m not doing technical trading stuff but I have got like a chunk of my portfolio which I’m kind of playing in and you know I admit it’s perhaps more entertainment than anything else because I almost started with things like upstart just to kind of rub it in your face when you said you were selling that stuff and I’ve had a good debate on discord in the last 24 hours with our esteemed colleague, Anavan, about a company.
I think I’m, I thought I knew Twilio and I’m just starting to use put options like taking, essentially taking. A position where I, I benefit if the company’s share price goes down. I don’t really understand puts, but I’m just buying stuff. So I think it’s probably relatively safe. And I set out my bare thesis on discord.
Like Anavan has adeptly sort of picked apart my bare thesis. So, you know, maybe this particular put was kind of dumb, but I’m there learning, right. And
[00:38:53] Krzysztof: Well, you know, we have our quote of the week. Luke. I don’t know what I’m doing. I’m just buying stuff. So. So, yeah, fantastic.
[00:39:03] Luke: Okay. Cool. I’ll produce the promo clip from that and out myself as a wild gambler for sure. But one thing I am doing right, just if you are listening to this whole episode, not just the promo clip. Um. Yeah. Like, I don’t, I’m not including that stuff in my long term returns and I’ve got super lucky like my upstart option is up like, uh, what, 1, 300%.
I’m in a 13 X on that it’s actually become what was supposed to be a joke has become actually somewhat material and how it’s like, it’s a, it’s a, it’s a small part of my retirement portfolio, but it is material. So, uh, uh, you know, I fully recognize I’ve been lucky. I’m not going to count that as a win. I’ve just kind of flipped a coin and it’s come down like head six times in a row, I think.
[00:39:46] Krzysztof: we should make, uh, options, uh, episode topic for future episodes, probably several. There’s a lot to say there.
[00:39:55] Luke: Yeah.
[00:39:55] Krzysztof: Uh, uh, you, the one thing I’ll, I’ll say in response to your upstart success, I’ve had many options successes in my investing career. It’s like the sirens where especially if you, you’ve done well in the beginning, you think, Oh my God, this is the easiest thing in the world.
And believe me, it’s not. It’s playing with fire. Uh, but it is also possible to gain a lot of skill with it. So it’s a very deep and, uh, complicated world, but it’s doable. So I look forward to, to more conversations. Just be careful.
[00:40:32] Luke: That’s quite interesting, right? We’ve both shared a caution with each other, you on technical trading, me with derivatives, and we’re both going to learn stuff over the next six months and kind of, I’m not saying let’s compare our results, but I’m just saying, you know, maybe let’s compare our learning journeys.
That’d be quite, quite a useful, uh, objective thing to do.
[00:40:49] Krzysztof: Yeah, very much so. I want to, uh, I want to turn to the, uh, to our two truths and the lie game, Luke. And in order to do that,
[00:40:59] Luke: Yeah.
[00:41:00] Krzysztof: uh, I just want to give you a background, uh, on where these truths came from. some time ago, some investor that I think highly of said all investing.
is demographics. Now that’s obviously an overly generalized high macro level comment, but it’s a punchy statement and I think there’s there’s weight to it. What he’s saying is that economies fall and rise based fundamentally on the age of the nation’s working populations. In other words, you can predict a country’s economic successes over, now we’re talking about decades, years.
If you only, if you want to predict, make a prediction about a country’s success, all you need to find out is the percentage of people who are too young to work. Working age or retired and no longer working in the shifts in those percentages will be the guide, your guide, your best guide to which countries, therefore, which industries, therefore, which investments will be more and less successful.
So I recently came across a New York Times. about the shifting demographics in the world, which, uh, when I was looking at this, I thought, Oh, wow, this is, you know, seeing it graphically is, is really, uh, fascinating because it’s basically the best, according to this model predictor for where the world is going.
So out of that, I constructed your, , two truths and the lie test. Uh, but I kind of have four. I have four. I have four. So I don’t know if that’s twisting the format. You want to, you want to go for
[00:42:57] Luke: Yeah, go for it. Is it two truths and two lies? I’ve got three
[00:42:59] Krzysztof: So no. Three truths and
[00:43:02] Luke: sounds interesting. Let’s share a link in the show notes. I’ll go read the article after the episode.
[00:43:06] Krzysztof: Okay, right. So, uh, I’m going to read you four statements. One of them is a lie. The other are true,
[00:43:14] Luke: hang on. You’re giving me three truths and a lie. It’s harder. So I’m going to take two points because we are tracking the score if I get this right because I’m currently one point behind so that’ll put me ahead if I can nail the truth of the lie.
[00:43:26] Krzysztof: Okay.
Alright. Okay. So, uh, point number one. by the year 2013, ten years ago. One quarter of Japan’s population was 65 and older, making it the oldest large country ever. Point number two, the next country to hit that tally, 25 percent, older people, will be France in 2025. Claim three, by 2050, people age 65 and older will make up nearly 40% of the population in some parts of East Asia and Europe. That’s almost twice the share of older adults in Florida, America’s retirement capital.
[00:44:21] Luke: Yeah. But yeah. Okay.
[00:44:23] Krzysztof: and claim for soon the best balanced workforces will mostly be in South and Southeast Asia, Africa and the Middle East, according to UN projections.
[00:44:39] Luke: Okay. This is awesome. This, this is really hard. Um, I’m going to take, I’m going to, I’m going to sort of pick these apart one by one and try and use a bit of logic because it’s two points. It’s important. So the last claim seems self evidently true to me. Like we’ve talked about. India. I’ve done a bunch of research on sub Saharan Africa for one of my seven investing recommendations.
Like demographics are on the side of those countries. So I think the number four claim was like the best balance. So, you know, sort of to promote growth. So that seems to be true. Um, what else seems self evident? Like, number three is just too complex a claim, perhaps, so maybe there’s a poker thing there, that you’d put like a lie into that.
By 2050, 40% of folk will be 65 and over, double that of Florida today. I mean, maybe I’m a little surprised that only 20% of Florida is 65 and over, but that’s not unbelievable. So I’m going to take that as a truth. Ooh, Japan, it was a, was a quarter of Japan’s population 65 or older 10 years ago. Like, maybe that’s the lie, but for the other opposite reason, because maybe Japan has way more than a quarter of their population then, hmm, they’ve like, they’ve had this demographic challenge for a long time, I think.
So I’m, that’s on my radar. And the number two was, tell me if I got any of these misstated, number two was, uh, the next country to be 25% or older will be France in 2025. That’s, that’s surprising, because France certainly doesn’t seem like an older population, and you see, you know, the young people rioting, and you know, there’s just like, unfortunately some bad social things happening in the country right now.
Um, but I’m not shocked that that’s perhaps true, and it’s only 25%.
[00:46:36] Krzysztof: So, Luke, I need to adjust one thing that the first claim about Japan. I made it a little tricky because there are two, there are kind of two claims in there. Uh, remember that it’s also making, uh, it the oldest large country ever.
That’s part of the first claim. So not only that it was a quarter of the population, but also that it was the oldest country ever.
[00:47:00] Luke: Okay. If there’s two things to I’m like, I’m tempted to go with that one as the lie. And if there’s two things to refute, it gives me a bit of optionality on my, my lie. Maybe it’s a lie for a different reason.
Wow, this has turned into a long answer. It’s famously a large population and like it only makes sense that increasingly countries will get older and older and older because we’re just living longer, right? So unless COVID has done something insane to demographics, um, then you’d expect always, you know, some country to be becoming the oldest ever. Uh, yeah, go on, I’m gonna, I’m gonna go with my Japan number one as being the lie.
[00:47:36] Krzysztof: Number one being the lie.
[00:47:38] Luke: Final answer. Yeah.
[00:47:39] Krzysztof: Yes.
That’s actually true. The, uh, I liked your reasoning. I, I mean, you were, you know, I, I, uh, I did a little bit of mentalism on you because I, I started to think you were getting close to the truth. So I had to, I had to redirect your, your gaze back to, back to Japan.
The lie, uh, in these four is the second one. The next country to hit the tally
[00:48:07] Luke: yeah.
[00:48:08] Krzysztof: will be Italy. in 2025.
[00:48:12] Luke: Oh right, wow.
[00:48:12] Krzysztof: When you check out this article on the New York Times, it’s one of those fancy graphic, uh, graphics that kind of updates as you scroll. You’ll see that unfortunately, Western Europe, uh, including Spain, Italy, France, uh, and the UK, you’re not far off. Like that’s, so the big warnings here are China’s gonna be on it’s way down, India on it’s way up, but Western Europe is not in good shape either. But I was surprised that, of all the countries in the world, Italy is the next one that’s kind of in the worst shape, uh, globally.
[00:48:45] Luke: Where does France sit out of interest? Are they on the chopping block or they’re actually a fairly young population?
[00:48:51] Krzysztof: Yeah, they’re also, they’re also part of that troubled, uh, Western demographic block. So, the riots and the young people that you’re seeing, it’s because the older folks are staying home.
[00:49:01] Luke: Okay, right, okay, fair enough, yeah, cool,
And going back to your start of this, right, I totally… Like, I don’t think demographics is everything, but it’s massively correlates with like the success and growth in a country. And uh, you know, that correlates heavily with whether something is investable or not.
So yeah, it’s really good as an investor to be aware of this stuff. Thanks for educating us.
[00:49:24] Krzysztof: My pleasure, Luke. All right.
[00:49:26] Luke: All right. Very good. So again, let you get back to your Sicilian vacation. You’ve got a couple of weeks to run, right? You’re heading home in August.
[00:49:33] Krzysztof: Less than two weeks, unfortunately. I’ve got 11 days left.
[00:49:37] Luke: Okay. Well, make sure you use them wisely.
[00:49:39] Krzysztof: Yes, sir. Um, I’m working on hitting the cannoli, , quota every day.
[00:49:44] Luke: Very good, and make sure you keep that running up as well, balance the calories in and calories out.
[00:49:49] Krzysztof: All right, Luke. It was a pleasure. Until, uh, until we meet again.
[00:49:52] Luke: Very good chap, nice talking to you.
you’ve Been listening to No Limit with Krzysztof and Luke, if you’ve enjoyed today’s episode, um, give us a tweet, drop us a thread, and maybe recommend it to a friend. We’ll see you again in two weeks time.
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