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Join host James Connor with guest Bill Smead, the insightful money manager from Smead Capital Management, as they discuss the pressing issues facing today’s investors. In this episode, they discuss the looming dangers of a market bubble, the realities of escalating inflation, and the untapped potential of oil investments. Learn how you can shield and grow your wealth in a volatile economic climate. Don’t forget to like, subscribe, and hit the bell icon for more financial wisdom from Wealthion!


Bill Smead 0:00
If Bitcoin succeeds, it’ll turn into a barbarous relic like gold where it’s a better currency than paper. That’s its that’s its success story if it becomes a better currency than paper.

James Connor 0:20
Hi, and welcome to Wealthion. I’m James Connor. And today my guest is Bill Smead of Smead Capital Management, which is a money management firm based in Phoenix, Arizona.

Bill, thank you very much for joining us today. How are things in Phoenix?

Bill Smead 0:38
It’s a beautiful day. It’s going to be a beautiful week, and I really appreciate you having us.

James Connor 0:43
I’m sure the weather is always beautiful there. I have yet to visit Arizona, but I would love to go. And it’s an interesting part of the country. It’s not too far away from Los Angeles, not too far from Las Vegas. And if you’re into skiing, I guess you could also drive to Salt Lake City.

Bill Smead 0:58
Yeah, they even have some skiing and in the north part of the state, we haven’t have an unusually wet winter this year. And that made skiing better locally and it made Paulin worse now that the weather’s getting warmer. And

James Connor 1:12
I’m not sure if you’re a hockey fan, but one of the greatest hockey players in the league right now, if not the greatest Austin Matthews is from Scottsdale.

Bill Smead 1:22
Yeah, that’s amazing, because it doesn’t last long here.

James Connor 1:26
Yeah, he is currently leading the league in goals, I believe it’s at 69. And there’s still a week to go in the regular season. So he’s going to be setting records. So Bill, I want to move on now. And you are a value investor. And just for the benefit of viewers who might not be familiar with this approach, maybe you can just expand on it and tell us exactly what is value investing.

Bill Smead 1:49
Yeah, value comes in multiple forms. But the main premise, give you a burden, the hand is worth two in the bush. So we want to buy a burden a hand that is worth dramatically more in reality than what the marketplace edit temporary point in time is willing to pay for it. So that can come from being a company that’s going to grow quite a bit and trades at a very low P E ratio in relation to how much it’s going to grow in the future, it can come from being a bargain on their asset base. And with a with a future brighter than what was expected for their asset base. It can come in a wide variety of ways. Sometimes it’s the sum of the parts that get us interested, like in the case of a company like U haul, which not only rents vehicles, so people can move around the country, but also just storage units, which a company by the name of public storage proved over the last 40 years is one of the best businesses on the planet.

James Connor 2:53
And so you and I have been involved in capital markets for many years now. And one of the trends that we’ve seen here in the last 10 or 15 years is this movement toward passive investing, right? And you’re an active money manager. And I’m just wondering what your views on passive investing? And do you think active management is a dying art?

Bill Smead 3:17
Well, it’s very much an unpopular arc. Because most of the people that are doing it have not done a good job in relation to what the passive index is up produced. But the nature of the common stock market is that a good idea ends up getting overcooked. And what’s happened now is so much of the participation is via passive indexes, that too much of the common stocks in total, our own passively which dooms any good investment discipline. So John Bogle had a brilliant idea. He said, hey, just get into a vehicle that cost less that will keep you in the market. You’ll you’ll have some duds, but your winners were more more than offset that you’ll keep your turnover down, et cetera. And and that was a it was a genius stroke, really. But any good discipline ends up getting overcooked. And just so growth stock investing got overcooked in 2000. And and then, when that broke, the index did poorly for 10 years. Well, we think in this particular case that the goose has gotten so massively overcooked, that the s&p 500 index people have now been jacking reality around by moving tech companies out of the tech category to make it look like a more diversified portfolio than it really is. Because right now it’s about 45% in tech or what most of us would be considered tech companies.

James Connor 5:00
Well, that’s an interesting point. When was the last time it was that high?

Bill Smead 5:04
Well, the last time it was that high was Tech was 30% at the top and Bubble. Tech is now 30%. Again, in the s&p, but they’ve moved Facebook, and Google, and Amazon, Netflix and Tesla out of the tech category. So in effect, there’s another 15 plus percent outside of what is they call tech in tech, which means it’s just a glorified growth stock portfolio right now, the s&p 500 is a growth stock portfolio that would fall into the growth stock category, say on, on on a Morningstar analysis.

James Connor 5:46
So before we do a deeper dive on the stock market, and in determine where you are investing your clients money, why don’t we look at the economy and take a top down approach. And when I look at the economy and things overall, it looks very good to me, okay, it’s growing at three to 4% annualized, this jobless number continues to stay below 4%. And the stock market’s making new highs every day. What’s your take on the economy?

Bill Smead 6:13
Boy, that’s a great question. To answer that question. I would take your viewers and listeners to the November 1999, Fortune magazine article by Carol Loomis, who is the editor of Warren Buffett’s annual letter. And what she did was she recounted the talk that Buffett did in 99, to billionaires. And what he explained was from 1964 to 1981, the United States economy grew 4.3% per year. And the primary index in those days was the Dow Jones Industrial Average. And Buffett said the Dow Jones Industrial Average did not break above 1000. During that entire 17 year stretch, even though at the beginning of that stretch, it was close to 1000. So the moral of his story was, why did 4.3% economic growth not equate to good stock market performance? And of course, the answer to that question is that interest rates rose that entire time. And inflation was a big problem. And in that time period, I just finished reading Cornelius bonds book about T Rowe Price, and T Rowe Price was one of the great growth stock investors of all time. And in the midst of the 68 escalation of the Vietnam War 500,000 American troops halfway around the world, and the borrowed money by the federal government to fund that process, combined with Johnson’s Great Society legislation, troubled troubled T Rowe Price greatly. And what he did was he pivoted, he put oil and gas stocks in his growth line. And he started what today is called the T Rowe Price, New Era fund, because he thought it was going to usher in an era of inflation. So he owned oil and gas stocks and gold stocks, etc. In the T Rowe Price, New Era fine, which was a massive pivot for a growth stock guy to make that pivot. What was was a massive pivot. We’ll fast forward to today. That is, in effect, what we have the pandemic war is the Vietnam War. And here we are in Arizona, President Biden just tossed another $10 billion to two semiconductor companies to do chips in the Phoenix area. They’re throwing out billions just like candy to a baby, billions of dollars of debt forgiveness for college students, billions and billions. So the point is, the economy is likely to be solid, the next 15 years, because 100 and 80 million out of 330 million people in the United States are under 40. People under 40 are way slower getting their lives started than we used to be right we used to get our lives going at age 23 or 24. Now they get them going at 30. And because there’s so much slower, we have a lot of household formation and marriages and babies in front of us, but that is inflationary. necessities are expensive, and necessities go up in price, especially when 180 million people want them. And and that’s where we’re at now. So we think we’re in an era like the 60s and 70s, where the economy is going to be above average. But what happens is, and I’ve been trying to explain this to people for 43 years that I’ve been in the investment business, when the economy stinks and the Fed is friendly. When the Fed creates money, it sloshes into the stock and bond markets. So stocks do well when the economy does credit does poorly. Then when the economy’s doing well, and the Fed tightens As up, people take money out of common stocks to do Main Street business, to buy a building for their company to expand their chip plant, yada, yada, right. So So in effect, stronger economic activity is bad for the stock market. And the funny thing of it is the the normalization of interest rates, and that fact has not completely hit home yet. And we highly expect it will hit home in the next two or three years.

James Connor 10:30
Okay, so there’s a lot to unpack there, you just touched on interest rates. And when we started this year, everybody was looking for six cuts, which was kind of a rageous. But as we’ve gotten into 2024, the economy appears to be stronger than it is, and inflation is also very strong. So therefore, now we’re looking at according to the dot plot three cuts sometime this year, what are your views on interest rates in 2024? And do you think we’re going to see a cut? And if so, when might that be?

Bill Smead 10:59
You just remind me of a Rod Stewart song isn’t The First Cut Is the Deepest baby, you know, The First Cut Is the Deepest? Well, we’re having a hard time finding that first cut, we might not get that first cut. So here’s what’s funny. If you would have been interviewing me five years ago, the thing that we were most frustrated by was we had been telling people that interest rates will normalize at some point. So we’ve now normalized interest rates. And the stock market has not readjusted its pricing relative to that normalization, the stock market is still priced at a one to 2% Treasury rate, and we got five or five and a half or whatever it is, right, five and a quarter. So the bizarre so people ask me, Well, Bill, when is the market going to readjust itself to these interest rates? I said, Well, five years ago, I would tell people, interest rates are going to normalize. And they’d say, When’s that going to happen, Bill? And then I’d say, Well, you can’t hold your breath till then. So then now, I say that at some point, the stock market is going to rationalize itself against these interest rates. And they say, Bill, when’s that gonna happen? I said, Well, you can’t hold your breath. Till then. We kind of think that we’re in we’re in 1972 right now. So what happened back in 69, at the beginning of your Buffett closed, his partnership, sent the cash out to the investors, criticized the stock market, made fun of the gogo 60s. And then we have the 6970, bear market of 40%. And then they put the bull market back together on a narrow group of stocks, 24 stocks that were in both the Kidder Peabody and the Morgan Guaranty nifty 50 list. And we had a bull market in 7172, on the back of that neuro group of stocks, now having a bull mark on the back of a neural group of stocks, does that sound familiar at all, to your viewers and listeners? And the answer is, yeah, we have, we went from fangs to Magnificent Seven to what’s the latest group of neural stocks that are leading this. And that’s what 7172 was like. But the problem is 72 ended up being followed by 7374, and a nightmare, a market from the end of 72 to the bottom and 1982. And we believe we’re headed for there.

James Connor 13:19
Okay, so let me ask you about a few things. First of all, let’s just get right into inflation, you’re making comparisons to what the inflation we’re seeing right now, and what’s happening, and what happened in the 1970s. And we just saw recently had a CPI number which came in stronger than expected, and a big part of that had to do with services. Car Insurance, for example, was up 22%, year over year, the biggest move we’ve seen in that since 1976. And there’s so many other things like, I know, I’m in Toronto, but I would imagine, you know, the inflation rates here are probably just as high as they are in Phoenix. But even simple things like go into a barber now, you charge me so much money, I just started cutting my hair on my own. But it’s like you can’t escape this inflation. It’s just non stop. And even though the government is saying it’s only 3% I think it’s much higher than that. But what are your thoughts on inflation? And it sounds like if you compare it to the 1970s, you think it’s going to escalate or accelerate? What’s going to cause that and where do you think it might be going?

Bill Smead 14:24
Well, we have two different strategies are our main us Value Fund, and our International Value Fund, and our international value value fund is loaded with Canadian companies, because the natural resource industries are going to win the next 10 years, we believe so we you know, we maybe we should move our offices to Canada or something because it’s, it’s a better place to be, we think the next 10 years. So the too much money in the hands of too many people chasing too Few goods. It’s not very complex that here we are. The Fed has tightened credit, but simultaneous lat that the federal government, the United States is handing out money like drunken sailors on leave. So, so the answer is that think of the Phoenix metropolitan very well, they just announced they’re going to pump $10 billion into the local economy. Well, $10 billion for the, this is the what is Phoenix, it’s the I don’t know, it’s, it’s maybe the fifth largest metropolitan area, United States, that’s a lot of money just in that one source. And then you go to Applebee’s for the grilled chicken salad. And they have such a hard time hiring waiters and waitresses at the going rate, that she she brings three out of the four of them the breaded chicken instead of grilled, we want the grill? Well, that’s because they have a hard time finding staff. And that means you got to pay more to get the staff you want. And that’s exactly what you’re talking about. By the way, in the United States. Gasoline is a much smaller part of the household budgets than it was 15 years ago, even at dramatically higher prices. It’s a way lower part of household budgets. But it’s psychologically important in the United States, because it’s about the only way the average American family measures inflation. Oh, I went to the pump, and I’m paying 50 cents more than I was paying two months ago. We’ve got inflation. And so that’s what they’re gonna see. And by the way, they they strip out energy and food. It’s like, okay, let’s take out the two things that everybody has to have, and tell people that there’s no inflation. It’s bizarre. It’s there, it’s there. And it’s going to stay there. Because those 100 80 million people need the necessities. And as their demand for necessities go up, inflation kicks into gear, much like baby boomers in the 1960s and 1970s.

James Connor 16:59
Yes, I know what you’re saying about fuel. It’s something you see every day. And I kind of enjoy that, right, because you get an idea of where it is. But when you look at CPI, it’s the three primary components are shelter, food and fuel. Every time I go and get my groceries on a weekly basis, it doesn’t matter if I go to Costco, WalMart or Whole Foods, I’m reminded of what’s happening with inflation. If I’m spending 500 bucks, I know last year was up 400 bucks the year before that it was 300. So I’m constantly being reminded, if you look at the real estate market, you know, a home that I could have bought in Toronto, four or five years ago for a million bucks is now costing me 2 million. So it’s just not fuel like it’s, you’re being bombarded constantly, that these higher prices are really coming home to roost,

Bill Smead 17:47
Yeah you brought me to one of our theories, since I’ll just pick right up on on that point you made the millennials and the ones right behind them, which is Gen Z, they are going to have to do what Southwest Airlines has been asking people to do for years, which is you’re free to move about the country, the arbitrage the land arbitrage that’s going to go on the next 10 years, the United States is going to be huge. Because most people in the companies should recognize, hey, let’s put our employees in a place where they can afford to buy a house. Well, 75% of the landmass in the United States is empty. There’s lots of places to put people that are nice places to live. They just don’t have much population yet. And technology allows them to be wherever they need to be that that’s going to be the one of the big themes. So we own U haul that helps them move someplace else in the country, and gives them a place to store their goods that they didn’t want to move. And and we liked that theme, you’re now free to move about the country.

James Connor 18:57
So I want to continue on with this theme about inflation and once again, go back to what happened in the 1970s. And the 1970s was very unique because we had two major oil shocks. First one happened in the early 70s Because of the oil embargo. The second one was in the late 70s due to the Iranian Revolution. And so a big part of this inflation that we saw had to do with oil. I think it was up two or 300%. And do you foresee that same sort of thing happening now with the oil price and also given the troubles that we’re seeing in the Middle East?

Bill Smead 19:32
In 2017 through 2021 There was an explosion in US investors investments and ESG oriented investments. And there was a literally a net money pulled out of the oil and gas industry. That’s all you need to know. We have massively under invested in fossil fuels. We’re now going to do a AI, which is maybe the biggest electricity eater of all time. Electric cars are massive electricity eaters, it takes 60 barrels of oil just to make a Tesla battery, you know, to make a Tesla requires 60 barrels of oil. So the bottom line is, electricity prices are gonna go through the roof in the next 10 years. And the, the sins of the prior 10 years will have pennants that match it. And that’s you under invested in fossil fuels. Our strategic oil reserves in the United States is 140 million barrels below where it was when when, when President Biden started selling, and he said he was going to refill it at 70. And he skipped that. We think it’s very possible he won’t, he won’t ever see 70. Again, we think oil is going to go to 150 to 200 bucks over the next five to 10 years. And I’m telling people, I might change my name to Jed Clampett.

James Connor 21:06
That’s like the Canadian central bank selling all their gold. So, so Okay, so we both agree there’s an issue with inflation, it’s not going lower, it’s going higher. And yet this whole move that we’re seeing in the stock market is predicated on lower interest rates, okay. But there’s no way they’re going to be able to cut interest rates, if inflation takes off again, do you think that there’s a risk that we don’t see a cut this year, and in fact, maybe as we go into 2025, interest rates go higher?

Bill Smead 21:41
Well, first of all, as a man who started a mutual fund, the second trading day of Oh, eight, we’re not famous for our market timing. So just give you that caveat right up front, I don’t necessarily think I’m any better at predicting the next six to 12 months than anybody else. Now at major inflection points, which by the way, will be the title of our our webcast is, is basically saying that stock market psychology is only important at extremes, major historical extremes. And we happen to be in one of those right now. So so. So we don’t know the timing of things. But we do feel like we have an understanding of when the goose gets overcooked one direction or the other. So I again, you can’t hold your breath till these things play out. But I would say that the likelihood now is this hope that they will steep in the yield curve over the next year. And that is a reason to be as excited about growth stocks, as you were before the interest rates went up, is in a lot of trouble.

James Connor 22:56
So I understand you don’t want to put a time on it. And because you don’t want me coming back in six months and attacking you because your timing was wrong. But what’s the catalyst? Okay, if you think this market is so overdone right now, what will be the catalyst that take it lower?

Bill Smead 23:12
Well, there’s a great book by John Kenneth Galbraith, last read done in 1990. And if you’re your watchers and listeners read it, it’s 125. Page paperback, that only takes about three hours to read. A short history of financial euphoria is the name of the book. And he does as good a job as anybody’s ever done, of explaining financial euphoria, using the two historical examples that he focused on was the tulip mania of 1636. And the South Seas bubble of 1720. Well, the beauty of it is, in both cases, one country, the Netherlands, and the other country, England, got on top of the world because they had the greatest Navy in the world, and dominated trade in the world and got incredibly prosperous. So in reaction to getting incredibly prosperous. In Amsterdam, they started, they started trading these fine tulip bulbs, and people got out of control. And at the height of the tulip mania, you could trade a fine bulb for a house, a carriage and two fine horses in in today’s American dollars, that’d be about 700 or $800,000 for a fine tulip bulb, that if you plant it, it grows into a tulip. And that’s how much utility it had. Okay, it’s kind of like cryptocurrency or something, or as Buffett would mention on gold is it’s not a productive asset, right? It’s there’s nothing produced. So other than just being a payment system, that’s all you can have. So he used that example and then it’s in the South Seas bubble. England got very prosperous. And both by both cases, the governments of those two countries were just producing monetizing debt, like drunken sailors on leave. John Law looked and he said, Wow, there’s so much money floating around, how do I get my share of it? He said, Oh, I know, let’s anticipate the commercials from the BRIC trade, and go down and start companies, shell companies to go down and bring back natural resources from remarkable Indonesia, which is what the ads were. And and so he did that. And of course, even the wisest man in all of the world at that time, Sir Isaac Newton got sucked into that bubble, and lost his entire fortune, if you worked for him, and were in his office in the aftermath of that fallout. If you mentioned the South Seas bubble, you’d get fired on the spot. So so the beauty of it is, he asked the question, what causes financial euphoria is people get enamored with a certain piece of art, or an item or a stock market or a an industry, and they just get completely enamored with it, and it builds and it builds, it dies of its own weight, you just run out of anybody to participate? And let me tell it, I’m 43 years in the business, I think we know the last 150 years of US stock market history as well as anybody out there. And I can’t even fathom, if you would have said 15 years ago that we would go 15 straight years where the best performing stocks came out of the prior years best performing stocks almost every year for 15 years. I mean, that is a complete statistical anomaly, right? I mean, that is a total freak show is what it is. So what we did recently is I got this crack team of analysts around me. I said, guys, let’s get me back into RCA. Let’s dig back into RCA. And compare that circumstance to today. Well, in 1923 1%, of American households had a radio and in 1937 75%, of American households had a radio many of them more than one. Well, from 1923, mainly through 2027 through 29, RCA stock went up 11 fold, they were the largest maker of radios, they were one of the two largest national broadcasters, and what are the two largest content providers. So they were like, Apple, Amazon and Netflix all tied up into one company, right. So their stock went from one from 10 to 110, between 27 and 29 to the market top and 29. And then for the next 10 years is spent most of his time between $5 and $10. Even though the adoption of the technology ended up doing everything they could have imagined 1% household share to 75% household share. Then, right before midway, when the United States was losing the World War, and Canada was losing the World War. You could buy that stock as a single digit stock. And then from 1941 to 1968. There was not a better stock to own on the planet. RCA was, but you just got crushed if you got caught in the euphoria of those initial years, and that’s what Nvidia is doing. What AI is doing is the same thing Bubble did. It’s the same thing, the nifty 50 did, people overpriced the euphoria, Disney traded at 89 times earnings and 72 at the top, Coke traded at 60. My first stock pitch in 1981 was coke at six times earnings paying a 5% dividend, a 90% cut in P E ratios and 90% cut. So Costco at 45 times earnings, it when they’re so much bigger company than they were earlier. It’s like Anna, five 5%, five and a quarter Fed Funds that 1% Maybe you could believe that. It’s just crazy. And that the penance for those sins are gonna come out in the wash the next three or four years, but we just don’t know when it starts. I thought it It started in 22. But 22 was the 6970 bear market. And now we’ve done the nifty 50 bull market. It’s not over maybe at the end of the year or early next year. It’ll be over and then the bear that follows that one is going to be a whopper like the 7374 was that was a 50% decline. And at the bottom. So Buffett gave the money back in 69. He got called by Forbes magazine at the bottom and 74. He says, What do you think of the market now? He said, I feel like an oversexed man and a harem.

James Connor 30:13
That’s a great quote. I might have to use that. Okay, I want to I want to ask you about Bitcoin. Okay, so are you suggesting bitcoin is going to go the way of the toilet bowl,

Bill Smead 30:22
I believe that Bitcoin is going to go the way of gold. So I spoke at an event in Houston about six months ago. And the other speaker was Jeremy Siegel. And Jeremy Spiegel updated that wonderful chart that shows that 250 years ago, you started with $1 and paper dollars $1 in gold $1 participating in the bond market, and $1 participating in the stock market, how you do over 250 years. And the the gold grew and adjusted for inflation to $1.75. And a paper dollar was a penny. So gold was 175 times better than paper dollars. But you are a rich person from the bond market in that time period. And you were a rich, rich, rich, unbelievably rich person from what happened in the stock market. In other words, if bitcoin succeeds, it’ll turn into a barbarous relic like gold, where it’s a better currency than paper. That’s its, that’s its success story. If it becomes a better currency than paper. That’s the upside. It’s an inanimate object. It’s got no productive value. It’s just like gold. It is it would become a better currency. And watching people treat it like an investment is bizarre. It’s It’s bizarre. You know, they’ll say, Well, bitcoins hard to mine. Well, gold was hard to mine. You know, it’s, it’s, so I’m kind of, I’m kind of in the Munger camp. It’s, it’s more of a rat poison, John, I’m a Jamie Dimon, Charlie Munger guy in that subject. But the best case scenario, it’d be an alternative currency.

James Connor 32:15
Interesting viewpoints. So let’s bring it back. I want to look at the stock market now. And and I want to find out where you and your team are investing in. So you are suggesting that this market that we’re in is a massive bubble, it’s going to pop it’s going to be ugly? So how are you navigating these markets right now? Where are you investing your capital? You made mention earlier that you’re investing in Canadian commodities?

Bill Smead 32:38
Well, in the international strategy, we’re massively overweight oil and gas. And in the US strategy, we’re 25% overweight in oil gas, which is also massive relative to our competitors in the value space and our competitors in the active space. And of course, three and a half percent of the s&p is in oil and gas, even though it produces 8% of the profits and free cash flow of the s&p 500. So So, in the 70s, the only real major category that made people a lot of money was oil and gas. So we’ve got them. We’ve got some participations in real estate, which have a tendency to benefit from inflation. So American households were massively under built homes, we own the home builders, because that’s a way for the average household besides their, their their labor, to defend themselves against inflation as being their own landlord. But as we’ve already mentioned, they’ve got to build these houses, places, different from where the houses have been built currently, so that they can move about the country to take advantage of land arbitrage. And then we own U haul, it’s another way to take the benefit from this. And then we own. We own the banks that cater to that millennials, American Express Bank of America, JP Morgan, and now three regional banks that looked hellaciously cheap to us in November. And banks in general look very cheap, historically in relation to the s&p 500. And then we own Merck and Amgen, which trade at a large discount to the s&p 500 price earnings ratio, even though they’ve been superior companies for decades, and have no more risk. And then Apple does, which is they got to bring out a major new product every three or four years, which is exactly the same risk you take in apple. But we get that at a 40% discount to Apple’s price earnings ratio in Merck and Amgen.

James Connor 34:45
And you mentioned, you’re investing in regional banks. And I’m surprised to hear that given you your value investor. And we’ve seen a lot of trouble with regional banks or in the past year signature Silicon Valley more recently, New York Community Bank.

Bill Smead 34:59
Yeah, by the way, it it the, the area that has been the slowest to adapt to interest rates is venture capital, private equity, private credit. And that whole that that was all part of the Woogie and 2020 22 exposed all those problems. So you see that 6970 bear market destroyed the Woogie Gogo 60 stuff. This 22 bear market crushed the Ark funds crushed peloton beyond me, we, we joke we wrote a piece back six years ago called or five years ago, the the Beyond Meat Market, right? It crushed the egregious stuff, the meme trades, the specs and IPOs. That stuff got crushed and 22. What we haven’t crushed is the growth stock mentality. See Charlie Munger passed away. And he was brilliant. And he convinced Buffett that it was okay to overpay for a company that was going to have 18% return in equity on average for 20 years. But when everybody decides that’s a good idea, and that that means you pay 45 times earnings for Costco, even even Munger would have to admit at some point, it’s a bad idea. Again, it’s just like the s&p gets way overcooked. That becomes a bad idea. That kind of growth, stock investing becomes a bad idea. And even T Rowe Price pivoted away from that, who is the greatest growth stock investor from 1925 to 1968.

James Connor 36:40
So you’re a big proponent of value investing and therefore, Warren Buffett, who in his AGM is coming up in Omaha next month. Have you ever gone?

Bill Smead 36:49
Oh, I’ve gotten for? Let’s see 14 out of the last 15 years. Oh, well. Yeah, so I’m disappointed this year. Uh, he has to stock pickers backing him up. And that’s who I’d like to hear him and Ted calm. Ted Weschler and Todd Combs talk. I, I don’t, Greg Abel does a good job of running the operating businesses. But that’s boring. And Ajit Jain is a mathematical wizard and insurance specialist. And that’s boring. I don’t want to hear about that. I want to hear what these guys think I want. I want them to expound and without Charlie there to be the aggressive one. I I’m fearful. I’m fearful of how much because they asked Patsy mamby pamby questions. You know, they some half the questions are coming from a 10 year old child in the audience and saying, you know, the blooms are out, how can I make money on a bloom stock? You know, that that kind of question? And that, you know, that’s that’s not good. You got the greatest investor of all time. You want it, you want somebody to say, well, you close your partnership and 1969 and set the money out. How analogous is that to where we’ve been lately? That’s the question you want. And you won’t get you won’t get that anymore. Nobody asked him the questions that really allow him to expound on what’s going on. And in his letters, he just kind of gives his so subtle hints, right. But not just coming out. I mean, God willing, I would live to be 94. I you know, he just doesn’t want to die with enemies is I think the deal. And I can’t blame him for that. He’s a nice guy.

James Connor 38:43
Yes, I went in. I went once in 2018. It was a great experience, I would highly suggest anyone and everyone to go.

Bill Smead 38:51
Yeah, it’s a it’s a incredible people from all over the world descend and enjoy thinking about how to make money owning commerce stocks.

James Connor 39:01
Well that was a great conversation, Bill. And I want to thank you very much for spending time with us today. If anyone would like to learn more about you and your firm, where can they go?

Bill Smead 39:09
Smead S M E A D C A Just click on our advice. We we write regularly. Tomorrow our quarterly letter comes out in the in the the what we call our missives list, and we do podcasts and a book with legs. You can probably see that in the background. And we’re just out there all the time making every effort to communicate the discipline that we practice, and we appreciate you having us on.

James Connor 39:44
Well, that’s good. I didn’t realize you had a podcast also. I will make sure I download that.

Bill Smead 39:49
Yeah, it’s cool is driving that. And we’re just taking great books that from a wide variety of disciplines just trying to make ourselves better thinkers. By doing a lot of reading, and the term book with legs, of course, is what Charlie Munger is family called Charlie. Because he always had his face in a book.

James Connor 40:10
That’s interesting. Okay, well, once again, thank you very much. And maybe we’ll get together in a couple of months. And you can tell us all about the Berkshire AGM.

Bill Smead 40:19
Great. Thanks for having us.

James Connor 40:21
Thank you. Well, I hope you enjoyed that discussion with Bill Smead. I really enjoyed his insights on the history of the financial markets and how you can learn from the past. When we conduct these interviews, we’re trying to provide you with insights on how to navigate the financial markets. And if you need assistance in doing that, consider having a discussion with a Wealthion endorsed financial advisor at will There’s no obligation to work with any of these advisors. It’s a free service that will be on offered to all of its viewers. Don’t forget to subscribe to our channel, and also hit that notification button to be kept up to date on upcoming events. Once again, thank you for being with us today. And I look forward to seeing you again soon.


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