1 00:00:00,040 --> 00:00:03,320 Ladies and gentlemen, welcome to the Business Brew. 2 00:00:03,360 --> 00:00:06,560 I'm your host, Bill Brewster. As always, thank you for 3 00:00:06,560 --> 00:00:08,880 listening. This episode features Bruce 4 00:00:08,880 --> 00:00:12,280 Berkowitz. If you have followed finance for 5 00:00:12,280 --> 00:00:14,360 any amount of time, you will know who Bruce is. 6 00:00:14,560 --> 00:00:16,320 If you're relatively new, you may not. 7 00:00:16,800 --> 00:00:22,160 You should. I hope that I did a decent job 8 00:00:22,160 --> 00:00:25,440 at asking some version of questions to Bruce that hasn't 9 00:00:25,440 --> 00:00:28,280 been asked before. If you haven't heard William 10 00:00:28,280 --> 00:00:31,320 Green's interview with Bruce, it's a wonderful interview. 11 00:00:31,320 --> 00:00:34,320 I would direct you to that. For some background, I think the 12 00:00:34,320 --> 00:00:37,720 short story is Bruce is somebody that I've followed for a really 13 00:00:37,720 --> 00:00:44,320 long time and I wanted to ask him the right questions and do a 14 00:00:44,320 --> 00:00:48,880 unique interview. And I found talking to him to be 15 00:00:49,120 --> 00:00:54,400 very, very interesting. And I feel as though I've gained 16 00:00:54,400 --> 00:00:57,800 an appreciation of how he may be looking at the world right now. 17 00:00:58,640 --> 00:01:03,320 And I hope that I drew out some insights that may be unique to 18 00:01:03,320 --> 00:01:07,560 this particular interview. I thank Heda Nadler for 19 00:01:08,080 --> 00:01:10,520 introducing me to Bruce. I thank Bruce for saying yes to 20 00:01:10,520 --> 00:01:14,160 coming on the show. And I hope that you all, as 21 00:01:14,160 --> 00:01:18,000 listeners, enjoy what you hear. As always, none of this is 22 00:01:18,000 --> 00:01:20,640 investment advice. Everything in this program is 23 00:01:20,640 --> 00:01:24,800 for educational purposes only. Please consult your financial 24 00:01:24,800 --> 00:01:27,800 advisor and potentially tax advisor. 25 00:01:27,840 --> 00:01:33,960 We talked about an MLP in this episode and I highly encourage 26 00:01:33,960 --> 00:01:37,000 you to reach out to the professionals around you and do 27 00:01:37,000 --> 00:01:40,280 your own due diligence. What we say on this program is 28 00:01:40,280 --> 00:01:44,480 not necessarily applicable to your individual situation and it 29 00:01:44,480 --> 00:01:48,320 is incumbent upon you to figure out whether or not you agree 30 00:01:48,320 --> 00:01:50,800 with what is said from an entertainment perspective. 31 00:01:51,200 --> 00:01:56,320 So with that out of the way, do your own due diligence and I 32 00:01:56,320 --> 00:01:58,800 hope you enjoy the interview that follows. 33 00:01:59,120 --> 00:02:00,600 I know I enjoyed talking to Bruce. 34 00:02:01,640 --> 00:02:06,400 Before this music drops, I do want to give a shout out to my 35 00:02:06,400 --> 00:02:11,080 editing team at Speech Docs. You can find them on Twitter at 36 00:02:11,200 --> 00:02:17,280 Speech and Docs's docs. Dax and his team is are 37 00:02:17,280 --> 00:02:20,520 fantastic. I met them, well, I was 38 00:02:20,520 --> 00:02:23,760 introduced to them when I was on Value after hours. 39 00:02:23,760 --> 00:02:27,080 They've done Toby's work, at least on the transcript side. 40 00:02:27,080 --> 00:02:29,800 I don't know about editing the pod because those pods are 41 00:02:29,800 --> 00:02:32,560 normally dropped live. However, I moved from the 42 00:02:32,560 --> 00:02:37,440 podcast consultant to speech docs and the transition has 43 00:02:37,440 --> 00:02:40,680 been, I would argue, seamless. I hope that you as listeners 44 00:02:40,680 --> 00:02:44,960 have not noticed a difference. And all I can say is that Dax 45 00:02:44,960 --> 00:02:48,800 and his team offer incredibly good value and they're very 46 00:02:48,800 --> 00:02:52,960 responsive, and I very much appreciate what they do on the 47 00:02:52,960 --> 00:02:55,680 back end of the show. So if you are somebody who is 48 00:02:55,680 --> 00:02:59,120 thinking about starting a podcast, please consider Dax and 49 00:02:59,120 --> 00:03:03,480 his team at Speech Docs. That's SPEECHDOCS. 50 00:03:23,560 --> 00:03:26,000 All right, ladies and gentlemen, I am thrilled to be joined by 51 00:03:26,000 --> 00:03:28,120 the one and only Bruce Berkowitz today. 52 00:03:28,160 --> 00:03:30,720 Bruce, how you doing? I am excellent. 53 00:03:30,800 --> 00:03:33,440 And you, I'm. Well, I've been following you 54 00:03:33,440 --> 00:03:36,920 since, I don't know, let's call it 2009 or so. 55 00:03:36,920 --> 00:03:41,120 And the idea that I get to talk to you is, is something that I 56 00:03:41,120 --> 00:03:43,320 didn't think I would. So it's one of those beautiful 57 00:03:43,320 --> 00:03:46,200 benefits of having a podcast. So thank you for saying yes. 58 00:03:46,480 --> 00:03:48,920 It's my pleasure. I quite enjoyed your interview 59 00:03:48,920 --> 00:03:51,560 with William Green that was very comprehensive. 60 00:03:52,280 --> 00:03:55,720 He did his homework. He asked me questions about 61 00:03:55,720 --> 00:03:59,080 events I've haven't thought about in decades. 62 00:03:59,840 --> 00:04:03,120 I think he treats investigative journalism much in the same way 63 00:04:03,120 --> 00:04:05,680 that you treat investigating investments. 64 00:04:05,680 --> 00:04:08,760 And it's evident in the product that he puts out. 65 00:04:08,760 --> 00:04:10,440 It's it's always a joy to listen to. 66 00:04:10,640 --> 00:04:12,400 Yeah, I I enjoyed talking with him. 67 00:04:12,520 --> 00:04:15,960 Good. So I, you know, have thought 68 00:04:15,960 --> 00:04:19,000 about what questions would I ask Bruce? 69 00:04:19,000 --> 00:04:23,520 And I think that the one thing that anyone that has followed 70 00:04:23,520 --> 00:04:29,360 your career over time knows is you are not afraid to swing and 71 00:04:29,440 --> 00:04:33,720 get concentrated in positions that are, are very against the 72 00:04:33,720 --> 00:04:36,760 grain. And I, I was hoping if we could 73 00:04:36,760 --> 00:04:40,640 maybe rewind the clock a little bit and talk a little bit about 74 00:04:40,640 --> 00:04:42,320 your days in the financial crisis. 75 00:04:42,320 --> 00:04:47,000 And after I was reading recently an interview that you gave it 76 00:04:47,000 --> 00:04:50,560 with about Wells Fargo and you said, I clearly see a path to 77 00:04:50,640 --> 00:04:54,160 200 to $300.00, the stocks trading at 66. 78 00:04:54,160 --> 00:04:55,760 By the way, Buffett just bought it. 79 00:04:56,360 --> 00:05:02,160 I mean, what at that time did you see and and how are you able 80 00:05:02,160 --> 00:05:06,120 to sort of get rid of the noise for lack of a better term? 81 00:05:06,600 --> 00:05:12,720 I do my best when I stick to counting cash and if you took a 82 00:05:12,720 --> 00:05:17,760 look at the the cash coming into Wells Fargo at the time, what I 83 00:05:17,760 --> 00:05:23,760 call the earnings power, what I believe most call pre provision 84 00:05:24,280 --> 00:05:27,240 net revenues. There was more than enough cash 85 00:05:27,240 --> 00:05:32,520 coming in to handle the real estate occupancy issues at the 86 00:05:32,520 --> 00:05:36,760 time. And once that hole was filled 87 00:05:36,760 --> 00:05:41,200 in, you would really start to see the earnings and it was 88 00:05:41,560 --> 00:05:44,920 really as simple as that. That and one other point being 89 00:05:44,920 --> 00:05:51,960 that financial institutions do their best business in tough 90 00:05:51,960 --> 00:05:55,200 times. They're underwriting tightens up 91 00:05:55,640 --> 00:05:58,160 big time. They have all these mistakes on 92 00:05:58,160 --> 00:06:00,440 their books from being a little too loose. 93 00:06:00,560 --> 00:06:04,280 They can't afford it to make those mistakes that they're all 94 00:06:04,280 --> 00:06:08,120 in recent memory. So great loans, great insurance, 95 00:06:08,120 --> 00:06:11,120 whatever, whatever you want to talk about, great book of 96 00:06:11,120 --> 00:06:15,160 business when it's initiated during, whether it's the great 97 00:06:15,160 --> 00:06:23,120 financial crisis or Y2K or the TNT bubble or you know, going 98 00:06:23,120 --> 00:06:26,720 back to the 80s. So when you say you count the 99 00:06:26,720 --> 00:06:31,480 cash and, and Wells just had to, I don't mean to misstate what 100 00:06:31,480 --> 00:06:33,960 you said, but had to make it through to fill the real estate 101 00:06:33,960 --> 00:06:38,880 hole that they had. I mean, how, how long are you 102 00:06:38,880 --> 00:06:42,000 typically thinking about when you're underwriting and you're 103 00:06:42,000 --> 00:06:45,880 thinking out years ahead? How long are you thinking and 104 00:06:45,880 --> 00:06:49,680 how much do you worry about like the precision of your timing 105 00:06:49,680 --> 00:06:52,920 versus being sort of, I know this is going to happen 106 00:06:52,920 --> 00:06:55,560 eventually and things will take care of themselves? 107 00:06:55,960 --> 00:06:59,320 I try to be roughly right because I don't think I can do 108 00:06:59,320 --> 00:07:04,960 much better than roughly right. And in the case of Wells Fargo 109 00:07:04,960 --> 00:07:07,760 is the old pig going through the Python. 110 00:07:08,400 --> 00:07:11,080 So I believe there was going to be a couple of years of 111 00:07:11,080 --> 00:07:16,240 indigestion and those issues would take care of themselves 112 00:07:16,240 --> 00:07:19,920 and then they would be off. They'd be off with what would 113 00:07:19,920 --> 00:07:22,960 eventually be a new, pristine book of business. 114 00:07:22,960 --> 00:07:25,600 That makes sense to me. So I, I mean, when you're saying 115 00:07:25,600 --> 00:07:28,080 roughly right. And, and the reason that I'm, 116 00:07:28,080 --> 00:07:32,880 I'm asking this question is I'm just curious with a strategy 117 00:07:32,880 --> 00:07:36,560 that is as concentrated as what you have historically run and is 118 00:07:36,560 --> 00:07:39,600 even more so now. I mean, is, is within two to 119 00:07:39,600 --> 00:07:41,520 three years, sort of roughly right? 120 00:07:41,520 --> 00:07:44,120 Are you looking for directions and trends? 121 00:07:44,120 --> 00:07:47,880 I mean, how do you know once you've sort of like work through 122 00:07:47,880 --> 00:07:50,120 a thesis, is is sort of the question? 123 00:07:50,120 --> 00:07:52,840 Yeah, two to three years is about right. 124 00:07:54,560 --> 00:07:58,520 And I'm going by the existing at that time. 125 00:07:58,520 --> 00:08:01,640 I was going by the existing cash flow of the operation. 126 00:08:02,840 --> 00:08:07,160 The money was coming in. It was the gap reserving. 127 00:08:07,680 --> 00:08:12,520 It was having to put a number down in one day that represented 128 00:08:12,520 --> 00:08:16,800 the potential losses over 5 to 10 years. 129 00:08:18,400 --> 00:08:20,240 That freaked out a lot of people. 130 00:08:21,280 --> 00:08:23,840 And of course, the headlines were pretty scary. 131 00:08:24,280 --> 00:08:28,320 But my thesis is that history Trump's those headlines. 132 00:08:28,800 --> 00:08:31,480 And we've seen it. We've seen most of this all 133 00:08:31,480 --> 00:08:33,080 before. That doesn't mean it's going to 134 00:08:33,080 --> 00:08:36,559 happen. Of course not. 135 00:08:37,000 --> 00:08:39,679 But that that's, that's, that's expose the only thing that we 136 00:08:39,679 --> 00:08:42,280 can actually say right is what what did happen, not what's 137 00:08:42,280 --> 00:08:44,920 going to happen. And plus with Warren Buffett 138 00:08:44,920 --> 00:08:48,960 going into the stock or you, you ended up being sale, so that 139 00:08:48,960 --> 00:08:51,560 didn't hurt. With Wells specifically, 140 00:08:51,560 --> 00:08:55,440 especially back then, I guess the last last decade or so has 141 00:08:55,440 --> 00:08:58,400 tarnished the reputation a bit, but I I don't think anybody 142 00:08:58,400 --> 00:09:00,760 would argue that they were not known as aggressive 143 00:09:00,760 --> 00:09:05,320 underwriters. So to what extent does culture 144 00:09:05,760 --> 00:09:09,800 like are do you put a lot of emphasis on culture and 145 00:09:09,800 --> 00:09:15,800 management or do you put more emphasis on the numbers and sort 146 00:09:15,800 --> 00:09:19,920 of what you can clearly see from the filings in the? 147 00:09:19,920 --> 00:09:25,320 Past more so on the numbers and then I swung over to very heavy 148 00:09:25,320 --> 00:09:29,720 on the manager and culture and ownership and now it's both. 149 00:09:29,720 --> 00:09:33,200 I mean, basically you can't do a good deal with a bad person. 150 00:09:33,200 --> 00:09:37,760 I mean, you may get lucky, but I've learned that you just 151 00:09:37,880 --> 00:09:42,720 should not do a deal with a bad person and whatever bad may 152 00:09:42,720 --> 00:09:46,920 define at the time. So even if it's an obvious 153 00:09:47,000 --> 00:09:54,400 pathway to success, ego, envy, whatever the case may be, could 154 00:09:54,400 --> 00:09:57,720 can get it get in the way. So it's both it's you really 155 00:09:57,720 --> 00:10:04,800 want a good business and a good person, a good people and 156 00:10:04,800 --> 00:10:09,360 banking isn't necessarily a good business, especially what's 157 00:10:09,360 --> 00:10:13,480 going on today. So I've become more cautious on 158 00:10:13,480 --> 00:10:17,280 banking and financial services, even though there are exceptions 159 00:10:17,280 --> 00:10:21,640 and there are good businesses run by good people out there. 160 00:10:21,640 --> 00:10:23,960 But I believe they're few and far between. 161 00:10:24,360 --> 00:10:29,720 I mean, for example, today most institutions do not have to mock 162 00:10:29,720 --> 00:10:33,520 to market their loans. I mean, they have to take into 163 00:10:33,520 --> 00:10:39,720 account potential credit losses. But for example, Bank of America 164 00:10:39,720 --> 00:10:44,440 doesn't have to mark a 3% home mortgage down because interest 165 00:10:44,440 --> 00:10:49,360 rates have gone up to the point where that mortgage is 7% now. 166 00:10:49,360 --> 00:10:53,560 And no one would buy that 3% mortgage at par. 167 00:10:53,880 --> 00:10:56,680 But there are in the books at par even more so. 168 00:10:56,680 --> 00:11:01,000 The government up until March of this year was willing to lend 169 00:11:01,000 --> 00:11:05,200 100% on that mortgage, which is one of the ways in which all the 170 00:11:05,200 --> 00:11:08,880 banks have been recently bailed out by the government. 171 00:11:09,680 --> 00:11:12,160 So the government definitely chooses winners and losers. 172 00:11:12,440 --> 00:11:15,240 They can. One civil servant can decide the 173 00:11:15,240 --> 00:11:19,680 death of a financial institution or the life, especially when you 174 00:11:19,680 --> 00:11:24,400 leverage 12:50. So I've had conflicting thoughts 175 00:11:24,400 --> 00:11:26,800 on this. On one hand, I've thought to 176 00:11:26,800 --> 00:11:29,760 myself, well, the bigger banks that are too big to fail 177 00:11:29,760 --> 00:11:35,000 especially are arguably safe because of the dynamic that 178 00:11:35,000 --> 00:11:37,520 you're describing. However, the other side of it is 179 00:11:38,080 --> 00:11:41,160 should we go into another financial crisis or something 180 00:11:41,160 --> 00:11:44,520 like that? It's possible that those bigger 181 00:11:44,520 --> 00:11:47,520 banks could maybe get nationalized or something like 182 00:11:47,520 --> 00:11:51,080 that. I mean, is that where your 183 00:11:51,080 --> 00:11:56,000 experience of Freddie and Fannie maybe makes you more cautious of 184 00:11:56,000 --> 00:11:58,320 the larger banks? Because I, I do think on one 185 00:11:58,320 --> 00:12:00,920 hand they're much safer than all the others and on the other, 186 00:12:00,920 --> 00:12:04,120 there's a much bigger sort of, I guess, unique risk that may 187 00:12:04,120 --> 00:12:06,600 apply to them. With with Fannie and Freddie, I 188 00:12:06,600 --> 00:12:09,880 learned that anything could happen in the name of national 189 00:12:09,880 --> 00:12:13,120 security. And that's whether, you know, 190 00:12:13,320 --> 00:12:17,000 our financial system is destabilized, the name of 191 00:12:17,000 --> 00:12:21,120 national security of company can be taken, gifts can be given. 192 00:12:23,280 --> 00:12:27,920 And I've obviously learned that that's way above my pay grade to 193 00:12:27,920 --> 00:12:32,080 determine who wins and who loses by a few individuals. 194 00:12:32,080 --> 00:12:35,600 I always thought that it was basically the law matters, but 195 00:12:35,600 --> 00:12:40,560 in tough times anything does. Or in perceived tough times, 196 00:12:40,560 --> 00:12:43,000 they don't even have to be tough, they can just be colored 197 00:12:43,000 --> 00:12:45,640 as a tough time. Yeah. 198 00:12:46,120 --> 00:12:47,920 I mean, just when you're generally looking at the 199 00:12:47,920 --> 00:12:52,280 landscape, are you typically US focused or will you look? 200 00:12:52,280 --> 00:12:55,400 I mean, I'm not familiar with too many foreign investments 201 00:12:55,400 --> 00:12:59,160 that you've made, but I'm kind of curious just for your general 202 00:12:59,160 --> 00:13:00,520 thoughts. I think that there's this 203 00:13:00,520 --> 00:13:03,920 assumption that there is, I mean there is the rule of law in the 204 00:13:04,040 --> 00:13:06,080 US and I don't mean to denigrate that, but there's this 205 00:13:06,080 --> 00:13:09,280 assumption that the US has much stronger legal protections. 206 00:13:09,280 --> 00:13:13,840 And I think what you live through may lead you to less of 207 00:13:13,840 --> 00:13:16,400 a conclusion. I'm curious to hear how you 208 00:13:16,400 --> 00:13:18,840 think our legal protections are versus maybe other 209 00:13:18,840 --> 00:13:23,800 jurisdictions. Well, my conclusion is that we 210 00:13:23,800 --> 00:13:26,920 may not be perfect we're but we're better than everyone else. 211 00:13:26,920 --> 00:13:34,240 And I know the US system better than any other system and I have 212 00:13:34,240 --> 00:13:38,280 an ability to only comprehend a certain amount of information. 213 00:13:38,280 --> 00:13:42,400 So my focused on investments is really do about my desire to 214 00:13:43,560 --> 00:13:47,280 learn as much as I can about complex organizations. 215 00:13:47,280 --> 00:13:52,120 And some may argue I try to learn too much, but I am most 216 00:13:52,120 --> 00:13:58,080 comfortable focused on a few three to six positions and 217 00:13:58,480 --> 00:14:04,400 trying to fully understand the industry, the competitors, the 218 00:14:04,400 --> 00:14:08,360 suppliers, the customers, the strategy, the ownership 219 00:14:08,360 --> 00:14:13,160 structure, the takers that needs to the extent they're regulated, 220 00:14:13,160 --> 00:14:19,400 taxed federal versus state laws. So I have enough on my plate. 221 00:14:19,400 --> 00:14:22,480 Just trying to understand companies that are domiciled and 222 00:14:22,480 --> 00:14:24,560 mostly operating in the United States. 223 00:14:25,120 --> 00:14:28,040 I heard a rumor Once Upon a time that when you were doing 224 00:14:28,440 --> 00:14:33,200 research on Sears, you had your your team go to local tax 225 00:14:33,200 --> 00:14:38,840 collectors to to see either sales or tax receipts. 226 00:14:38,840 --> 00:14:42,880 Is that, is that actually true? And is that indicative as to the 227 00:14:42,880 --> 00:14:46,520 depth of research that you do? And if not, is it? 228 00:14:46,560 --> 00:14:50,680 Is it directionally sort of correct as a as a urban legend? 229 00:14:50,680 --> 00:14:56,240 It's directionally correct and that there's a tremendous amount 230 00:14:56,240 --> 00:15:00,440 of data from your local government at work. 231 00:15:00,760 --> 00:15:04,560 I mean, you want to find out how Saint Joe is doing, for example, 232 00:15:04,560 --> 00:15:11,240 or any real estate company or Abby, or you can go to each 233 00:15:11,240 --> 00:15:15,320 county of the state and for the example Saint Joe, that would be 234 00:15:15,320 --> 00:15:21,480 Walton Bay and Gulf counties and you can see all the 235 00:15:21,480 --> 00:15:23,840 transactions. Maybe there's a two week lag. 236 00:15:23,920 --> 00:15:27,880 You can go and get the maps. You could see the planning maps, 237 00:15:27,880 --> 00:15:32,160 you can see the new lots that have been put on that have been, 238 00:15:32,280 --> 00:15:35,160 you could see the entitlements, the zoning. 239 00:15:35,560 --> 00:15:39,160 You can get way ahead of the curve with that kind of detailed 240 00:15:39,160 --> 00:15:42,960 information. So when I see your portfolio 241 00:15:42,960 --> 00:15:47,040 today, I mean it's, it's for all intents and purposes almost I I 242 00:15:47,040 --> 00:15:50,280 think it's 80% or 75% last time I looked Saint Joe. 243 00:15:50,640 --> 00:15:53,280 I know that that's because Saint Joe has done well and I realized 244 00:15:53,280 --> 00:15:57,160 that you've been selling, but is, is what you're looking for 245 00:15:57,160 --> 00:16:02,440 as an investor that kind of clarity before you're making a 246 00:16:02,440 --> 00:16:09,200 decision and, and how do you think about known unknowns and 247 00:16:09,200 --> 00:16:13,400 your willingness to accept them or, or are you not willing? 248 00:16:13,400 --> 00:16:15,360 I'm I'm just kind of curious to hear that. 249 00:16:15,840 --> 00:16:20,000 Well, I have two funds. One fund has zero Saint Joe in 250 00:16:20,000 --> 00:16:22,080 it. The other fund which is up to 251 00:16:22,120 --> 00:16:26,560 80% is and I have not bought Saint Joe in over a decade, just 252 00:16:26,560 --> 00:16:30,200 the nature of the position, the growth, the shrinking of the 253 00:16:30,200 --> 00:16:35,320 fund and I've in fact have sold a few $100 million of Saint Joe. 254 00:16:35,320 --> 00:16:41,960 So I do try and understand the most important knowns and I try 255 00:16:41,960 --> 00:16:47,320 and determine if there are significant unknowns which I've 256 00:16:47,320 --> 00:16:49,440 not been perfect at. Well, no. 257 00:16:49,440 --> 00:16:51,520 No one. Is so I don't think that would 258 00:16:51,520 --> 00:16:53,800 be a reasonable standard to hold yourself to. 259 00:16:54,160 --> 00:16:58,960 But I was curious as to whether or not you've just evolved in 260 00:16:58,960 --> 00:17:04,400 that way, because as I look back at your, at your previous, like 261 00:17:04,839 --> 00:17:09,040 let's say if I were to pull up the fair home funds from 22,005 262 00:17:09,040 --> 00:17:14,760 to 2012, it seemed like reasonably diversified. 263 00:17:14,760 --> 00:17:17,480 I think maybe like Berkshire would be your biggest position 264 00:17:17,480 --> 00:17:21,560 or something at 13 percent or, or whatever was at the time. 265 00:17:22,160 --> 00:17:26,319 And, and there were more positions as I've watched you 266 00:17:26,319 --> 00:17:30,040 sort of morph over time. And I'm, I may be wrong, so 267 00:17:30,040 --> 00:17:34,360 please correct me if I am, but it seems as though you have have 268 00:17:34,360 --> 00:17:37,480 taken more concentrated positions and you've been a much 269 00:17:37,480 --> 00:17:41,080 longer holder of positions than I think most investors out there 270 00:17:41,160 --> 00:17:42,800 both when things go right and wrong. 271 00:17:43,400 --> 00:17:47,600 So is that by strategy or or indecision or is that a function 272 00:17:47,600 --> 00:17:49,320 of just kind of how things have played out? 273 00:17:49,640 --> 00:17:52,040 Well, there's two aspects to this. 274 00:17:52,040 --> 00:17:56,960 One is I don't believe that I've changed much from day one of the 275 00:17:56,960 --> 00:18:01,240 funds. I was non diversified focused 276 00:18:01,240 --> 00:18:03,680 investor. I mean there were times when 277 00:18:03,680 --> 00:18:06,920 I've only had two positions. I remember there was a time when 278 00:18:06,920 --> 00:18:11,120 it was Berkshire Hathaway and Fireman's Fund, which became 279 00:18:11,120 --> 00:18:15,640 Fund American Enterprises, which was eventually, well Fireman's 280 00:18:15,640 --> 00:18:20,040 Fund was taken over by Allianz and then the there was a stub 281 00:18:20,040 --> 00:18:22,480 left called Fund American Enterprises. 282 00:18:23,000 --> 00:18:25,920 I've always been very focused. There may have been a bunch of 283 00:18:25,920 --> 00:18:30,040 names, but there's only been a few large positions. 284 00:18:30,280 --> 00:18:32,920 Sometimes. If it was banking, maybe I would 285 00:18:32,920 --> 00:18:37,120 have a handful of names just to represent the the sector, but 286 00:18:37,120 --> 00:18:44,720 the concepts were quite few. I have tried to evolve in two 287 00:18:44,720 --> 00:18:49,440 ways and and it's not obvious that it's worked out yet and 288 00:18:49,440 --> 00:18:54,440 that I wanted to try and find investments that have the 289 00:18:54,440 --> 00:18:57,960 ability to hold over multiple generations. 290 00:18:59,640 --> 00:19:04,760 I mean, it's exhausting to do the work on a position, an 291 00:19:04,760 --> 00:19:09,480 investment and then you're done 3-4 years later after you've 292 00:19:09,480 --> 00:19:12,800 spent a huge amount of time on it and you got to move on and 293 00:19:12,800 --> 00:19:16,680 try and find something else. I was trying to get more 294 00:19:16,680 --> 00:19:21,440 economies of scale. I also totally failed in 295 00:19:21,440 --> 00:19:25,560 building up a research staff. Your research staff is only as 296 00:19:25,560 --> 00:19:32,240 good as they are. I went in tough times, so I I 297 00:19:32,240 --> 00:19:38,320 could not find the right people that that would work and get 298 00:19:38,320 --> 00:19:40,880 comfortable with the level of analysis. 299 00:19:40,880 --> 00:19:44,760 And if you have the wrong people, you just you just 300 00:19:44,800 --> 00:19:47,000 doubling up your workload because you have to. 301 00:19:47,000 --> 00:19:49,280 You're doing your work and then you're checking their work. 302 00:19:50,360 --> 00:19:53,960 So I did not have that skill. The failure is all mine. 303 00:19:53,960 --> 00:19:59,280 It isn't the failure of other people, it's my failure and not 304 00:19:59,280 --> 00:20:01,960 finding the right people for Fair Home. 305 00:20:02,640 --> 00:20:09,000 Much of my success was based on very few people at fair Home and 306 00:20:10,200 --> 00:20:16,360 my making all of the decisions I was not able to delegate. 307 00:20:17,160 --> 00:20:19,840 I have a tremendous amount of respect for people who build 308 00:20:19,840 --> 00:20:25,640 large operations and end up finding and retaining successful 309 00:20:25,640 --> 00:20:28,040 people. I'm not one of them. 310 00:20:28,880 --> 00:20:31,240 Well, that brings me to one of the questions that I, I had 311 00:20:31,240 --> 00:20:34,320 asked you in e-mail before we got on the mic. 312 00:20:34,680 --> 00:20:38,920 And I had said after 2010, you could have easily become an 313 00:20:38,920 --> 00:20:42,960 asset gatherer, become a little bit more diversified, still 314 00:20:42,960 --> 00:20:47,960 arguably been concentrated and had this huge asset management 315 00:20:47,960 --> 00:20:51,280 firm. And you did not choose that 316 00:20:51,280 --> 00:20:54,600 path, which I find to be very admirable for the record. 317 00:20:55,080 --> 00:21:00,440 What, what is it about you that I'm going to say it this way and 318 00:21:00,440 --> 00:21:04,440 I, I think it's the right way. You seem to have continued to 319 00:21:04,440 --> 00:21:09,680 try to put up returns for your investors rather than selling 320 00:21:09,680 --> 00:21:13,400 out a little bit and and guaranteeing yourself tons of 321 00:21:13,520 --> 00:21:16,200 AUM and fees for the long term and fair. 322 00:21:16,200 --> 00:21:18,720 Home was never a marketing organization. 323 00:21:19,520 --> 00:21:23,720 Success happened. Many people became attracted to 324 00:21:23,960 --> 00:21:27,160 to the firm's funds. We never had a marketing 325 00:21:27,160 --> 00:21:31,360 department, never really had an investor relations department, 326 00:21:31,720 --> 00:21:36,120 never paid for business. I didn't want to do any of that. 327 00:21:36,760 --> 00:21:41,320 I started Fair Home on the basis that I wanted to invest my 328 00:21:41,320 --> 00:21:46,000 family's money in a certain way and that I would invest money of 329 00:21:46,000 --> 00:21:50,360 clients exactly that way. We'd all be on the same side of 330 00:21:50,360 --> 00:21:53,480 the fence. It'd be a level playing field. 331 00:21:54,160 --> 00:21:58,000 That's what I was focused on. When Fair Home became quite 332 00:21:58,000 --> 00:22:01,240 large. I'd never thought about gaming 333 00:22:01,240 --> 00:22:04,480 it. I, I was never focused on the, 334 00:22:05,120 --> 00:22:08,320 the revenues that will coming in. 335 00:22:08,760 --> 00:22:10,920 Some would say that was quite foolish and I should have 336 00:22:10,920 --> 00:22:13,480 thought about that. It became family became a 337 00:22:13,480 --> 00:22:18,200 valuable business, but I didn't. I was more interested in the 338 00:22:18,200 --> 00:22:24,920 continuing value creation and eventually getting to a position 339 00:22:24,920 --> 00:22:29,920 where I didn't charge. I made enough and I'm frankly, I 340 00:22:30,520 --> 00:22:33,480 didn't really want to talk to clients that much. 341 00:22:33,480 --> 00:22:38,600 It becomes very repetitive. I'm very loyal to my clients, 342 00:22:38,600 --> 00:22:42,560 people who are with me, they can stay with me forever and I'm, 343 00:22:42,680 --> 00:22:45,640 I'm not going to say goodbye to them, but I'm not very 344 00:22:45,640 --> 00:22:50,000 interested in new clients or building assets under 345 00:22:50,000 --> 00:22:52,120 management. Life is more interesting 346 00:22:52,120 --> 00:22:56,200 studying businesses get to, you know, you know, investing, 347 00:22:56,200 --> 00:23:00,200 becoming more businesslike, which is not easy with mutual 348 00:23:00,200 --> 00:23:01,520 funds. Yeah. 349 00:23:01,520 --> 00:23:04,520 Well, I, I think generally in the industry, it's so pro 350 00:23:04,520 --> 00:23:10,320 cyclical that it's tough. And you, you had mentioned, you 351 00:23:10,320 --> 00:23:14,960 said that it, it was hard to find people when times are 352 00:23:14,960 --> 00:23:18,480 tough. And I, and I, I think that it's 353 00:23:18,840 --> 00:23:21,440 hard to find investors. It's hard to find people that 354 00:23:21,440 --> 00:23:26,800 are willing to stick with an investment firm when times are 355 00:23:26,800 --> 00:23:29,080 tough. It's much easier when times are 356 00:23:29,080 --> 00:23:32,240 good to find both. And it's one of the really 357 00:23:32,240 --> 00:23:37,680 unique things about the business of finance that I, I think can 358 00:23:37,680 --> 00:23:39,800 really obscure a lot of incentives. 359 00:23:40,760 --> 00:23:42,160 It's kind of interesting to think about. 360 00:23:42,160 --> 00:23:46,120 I'm, I'm in a, in a way, way smaller version of you. 361 00:23:46,120 --> 00:23:50,360 But, but my job is to figure out how to manage my family's money. 362 00:23:50,760 --> 00:23:53,920 And that's, that's part of why I started this podcast. 363 00:23:53,920 --> 00:23:56,760 It's why I'm, I'm really happy to talk to you today that to get 364 00:23:56,760 --> 00:24:00,360 your thoughts on how, what you've learned over time. 365 00:24:00,880 --> 00:24:04,400 And I and there's just a lot of different incentives when you're 366 00:24:04,400 --> 00:24:06,960 running your own capital versus when you're trying to build a 367 00:24:06,960 --> 00:24:10,800 firm and trying to really excel at the business of investment as 368 00:24:10,800 --> 00:24:14,240 opposed to investments. One aspect is making it. 369 00:24:14,240 --> 00:24:16,440 The other aspect, of course, is keeping it. 370 00:24:16,960 --> 00:24:22,480 And your children are not you. Making money for people who 371 00:24:22,480 --> 00:24:25,920 already have money may not be the most productive activity in 372 00:24:25,920 --> 00:24:27,720 the world. I think it's probably more 373 00:24:27,720 --> 00:24:31,200 productive to be a good school teacher or a good plumber. 374 00:24:32,160 --> 00:24:37,280 So I don't expect my children to follow my footsteps. 375 00:24:37,280 --> 00:24:39,200 I hope they're happy, healthy and productive. 376 00:24:39,800 --> 00:24:44,840 So the last 10 years I've thought about, well, how can I 377 00:24:44,840 --> 00:24:50,480 create an ecosystem by which they can be good stewards of the 378 00:24:50,480 --> 00:24:54,240 capital? And, but you know, most of my 379 00:24:54,240 --> 00:24:56,680 money is going to be given away. So it matters. 380 00:24:56,680 --> 00:24:59,480 But they have the privilege to be able to do whatever they want 381 00:24:59,480 --> 00:25:03,000 in this life and, and to help me give it away. 382 00:25:03,000 --> 00:25:07,200 So it's all good. But I don't expect my children 383 00:25:07,520 --> 00:25:11,800 to be me, or to enjoy the investing process the way I 384 00:25:11,800 --> 00:25:15,800 have, or to have to work the kind of hours I did. 385 00:25:16,320 --> 00:25:21,120 But it, it sounds to me like you work the hours that you did not 386 00:25:21,120 --> 00:25:24,160 because you love it, right? I mean, if your ultimate goal 387 00:25:24,160 --> 00:25:28,240 was to to drive your fees down to zero, it's not as if you were 388 00:25:28,240 --> 00:25:31,560 trying to work those hours to build a huge firm. 389 00:25:32,360 --> 00:25:35,600 It's that you really enjoy connecting dots and making 390 00:25:35,600 --> 00:25:38,800 investments. Well, yes, in the beginning it 391 00:25:38,800 --> 00:25:41,080 was about the money because I didn't have any. 392 00:25:41,080 --> 00:25:43,680 Once you have money, it could be a lot of but a lot of things. 393 00:25:43,680 --> 00:25:46,680 But when you have to pay the monthly bills, it's about the 394 00:25:46,680 --> 00:25:49,960 money. And I remember opening my first 395 00:25:50,000 --> 00:25:53,840 brokerage account and after a year or two thinking, I can do 396 00:25:53,840 --> 00:25:56,880 this and this guy gets paid even when I lose money. 397 00:25:56,880 --> 00:25:59,520 Something's up here. This is an interesting business. 398 00:26:01,880 --> 00:26:04,560 And get and gets paid for a while as long as they do it the 399 00:26:04,560 --> 00:26:07,840 right way and and maybe lose money alongside everybody else 400 00:26:07,840 --> 00:26:09,440 losing money the same way, right? 401 00:26:09,480 --> 00:26:12,440 It is an interesting business. It's a hell of a business with 402 00:26:12,440 --> 00:26:17,160 someone who you know you know, probably would be driving a taxi 403 00:26:17,160 --> 00:26:19,360 ends up becoming and making a fortune. 404 00:26:19,360 --> 00:26:22,600 I like how you said that. What was it like when you were 405 00:26:22,600 --> 00:26:24,440 named fund manager of the decade? 406 00:26:24,800 --> 00:26:27,760 I guess my real question is, how do you remain rational when 407 00:26:27,760 --> 00:26:31,160 everybody's telling you that you were the best of a decade? 408 00:26:31,160 --> 00:26:34,800 And do you start to believe some of the hype around yourself, or 409 00:26:34,800 --> 00:26:36,240 is that just not how you're wired? 410 00:26:36,760 --> 00:26:38,720 Well, I didn't talk to that many people. 411 00:26:38,720 --> 00:26:44,440 I learned about it from AI. Think CNBC watching the show, I 412 00:26:44,440 --> 00:26:47,240 was pretty excited. Think I I received a little 413 00:26:47,240 --> 00:26:50,840 bobble in the mail and you know, that was about it. 414 00:26:51,320 --> 00:26:52,720 I didn't spend a lot of time on it. 415 00:26:52,720 --> 00:26:56,440 Of course I was excited and I was also quite grateful because 416 00:26:56,440 --> 00:26:59,240 the money started coming in and already was, but the money 417 00:26:59,360 --> 00:27:01,600 continued to come in fast and furious. 418 00:27:01,600 --> 00:27:04,840 I mean, I do have to ask I and I don't want to relive the whole 419 00:27:04,840 --> 00:27:11,160 thing, but when you got involved in Sears, you clearly saw a lot 420 00:27:11,160 --> 00:27:15,320 of real estate value and it coincided or or was shortly 421 00:27:15,320 --> 00:27:17,480 thereafter after a lot of the money came in. 422 00:27:17,480 --> 00:27:24,080 Do you think that being so focused on the minutiae of the 423 00:27:24,080 --> 00:27:28,320 value that was there perhaps blinded you to some of the other 424 00:27:28,320 --> 00:27:33,360 risks or did the risks sort of manifest later on? 425 00:27:33,600 --> 00:27:35,840 Well, it was a replay in my mind. 426 00:27:35,840 --> 00:27:39,360 We just came off making a ton of money in General Growth 427 00:27:39,360 --> 00:27:44,760 Properties who had a liquidity issue. 428 00:27:44,800 --> 00:27:50,920 And Sears reminded me the old Alexander and Alexander's or 429 00:27:50,920 --> 00:27:55,840 what I guess some would call the cancer surgery model whereby 430 00:27:55,840 --> 00:27:59,680 Sears had this huge real estate portfolio, maybe the largest in 431 00:27:59,680 --> 00:28:05,360 the United States that with a very low cost basis and then 432 00:28:05,360 --> 00:28:08,840 they had this bleeding retail operation. 433 00:28:09,120 --> 00:28:13,760 I mean, it's a very strange and Amazon was succeeding, trying to 434 00:28:13,760 --> 00:28:20,520 be the Sears of the Internet. And then Sears was trying to 435 00:28:20,520 --> 00:28:23,560 become the Amazon coming, trying to become Amazon. 436 00:28:23,560 --> 00:28:26,760 And and it wasn't happening. And it just seemed to me if you 437 00:28:26,800 --> 00:28:32,640 just stop the bleeding, got rid of the retail, you would have a 438 00:28:32,800 --> 00:28:36,480 hell of a real estate empire. You'd be able to deliver. 439 00:28:36,560 --> 00:28:41,160 I mean, it was common sense. I wasn't sure if Sears would be 440 00:28:41,160 --> 00:28:45,680 the greatest home run ever, but I thought there were definitely 441 00:28:45,680 --> 00:28:50,720 ways to avoid death. And I tried real hard to 442 00:28:50,720 --> 00:28:55,720 convince the board to pursue that strategy and I failed. 443 00:28:56,160 --> 00:28:59,440 Success, retail success was always just around the corner. 444 00:28:59,480 --> 00:29:02,880 Meanwhile, billions and billions of dollars later, it wasn't. 445 00:29:03,800 --> 00:29:07,640 And those billions and billions of dollars were more than enough 446 00:29:07,640 --> 00:29:12,240 to have to full that, to have the raw materials, the cash and 447 00:29:12,240 --> 00:29:16,760 the real estate for a very successful real estate empire. 448 00:29:17,640 --> 00:29:19,400 It's not as if it hasn't been done before. 449 00:29:19,400 --> 00:29:23,120 From the ashes of retail it has come great real estate 450 00:29:23,120 --> 00:29:25,880 companies. How many of those board members, 451 00:29:26,000 --> 00:29:28,200 to the extent you're comfortable answering this, do you think 452 00:29:28,200 --> 00:29:32,480 actually walked into Sears and saw what was going on from a 453 00:29:32,480 --> 00:29:35,520 retailer perspective? I don't think they did. 454 00:29:35,920 --> 00:29:40,800 I mean, you, you had Eddie Lampert, chairman and CEO at the 455 00:29:40,800 --> 00:29:45,800 time, super smart, successful in everything he's ever done on the 456 00:29:45,800 --> 00:29:48,840 cover of magazines is the next Warren Buffett. 457 00:29:48,920 --> 00:29:52,880 And the thinking was, with enough time and effort, anything 458 00:29:52,880 --> 00:29:55,080 is possible. I was going to say interesting. 459 00:29:55,080 --> 00:29:57,720 Those that have studied Buffett would know his history with 460 00:29:57,720 --> 00:30:02,640 retailers is sketchy at best. Well, you know, yeah, right. 461 00:30:02,640 --> 00:30:06,880 But ESL had very good success with retailers, whether it was 462 00:30:06,880 --> 00:30:12,360 AutoNation Auto Parts, other companies, tremendous success. 463 00:30:13,360 --> 00:30:16,080 So the thinking was that you. Were saying something about your 464 00:30:16,080 --> 00:30:18,840 thinking at the time. It was very simple. 465 00:30:20,440 --> 00:30:27,920 Cut out the retail, stop the losses, take the cash, redeploy 466 00:30:27,920 --> 00:30:31,400 it into the real estate. Happy ending. 467 00:30:31,600 --> 00:30:35,400 That's it. First you avoid death, financial 468 00:30:35,400 --> 00:30:37,680 death by stopping the hemorrhaging. 469 00:30:37,680 --> 00:30:41,160 Then you use the cash flows, either sell the real estate, 470 00:30:41,200 --> 00:30:43,800 build it up, return the money to shareholders. 471 00:30:43,800 --> 00:30:46,280 I mean, it's, it's, it's not much different than what's 472 00:30:46,280 --> 00:30:50,320 happening at Saint Joe today. Exactly the same strategy. 473 00:30:50,320 --> 00:30:53,680 Yeah, well, one difference is Saint Joe's is a, is a growing 474 00:30:53,680 --> 00:30:55,720 story now, right. I mean that's been quite 475 00:30:55,720 --> 00:30:58,720 successful in developing, I'm going to call it a master plan 476 00:30:58,720 --> 00:31:00,400 community. I think that's an accurate 477 00:31:00,400 --> 00:31:01,600 description. Yes. 478 00:31:01,640 --> 00:31:02,560 Well, it's. Yeah. 479 00:31:02,560 --> 00:31:06,400 But before, to get to that growth, you first had to stop 480 00:31:06,440 --> 00:31:11,440 past behaviors and practices you had many times in life you have 481 00:31:11,440 --> 00:31:14,680 to take a couple of steps back. And in order to take a lot of 482 00:31:14,680 --> 00:31:18,840 steps forward, it's a painful process. 483 00:31:20,440 --> 00:31:23,480 The optics aren't good. No one wants to see you going 484 00:31:23,480 --> 00:31:29,080 backwards, you know. So it, it, it took time, it 485 00:31:29,080 --> 00:31:32,240 would have taken time with Sears too, but plenty of time has gone 486 00:31:32,240 --> 00:31:38,000 by and would have been done. But we'll never know. 487 00:31:39,240 --> 00:31:42,800 And what remains of Sears seems to be that's exactly what 488 00:31:42,800 --> 00:31:45,560 they're doing now. Seems to be yes, take the real 489 00:31:45,560 --> 00:31:50,320 estate, go into multi use, build some apartments where needed, 490 00:31:50,320 --> 00:31:56,360 condos where needed, you know, refurb some spaces, warehousing 491 00:31:56,360 --> 00:31:59,200 the there's a lot of there's a lot of infrastructure on the 492 00:31:59,200 --> 00:32:02,200 malls and they happen to you know, and there's still plenty 493 00:32:02,200 --> 00:32:04,920 that happened to be at the intersection of lots of 494 00:32:04,920 --> 00:32:07,040 highways. That's not to say there hasn't 495 00:32:07,040 --> 00:32:11,160 been dramatic migration shifts, but again, today that's the 496 00:32:11,160 --> 00:32:14,160 reason for Saint Joe, the amount of immigration coming into 497 00:32:14,160 --> 00:32:16,400 Florida. The interesting thing about 498 00:32:16,400 --> 00:32:20,120 Saint Joe is I think about it is, is if there is a scenario 499 00:32:20,760 --> 00:32:24,920 where hurricanes make the southeast of Florida less 500 00:32:24,920 --> 00:32:29,360 livable, there's a potential that, that that area of Florida 501 00:32:29,360 --> 00:32:32,520 that Saint Joe resides in actually get some northern 502 00:32:32,520 --> 00:32:36,360 migration in conjunction with the southern migration that the 503 00:32:36,360 --> 00:32:39,760 Sunbelt, oh sorry, generally benefits from. 504 00:32:39,880 --> 00:32:43,200 I I don't have a position in Saint Joe, but I I've watched it 505 00:32:43,200 --> 00:32:45,480 for a while and I I admire what you built with it. 506 00:32:46,000 --> 00:32:50,000 Well, that, that's right. Most people don't realize that 507 00:32:50,040 --> 00:32:54,400 most of Saint Joe's properties are elevated as you, you know, 508 00:32:54,400 --> 00:32:58,800 you get, you have the beach and then on the Oceanside you have a 509 00:32:58,800 --> 00:33:04,120 bluff. So most of the land is 20 to 80 510 00:33:04,120 --> 00:33:07,760 feet above sea level. I mean, Miami's airport, Fort 511 00:33:07,760 --> 00:33:11,560 Lauderdale's airport, they're basically at at sea level. 512 00:33:12,240 --> 00:33:16,320 North ECP Northwest International is at 70 feet 513 00:33:16,320 --> 00:33:23,560 above sea level and most of the facilities are brand new, so 514 00:33:23,560 --> 00:33:27,160 there's modern day drainage. Building codes makes a 515 00:33:27,160 --> 00:33:29,920 difference. During Hurricane Michael, St. 516 00:33:29,920 --> 00:33:33,480 Joe suffered maybe a couple of buckets of water damage on the 517 00:33:33,480 --> 00:33:36,800 floor and lost some shrubs and trees. 518 00:33:37,160 --> 00:33:40,240 That was it. When it comes to hurricanes, you 519 00:33:40,240 --> 00:33:44,480 have to be above the surge and you have to be in a product that 520 00:33:44,480 --> 00:33:49,080 you have to be in a modern code, you know, where you consist, 521 00:33:49,080 --> 00:33:53,840 where you can survive 140 mile an hour wind gusts. 522 00:33:55,720 --> 00:33:58,600 Saint Joe, the Northwest Florida, you know, Saint Joe is 523 00:33:58,600 --> 00:34:01,000 fairly new. Its buildings, its 524 00:34:01,000 --> 00:34:04,480 infrastructure is fairly new. So it's a big plus. 525 00:34:05,080 --> 00:34:07,160 Companies own the land for decades. 526 00:34:08,360 --> 00:34:11,560 What the structures are. Structures are quite new, the 527 00:34:11,560 --> 00:34:13,880 homes are new. There's a lot to be said for the 528 00:34:13,880 --> 00:34:16,280 building codes. It's pretty much based on 529 00:34:16,280 --> 00:34:19,800 Miami-Dade building codes. Well, that Hurricane Andrew 530 00:34:19,800 --> 00:34:21,639 changed everything. So is. 531 00:34:21,679 --> 00:34:26,000 Yeah, that was, I remember, I was, I grew up in Florida and I 532 00:34:26,000 --> 00:34:29,360 remember Hurricane Andrew and I remember driving supplies down 533 00:34:29,920 --> 00:34:33,440 to Miami to help in the aftermath and it was just crazy 534 00:34:33,440 --> 00:34:36,080 to see the devastation. So the difference between pre 535 00:34:36,080 --> 00:34:40,840 1995 and post 1995 construction is very very real. 536 00:34:41,159 --> 00:34:44,800 You put your finger on it in a way they as painful as the 537 00:34:44,800 --> 00:34:47,560 occurrence of the hurricane and the damage. 538 00:34:48,040 --> 00:34:50,920 You eventually end up with a much stronger ecosystem. 539 00:34:51,440 --> 00:34:54,880 Well, much like like much of life, right, to your point 540 00:34:54,880 --> 00:34:57,040 earlier, sometimes you got to take two steps back to go 541 00:34:57,040 --> 00:34:59,080 forward. And I would argue Hurricane 542 00:34:59,080 --> 00:35:02,240 Andrew was more than two steps back and, and very, very 543 00:35:02,240 --> 00:35:04,360 devastating. But I think Florida has gone 544 00:35:04,360 --> 00:35:06,960 forward as a result. So knock on wood. 545 00:35:07,640 --> 00:35:11,440 I, I am curious to the extent that, that your two funds 546 00:35:11,840 --> 00:35:16,120 represent how, how you're thinking about the investment 547 00:35:16,360 --> 00:35:20,400 landscape right now. It, it seems to me they're, 548 00:35:20,400 --> 00:35:21,840 they're obviously different vehicles. 549 00:35:21,840 --> 00:35:24,400 So they're, they're weighted differently and what not. 550 00:35:24,400 --> 00:35:28,040 But it seems to me that treasuries are something that 551 00:35:28,040 --> 00:35:31,480 you're thinking about, midstream energy is something that you're 552 00:35:31,480 --> 00:35:34,600 thinking about and then Florida real estate is something that 553 00:35:34,600 --> 00:35:37,800 you are thinking about. And I'm curious as to why. 554 00:35:37,800 --> 00:35:42,040 I mean you're a fixed income guy by nature or or by background. 555 00:35:42,520 --> 00:35:47,600 Why no risk? Why not so much duration? 556 00:35:47,600 --> 00:35:50,720 Like what's going through your head from sort of a macro 557 00:35:50,720 --> 00:35:54,960 perspective or from a credit speed perspective? 558 00:35:54,960 --> 00:36:00,360 On the T-bills, you know, started when interest rates went 559 00:36:00,360 --> 00:36:04,360 near zero, I just was not willing to take the duration 560 00:36:04,360 --> 00:36:11,160 risk knowing what would happen to the market value of bonds and 561 00:36:11,480 --> 00:36:15,800 you'd end up making a few extra points and then you'd lose 50% 562 00:36:15,800 --> 00:36:19,240 of your capital if you, if you went out long. 563 00:36:19,960 --> 00:36:23,320 And you just, you just have to see that now in the value of the 564 00:36:23,320 --> 00:36:29,960 bond portfolios of the banks. They were unwilling to take the 565 00:36:29,960 --> 00:36:34,880 hit of not making any money and not keeping up their returns. 566 00:36:35,200 --> 00:36:40,400 I was very happy to have T-bills at a zero interest rate. 567 00:36:40,880 --> 00:36:44,160 Sometimes I even sold them for at a negative rate because when 568 00:36:44,160 --> 00:36:49,120 times get tough, everything's correlated except for cash and 569 00:36:49,120 --> 00:36:51,280 T-bills for the only vehicle I could think of where you can 570 00:36:51,280 --> 00:36:58,320 instantly turn that piece of paper into cash the same day if 571 00:36:58,320 --> 00:37:01,760 need be. And so and I, I didn't have a 572 00:37:01,760 --> 00:37:05,360 lot of better alternatives, especially, you know, knowing 573 00:37:06,160 --> 00:37:09,640 that that the banks and other financial services firms would 574 00:37:09,640 --> 00:37:12,280 have issues. It would be good, you know, 575 00:37:12,320 --> 00:37:16,160 rising interest rates, you know, Oh yeah. 576 00:37:16,160 --> 00:37:19,320 So our margins are going to go up and, and there was some 577 00:37:19,320 --> 00:37:23,320 thought that depositors don't deserve to make anything on 578 00:37:23,320 --> 00:37:26,920 their money and that even when interest rates went up, a lot of 579 00:37:26,920 --> 00:37:30,400 banks thought they could keep those deposit rates near zero. 580 00:37:30,840 --> 00:37:34,680 And you know, their, their interest, their net interest 581 00:37:34,680 --> 00:37:41,560 margin would expand and their DAP earnings would increase even 582 00:37:41,560 --> 00:37:46,360 though their balance sheet may be severely degraded through the 583 00:37:47,280 --> 00:37:51,760 reduction in the fair market value of some of the of the 584 00:37:51,760 --> 00:37:56,720 assets they were holding. So that was it on the T-bills. 585 00:37:56,720 --> 00:37:59,320 And I thought that the eventually interest rates only 586 00:37:59,320 --> 00:38:04,080 had one way to go up. And when they do go up, I wanted 587 00:38:04,080 --> 00:38:06,120 to be ready. Of course, they stayed low for 588 00:38:06,120 --> 00:38:10,040 much longer than I thought. So do you think much about where 589 00:38:10,040 --> 00:38:13,960 they're going from here or was it, was it just a whole lot 590 00:38:13,960 --> 00:38:17,520 easier when they were near zero to say there's only one way they 591 00:38:17,520 --> 00:38:19,880 can go? I, I, I think a lot about 592 00:38:19,880 --> 00:38:25,000 interest rates, but more so in the matching of the duration of 593 00:38:25,000 --> 00:38:28,720 assets and liabilities. I mean, it was some of the big 594 00:38:28,720 --> 00:38:33,240 problems with commercial real estate today is that you can't 595 00:38:33,240 --> 00:38:37,080 match your asset, the duration of your asset to an equal 596 00:38:37,080 --> 00:38:40,520 duration of a liability. At most you can get 10 year 597 00:38:40,520 --> 00:38:45,680 money and while people have variable rate debt and I don't 598 00:38:45,680 --> 00:38:48,760 know how you match that up with an asset where the rents may be 599 00:38:48,760 --> 00:38:52,960 fixed for 10 years and the assets going to last you 30-40 600 00:38:52,960 --> 00:38:54,760 years. You end up getting that kind of 601 00:38:54,760 --> 00:38:59,600 mismatch and eventually you don't have any operating income. 602 00:38:59,600 --> 00:39:04,640 So I think about it in terms of the funding and think about it 603 00:39:04,640 --> 00:39:09,680 in terms of leverage. But interest rates have kind of 604 00:39:10,560 --> 00:39:14,280 average now on a historical basis, yeah. 605 00:39:14,920 --> 00:39:18,880 Seems to me that corporate spreads are pretty tight, but I 606 00:39:18,880 --> 00:39:21,520 don't know if that's because the market is betting that interest 607 00:39:21,520 --> 00:39:26,000 rates are going to go down or if I don't know with that. 608 00:39:26,880 --> 00:39:30,600 I don't either. Whether it's a demand supply 609 00:39:30,600 --> 00:39:35,120 issue, I I don't. All I know is the spread isn't 610 00:39:35,120 --> 00:39:39,680 enough to take on the risk, even if that risk is illiquidity. 611 00:39:41,480 --> 00:39:45,720 You would rather accept reinvestment rate risk right now 612 00:39:45,880 --> 00:39:50,080 then you would rather accept illiquidity risk, it sounds. 613 00:39:50,320 --> 00:39:52,600 Absolutely, yes. Yes, I would. 614 00:39:52,800 --> 00:39:57,440 And it and is that because is that because that the interest 615 00:39:57,440 --> 00:40:02,520 rates seem roughly within line of historically where they are, 616 00:40:02,520 --> 00:40:08,280 so reinvestment rate risk is probably somewhat mitigated? 617 00:40:08,800 --> 00:40:13,960 And if rates were to go much higher, that's a positive for 618 00:40:13,960 --> 00:40:16,560 reinvestment rate risk. Is that sort of how your mind is 619 00:40:16,560 --> 00:40:19,280 breaking that down? My mind is out is at the 620 00:40:19,280 --> 00:40:23,800 illogical extremes. OK, if interest rates go down, 621 00:40:24,760 --> 00:40:29,840 the value of other assets are going to go up and maybe I'll 622 00:40:29,840 --> 00:40:32,160 make less money, but I'm not going to die. 623 00:40:32,400 --> 00:40:35,680 If interest rates go up dramatically, which no one 624 00:40:35,680 --> 00:40:40,840 believes possible, I don't know you could really be her. 625 00:40:41,440 --> 00:40:46,520 The real degradation of capital then you see it, you see it the 626 00:40:46,520 --> 00:40:51,520 people who went into long term bonds at low rates, you see it 627 00:40:51,520 --> 00:40:53,720 in the performance of bond indices. 628 00:40:54,240 --> 00:40:59,200 So I'd rather make less a more focused on the return of the 629 00:40:59,200 --> 00:41:01,920 capital as opposed to the return on the capital. 630 00:41:02,480 --> 00:41:08,280 Is that focus increasingly less pervasive in society? 631 00:41:08,680 --> 00:41:15,360 Because it feels to me like all the emphasis is on return on 632 00:41:15,360 --> 00:41:18,920 capital as opposed to return of capital outside of a few 633 00:41:18,920 --> 00:41:21,960 organizations. I don't know if that's a 634 00:41:21,960 --> 00:41:24,720 function of where we are in a cycle, or if that's a function 635 00:41:24,720 --> 00:41:27,880 of how it's always been and I'm just not experienced enough to 636 00:41:27,880 --> 00:41:30,360 know how it's always been. I think it's it's a function of 637 00:41:30,360 --> 00:41:34,760 age for me. That is, I would not have the 638 00:41:34,760 --> 00:41:40,880 energy to start all over again. So that's one. 639 00:41:40,880 --> 00:41:43,720 But I think it's also a function of society. 640 00:41:43,720 --> 00:41:46,960 Let me rephrase this. We have put the significant 641 00:41:46,960 --> 00:41:49,600 social welfare Nets underneath us. 642 00:41:49,600 --> 00:41:53,320 I There are so many activities taking place there that I just 643 00:41:53,320 --> 00:41:57,680 don't understand the amount of spending that takes place, the 644 00:41:57,680 --> 00:42:03,360 amount of entertainment, vacations, the lack of savings. 645 00:42:03,400 --> 00:42:08,200 We have certain cohorts that do not know what it is to suffer, 646 00:42:09,800 --> 00:42:15,720 do not know what it's like to be hungry or to worry about where 647 00:42:15,720 --> 00:42:20,640 the next rent payment is going to come from or how the electric 648 00:42:20,640 --> 00:42:23,040 bill is going to be paid. We still have plenty of groups 649 00:42:23,040 --> 00:42:28,840 that do have those issues, but as a society we have increased 650 00:42:28,840 --> 00:42:34,040 the protections of for people, I believe, and that's good, but it 651 00:42:34,040 --> 00:42:38,720 also changes the way people think and how they compete and 652 00:42:38,720 --> 00:42:42,200 how they work, what they're willing to do and not do. 653 00:42:42,520 --> 00:42:45,800 It also increases the need for return on capital if you're 654 00:42:45,800 --> 00:42:49,000 going to make good on the promises that are on the come. 655 00:42:49,000 --> 00:42:51,960 Yes, absolutely. And then all of a sudden you 656 00:42:51,960 --> 00:42:57,040 can't, and then what? And that's when you the extreme 657 00:42:57,040 --> 00:43:00,200 events start when you're out of time. 658 00:43:00,840 --> 00:43:06,600 So in a way, treasuries are actually an expression of having 659 00:43:07,680 --> 00:43:11,440 enough duration in your thought to think about what happens when 660 00:43:11,440 --> 00:43:15,120 the extreme event occurs and how might I be protected. 661 00:43:15,560 --> 00:43:17,800 Even if they're short duration treasuries, they're actually 662 00:43:17,800 --> 00:43:19,480 kind of a long duration expression. 663 00:43:19,480 --> 00:43:24,480 I think of it as you never want to put yourself in a corner and 664 00:43:24,560 --> 00:43:29,120 you think about a few low, low probability, high severity 665 00:43:29,120 --> 00:43:33,680 events that that that can happen and do happen every 10 or 20 666 00:43:33,680 --> 00:43:38,320 years and you wonder, you don't still wonder how you can protect 667 00:43:38,320 --> 00:43:40,480 yourself from it. You start to think about how you 668 00:43:40,480 --> 00:43:45,480 can benefit from such an event. Now it's not fun protecting most 669 00:43:45,480 --> 00:43:48,680 of the time protecting yourself or thinking about how you can 670 00:43:48,680 --> 00:43:52,240 improve your position in in such difficult times. 671 00:43:52,240 --> 00:43:56,840 But you get the biggest bang during when you can plant some 672 00:43:56,840 --> 00:44:00,520 seeds during very tough times. You just, you just don't know it 673 00:44:00,520 --> 00:44:02,480 when you do it. I think the counter to that 674 00:44:02,480 --> 00:44:07,280 would be, well, holding cash has been a drag. 675 00:44:08,320 --> 00:44:10,640 I mean, really I, I, I don't know when you would have to go 676 00:44:10,640 --> 00:44:14,360 back to see cash. Probably the 70s cash was was a 677 00:44:14,360 --> 00:44:19,040 good investment, but certainly since 1980s cash has been a poor 678 00:44:20,000 --> 00:44:23,320 allocation strategy just from a return perspective. 679 00:44:23,840 --> 00:44:27,600 But what I find interesting about this conversation is a 680 00:44:27,600 --> 00:44:30,720 contrarian might argue that that when no one is thinking about 681 00:44:30,720 --> 00:44:34,280 what may happen and and I guess that's this is wrong. 682 00:44:34,280 --> 00:44:39,760 Cash was good in 2008, 2009, but I don't feel like too many 683 00:44:39,760 --> 00:44:42,680 people are worried about, you know, the real severe downturn 684 00:44:42,680 --> 00:44:43,520 out but. Yeah. 685 00:44:43,960 --> 00:44:48,160 Well, it's a two step process. You have to have the cash and 686 00:44:48,160 --> 00:44:51,120 then you have to have the wherewithal to employ the cash 687 00:44:51,120 --> 00:44:55,720 during a difficult time when most people have their sort of 688 00:44:55,720 --> 00:45:01,240 head in the dirt. I mean, the great bargains occur 689 00:45:01,240 --> 00:45:05,600 when everyone is forced to sell, no matter, no matter the 690 00:45:05,600 --> 00:45:07,840 position. You know, fear is rampant. 691 00:45:09,160 --> 00:45:12,840 The only way to be greedy when fear is rampant is to have the 692 00:45:12,840 --> 00:45:16,600 cash. Yeah, I I like your expression 693 00:45:16,600 --> 00:45:19,960 of cash's financial value and helps people stay, stay 694 00:45:19,960 --> 00:45:21,480 rational, right. Yeah, right. 695 00:45:21,480 --> 00:45:24,000 And the older you get, the more so. 696 00:45:24,400 --> 00:45:27,360 I mean, I didn't understand what some of my clients would say to 697 00:45:27,360 --> 00:45:32,560 me years ago, you know, Bruce, them heading into my 70s. 698 00:45:33,640 --> 00:45:35,000 Yeah. I don't know if I want that 699 00:45:35,000 --> 00:45:40,520 volatility. I'd say, oh, you're fine, but it 700 00:45:40,520 --> 00:45:44,040 tends to be true. As you get older, your 701 00:45:44,040 --> 00:45:46,560 opportunity window narrows. Yeah. 702 00:45:46,600 --> 00:45:49,720 Well, to your point on asset liability mismatches, when 703 00:45:49,720 --> 00:45:53,600 you're older, you you need some shorter duration asset should 704 00:45:53,600 --> 00:45:57,840 you have healthcare problems or or anything along those lines, 705 00:45:58,440 --> 00:46:01,240 you you don't want to have to be paying bills with securities. 706 00:46:01,400 --> 00:46:02,640 Right. And of course we're talking 707 00:46:02,640 --> 00:46:06,280 about percentages and it just happens to be about the fair 708 00:46:06,280 --> 00:46:11,240 home income fund. I've thought that having AT 709 00:46:11,320 --> 00:46:15,080 bills yielding 4% was pretty good compared to most 710 00:46:15,080 --> 00:46:18,400 alternatives. And of course the the biggest 711 00:46:18,400 --> 00:46:22,600 position in that fund is Enterprise Products midstream 712 00:46:22,640 --> 00:46:29,720 pipeline of a master limited partnership, which is quite an 713 00:46:29,760 --> 00:46:34,240 interesting animal And anyone interested in such animals at 714 00:46:34,240 --> 00:46:38,160 the take the time to talk with a whole bunch of tax experts and 715 00:46:39,360 --> 00:46:43,080 understand the exact workings of an animal MLP. 716 00:46:43,080 --> 00:46:46,600 But it happens to work quite well from mutual fund. 717 00:46:48,640 --> 00:46:51,880 So what I'm getting at is you have a company, Enterprise 718 00:46:51,880 --> 00:46:58,880 Products that has a 7 1/2 percent distribution and that 719 00:46:58,880 --> 00:47:04,480 distribution is considered a return of capital and has been 720 00:47:04,800 --> 00:47:07,520 based upon the growth of the company and so on. 721 00:47:07,960 --> 00:47:13,000 And I, I expect it will continue to be a return of capital. 722 00:47:13,760 --> 00:47:18,680 And then you hold the position and eventually that return of 723 00:47:18,680 --> 00:47:22,280 capital reduces your cost basis and could eventually reduce your 724 00:47:22,280 --> 00:47:26,160 cost basis down to 0. And then the money you start, 725 00:47:26,160 --> 00:47:29,320 the cash you start to receive after that gets taxed at a 726 00:47:29,920 --> 00:47:33,920 capital gains rate. And for an individual, if they 727 00:47:33,920 --> 00:47:37,800 hold it until death and they get the step up in basis, Very 728 00:47:37,800 --> 00:47:39,480 interesting. Of course, it's a totally 729 00:47:39,480 --> 00:47:44,360 inappropriate for a retirement account based upon some of the 730 00:47:44,360 --> 00:47:47,760 rules, but there's only a settling up with the tax man 731 00:47:47,760 --> 00:47:52,280 upon the sale of the instrument. And for mutual funds, as long as 732 00:47:52,280 --> 00:47:55,480 you keep it under 25 master limited partnerships, 733 00:47:55,640 --> 00:48:00,000 partnerships under 25% on a cost basis, you get certain 734 00:48:00,000 --> 00:48:04,800 exemptions in terms of, you know, filing with States and how 735 00:48:04,800 --> 00:48:09,400 it's treated a bit of an arcane area of when it comes to mutual 736 00:48:09,400 --> 00:48:11,640 funds. But here's a company 737 00:48:11,640 --> 00:48:15,120 distributing out seven and a half percent and plus growing 738 00:48:15,680 --> 00:48:20,400 where they've averaged about 12% per annum since their start has 739 00:48:20,400 --> 00:48:24,840 the potential to earn between 10 and 15% per annum. 740 00:48:24,840 --> 00:48:28,640 Excellent adult supervision in terms of the management and 741 00:48:28,640 --> 00:48:35,280 ownership base is in an absolute critical area, which is 742 00:48:35,360 --> 00:48:39,080 basically they're a logistics company for energy. 743 00:48:39,680 --> 00:48:44,960 They they sort of get energy from A to be energy which is 744 00:48:44,960 --> 00:48:49,360 absolutely essential in terms of say natural gas liquids which 745 00:48:49,360 --> 00:48:56,080 become ethane or propane, which eventually enter maybe 95 plus 746 00:48:56,080 --> 00:48:59,800 percent of all products made with no substitutes. 747 00:48:59,800 --> 00:49:04,280 Natural gas is if the world just went from coal to natural gas, 748 00:49:04,280 --> 00:49:08,720 it would probably be the the most environmentally positive 749 00:49:08,720 --> 00:49:11,840 process. And in fact, I believe that the 750 00:49:11,880 --> 00:49:16,520 US has achieved a cleaner air based just on the switch from 751 00:49:16,520 --> 00:49:19,840 coal to natural gas. But I've spent a lot of time 752 00:49:19,840 --> 00:49:23,400 trying to understand thermodynamics, chemical 753 00:49:23,400 --> 00:49:27,960 engineering, playing with molecules of understanding of 754 00:49:28,080 --> 00:49:31,040 the intermittency of wind and solar. 755 00:49:31,040 --> 00:49:36,040 It's a Enterprise Products that they make money no matter what 756 00:49:36,040 --> 00:49:39,280 the price of oil and gas, they don't matter the price because 757 00:49:39,280 --> 00:49:43,600 they're it's a service business and they have an annuity like 758 00:49:43,600 --> 00:49:45,960 stream. So I find that type of company. 759 00:49:46,680 --> 00:49:50,480 And by the way, it's a AA minus, sorry, it's an A minus credit. 760 00:49:50,680 --> 00:49:54,520 So investment grade, I think the highest investment grade of any 761 00:49:55,240 --> 00:49:58,760 type of midstream company. So I find that a perfectly 762 00:49:58,760 --> 00:50:04,240 acceptable income idea, and I like matching that with T-bills. 763 00:50:05,840 --> 00:50:10,520 I like that you've talked about counting the cash and and if I 764 00:50:11,080 --> 00:50:14,440 sort of back of the back of the envelope look at Enterprise 765 00:50:14,440 --> 00:50:18,640 Products, I'm not asking you to opine on whether or not my 766 00:50:18,640 --> 00:50:21,080 numbers are correct. I am sort of asking if I'm 767 00:50:21,080 --> 00:50:25,800 thinking about this roughly properly in your estimation, you 768 00:50:25,800 --> 00:50:30,960 have I guess, 8 billion of cash from operations, 3.6 of CapEx 769 00:50:31,000 --> 00:50:37,120 roughly on a TTM basis, figure 22 billion or so or what they've 770 00:50:37,120 --> 00:50:40,680 got 800 million to billion of maintenance CapEx. 771 00:50:40,680 --> 00:50:45,000 So let let's say 2 1/2 billion is growth CapEx, which is 772 00:50:45,000 --> 00:50:47,920 probably a little low if I'm thinking about it. 773 00:50:47,920 --> 00:50:54,280 And I say, OK, I have roughly a 10% yield to equity on the 774 00:50:54,280 --> 00:50:59,160 enterprise today and then they're deploying 2 billion that 775 00:50:59,160 --> 00:51:04,240 they may be able to make 10% on. I I should roughly get somewhere 776 00:51:04,240 --> 00:51:08,280 between a 12 and 14% yield, assuming that that these numbers 777 00:51:08,280 --> 00:51:11,640 stick and obviously there's a thousand ways it can go wrong 778 00:51:11,920 --> 00:51:14,640 for those that aren't that have intelligence to do your own 779 00:51:14,640 --> 00:51:16,720 work. But like, is that roughly how 780 00:51:16,720 --> 00:51:19,800 you think about the math? Yes, that's, that's roughly 781 00:51:19,800 --> 00:51:22,640 right. And they have a very long, if 782 00:51:22,640 --> 00:51:25,920 they paid a dividend rather than a distribution, they would be a 783 00:51:25,920 --> 00:51:31,880 dividend aristocrat and they do it with less leverage than most. 784 00:51:33,000 --> 00:51:36,800 It's more conservatism. So I've no, I, I, you have it 785 00:51:36,800 --> 00:51:38,880 right. I think about it on a per share 786 00:51:38,880 --> 00:51:43,200 basis and they have a distributable cash flow of about 787 00:51:43,200 --> 00:51:50,080 $3.50 a share around there. They're paying out a bit over I 788 00:51:50,080 --> 00:51:53,960 think $2.00 per share, roughly $2.00 per share. 789 00:51:54,800 --> 00:51:58,200 So you're, you're getting a nice cash distribution that's tax 790 00:51:58,200 --> 00:52:02,480 deferred plus they're reinvesting a significant amount 791 00:52:02,800 --> 00:52:08,320 of money, which will increase that distribution over time. 792 00:52:08,800 --> 00:52:11,280 You're also lowering your duration because when you think 793 00:52:11,280 --> 00:52:13,520 of it, it's very interesting to think about the cash 794 00:52:13,520 --> 00:52:15,720 distributions as a return of capital. 795 00:52:16,120 --> 00:52:19,280 So you're lowering your cost basis and, and over time you got 796 00:52:19,280 --> 00:52:22,600 a 0 cost basis with a tremendous distribution. 797 00:52:22,640 --> 00:52:25,640 It's not a bad way to get wealthy at slowly. 798 00:52:25,640 --> 00:52:27,480 OK, this makes sense to me in a way. 799 00:52:27,640 --> 00:52:30,320 I, I'm, I'm going to say it slightly differently, but if I 800 00:52:30,320 --> 00:52:34,480 pay 64 billion for the equity today and they return 4 billion 801 00:52:34,480 --> 00:52:40,800 to me, that what that's just like 6 1/2 percent or so that is 802 00:52:40,800 --> 00:52:45,440 reducing my duration by that amount is, is sort of how you're 803 00:52:45,440 --> 00:52:47,680 thinking about it and when. Yeah, you're getting your cost 804 00:52:47,680 --> 00:52:49,120 back. Yeah. 805 00:52:49,120 --> 00:52:52,560 And when you balance that against T-bills, sort of the 806 00:52:52,560 --> 00:52:57,160 aggregate duration of the portfolio shrinks and the risk 807 00:52:57,160 --> 00:53:01,680 is potentially favorable. I mean certainly if that's how 808 00:53:01,680 --> 00:53:04,880 you have the fun position. Yeah, you got a barbell, but 809 00:53:04,880 --> 00:53:09,080 one, the T-bills have a duration basically of 30 days. 810 00:53:09,920 --> 00:53:13,680 And then you have enterprise with the duration of about 10 811 00:53:13,680 --> 00:53:15,920 years, less than 10 years, eight years. 812 00:53:15,920 --> 00:53:20,440 So you're getting high yields with a relatively, you know, 813 00:53:20,520 --> 00:53:23,160 reasonable duration. And the potential for the entity 814 00:53:23,160 --> 00:53:27,040 to continue to reinvest, to not extend the duration in the sense 815 00:53:27,040 --> 00:53:30,920 of a static duration, but they they can continue to grow the 816 00:53:30,960 --> 00:53:33,560 enemy. There are, you know, for a top 817 00:53:33,560 --> 00:53:39,280 quality logistics business, I mean, they're, the valuation is 818 00:53:39,280 --> 00:53:42,120 quite low. It's, you know, it's when you 819 00:53:42,120 --> 00:53:46,800 start to, you know, it's the oil and gas debate which is keeping 820 00:53:46,800 --> 00:53:52,120 that valuation low, even though the debate is nonsensical in 821 00:53:52,120 --> 00:53:57,680 some ways. Yes, it is. 822 00:53:57,800 --> 00:54:01,440 Yeah, but we can't change with society debates, right? 823 00:54:01,440 --> 00:54:05,320 But I I think the facts are you you know, what's interesting to 824 00:54:05,320 --> 00:54:11,520 me about that debate is to the extent people want to reduce the 825 00:54:11,520 --> 00:54:16,000 world's dependence on oil and gas by shrinking natural gas 826 00:54:16,000 --> 00:54:21,680 production, it it is a very in in my estimation. 827 00:54:21,680 --> 00:54:26,280 I'll pull the ladder up behind us answer because I don't think 828 00:54:26,280 --> 00:54:29,560 the emerging countries of the world are going to say we don't 829 00:54:29,560 --> 00:54:34,520 want the energy usage that the United States has and therefore 830 00:54:34,520 --> 00:54:38,000 we're OK not burning coal or not burning. 831 00:54:38,760 --> 00:54:42,320 Like the the idea that they're just going to go to a grid that 832 00:54:42,320 --> 00:54:45,320 is not dependable and they should just accept what we have 833 00:54:45,320 --> 00:54:48,720 determined is, is kind of offensive. 834 00:54:48,720 --> 00:54:51,040 Yeah, it's a very, but it's it seems to be the debate that 835 00:54:51,040 --> 00:54:53,760 permeates society. It's a very arrogant viewpoint 836 00:54:53,760 --> 00:54:58,520 that others don't deserve what you have and others should not 837 00:54:58,520 --> 00:55:02,280 strive for a better quality of life for their families. 838 00:55:03,040 --> 00:55:09,520 But it also gets into crazier issues like how how a an 839 00:55:09,520 --> 00:55:13,280 electric line is prevented through Maine that hooks up to 840 00:55:13,280 --> 00:55:18,280 Hydro Quebec to get relatively clean energy to Boston, for 841 00:55:18,280 --> 00:55:23,600 example, because someone objects to putting a, you know, a 10 842 00:55:23,600 --> 00:55:29,160 foot gash in a forest to, you know, cut down 10 feet wide of 843 00:55:29,160 --> 00:55:34,200 the forestry when that Boston may still be bringing in dirty 844 00:55:34,200 --> 00:55:39,160 fuel by boat because they can't get the clean electricity. 845 00:55:39,160 --> 00:55:43,120 You're like, California will import that, you know, heavy 846 00:55:43,120 --> 00:55:49,560 oils to burn because they refuse to put a natural gas pipeline 847 00:55:49,560 --> 00:55:52,440 in. It goes on and on and on. 848 00:55:52,440 --> 00:55:58,280 The the craziness of it all. You know, there's a good book 849 00:55:58,280 --> 00:56:04,720 out there, How the World Really Works by Smell, who is an energy 850 00:56:04,720 --> 00:56:06,680 expert. And I think he's written 30 851 00:56:06,680 --> 00:56:10,080 books on the topic. And he he talks about how the 852 00:56:10,080 --> 00:56:14,200 world really works with energy, with hydrocarbons and the 853 00:56:14,200 --> 00:56:18,880 process and the conversions and their relative merits. 854 00:56:18,880 --> 00:56:22,200 And he does a good job piercing it all together. 855 00:56:22,200 --> 00:56:25,000 He supposedly Bill Gates his favorite author. 856 00:56:26,040 --> 00:56:29,600 Yeah, Yeah, he's interesting. The other thing, friend of the 857 00:56:29,600 --> 00:56:32,400 show, Bob or Body, I'd like to call him like a true friend. 858 00:56:32,680 --> 00:56:38,080 He has been talking about a company that is in the ammonia 859 00:56:38,080 --> 00:56:42,800 industry and he has a little bit of, well, he doesn't have a 860 00:56:42,800 --> 00:56:46,080 little bit, but he's involved in sub C7 and tidewater and whatnot 861 00:56:46,080 --> 00:56:52,720 and, and as a result has an insight into what those 862 00:56:52,720 --> 00:56:56,200 industries are looking into to reduce shipping emissions. 863 00:56:56,640 --> 00:56:59,280 And I guess one of the things that they're looking at burning 864 00:56:59,280 --> 00:57:02,680 as opposed to fuel is ammonia, which would be yet another 865 00:57:02,680 --> 00:57:07,560 natural gas pipe. Bob's a Bob's a long time great 866 00:57:07,560 --> 00:57:13,880 value investor, yes, and and an energy he's been he's been doing 867 00:57:13,880 --> 00:57:17,120 energy forever. Yeah, energy's fairly new for 868 00:57:17,120 --> 00:57:20,200 me. A lot of value investors stay 869 00:57:20,200 --> 00:57:25,120 away from energy because the cyclicality of it, hence my 870 00:57:25,120 --> 00:57:28,320 desire to go into the logistics company was which is not 871 00:57:28,320 --> 00:57:34,040 dependent upon the cycle price or mostly not dependent upon the 872 00:57:34,040 --> 00:57:37,400 price during the cycle. But yes, that's the that's 873 00:57:37,520 --> 00:57:41,760 there's real excitement in green hydrogen, blue hydro, blue 874 00:57:41,760 --> 00:57:43,560 hydrogen. Green hydrogen would be through 875 00:57:43,560 --> 00:57:46,200 electrolysis. Blue hydrogen would be through 876 00:57:47,400 --> 00:57:51,920 the conversion of natural gas into hydrogen using a carbon 877 00:57:51,920 --> 00:57:54,720 capture and underground sequestration. 878 00:57:55,160 --> 00:57:58,560 And then the latest is geological hydrogen. 879 00:57:59,000 --> 00:58:01,720 I forgot what color they're calling that or natural 880 00:58:01,720 --> 00:58:06,240 hydrogen, which supposedly there are reservoirs of, of which 881 00:58:06,400 --> 00:58:12,360 based upon, you know, certain elements combining with iron ore 882 00:58:12,520 --> 00:58:15,920 and that there's, there, you know, you may be able to just 883 00:58:15,920 --> 00:58:18,960 drill for, for hydrogen, but it's there. 884 00:58:19,880 --> 00:58:21,640 There's a lot of money being spent on that. 885 00:58:22,000 --> 00:58:25,600 So yes, the technological evolution and all this energy is 886 00:58:25,600 --> 00:58:28,960 quite interesting. And the, I mean, carbon capture, 887 00:58:28,960 --> 00:58:33,600 I believe is quite real and we're going to continue for 888 00:58:33,600 --> 00:58:39,440 decades to need natural gas and oil because I mean, the foins 889 00:58:39,440 --> 00:58:43,480 basically forms the building blocks for fertilizers, 890 00:58:43,600 --> 00:58:51,000 plastics, heat steel, cement. I mean, world just doesn't work 891 00:58:51,000 --> 00:58:53,680 without it. What have you found with the 892 00:58:53,680 --> 00:58:55,680 carbon capture and sequestration? 893 00:58:56,800 --> 00:59:00,680 It seems to me that the technology like provably works, 894 00:59:00,680 --> 00:59:05,520 but the impediment is the cost. Is that am I correct or am I off 895 00:59:05,520 --> 00:59:08,440 base? You have to capture, transport 896 00:59:08,440 --> 00:59:12,840 it, but with the most recent tax credits, it's quite doable. 897 00:59:12,840 --> 00:59:17,800 Now the government's putting out some serious money to help 898 00:59:17,800 --> 00:59:22,840 capture that carbon and putting it back into the ground. 899 00:59:22,840 --> 00:59:27,160 I mean people have been using it to fizz up oil wells, gas wells 900 00:59:27,160 --> 00:59:33,120 for a long time, being used to sell carbon dioxide needed for 901 00:59:33,120 --> 00:59:36,960 Coca-Cola or whatever. I'm by far not an expert in this 902 00:59:36,960 --> 00:59:38,800 area. I'm not either. 903 00:59:38,840 --> 00:59:41,640 I do understand the need to get it from A to B. 904 00:59:41,640 --> 00:59:46,160 For example, in some places in Texas right now to you have, 905 00:59:46,160 --> 00:59:50,280 there are times this year where you've had to pay people to take 906 00:59:51,560 --> 00:59:55,560 your natural gas because they just wasn't, there weren't 907 00:59:55,560 --> 01:00:00,360 enough facilities, pipelines, logistical systems in order to 908 01:00:00,360 --> 01:00:02,840 take it from the gathering systems. 909 01:00:05,160 --> 01:00:08,920 And how can and how can the, how can the price be so different 910 01:00:08,920 --> 01:00:12,960 between the, the, you know, the price in Texas versus the price 911 01:00:12,960 --> 01:00:16,280 in the the Netherlands or in the price of Japan? 912 01:00:16,280 --> 01:00:17,960 It's a logistical. Challenge. 913 01:00:18,960 --> 01:00:21,360 Well, it's one of the nice things about being located in 914 01:00:21,360 --> 01:00:23,920 the United States. We've got a lot of geographical 915 01:00:23,920 --> 01:00:27,600 advantages. Yes, and with a little luck, 916 01:00:27,600 --> 01:00:32,080 we'll see a lot of industry come back, especially to the 917 01:00:32,080 --> 01:00:35,640 southeast of the United States. Yeah, it'd be good for the 918 01:00:35,640 --> 01:00:38,240 country. One question I do have or not 919 01:00:38,240 --> 01:00:41,920 one, but one wrapping up question, you mentioned you run 920 01:00:41,920 --> 01:00:43,960 a mutual fund. Have you ever considered 921 01:00:43,960 --> 01:00:47,200 converting to an ETF or is that not really on the I? 922 01:00:47,200 --> 01:00:50,400 I just, I think there's some tax advantages that could eventually 923 01:00:50,400 --> 01:00:54,320 come out of that. But I I not an expert, I was 924 01:00:54,320 --> 01:00:56,360 just curious. No, I haven't. 925 01:00:56,640 --> 01:00:59,800 Tell me about the tax advantage. I've looked at it a bit. 926 01:00:59,840 --> 01:01:03,000 I can connect you to somebody that that can tell you about it. 927 01:01:03,040 --> 01:01:04,720 I know enough to ask the question. 928 01:01:04,720 --> 01:01:08,080 Somebody that I know that I trust wrote that question. 929 01:01:08,080 --> 01:01:11,640 And I asked what questions do you have for Bruce and, and he 930 01:01:11,640 --> 01:01:15,160 had said has he ever considered converting to an ETF? 931 01:01:15,160 --> 01:01:16,920 I'd be happy to make that introduction for you. 932 01:01:18,200 --> 01:01:20,200 Yeah, I'd like that. I know there is some tax 933 01:01:20,200 --> 01:01:25,560 implications on selling and how it can be done, and I've looked 934 01:01:25,560 --> 01:01:32,200 at the closed end funds, but I I didn't want my clients to suffer 935 01:01:32,200 --> 01:01:36,960 what could potentially be a discount to net asset value. 936 01:01:37,120 --> 01:01:40,920 Yeah, I've always been focused more on how to create permanent 937 01:01:40,920 --> 01:01:45,120 capital via a mutual fund. And my only conclusion is to 938 01:01:45,120 --> 01:01:48,040 just make sure I own more of it. That's the only permanent 939 01:01:48,040 --> 01:01:51,920 capital your ownership in it. Yeah, that's, that's not wrong. 940 01:01:51,920 --> 01:01:54,320 And the partners that have been with you for a very long time 941 01:01:54,320 --> 01:01:59,040 and and hopefully one or two new stragglers that are, are truly 942 01:01:59,040 --> 01:02:00,560 committed to the strategy, right. 943 01:02:01,600 --> 01:02:02,800 Wouldn't hurt. Yeah. 944 01:02:02,800 --> 01:02:05,840 I mean, you know why? So I have noticed you've done a 945 01:02:05,840 --> 01:02:09,120 lot of media lately. Are you looking to raise assets? 946 01:02:09,120 --> 01:02:13,320 Are you doing media now because you're sort of ready to move on? 947 01:02:13,320 --> 01:02:15,960 Like why? Why are you a little bit more 948 01:02:15,960 --> 01:02:19,080 public now than then? Maybe I have seen you in the 949 01:02:19,080 --> 01:02:22,560 past five years. Well, I feel it's a very 950 01:02:22,560 --> 01:02:28,600 efficient way to let to talk to existing shareholders and. 951 01:02:28,720 --> 01:02:32,960 That I agree with. And to you know, and, and in an 952 01:02:32,960 --> 01:02:37,240 off the cuff way, talk about positions, philosophy, strategy, 953 01:02:37,240 --> 01:02:41,680 what I'm planning. So and I haven't done it for a 954 01:02:41,680 --> 01:02:43,920 long time. I've, I've typically have said 955 01:02:43,920 --> 01:02:49,920 no to conferences or TV and the only time I really did that was 956 01:02:49,920 --> 01:02:51,760 when I had a position to discuss. 957 01:02:51,760 --> 01:02:53,960 So I was fighting with a company. 958 01:02:53,960 --> 01:02:58,320 There's a part of me that wants to make sure that, you know, 959 01:02:58,360 --> 01:03:01,800 people that my clients know, my shareholders know what I'm doing 960 01:03:01,800 --> 01:03:05,640 and, and talking to smart people that helps. 961 01:03:06,360 --> 01:03:10,520 And then I've been told by others that I should just, you 962 01:03:10,560 --> 01:03:12,800 know, why not? It's not clear to me the 963 01:03:12,800 --> 01:03:16,960 benefits, but I'm willing to take suggestions. 964 01:03:19,360 --> 01:03:22,560 Well, I appreciate you saying yes to coming on this program 965 01:03:22,560 --> 01:03:26,560 and I hope that I have helped you further your goals and I 966 01:03:26,560 --> 01:03:28,520 hope that you've enjoyed the conversation. 967 01:03:28,520 --> 01:03:32,880 I have quite a bit and I really appreciate being able to ask you 968 01:03:32,880 --> 01:03:35,080 the questions and you being open with how you're thinking. 969 01:03:35,080 --> 01:03:38,640 So thank you very much. Thank you, I enjoy talking with 970 01:03:38,640 --> 01:03:42,600 you all. Right, take care and thanks 971 01:03:42,600 --> 01:03:44,800 again for stopping by all. Right, all the best.