My Worst Investment Ever Podcast

BIO: Nick Maggiulli is the Chief Operating Officer and Data Scientist at Ritholtz Wealth Management, where he oversees operations across the firm and provides insights on business intelligence.STORY: Nick invested in a stock he wasn’t familiar with just because his friends were doing it. He suffered a 78% loss.LEARNING: Don’t buy individual stocks. Trust your gut. “If you’re going to gamble, just wager less.”Nick Maggiulli Guest profileNick Maggiulli is the Chief Operating Officer and Data Scientist at Ritholtz Wealth Management, where he oversees operations across the firm and provides insights on business intelligence. He is also the author of OfDollarsAndData.com, a blog focused on the intersection of data and personal finance. His work has been featured in The Wall Street Journal, CNBC, and The Los Angeles Times. Nick graduated from Stanford University with a degree in Economics and currently resides in New York City.Worst investment everIt was the summer of 2021, and Nick was having a great night with some friends. One of his buddies, who’s pretty good at stock picking, told the group about this new exciting stock called Matterport (MTTR). Matterport is a virtual reality software that allows you to do 3D imaging of a room.Up until this point, Nick had primarily been a passive investor. The friend convinced the group to invest in Matterport, saying it would be big. Nick put in about 1% of his net worth. The group didn’t do much research. They just discussed the stock in a group chat for a day or two. They didn’t pay attention to it anymore.Over the next few months, the stock starts going up. Nick got excited about the surprising stock performance. He happened to attend an art show in New York. Coincidentally, the gallery was using Matterport to give a tour of their art venues. This was so wild and got Nick even more excited.The stock kept going up, and by November 2021, it had doubled. Nick bought it for $15, and now it was $30. At this point, everyone in the friends’ group doubled their investment.The peak was in November, and then the price started to decrease slightly. Nick figured it was no big deal, as every great winning stock has a decline. So he held onto the stock. The price kept going down. Nick sold his stock in October 2022 at $3.30 a share, making a 78% loss.Lessons learnedDon’t buy individual stocks.Trust your gut.Andrew’s takeawaysWhen you get invested in something, you’ll find every possible reason to justify it.There are a lot of times that we know stuff that we’re not supposed to do, yet we somehow end up in it.Actionable adviceIf you’re going to gamble, make sure you know exactly how much you’re willing to lose.Nick’s recommendationsIf you want to learn about individual stocks, Nick recommends reading Scale: The Universal Laws of Life, Growth, and Death in Organisms, Cities, and Companies. The book talks about the growth of cities, companies, and that type of stuff. To understand asset allocation, Nick recommends books by William Bernstein. He also recommends reading his book Just Keep Buying: Proven ways to save money and build your wealth if you want to learn the risks of investing in individual stocks.No.1 goal for the next 12 monthsNick’s number one goal for the next 12 months is to expand his blog’s SEO traffic.Parting words “Keep buying.”Nick Maggiulli [spp-transcript] Connect with Nick MaggiulliLinkedInTwitterInstagramWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

In this episode of Investment Strategy Made Simple (ISMS), Andrew and Larry discuss a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this third episode, they talk about mistake number three: Do you believe events are more predictable after the fact than before? And mistake number four: do you extrapolate from small samples and trust your intuition?LEARNING: Know your investment history. Don’t be subjected to confirmation or recency biases. “The key to long-term success is having a deep understanding of history and not being subjected to recency bias.”Larry Swedroe In today’s episode, Andrew continues his discussion with Larry Swedroe, head of financial and economic research at Buckingham Wealth Partners. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.Larry deeply understands the world of academic research and investing, especially risk. Today Andrew and Larry discuss a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this third series, they talk about mistake number three: do you believe events are more predictable after the fact than before? And mistake number four: do you extrapolate from small samples and trust your intuition?Missed out on previous mistakes? Check them out:ISMS 8: Investment Mistake No.1: Are You Overconfident in Your Skills?ISMS 17: Investment Mistake No.2: Do You Project Recent Trends Indefinitely Into the Future?Mistake Number 3: Do you believe events are more predictable after the fact than before?People often believe that events are more predictable before the fact than after. Larry says this is a big investment problem because it leads to overconfidence. After all, investors think they know what the outcome is.To avoid making this mistake, Larry’s advice is not to act immediately because if you do, you’re likely acting based on irrational fears. You don’t know the investment history and have a confirmation bias. The cure for this bias of believing events are inevitable is to think before the fact when the events are far from certain, let alone inevitable.Before you invest, Larry says you should keep a diary. Write down what you think will happen and compare it with the results after the fact. This analysis shows that you don’t know the future any better than anyone else. Your crystal ball is just as blurry. So don’t try to make forecasts based on your views because you think events are predictable.Mistake Number 4: Do you extrapolate from small samples and trust your intuition?People make investment judgments based on small samples, typically recent ones. For example, growth dramatically outperformed small-value stocks in 1997, 98, and 99 because of the Dotcom bubble.So people judging by that small sample didn’t look at the long-term historical evidence, showing a 20% chance that growth will outperform small value over any three-year period. At five years, the likelihood drops to 15%. At 20 years, the chances of this happening are between 3% and zero. So there’s always a chance that growth will outperform small value, but the longer the period, the less likely it will happen.Larry insists that you have to know your investment history. Whenever you see a small sample, look at the long-term data and remember that when investing in risk assets, three years is a very short time, and five years is still a pretty short time. You need much longer periods. The key to successful investing is not intelligence; it’s patience.Final thoughts from LarryKnow your investment history and keep that diary every time you make a forecast.About Larry SwedroeLarry Swedroe is head of financial and economic research at Buckingham Wealth Partners. Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match.Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has authored or co-authored 18 books.Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets.Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect, Advisor Perspectives, and Wealth Management. [spp-transcript] Connect with Larry SwedroeLinkedInTwitterWebsiteBooksAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedGary Belsky (January 2010), Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral EconomicsAndrew L. Berkin and Larry E. Swedroe (October 2016), Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests TodayJames O’Shaughnessy (November 2011), What Works on Wall Street, Fourth Edition: The Classic Guide to the Best-Performing Investment Strategies of All Time

BIO: As an accomplished entrepreneur and respected leader in the fintech industry, Larry Shumbres’s mission is to continuously enhance the investing experience for both advisers and investors through innovative technology.STORY: Larry tried to create a hedge fund, 50% tied to digital gold and 50% tied to the top five cryptocurrencies but faced so many setbacks in the process. He spent too much time and money on this venture, which never paid off.LEARNING: Don’t try to build an investment product around an unregulated industry. Don’t invest in what you don’t know. “If you don’t know anything about private equity, derivatives, or options, don’t do it. First, learn how it works and then look to invest in it.”Larry Shumbres Guest profileAs an accomplished entrepreneur and respected leader in the fintech industry, Larry Shumbres’s mission is to continuously enhance the investing experience for both advisers and investors through innovative technology. He is recognized as an industry expert and has over 20 years of fintech experience with companies such as Charles Schwab, Morningstar, and New York Life Investments.Most recently, Larry founded, built, and exited Totum Risk, a leading risk tolerance platform for the financial industry, through its acquisition by TIFIN. Before Totum, Larry built SmartVision by eVestment, which was later acquired by Nasdaq. He also led the sales team at eMoney before its acquisition by Fidelity.Worst investment everIn 2017, Larry had the idea of building a hedge fund, 50% tied to digital gold and 50% to the top five cryptocurrencies based on market cap. He put a lot of time and money into it. Larry had another business partner that was also putting time and money into it. He even had some friends and family money tied into this venture.Larry completed the private placement memorandum (PPM) to enable him to sell the product and have investors review it. Larry faced a couple of problems during this whole process. One, he didn’t have a track record. Two, he couldn’t sell the product in the United States. Three, it was impossible to distribute the product in other countries that had their own rules and regulations.So after spending a lot of money on attorneys, consultants, rules and regulations, and licenses, it got to the point where it wasn’t worth it. So Larry shut it down and lost the money.Lessons learnedDon’t try to build an investment product or tool around an unregulated industry.Anything that the SEC hasn’t approved is a big risk.Andrew’s takeawaysRevenue is everything. As a startup, your number one goal is to get your revenue up as fast as possible.Actionable adviceWhether you’re an entrepreneur or an investor, investing in what you know and what is regulated is wise.Larry’s recommendationsTo review any investments, Larry recommends going to large financial institutions like Schwab, Fidelity, Vanguard, JPMorgan, Chase, etc. Such institutions have a plethora of information to help you learn about investments. But more importantly, if you don’t have a passion for investments, Larry recommends partnering with a financial advisor to help you invest and plan for any life events and goals.No.1 goal for the next 12 monthsLarry’s number one goal for the next 12 months is profitability. The company is also planning to install its machine learning use cases in AI to widen its moat and be the leader in the industry.Parting words “If you’re an advisor, check out Presults.com, and if you’re an investor, do your homework.”Larry Shumbres [spp-transcript] Connect with Larry ShumbresLinkedInTwitterWebsiteConnect with Vincent DeluardLinkedInTwitterWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: After starting his career at Bear Stearns and then co-founding a multi-billion-dollar hedge fund firm, Jesse Felder left Wall Street to focus his energies on research and writing. Today he publishes The Felder Report and hosts the Superinvestors podcast.STORY: Jesse found a cigar butt stock that was cheap and performed extraordinarily well in just a few months after he took a pretty sizable position. A friend convinced him to hold the stock long-term instead of short-term as he had planned. Government legislation affected the business, and Jesse lost about 50% of his investment.LEARNING: Don’t rationalize a bad trade; get out. Be very careful when you’re in a situation that’s being primed by the government. “When you’re in a situation that’s not working out as you would hope, rather than dig the hole deeper, move on and find something different.”Jesse Felder Guest profileAfter starting his career at Bear Stearns and then co-founding a multi-billion-dollar hedge fund firm, Jesse Felder left Wall Street to focus his energies on research and writing. Today he publishes The Felder Report and hosts the Superinvestors podcast.Worst investment everAbout 10 years ago, Jesse came across an idea that seemed to tick all the boxes for a cheap stock. It looked really compelling. The company was Corinthian College, a for-profit college in the US. The company was a reputable business and had excellent profit margins. The stock was trading about three times the cash flow.From a technical standpoint, the stock seemed like it would turn around positively, so Jesse took a pretty sizable position. The stock did nothing for the next couple of months. However, it took off the following year and doubled in a very short period. In fact, it went 150-200% up. All along, Jesse knew this was a cigar butt stock, and the plan was to hold it short-term.One of Jesse’s friends, whom he was managing money for at the time, called him and said he’d never owned a stock that performed so well in such a short period. The friend asked Jesse to hold the stock for at least a year. Initially, Jesse wanted to take the profits. After his friend’s call, he rationalized why he should keep it longer. Jesse held on to it and kept monitoring it.As time passed, it became clear that the Obama administration would limit for-profit colleges’ ability to offer government-subsidized student loans. This was essentially a death knell for these companies. If their students couldn’t get debt financing to pay tuition, they would go out of business because that was 90% of the people borrowing money to pay tuition. Jesse naively thought there was no way the government would put an entire industry segment out of business.Jesse kept holding on to the stock and reinvested all of the gains. The stock went down about 50% below Jesse’s purchase price. He finally sold the stock before the company went out of business. This ended up being one of the worst losses that Jesse has taken as an investor.Lessons learnedDon’t let your thesis migrate. You need to remember why you bought something and always ask yourself if it’s working out how you anticipated it.Don’t rationalize a lousy trade; get out.Never underestimate the government’s willingness to put an entire industry out of business if it serves a political or economic purpose.Ego has no place in investing. It can be very dangerous.Andrew’s takeawaysBe very careful when you’re in a situation primed by the government, particularly in an industry where the potential customers are poor.Tax is not a good motivator for building a position.Actionable adviceLearn to be proud of yourself for taking losses early. Focus on risk, and the gains will take care of themselves.Jesse’s recommendationsJesse recommends following him on Twitter, where he shares some of the most exciting things that he’s found, such as articles and charts.No.1 goal for the next 12 monthsJesse’s number one goal for the next 12 months is to focus on what he loves to do. He’ll continue plugging away, put his best efforts forward, and whatever happens happens.Parting words “This has been a lot of fun, and I really appreciate the opportunity. You made this very enjoyable.”Jesse Felder [spp-transcript] Connect with Jesse FelderLinkedInTwitterBlogWebsitePodcastConnect with Vincent DeluardLinkedInTwitterWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

Remember that CPI is not inflationMar 2023 US CPI was 5%, down from 6% in Feb and off its June 2022 peak of 9.1%Mar 2023, the food component was up 8.5% but has come off its Aug 2022 11.4% peakMar 2023, the energy component was down 6.4, a massive fall from its 41.6% June 2022 peakIn Mar 2023, all other items were flat MoM at 5.6%, down from Mar 2022 6.5% highWithout a surge in oil US, we forecast CPI could end 2023 at 4%Two things that could derail YE23 4% …An oil price surge would push end-2023 slightly higher than 4%, but only slightly because it takes a few months for an oil price rise to impact CPIA US recession could quickly bring CPI below 4% Click here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Sachi Wickramage is the Co-founder, COO & CPO of i4T Global, a disruptive Field Service Management ecosystem.STORY: Sachi and his partner created an app that they thought would solve a problem for suppliers. Turns out, the suppliers didn’t need the app at all.LEARNING: Sometimes, you have to take a step back to take a step forward. Understand the moment of intent for each of your customer segments. “Understand the moment of intent for each of the segments of your customer base.”Sachi Wickramage Guest profileSachi Wickramage is the Co-founder, COO & CPO of i4T Global, a disruptive Field Service Management ecosystem.With a track record of co-founding multiple mobile-first startups, Sachi has taken his apps to over 1 million active users across various platforms worldwide.Worst investment everWhen Sachi and his co-founder were building their Field Management Service app, they looked at the problem and figured the consumer in the ecosystem was the one facing the problem. But, they targeted the supplier. The goal was to provide the supplier with a better tech platform to provide better consumer visibility. One thing the partners did not identify at that time was that the suppliers were okay with the way they were operating their business because they knew they were a scarce resource.Now the partners were in a fix. They couldn’t promote the app to the consumer because they needed a critical mass of suppliers on the app. When they tried to promote the app to the suppliers, their question was if there were already many customers who would give them more jobs.The two partners had to step back, look at their model, and figure out who was the target audience with the problem at scale.Lessons learnedWhen building solutions, first figure out who is the target customer with the problem at scale.Andrew’s takeawaysSometimes you have to take a step back to take a step forward.Actionable adviceWait for the moment of intent. Once the moment of intent arises, people are ready for your solution. But if you incorrectly identify the moment of intent, your solution becomes a disturbance because people don’t have a need at that time.No.1 goal for the next 12 monthsSachi’s number one goal for the next 12 months is to expand beyond Australia to Europe and the US while staying true to his purpose.Parting words “Define who you are and who you inspire.”Sachi Wickramage [spp-transcript] Connect with Sachi WickramageLinkedInFacebookTwitterInstagramYouTubeBlogWebsitePodcastAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

In this episode of Investment Strategy Made Simple (ISMS), Dave joins Andrew again as he shares more about his good and bad investments, among other things. “Most of the books I read that helped me invest are not about investing but about history.”Dave Collum Listen to Dave’s previous interview Ep660: What Should the US Be Doing in Ukraine? He shares his views about the UK, the US, and what the US should do about Ukraine.Dave’s early investment journeyIn 1980, when Dave started investing, it was nothing but bonds because interest rates were humongous, and investors could get a great return. Dave didn’t know what he was doing. He just depended on recency bias to make his investment decisions. Luckily, the bonds did great. After the 1987 crash in equities, Dave found himself sitting in the faculty lounge with an old guy who convinced him to buy equities. He looked into it, liked the idea, went in, and flipped equities. Dave was in equities until the mid-90s when he got enthusiastic after starting to accrue some wealth and was very bullish.Dave had a contact who was a traveling pharma salesman who would tell him what all the CEOs and staff were telling him. The connection had good information and gave Dave some ideas, one of which was a small company in Mississippi. The company did well and started acquiring everything under the sun.In early 1998, Dave started getting a little queasy about the markets because he’d read enough books now and better understood investing. At the beginning of July 1998, Dave emptied half of his equities. Then the economy went right into the Asian crisis. At this point, Dave had dumped everything and made 700%, and everything had worked great. So he thought he was a genius.Dave then got into gold. He had no clue what he was doing and simply white-knuckled gold for two years. Prices went from $256 to $1,900 at one point. Energy soared, too, and the decade following the tech boom was Dave’s best decade relative to the world. While the world was getting pounded by two nasty bear markets, Dave compounded 13% a year—that was extraordinary.Dave’s recommendationsDave recommends reading history books to understand investing. He highly recommends The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War.Andrew’s takeawaysIt’s important to understand that the returns in the stock market are a function of two things. The first part of the return is what you’re getting for a company’s earnings which are paid in dividends. The second part is the premium people are willing to pay for those earnings.We have had fantastic times for decades. It’s time to pay attention and think about a different way of looking at things.About Dave CollumDave Collum is a professor of Organic Chemistry at Cornell University who developed an interest in markets, which, in turn, led to an interest in geopolitics. He enjoys the human folly of it all. He has a natural predilection for being contrarian, which makes him a “denier” on almost all hot topics. [spp-transcript] Connect with Dave CollumLinkedInTwitterBlogAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Vincent Deluard is the global macro strategist for StoneX Group Inc., where he authors weekly commentary on global macro topics and advises pension funds on asset allocation.STORY: Vincent decided to overleverage an ETF during the financial crisis of 2008 in the belief that the economy would bounce back. Interest rates, however, fell, and he lost 70% of his investment.LEARNING: Take into account falling yields and falling inflation. Understand the difference between a trade and an investment. “The more volatile something is, the more likely it will lose its value over time.”Vincent Deluard Guest profileVincent Deluard is the global macro strategist for StoneX Group Inc., where he authors weekly commentary on global macro topics and advises pension funds on asset allocation. Prior to joining StoneX Group Inc., Vincent served as Europe strategist for Ned Davis Research, where he created the firm’s Europe product. Before that, Vincent was executive vice president for TrimTabs Investment, where he headed the firm’s quantitative research. Vincent is frequently quoted in the Financial Times, the Wall Street Journal, and Barron’s and is regularly on Bloomberg TV and CNBC.Worst investment everDuring the great financial crisis of 2008, Vincent had just started working and decided to get into investing. The interest rates at the time were stable at 5%—which seemed like a good number to Vincent.Then in a matter of a week, the interest rates went all the way to 2.5% in the wake of the Lehman Brothers panic. As the interest rates went down, bond prices went up. Vincent believed the situation would reverse, so he leveraged an ETF that gave him access to shorting the US Treasury prices. This worked at the beginning.The economy came out of recession, the yield curve steeped, and interest rates increased. Vincent thought they would go higher and back up to the 5% range, so he didn’t sell his position. Unfortunately, the interest rates didn’t go back up, and Vincent lost about 70% of his investment.Lessons learnedThe more volatile something is, the more likely it will lose its value over time.Take into account falling yields and falling inflation.Understand the difference between a trade and an investment.Andrew’s takeawaysAvoid leverage.Be careful about treasuries and Forex. Because basically, you’re fighting against the Fed, banks with a massive balance sheet, and a limited buyer who can move in any direction.Don’t overestimate the genius of the Fed and other bureaucrats.Actionable adviceMake your mistakes when you’re young, and learn from them to become a prudent investor.Vincent’s recommendationsVincent recommends signing up for his weekly reports, in which he addresses risks that people may have missed and other overlooked things. Sign up on his pinned tweet to get a two-month free trial.No.1 goal for the next 12 monthsVincent’s number one goal for the next 12 months is to do what matters to him and live a more meaningful life.Parting words “This was fun, and I like your humility. I think we all need some of that.”Vincent Deluard [spp-transcript] Connect with Vincent DeluardLinkedInTwitterWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Igor Yelnik founded Alphidence Capital Ltd in 2020 and holds the positions of CEO and CIO. Alphidence is a systematic macro hedge fund management firm based in London, UK.STORY: Igor’s company entered into a forward contract with one of Russia’s biggest banks and sold a very significant amount of the Russian ruble against the US dollar. The company made a considerable profit, but the bank decided not to pay. After a lengthy court battle, the company gave up and counted its losses.LEARNING: Infrastructure and systematic risks can affect your trade significantly. “Non-market risks are really paramount in forward currency trades.”Igor Yelnik Guest profileIgor Yelnik founded Alphidence Capital Ltd in 2020 and holds the positions of CEO and CIO. Alphidence is a systematic macro hedge fund management firm based in London. Previously Igor was the CIO for ADG Capital Management from 2013 to 2019. Prior to that, he spent 9 years at IPM Informed Portfolio Management, where he was a Partner and Head of Portfolio Management and Research. Before this, Igor co-founded St. Petersburg Capital, an asset management firm that specialized in the Russian securities market, and later Unibase Invest, a managed futures business based in Tel Aviv.Worst investment everIn 1998, Asian prices, oil prices, stock prices, and the Russian ruble were going down. Igor was still working in Russia at that time. The Russian Central Bank established a cap—the currency corridor—they set ranges for the ruble. The exciting part was how much the US dollar could appreciate against the ruble. Everybody understood that the ruble was doomed to depreciate in that macroeconomic environment.Then the most popular trade of the summer of 1998 happened. This was the currency forward trade. Russian banks believed the Russian Central Bank would support the currency, so they bought the ruble. Then all the foreign banks played against them and sold the ruble.The ruble was already trading in the Chicago Mercantile Exchange. The foreign price of the ruble on the over-the-counter market in Russia was higher than in Chicago. So in principle, you could sell the ruble in Russia and buy it in Chicago, which was like free money.Under Russian law, Igor’s company entered into a forward contract with one of Russia’s biggest banks. The company sold a significant amount of the Russian ruble against the US dollar. The trade was entered into in July, and the delivery would be on the 15th of September 1998. The price of the trade was 6.37 rubles for $1.On the 17th of August, Russia defaulted on its debt denominated in the national currency. At the same time, it stopped supporting the ruble, so it devalued. By the middle of September, the ruble depreciated relative to the US dollar. It went from 6.37 to around 16. So Igor’s company won in that trade. Then on the 14th of September, the morning trading session set the price of the ruble at 8.25. This was still profitable for Igor’s company.The most interesting thing happened. The Russian bank refused to pay for these contracts, so Igor’s company wasn’t paid for its trade. The company decided to go to court and won. The bank appealed, but Igor won again.At that time, the Supreme Court decided in a similar case, where another major Russian bank was sued by one of the major French banks because of a non-payment on a similar contract. The Russian Supreme Court decided that the law should not protect a currency-forward transaction because it’s akin to betting. Igor and his company decided enough was enough, so they just dropped the matter that was it. They never received any payment and also lost legal fees.Lessons learnedBeing right and making money are two very different things.Infrastructure risks matter because a winning trade may become a losing one if you have the wrong counterparties and infrastructure.If your trade presents a systemic risk, there’s no guarantee you’ll get paid because the government could find non-market ways to deal with you.Andrew’s takeawaysGovernment makes the rules. You may think you’ve made a good bet, but there’s no telling what will happen.Actionable adviceThink about non-market risks when making forward currency trades. It’s also crucial to understand who you’re in business with. Your business partners have to be honest and dependable.Igor’s recommendationsIgor recommends three books:Market Wizards: Interviews with Top TradersReminiscences of a Stock OperatorA Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial InnovationNo.1 goal for the next 12 monthsIgor’s number one goal for the next 12 months is to perform well as a hedge fund manager.Parting words “The last 12 months have been very difficult for many people. I really hope that the next 12 months will be much, much better for all of you.”Igor Yelnik [spp-transcript] Connect with Igor YelnikLinkedInWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Bogumil Baranowski is a founding partner of Sicart Associates, LLC, a New York City investment firm. He has almost two decades of investment experience.STORY: Bogumil invested a lot of time and money in two companies that were drowning in debt, had poor management, and had a secular decline.LEARNING: Just because it’s cheap, don’t compromise on debt, management, and secular decline. Debt is the number one risk for an existing company. “Yes, you can make money, but keeping it is equally as important.”Bogumil Baranowski Guest profileBogumil Baranowski is a founding partner of Sicart Associates, LLC, a New York City investment firm. He has almost two decades of investment experience. He holds a master’s degree in Finance and Strategy from Sciences Po Paris and a master’s in Finance and Banking from the Warsaw School of Economics. He is the author of Outsmarting the Crowd and Money, Life, Family. He is the host of the Talking Billions Podcast.Worst investment everIn 2011, Bogumil picked up Verifone stock because it was cheap. The company had just acquired Hypercom, one of its competitors. It looked like they were well positioned, with Ingenico being the other competitor to coexist in a growing industry. Bogumil paid attention to how cheap the stock was. However, he had questions about how the merger would go, and the management was questionable. But Bogumil thought the price was so reasonable. So he overlooked the debt added for the acquisition and the fact that management was not exactly the team he was comfortable with.Soon enough, the management changed. There was a temporary chairman who even went to Bogumil’s office for a chat. Bogumil and his team invested so much time in understanding all the Verifone’s pieces, the payment systems, and how its products are sold.Then the stock started going down and got to 50% of his entry point. The earnings were also dropping, but Bogumil kept holding onto the stock. Then the tipping point came when Bogumil met with the new management. He didn’t like their approach, so he finally dropped the stock. He walked away with about a 70% loss at the time.Bogumil also shared an interesting case study, a South African retailer - an example of what can go wrong. The company was importing furniture from communist countries and then reselling it at very good prices. So it was a good business. One of the managers decided to get more aggressive with growth, and the company ran into some trouble.Bogumil looked at this company because some people had told him it was an exciting story. He had reservations about retail but put the company on the list regardless. Bogumil did his research well. Five minutes into reading about the company, Bogumil was ready to say no, no matter who was recommending it. But he decided to use it as a case study to teach his interns.The company was piling up debt quickly, and the market cap reached 20-something billion. It was the zero interest rate time in Europe, and money was so cheap. Businesses could easily get loans. This company accumulated about 20 billion in debt and was not picky about what it bought. The company purchased a US mattress business rolling up at a very high premium (over 100%). Bogumil thought it was crazy for an over-leveraged company to buy another over-leveraged company at a 100% premium and borrow money as if there was no tomorrow. And when he watched the management, listened to them, and read what they were saying, Bogumil felt uncomfortable.But as Bogumil continued learning the company’s story, one of the executives was featured on a cover of a prestigious magazine. The magazine called him the new visionary of retail, the one who figured out retail. So Bogumil made a note of it and kept watching it. A year later, the company went to almost zero and was nearly bankrupt. It negotiated a deal with the banks, and the management was fired.Lessons learnedJust because it’s cheap, don’t compromise on other factors that affect a stock, such as debt, management, and secular decline.Decide to cut your losses and not just think in terms of money but also in terms of timeAs an investor, money is one thing, but time is also crucial. Don’t waste too much time on a bad investment.It’s not only what you’re buying but also what you choose not to buy that can make a difference in the portfolio.Too much debt in a company is a red flag.Pay attention to how the management communicates with you.Be careful with a secular decline if you’re a value investor looking for a bargain.A company that can hold on to cash and is ready to survive will flourish in any economic downturn.Andrew’s takeawaysDebt is the number one risk for an existing company. Run with a minimal amount of debt.When acquisitions come along, and you got the cash, you can move fast and beat your competitors.Just because it’s cheap doesn’t mean you have to buy it.Actionable adviceWhen analyzing a company, pay attention and ask the right questions. Take the time to get to know the company’s story. Then explore the worst thing that can happen and how you can lose money on that business. Once you have that figured out, you can get excited about why you can make money in it.Bogumil’s recommendationsIf you’re new to investing, Bogumil recommends reading One Up On Wall Street by Peter Lynch. If you know a bit about investing, then any book about Warren Buffett is fantastic.No.1 goal for the next 12 monthsBogumil’s number one goal for the next 12 months is to keep publishing an episode weekly on his Talking Billions Podcast and get to his first 100 guests.Parting words “Investing is fun, so have fun with it. Happy investing.”Bogumil Baranowski [spp-transcript] Connect with Bogumil BaranowskiLinkedInTwitterInstagramYouTubeWebsitePodcastBooksAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast