MI Rewind: Studying Financial History w/ Ken Winans

25:02You really have to just, again, don't lie to yourself. If you can't handle it, don't go into it just because your friends are. Many people are better off with just real estate investment. And I talk to young people all the time that owning a house, they were fearful of it because they didn't want to lose the property. But now they've discovered now that they're working and they're making money, hey, and now with COVID, maybe having my own home and with rents going crazy, owning a house might not be a bad idea. So sell some of my stocks and put a down payment on a home. You just have to find what works for you.

25:30Yeah, I agree that the temperament piece is very important. That's something that Buffett hits the drum on very often. And related to millennials and Gen Z, we've seen this massive wave of new retail investors and Robinhood and such. And just more people are interested in finance in general and just kind of doing things on their own. What are your thoughts on younger investors managing their own money versus working with someone like yourself or another advisor? Great question. By the way, I know that we're doing a podcast and I know that some people will say there's a book I'm holding in my hand.

26:06I'm going to read you the title of this book, Clay. It's called Every Man His Own Stock Broker. Okay. Dated 1791. So this idea of you doing your own investing, this isn't new. Okay. This has been around a very long time. Here's the thing. Everybody needs to be involved in the investment process. Just like your health, you know, if you're going to have a legal problem, you want to be involved in the problem. You have to. If you're going to get audited by the IRS, you need to know what's going on with that. The question really is, to what degree do you want to be involved? And is it a good use of your time versus you developing your skill set and whatever you do professionally?

26:45And for some people, the answer is yes, I'm good at what I do. I have the time to study investment and to take it seriously. So that's number one is what degree do you want to be involved? And number two, are you emotionally attached to your money? You know, for me, and not to say I'm callous about it. I mean, I've run right now approximately$300 million. I could take it personal. And these are, again, people I know, they're friends of mine. I've known their families forever. I take a lot of responsibility. But if I entrenched myself emotionally in the daily volatility of the stock market with my friend's money, I couldn't be in this business.

27:21I have to use the same discipline I did as an athlete. You have to keep calm when things don't go the way you're planning on it. Think on your feet. I think the question is, to what degree? Also, and certainly, look, if I'm going to go buy a piece of real estate, and I own my own home, I would turn to a real estate professional. I am a financial professional. I'm very good in areas of finance, but I'm not good at everything. So I turn to people where I need help. So a good case in point, somebody who's a millennial, who's developed a good discipline for stock investing, they might say, you know, I want to move some money into bonds.

27:59I don't know anything about bonds. Or they might say, I need to move money into commodities. I heard that guy, Ken Wyons talk about in high inflation, commodities are where you make your money. You're a farm kid. You tell me, hey, the farmers right now, they're pretty darn excited about what's going on with crop prices. Corn, wheat, they're all taken off right now. It's an inflationary cycle. But my point is, maybe they manage part of their portfolio, which is, by the way, many of my clients are this way. I manage that portion of their portfolio that I'm good at. But if they're going to go into foreign investing, that's not my area.

28:31They have somebody else to do it or they do it themselves. So the question really is to what degree do you want to be involved? Do you have the time to do it, especially now that the markets aren't going straight up anymore? Now it's more challenging. Challenging means more time, more commitment, more discipline. And there was an old phrase on Wall Street, don't confuse brains with a bull market. It's a lot of truth to that. So I think, like I said, you got to ask yourself some tough questions. And maybe it is keep a portion of your portfolio for your own independent stuff. But again, let other people who are experts do that.

29:05And as far as paying someone a fee, let's talk, I always comes up, oh, I don't want to pay anybody anything. Well, I would say you probably pay your doctor. God knows you paid your professors in college a lot of money. I just would argue that if you want somebody of quality and caliber, you should pay them a reasonable fee for their services. And if they do their job, they make you money. And it shouldn't really matter what that fee is. Now, if you're paying somebody a fee and they don't do well, get rid of them. Don't keep them around. Yeah. Don't let the fee drive the decision on getting help.

29:34That's a bad reason to do it. That's great advice. That reminds me of a book I've read by William Green, who was a guest I had on the show recently. The name of his book is Richer, Wiser, Happier. And in it, he documents the lessons from his interviews with the world's greatest investors, including Charlie Munger, Joel Greenblatt, Bill Miller, and many others. He wrote a chapter about Charlie, and one of Charlie's lines in his interview was, as an investor, you need to minimize the level of stupidity in your portfolio. So one should think about the worst possible decision they could make and avoid those types of decisions.

30:13That could include going all in on one crypto or one stock or buying on margin or something to that effect. Charlie Munger, everybody knows about Warren Buffett, but But Buffett will tell you, if it wasn't for Charlie, they're yin and yang, and they worked well together. It's a team approach. But there's a good example. No one person has all the answers. You know, so you find that team. And the millennials are more apt to work as a team. And I would say the same thing about your money. Build a good team of people that includes your accountant. Hey, you know, taxes are going to be a big issue going forward.

30:43Taxes are going up. And as you start amassing more money, tax bills get larger. So your accounting talent, your legal talent, your need to protect yourself in case there's lawsuits, your investment talent. I would also say this, that one other thing about hiring other people. You know what? I always love when people say, I really like my investment guy. Again, wrong question. Are they good at what they do? Now, I'm not saying work for a jerk or don't hire some egomaniac, but it's not about like. It's do you trust them and are they good at it? If those two questions can't be answered, don't work with them.

31:17And you have every right to ask them for a track record. If they cannot show you how they've done, and in our case, I mean, Morningstar, I have to face the music every quarter. It's like going to class, you're getting your grades. And sometimes it hurts. You have a bad quarter, you go, oh, you know, and somebody beats you up. But you need to be able to show somebody third-party verification that you are, in fact, as good as you claim you are. And as I said, certainly make sure you trust them. When I was looking into your background, I found an article where you talked about stock market seasonality and however January performs the rest of the year tends to follow.

31:54And judging this year's January, that's probably not good news for investors. Could you talk of this idea and the data you're seeing behind this? You know, putting history in the driver's seat. So here's a prime example, okay? So people can say, oh no, I think it's different this time. Well, I don't buy it's different this time. I just, I always love it when people throw that up. And I, hey, you might be right, but I play probabilities. And what I did, and again, this is my own research, Clay. I went back and physically got the data, looked at it and did my own analysis. I've taken it back to 1936 and I've carried it forward.

32:28And it is true that when you have a negative January, both for the Dow Industrial Average and the S &P 500, and then let's throw in the NASDAQ now. So you have three nasties. They're all down. What happens is, now it doesn't necessarily mean it's all over, run for the hills. But what it does tell me is that there's major headwinds the rest of the year. It means that I'm not expecting this to be a great year. You know, I hope it doesn't blow up any worse than it already has. But I just don't think we had four really great years of big returns. To have a year where there's nothing or slightly down, that's very much the same possibilities.

33:04So people should be making adjustments accordingly. The other thing that's important is now to take, okay, we have a negative January. Let's go back and look at what happened in other high inflation periods. And again, I talk about the 1970s, or you can also talk about the era right after World War II, which by the way, had logistical supply chain problems. They were missing raw materials. Same stuff we hear today was happening right at the end of World War II. When you have negative Januaries in an inflationary cycle, it usually is pretty bad. I mean, you have some pretty nasty downdrafts during the year.

33:38So I am prepared myself for this market giving back most of last year's returns. And so I have been putting protective measures in place to defend my portfolios. I have been raising cash. I have been putting on hedges with inverse ETFs of the S &P 500. But let's also very quickly talk about why January. Three very important things happen. Number one, the Federal Reserve usually makes comments about policy. Oh, and by the way, not just the Fed, but every central bank around the world that follows our calendar makes those pronouncements about monetary policy. So you have that piece of information.

34:17You have the State of the Union address from the president. What's the government's policy? most notably about things like taxes, spending priorities. And then last but not least, most companies report their year-end financials and they give guidance for the next year. And then you also have the Treasury Department comes out and talks about borrowing needs for the federal government for the upcoming year. So you have all this information hitting at one time and then the market digests it. And I think what you're seeing very clearly this January, it is the Federal Reserve is saying, again, the party is over.

34:50We're raising rates, we're tightening money supply, meaning credit is going to be harder to get. So it's not a surprise. But anybody blowing off this January as an outlier and buy this dip, I would caution people, let this thing play out before you step in and just get slaughtered. Be very careful. I like to pivot and talk a little bit about inflation. What are your thoughts on inflation and how it will change the lives of investors? Well, that's going to change all of our lives because now this is the blunt way of putting it, Clay. Everything today that you're buying, whether it's my coffee, my lunch, buy something on Amazon, a book, whatever, four years from now, it will be 20 % more expensive.

35:36Everything, that's inflation. And what it buys goes down. That's it, it buys less. And so what typically ends up happening is that it's tougher to make ends meet. You know, the employers are going to start giving cost of living increases that they haven't already. I think a lot of when we hear about the great resignation, what I keep hearing about is they did enjoy the work environment and they weren't paid enough. That's what common tale you hear from people who quit their jobs. So employers who are looking for those employees will have to pay them more money. You're going to have, especially in the case of what we worry about with schools, any other kind of public agencies, they're going to run out of money faster.

36:15but we constantly have budget shortfalls, constantly have trouble. So that inflation is really going to eat into people. So here's a good case in point. If you are a real conservative person, and you've just been having money sitting in a bank account paying 0.01 % interest, three years ago, when inflation was running at a half percent or 1%, you lost a little bit of buying power, but it didn't kill you. Now, you are guaranteeing yourself a loss that you cannot write off on your taxes, you cannot make back. And so people are going to have to think about the time value of having money to sit around.

36:53When it comes to stocks, some stocks do not do well with inflation, people are going to have to pivot their portfolios around. We talked about commodities, I think everybody who's an investor, however, they may feel about, you know, commodities and hear all these horror stories you hear about people blowing themselves up, they're going to have to seriously look at commodities in their portfolio because if I am correct, they will be the number one best performing investment for the next five years. The other thing, very important, this is a long-term problem. This is not going to disappear in a year.

37:27Most inflation cycles run six to eight years. So for a good part of the remainder of my career, I'm going to be dealing with this. And you and anybody out there who's thinking about having a family, getting married, buying a house, houses are going to get more expensive. And then on top of it, interest rates are going to go up. So borrowing costs are higher. If you can get a loan, it will not be as easy to get credit as it has been because banks are concerned about people not paying their bills. So it changes the thinking about finance. It changes the thinking about money. And unfortunately, it also causes people massive stress.

38:03So it's not a good deal. It's sad that it's happened. It's another thing that it's just very hard for me as a citizen of this wonderful country of ours to sit back and can't understand why people that we send to Washington and to the state capitals would have done the policies that they all knew were going to put us in this horrible mess and to do it and not even apologize for it. And I just really have trouble with it. With this high inflation, I've thought a lot about bonds. I know some traditional financial planners are still putting people in a traditional 60-40 portfolio, and it makes me wonder if that's really a sensible strategy.

38:41I just looked up the interest rate on the 10-year treasury, and it's sitting at 1.78%. Just some simple math for those in the audience. If someone were to buy a 10-year treasury that pays 1.78 % and holds it to maturity during a time when inflation is 7%, they are guaranteeing the loss of their buying power because it doesn't keep up with inflation. Bonds clearly aren't what they used to be since now we're in a lower interest rate environment with high inflation as well. I'm curious what your take is on how bonds fit in the portfolio during this time period. Well, let's back into your... And I'm just going to tweak the question a little bit.

39:19There's no such thing as a bond. I love when people say the bond market. They're bonds. Bonds are, for many people, might not even think about it this way, but they're loans. You've made loans to the federal government, state governments, local school districts, or corporations, which is a corporate bond. Further edification is notes, or what are notes? Notes are very short-term loans. So I agree with you about in some form of a pension, special people work in the public sector. If you go back and look what the public sector is invested in, much of their portfolio, guess what they're in? Government bonds.

39:58So I think pensions are going to have big problems over the next decade. There are massive shortfalls there. And I've been managing bonds for a very long time. It depends on the strategy you use, and it depends on how far out in maturity you're going, obviously, what are you being paid? So rule number one, I came out of the last cycle of inflation, and I was trained, built what we call a ladder. It means you have some bonds coming due one year out, two years out, three years out, four years out, five years out. Then you assess, it's called shopping for yield. Where do I get my best yield? If I look at corporate paper, various rated corporate bonds, some companies that might be kind of so-so versus AAA rated, which are very few.

40:39To me, in the high inflation period, one, you keep your maturities in. I do not think anybody should buy a bond that's coming due any further out than let's say six years right now. That's a sucker's bet. You will lose money on it. But if you buy some bonds today, corporate bonds, you can still find bonds that are paying five, six, in some cases, even 7%. But here's my point. If you have that ladder and think of it like a conveyor belt, the one year bonds are going to come due, pay you back a thousand bucks a bond, you then take that and you take that money and put it out on the next point at six years, a year from now.

41:14Those yields go up. You'll be buying a bond that might be paying you seven or even maybe 8%, but your overall portfolio will gradually, the yield will increase as you adjust it accordingly. That's the strategy that will work in an inflationary cycle. You just have to decide. You follow diversification. Don't put all your eggs in one company. There's also, talking very quickly about ratings, there's over-reliance on ratings. I remember what happened in the 2008 mess. I remember that Standard & Poor's and Moody's had investment-grade rankings on Lehman Brothers two months before the company filed bankruptcy.

41:54So you need to understand, I'm not saying ignore ratings, but you also have to remember the ratings have been paid for by the companies asking for the rating. Number two, They typically don't make a big difference of opinion on a rating between a short-term bond and a long-term bond. And they also say in their disclaimers, I find it comical, don't use this for investment advice, which I find pretty funny. And actually, you talk about Warren Buffett. Warren Buffett always said, own stock in great companies, lend money to mediocre companies. Okay, so there's a lot of companies. I guarantee you that Ford and General Motors will probably never get AAA rated.

42:36Why? They're cyclical companies. They have times when they will lose money. Just because you lose money doesn't mean you can't pay your bills. It's a function of you have cash flow to pay your bills. So I prefer to have a diversified portfolio of medium grade to lower grade bonds that are paying me a higher yield for taking the risk. And yes, somewhere down the road, some of these companies might fail to pay me back my money, but it's not going to blow my entire portfolio out of the water. So to get back to your original point, don't avoid bonds just because of inflation. You want to avoid areas where clearly it's bad.

43:09Long bonds, long term, anything long term, stay clear of it. Number two, don't be afraid to take a little bit of risk on some bonds in some area. But again, in an inflationary cycle, not all stocks will do well, not all bonds will do well, Not all real estate will do well. I right now wouldn't buy a shopping center. I wouldn't own one if you gave it to me. I think they're going to have a very tough road to hoe with what's happened with COVID. Don't just write off an area and know what you're dealing with.

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46:56That's theinvestorspodcast.com slash TIP-finance. All right, back to the show. This question just came to mind for me. Do you have any opinions on tips on if those are a good holding for those wanting something that's more stable, but also might hedge against some of that inflation? Absolutely. I think for an extremely conservative person who says, look, I want to leave some money on the sideline for six months, nine months. Absolutely. And the nice part is you can get into TIPS directly through a brokerage house, a Schwab, a TD, and interactive brokers, or you can buy the TIPS ETF. The only thing I would caution them about is just remember that they monitor one index, one inflationary gauge, and there's always going to be a little bit of a lag.

47:45So they're not perfect, but it's much better than having money sitting around doing nothing. And for those in the audience not familiar, TIPS stands for Treasury Inflation Protected securities. So TIPS do pay their coupons like a bond does, but the coupon adjusts up and down over time based on inflation. So in short, your regular treasury bond has fixed payments over the lifetime of the contract, whereas the payments on a TIPS contract adjust with inflation and helps hedge against that risk of high inflation. So the yield on those will go up and down based on what's going on with the inflation gauges, which also means the other way.

48:27Inflation cycles don't just go straight up, Clay. They pulsate. They go up, they pull back a little bit, then prices take off again. You could find a period of time where inflation might begin to ebb a little bit. And let's say it goes from 7 % to 5%. Well, if you're in that tip, your yield will go down. It will adjust to what's going on with those inflation gauges. But no, I think that, again, for somebody who's a very conservative investor or not even very sophisticated, yes, Yes, by all means, you should look at things that will help keep your money at least somewhat in buying power. It will keep it intact.

49:01Why do you think many investors stay away from commodities? Is it something that you've always worked into your portfolio? Well, yes and no. I think part of it is, and it's kind of funny, people bring up to me all the time that movie from the 80s, Trading Places, with Dan Aykroyd and Eddie Murphy. It's a funny movie. It's politically definitely not correct, but it is a good movie. It's a good movie for economics. It really is. But the problem is, one, I'm going to throw it out that most people who have a business degree and had a class in investing, I doubt, again, same thing, not covered. Commodities were not covered.

49:36They just basically went over and focused on equities, focused on bonds, and glossed over commodities. What's interesting is if you go back 100 years ago, it was very common for people to have commodities within their portfolios. A lot of them are like you. They came from the farms. It was logical to have wheat or corn or metals in your portfolio. So I think that part of what happened is one that, and Wall Street has just not been pushing it because the stock market was doing so well. Real estate was doing so well. Stay with what's easy to understand. Number two, they can bite you. They're very heavy leverage.

50:13They only, you know, commodities by their nature are contracts that go out 90 days. So you have to roll things. You also have to have a basic level of knowledge about whatever you're buying. So the brokerage houses worry about the liabilities. It's the same reason that they don't promote people buying stock options. They don't want the liability, Clay. They don't want people suing them saying, well, no one told me that I was going to lose my money in winter wheat. So you have to have a level of knowledge. But you brought up why now? I think you have to adjust your investment knowledge to reflect the times.

50:46And again, whenever you have inflation, and by the way, global inflation, global around the world, commodities will do well. Many people haven't really thought about this, but when you have that part of your portfolio that's in what we call emerging markets, most of those markets, let's take Brazil. I can sum up Brazil in three things. Coffee, cocoa, oil, the big three. That's it. The problem is you're buying commodities in another currency with its own set of political and social problems. But you take any emerging economy, that's where they make their money. It's in commodities. So I'm proposing forget the emerging market side of it, focus on the commodities themselves and learn how to do it.

51:30But if you're going to do it, I love to ride motorcycles. So now I tell people, look, I drive a car, I ride a motorcycle. Motorcycles are not for everybody. Okay. But as a rider, I'm still alive. I've been riding most of my life, but I never forget that when I'm sitting down, my backside is not too far away from that asphalt. So if you're going to do commodities, you got to have healthy respect. They're fun. They're fast. You can make a lot of money, but they're like that motorcycle ride. You better not forget you're one quarter away from hitting a little bit of loose gravel and maybe laying the bike down.

52:05So you've got to be prepared to take the risk. That's funny. One of my first ever investments was in an oil company back in 2015. I figured that since oil was at historical lows, it's bound to go back up and this company will do fantastic. Well, that wasn't exactly the case. And boy, have I learned a lot since then. Yeah. There's a good example where if you've been in the commodity, You know, we have to extend the talk a bit about the ETFs that are now commodity-based ETFs. There's quite a few out there. It's kind of the same problem I have with crypto. They're very new. They're very, very new.

52:40We don't quite know how they're going to react with this new cycle. So I've noticed that with some of them, they're very illiquid. They don't track the commodities well. And also, you're a farm kid. You know, there's times when you harvest a crop, and there's times it's winter and it's cold, and you're not in the commodity, which means you learn to buy and to sell. Most of the commodity ETFs are long only. They don't let you go short. They're not easy to get out of. And you can't short them because there might not be enough of them out there and they gap terribly. Not only that, they're also very expensive.

53:13A lot of those commodity ETFs are very, very expensive. So if members of your audience are serious about committing their knowledge or committing capital to commodities. One, the people who manage commodities, and I happen to be one myself, they're called commodity trading advisors. In fact, I'm just now forming a whole new company to deal with this because I think the demand for it's going to be huge. So I'm going through that regulatory process right now. But you find people are experts in it, and they're different than stock people. You're going to find people who really do know it. And number two, it's just a different animal.

53:46If you do 10 trades, six are not going to work. You will have stops that go up. You're going to have six losses, but those last four should more than make up for the losses and make you money. So it's unlike stocks where people would flip that around, Clay. They say, oh, I couldn't handle more than two losers in my portfolio. It's a different animal entirely. You've got to change your mindset and you've got to be very disciplined. I'm always curious to ask financial advisors how they look at cryptocurrencies. What they're hearing from clients. I personally own Bitcoin and really like it, but I'm curious to hear your thoughts on crypto and what you're kind of seeing from the clients you're working with.

54:27And I get asked a lot. So it's a new animal. And I mentioned before our interview that I'm very sold on blockchain technology. I actually think it is going to revolutionize real estate. I think it's downright Byzantine how much it costs and the time it takes to sell a house or any piece of land. It's crazy. I see crypto as these little tiny digital warehouses that are supposed to store value. And why can't we stick real estate in those little warehouses? So I'm hoping that's where this is all going to go. My problem is this. I'm a commodity person. I've traded currencies. I've traded yen, euro, Mexican pesos, Canadian dollars.

55:05I've studied them and I've traded them. Crypto is not a currency. It doesn't act like a currency. And certainly with how volatile it's been this last 12 months. These huge, massive drawdowns in this thing, people have to get used to the volatility. And I don't think you can dismiss it as a one liar. I think it is very much acts like a commodity that you have to, I would say, treat it like you would owning gold futures, or if you're going to go trade the euro, you need to put it in that same camp, which means you have a point where you get out of it, you have defensive strategies to deal with it.

55:41So for me, crypto would go into a commodity portfolio, but I would not by any stretch, nor would I in a commodity portfolio, take all my money and place a bet on, you know, September gold futures. I think you're just asking for trouble. It goes back to the same thing. What the audience should care about is meeting your financial goals. However you get there within reason, that's secondary to meeting your goals. Now, if someone feels they can meet their goals with being a crypto expert, great, learn about it. But like I said before, don't just forget about risk. And because when you forget about risk, at that point, you are betting.

56:19There are people who can gamble in stocks. There are people who can invest in stocks. You can blow yourself up in commodities or you can be a very savvy commodity trader. The difference between a bet and an investment is with a bet, you're just putting your money on the table and you're turning your back and you're hoping for the best. Hey, that's great, good luck. you might hit a windfall, but what if you don't? And that's what I'm saying. Hey, you want to go to Vegas and have fun? Don't take your life savings and do it. And I do think there are people out there that have gotten used to betting stocks and might actually, I dare say, have a gambling problem.

56:53And people need to do a gut check on that. Yeah. I think a lot of people have learned a lot of lessons being in the markets lately. The ARK fund is down substantially and many of the high growth names in the NASDAQ are down over 50%. Yeah, and they might not recover. You know, everything, when you look at when things blow up, and when people do get financially mortally wounded, to me, it's always the same things. It's over leverage, overexposure, and illiquidity. When you think about what happened to people in the 2008 real estate situation, it wasn't that they were bad properties, but they had too much debt, they couldn't get out, and they were stuck, and they couldn't absorb the exposure.

57:33So you always need to ask yourself, am I overexposed? And I said earlier, there's nothing wrong with having a process to remove risk from your portfolio, which means take some profits, take some money off the table, redeploy it to some other areas. There's nothing wrong with doing that. What is the biggest mistakes you see with the clients you've worked with over the years? I would say there is the greed bug. Because in my case, the portfolios we run, there's really, we have all bonds. We have 25-75, meaning 25 % growth, 75 % bonds, 50-50, 75-25, equity. And then we have trading accounts that would also include the commodity stuff.

58:16So we have these portfolios. So my worry is that I've seen through my years where somebody who, let's say, personality-wise and everything is a 50-50 person. They're balanced. So the stock market goes up. they decide to change their allocation to 7525 and i'm saying okay you didn't want to do that when the market was lower but now that the market's gone higher now you want to take on more risk or the other people i see and i've actually had this happen where i am ordered to liquidate a portfolio at a bottom and i am not to reinvest it and actually it's kind of interesting uh back during the the 9-11 attacks when the stock market shut down for a week a gentleman who was an accountant, was a well-trained accountant, ordered the liquidation of his portfolio the day after the market reopened.

59:04And I warned him, I said, you are making a historically significant error. We're going to war. Wars markets go up, not down. He said, no, it's different this time. Get me out. So he got out at the very bottom. The market then shot up 30%. And later on, he fired me because I wasn't assertive enough in telling him not to do that. You can't win. I actually call it portfolio geopolitics. You have to keep people in track. You have to keep them focused on things and you give them the knowledge to help them understand what they're trying to do. I'm not trying to give them a snow job, but I know them better than themselves in many cases.

59:39And I'm trying to get them to not order me to do things that will be at their detriment. So it happens all the time. You have to be able to read people. In my line of work, I love it when people say, well, I really don't like people, but I want to manage money. I want to be a money manager. It won't work, Trust me, because they're not going to trust you. They're going to think you're an idiot and they're just not going to trust you. Other mistakes I've seen would be, you know, we're in a world of digital echoes. They're following something on Facebook. They're listening to Jim Cramer on CNBC. They're reading something on a blog and they'll call me and say, well, they're telling me something different than you're telling me.

1:00:15And I'm saying, well, look, I'm not saying don't listen to these people, but they don't manage your portfolio. I do. I know this portfolio well. and that information they're giving you is like a scattershot. It's meant to appeal to a broad base of people, but it's not specific to your situation. So we have that. Last but not least, taxes. I'll have people take, look, I don't want you to sell that stock because I don't want to pay any taxes. And then I see these stocks lose half their value. It would have been far better to have paid a little bit of tax or donate some money to charity. Take some of those shares and give it to charity and take a tax ride off.

1:00:51But to sit there and take a massive hit because you didn't want to pay a long-term capital gains, that's just downright stupid financial planning. Wrong reason to do it. Mark Moss, 2020 was the first time I've seen mass panic in the stock market. There were just so many people acting out of pure emotions when it came to their stocks, thinking that it was all over and everything was going to zero. Having the temperament to keep your emotions in check during the good and the bad times is just so important. Clay, you're right. And I'll just add to look, I'm not heartless. It hurts me to see hard-fought gains blow up.

1:01:29But I also just, I mean, again, you have to have the discipline to stay on track. I would say this, that one, if it's okay with me saying it, go read some of my Forbes articles that are on Forbes.com. And one of the things I talk about in those stories is about hedging. I'm concerned that there's a lot of financial people out there, whether their firms won't let them talk about it, or they just don't believe in it. There is a third choice. And it's something, again, from my commodity background. I mean, farmers hedge crop prices all the time. Manufacturers hedge costs all the time. Why should investors not hedge when they're not sure about things?

1:02:07It's been done for hundreds of years. But the problem is, again, Wall Street is so wedded to buy and hold, buy for the long term, that the idea of hedging is counter to what they're trying to sell people. So I would tell your audience, if you're going to work with an advisor, if they do not have a strategy that allows you to hedge or lock in profits, whether it's using stock options, whether it's just doing a market hedge with inverse ETFs, if they're not knowledgeable in that, then I would tell you that going forward, you better find somebody who is, because you will need help with that. Anybody in this audience will need help with doing that stuff.

1:02:45So you talked about March 2020. That's what I did. We put in hedges on the portfolio. So we didn't necessarily go out and sell everything. We sold a few things, but we put hedges on. The hedges, when the market was down 30%, I think we were down 10. Then at the bottom, I took the hedges off and I had money to go in and start buying stocks going forward. So it worked well. But again, the clients wouldn't have been able to do it, wouldn't have known what to do, how to do it, and might not have emotionally been willing to do it. So those are the skills that you should expect from any kind of help you seek in the markets.

1:03:19Very interesting. Before I give you the handoff to tell us a little bit more about your business, I'd like to ask, are there any books outside of your own you'd recommend to our audience to help further their education? Have there been any books that have been fundamental to your development as an investor? Absolutely. And the thing is, realize that you have fundamental analysis and you have technical or statistical analysis. And so I think it's important. And a gentleman like Warren Buffett, where he manages so many billions of dollars, for him to try to do chart work, it's too big. He's like a big giant tanker.

1:03:59He can't navigate through the canyons very well. Some of my size, I can go into the shallow waters a little easier. So I would say definitely go back and read. There's a wonderful book on technical analysis. It was written actually originally in the 1960s called Technical Analysis, written by Edwards and McGee. It's very statistical. It is not for somebody who does not like numbers, but it's necessary. Okay. Number two, I mentioned Ben Graham's books on, you know, security analysis. He wrote these books in the 1930s, when the world was a pretty darn scary place. These are some of the Bibles of our industry, Clay.

1:04:36And I do think now, I quote them in my book, Investment Atlas 1 and 2. I do quote, and I try to embed what I learned from those other books. But I do think, you know, I love people who tell me, oh, I don't believe in charts. I don't believe in technical analysis. Well, you know what, I have news for you. Price does lead news. And that's fine if you don't want to believe in it, but just realize there are people out there who do, and they do follow those lines and those moving averages, and they will make decisions based on it. So I would encourage that even if somebody doesn't want to follow technical analysis, they should learn enough about it to understand what makes a guy like Ken Winans tick.

1:05:15The other thing, there's an annual book that comes out every year. You can get, and also it's on a website as well. It's called the Commodity Yearbook. And so if you're interested in commodities, I get it every year. It talks about what happened the previous year, projections on droughts, projections on geopolitical issues. So if somebody does want to get into commodities and they're talking to an advisor, they should learn a bit about why does Ken like gold? Why does he like crude oil? They're not fortune telling books, but it lays out the economic facts of what might be going on in the Midwest with a possible drought that might hit next year.

1:05:51So I think it's important to learn to knowledge. Last but not least, I'm asked all the time, what do I read? I still read the Wall Street Journal. I read Barron's Financial Weekly. I read The Economist. Of course, I read Forbes, last but not least. And I do, I try to gain knowledge. And I'm aware there might be certain biases, but certainly I believe in reading what's going on and to be aware of things and be willing to read someone else's opinion that's countered to mine. Awesome. I'll be sure to link all those books in the show notes for those in the audience that are interested. Ken, before I let you go, where can the audience go to connect with you?

1:06:30Well, there's a couple of places. So, you know, we talk about me, there's Ken, the author, Ken, the writer for Forbes, there's Ken, the money manager. And then I also have a big fan of the space program. So you'll probably see that. So there is KenWinans.com, which is my old website. My company's website is winensinvestments.com. And there I have, you know, I practice what I preach. You can find the Morningstar reports on how we're doing, or my track record and all those things. I would say that if you're interested in my books, you can buy them on Amazon. They're both digital and print copies.

1:07:05Just look at my name, Ken Winans, and it'll take you to my Amazon authors page. And then last but not least, for Forbes, Just go to Forbes.com, look up Ken Winans. And I've been writing articles there since 2004. And I do like to, I would encourage people to go back and read because I will tackle tough discussion points. I will talk about politics and investing and lay out an argument one way or the other, not promoting either party, but just saying that why an investor should think of things maybe differently. But I would just ask your audience, and by all means, look, I'm certainly, we'd love to have clients come from your audience.

1:07:41and hopefully they believe philosophically as I do. But even if you're not interested, stay in touch. I wanna see your generation get up to speed with being savvy with money. I believe that I need to pay it forward. America has been very good to me. I wanna pay it forward and help your generation and I'm sorry that my generation is so badly screwed up, the debts and all that stuff. But let me also say positive, I admire your generation in a lot of respects. You guys have had to deal with some pretty weird stuff in your life when it comes to money, and you're still willing to get involved and learn.

1:08:17And so that's all I'm suggesting. Come with an open mind. You might not agree with what I have to say, but if the audience is interested in getting my opinion on something, I will give you an unfiltered view on things. You might not like it, but I'll tell you how I feel. Thank you, Ken. I really appreciate you coming on and being willing to share your knowledge with our audience. I find it really interesting how you take this unique approach that I think many financial planners I'm seeing are missing and just taking a totally different approach that I find refreshing. Thank you again for coming on.

1:08:51Thanks, Clay. You take care. All right, everybody. I hope you enjoyed today's episode. Please go ahead and follow us on your favorite podcast app so you can get these episodes delivered automatically. And if you haven't already done so, be sure to check out our website, theinvestorspodcast.com. There you'll find all of our episodes, some educational resources we have, as well as some tools you can use as an investor. And with that, we'll see you again next time. Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by the Investors Podcast Network. Every Wednesday, we teach you about Bitcoin.

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