Transcription
if you don't like losing money then you
should be worried because if Warren
Buffett that has been investing greatly
for the last 50 years that has seen the
Cycles has been there in the 70s through
inflation investing and everything
suddenly practically sold everything
that could be sold and I'm arguing he
will sell the remainder of Apple this
quarter so all that's left in is
unsellable the Coca-Cola for Warren or
things like that he's not going to sell
that because he gets the cash flows the
dividend and that's why he bought but if
he sold everything practically then it's
time to
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worry hi and uh welcome to the wealthy
on network this is speak up with your
host Anthony scaramucci today our guest
is Sven Carlin of modern value investing
uh senen I can't read this whole thing
by the way because we'll lose viewers
okay but this is an illustrious
biography and obviously you are a great
theorist in addition to having a PhD you
have a value risk model for emerging
stocks that I think is second to none uh
and so if you want to read about Sven
you can go to Sven
car.com backabout me but but this is a
super impressive resume uh which is why
of course I've got you on the show and I
want you to start with where the economy
is right now and our long-term debt
cycle and what the potential risks are
if
any thank Jo Us by the way thanks for
having me it's a pleasure to be here and
now speaking of the economy those risks
are there and are piling up but you
never know when those will materialize
will it be tomorrow or 10 years down the
road for now we know that interest costs
are rising and this is how they tell
always you go bankrupt slowly then
suddenly and it's not like you go
bankrupt but higher inflation to pay
those to service th those debt costs is
inevitable in
time the debt talk about the debts fan
what are you worried about I am worried
that if you use that you live over your
means and that can be solved through
inflation and live living below one
means and I'm worried that the
population is not used or doesn't like
to live below their own means because we
have been having zero interest rates
higher and higher debt levels for a
decade and a half now almost and that
means the population is used to having a
good time and it's very unlikely that
that will change which leads to populism
to different actions to long-term even
costlier actions than just piling up
there so I mean are you worried about
anything you know Warren Buffett has
raised record cash levels uh last time I
looked at those numbers are over $300
billion uh he has some metrics that he
looks at in terms of U overall earnings
and and the multiple of earnings to
stocks he then looks at the overall
value of the market to the GDP and on
his economic dashboard there's some
warning lights there is that something
that we should be worried about or is
this something is something different in
the system or different in the model
that would cause you to worry less I
don't think we should be worried at all
if we like losing money if you don't
like losing money then you should be
worried because if Warren Buffett that
has been investing greatly for the last
50 years that has seen the Cycles has
been there in the 70s through inflation
investing and everything suddenly
practically sold everything that could
be sold and I'm arguing he will sell the
remainder of Apple this quarter so all
that's left in is unsellable the
Coca-Cola for Warren or things like that
he's not going to sell that because he
gets the cash flows the dividend and
that's why he bought but if he sold
everything practically then it's time to
worry I don't know what he's seeing
maybe that inflation will be coming back
maybe the 10year treasury yield going up
despite the FED lowering rates which
means that the Bond vigilantes might
come in and if we go at the 5% normal
interest rate the stock market has to
crash 50 % just to adjust to normal
valuations okay okay there there and and
again I'm doing this 35 years I've been
through nine Bull and bare market so uh
there's another school of thought that
you're right you lose money in the short
term but if you hold the
assets um you can write out the cycle or
you do not believe that do you think
that U you know we're in a situation now
where the market could drop 50% and it's
you know you know Irving fiser once said
uh that we're at a permanent plateau and
of course two weeks later we had a stock
market crash October the 29th 1929 but
you think we could be at a a permanent
uh Valley in the markets I think that
you can write it out if we are speaking
price earnings ratio of 15 going to 10
then yes you can write it out because it
will be back to that historical average
but we are now speaking the market at a
price earnings ratio of 30 it has been
only more expensive during the dotom
bubble and it has been cheaper in the
Roaring
20s each time it took 20 years or even
30 years adjusted for inflation for you
to ride it out as you say that's I don't
know what will happen but the risks of
just being long is crazy especially when
people have their pension fund invested
in markets and everyone thinks just
stocks will go up 10% forever history
tells us differently okay so let's talk
about Market psychology for a second
okay why then is there's so much
complacency in the market because we are
wired to see what has been going on and
simply replicating that going forward
each Wall Street analyst that looks at
the share they look at what has been
going on and they just replicate it
going forward nobody's talking about
recession nobody is talking about
changing interest rate environment the
FED will lower rates stocks keep going
up 10% or more per year 40% this year
but if you just look at history it can
go for on for another year two years
three years but it usually always
reverts to the mean and that is also
what what Warren Buffett knows the only
problem for Buffett is he cannot get out
today in one day he needs years to get
out of his risky
positions um so let's talk about the
average investor uh like you said long
stocks long bonds maybe they own some uh
digital currencies maybe they own
Bitcoin maybe they own gold what do you
recommending you're recommending a
fullscale liquidation into cash or
you're recommending cut yourself in
half what do you what do you recommend
it so if you start from stocks and if I
take I don't know the American investor
that's mostly invested in US markets
then Buffett is now going all into cash
with more than 30% of his assets into
short-term treasuries you get 4% the
difference is from a value investing
perspective with the 4% freem month
treasury you cannot lose so you have 4%
on one side and zero % of loss on the
other side if you own the sap 500 yes
maybe it can go up another 10 20 30%
going forward but you're getting just a
1% yield and it can crash 50% tomorrow
so it is about seeing how that risk and
rewards risk and reward feels from a
personal perspective if you know I need
these two million to live on for the
next 10 years to retire well then you
need to be a lot in cash now if you
think oh I'll be adding the next 20
years to my portfolio then you can also
risk it but if you keep adding
especially if the market goes down then
you will weather it out and actually if
the market goes down that's a great
situation for those that are constantly
building their pension so it depends on
the person and when where the person is
are you concerned about your financial
future or think your Investments could
be doing better I'm Andrew bril one of
the hosts here on wealth on and I've
been there not sure my money was in the
right places it's why I've gotten help
from a financial adviser maybe it's time
you think more about your financial
future or get a second opinion about
your Investments we've made that process
easy simply go to wealth on.com free to
speak with one of wealth On's registered
investment advisers for a free no
obligation portfolio review again that's
wealth on.com free I'm now less anxious
and confident I can achieve the
financial goals I've set for me and my
family so why while I while I have you
here let's talk a little bit about
Bitcoin because I know you you've
Express in your reports and in your
research that you're worried about its
meteoric rise as well and you're also
worried about the low liquidity around
it this is uh appropo to what Stan
Drucker Miller has been saying the
reason why Bitcoin is running hard is
that it's thinly traded if people want
to own it it's pushing the price up a
lot but that could also happen in
Reverse right if people decide okay they
don't no longer want to own it so tell
us your thoughts on bitcoin so Stanley
dra Miller said that he tried to buy 20
million of Bitcoin and he couldn't
because he doesn't want to buy something
where he is the one pushing the price up
and then he went to sell it and it took
months just to get out on on the
position he built and then you have this
low liquidity in elastic markets with
where with a few billions like micro
strategy is doing now you can push the R
significantly and look like a genius the
same strategy was applied by KY wood in
the great 2020 Arc ETF year she would
find these stocks that she could Market
all around social media with low
liquidity that's very inelastic and with
a few billions she could push stock
prices up two four 10 times even 20
times with s some positions we know how
that story ended and from being the next
Warren Buffett KY wood lost all the
gains in the subsequent years to 2020
and if that Trend revers with the
Bitcoin it will go three times faster in
Reverse than it went up and I think it
actually happened we already had a
Bitcoin Peak a few years ago only to see
it crash 60% or more later and now we
have a new story developed that's
pushing it
higher um okay but tell me tell me this
is a valuation call by you is this a
Peter Schiff call that Bitcoin is
worthless and it's just a a Ponzi scheme
that's his narrative or you know there's
there's Michael sailor that sees this as
a digital property digital gold sees it
as part of the future of the way we're
going to account for other Assets in the
world and then there's Peter schift that
thinks it's worthless obviously Warren
Buffett also thinks it's worthless he
has said repeatedly he wouldn't spend
$25 on the entire Bitcoin Network and so
where are you those are the two extremes
Sven so where are you I am always trying
to invest in producing assets I don't
own gold except for a coin that I
inherited because I'm trying to own
businesses that will produce something
over time and gold there is a lot of it
there has been around for thousands of
years but when I look at Bitcoin I think
that everyone that owns Bitcoin it is
owning it because they want to see it go
up in US dollars or in whatever other
currency Bitcoin is measured in value so
I sense huge
psychological let's say exuberance
around it and therefore that is the
driver simply supply and demand and a
lot of inflows going in and for it to be
a more serious situation of currency of
this or that it should be much more
stable it should be much more liquid
which it unfortunately isn't okay so I
mean let me just push back a little on
that because there are now and he's
actually created this you can get yield
on your Bitcoin you know you could go to
certain places where you could lend the
Bitcoin and you could receive interest
back on the Bitcoin now obviously things
like blockfi and Genesis and those
things frankly failed doing that and
they weren't properly regulated but are
you suggesting that uh even if that were
the case let me make
that supposition to you let's say I
could get a four treasury like yield on
bitcoin would that change your view of
Bitcoin depends if I have a Bitcoin and
I'm lending it to someone that someone
is not using it to buy a tractor to I
don't know work a field they are just
using it to speculate that I'm paying
here 5% yield on the person that wants
to get 5% so that I make on the Bitcoin
going higher in price it's not like you
are investing into something if you can
sell I don't know corn for Bitcoin and
then you have an whole ecosystem around
it it's just based on speculation so
okay you can get 5% % when the other
person if Bitcoin crashes go Bank goes
bankrupt then the whole also the lender
everyone the Clearing House and everyone
goes bankrupt too which is again not a
great way to create a financial system
okay so let me ask you this there were
tulip bulbs that and there was a tulip
Mania in in in Holland in the
Netherlands this lasted for many many
years and the Tulip prices went
extraordinarily High and then they
crashed and busted and you know tulips
still very popular in Holland but
they're you can buy them for uh you know
a fraction of what they were trading at
back in the Tulip Mania is Bitcoin
another example of tulip Mania as as
long as people want to pay up for it the
price will go higher I am scared about
what happens because if you look at all
the Bitcoin holders and my friend is a
Bitcoin Deca millionaire he's just
pumping the price up and when someone is
just piping pumping the price up because
he wants to see it go higher then you
know what happens on the reverse the
same as with the Tulip Mania because if
the asset isn't producing anything we
know the results sooner or later
unfortunately for all the people holding
it okay let's switch gears for a second
and this is why you say I love bringing
people like you on my show I brought
Peter shiff on as well I'm obviously a
long long term Bitcoin holder but uh the
the the the point of this show is not
for me to debate you Fen the point of
this show is for you to articulate your
wisdom and articulate your vision so
let's let's take it one step further
because you have a PhD in behavioral
psychology and So you you're you're an
interesting person because you're
applying behavioral psychology to
fundamental analysis so given that
intersection
what what what where do you find Value
today is it in the swab ETF that offers
a dividend yield three times higher than
the S&P is it in Asian markets is it
just in treasuries hey this thing is
completely overbought here it's going to
end in tears where where where where do
we go so if you compare fundamentals
with human psychology usually whenever
something is hot people want to flock
into it and then they overshoot the
fundamental value on the reverse side
when something stops being hot people in
panic over sell so you can always go and
look for the pockets that were hot and
now people have completely capitulated
and forgotten about it one example for
is lithium two years ago everyone was
crazy about lithium lithium stocks
batteries car makers and everything like
now the craziness is for AI and
for for Bitcoin or cryptocur currencies
and for lithium car stocks Etc
everything has already reverted so you
can go into such places and from a
behavioral perspective you seek where
there is panic where there has been
Panic that's oversold and thus you look
at such
markets um shared example
of a stock that you feel is overpriced
you know one of my producers said maybe
that's Walmart to you or or if it isn't
share one that share one before I go to
the questions of the audience share one
you think is overpriced and one that
could potentially even though the
Market's High be underpriced at this in
this period of time so the crazy thing
with Walmart is that it is more
expensive than Amazon Amazon is this
great company and if you just if you
adjust for the 65 billion dollars that
Amazon is investing into new products
into their ecosystem they don't need to
invest 65 billion if they would invest
30 billion they would still collect a
lot of cash flows and therefore Walmart
is trading at a p ratio of 40 while
Amazon is trading at a p ratio of 30
what is the best company of course we
don't have to argue that Amazon has so
so many leading points and so much more
future growth ahead than Walmart and
Walmart is most expensive so I don't
know why Walmart is trading that
expensive but this is another showing
how the stock is going up and people are
flocking in on the contrary if you look
at the American market now two years ago
inflation there was a boom with food
stocks and everyone was running into
food stocks and now that has reverted as
globally food stocks food prices started
to revert and now you have companies
that are providing the meals you will
eat tonight tomorrow like Archer Daniel
Midland trading at 10% free cash flow
yields and well the food cycle might
continue to go down but it usually
reverts because we have to eat unlike
doing things with cryptocurrency is and
there you have a 10% free cash flow
yield a dividend that has been growing
for 50 years and things like that and
you can slowly build a portfolio around
those value Pockets but yes if the
market crashes everything will crash
however you will have much higher
dividends to reinvest and let's say ride
it out when the time comes okay I mean
very I mean this is why I wanted you on
fin okay you're uh you're how old are
you by the way uh 41 41 all right you're
like a 41 year old with like an ancient
Soul uh you know you're you're you're
talking like a 91 year old which is why
you're going to be very rich and
continue to be very successful let's go
to the audience
questions what's the most important
piece of advice you'd give to someone
just starting in investing this is Jacob
from New York start just set aside
monthly amount that you're going to
invest and then invest and then
investigate because you have to learn so
many things and I think that learning
about investing takes five years just to
understand how the Cycle Works how human
psychology works impacts prices so I
always say to people starting just start
and then look what's going on and that
five years with little money will be
huge educational and hugely benefit 10
20 30 years down the road when you are
making big money when you have your
great job or great business and then you
need to know how to
invest let's go to the next
question Sven how do you stay
disciplined in your investment approach
when Market sentiment and hype which is
what's going on right now suggest
otherwise Justin from Canada I think one
should be just happy for everyone one
else getting rich like you with
cryptocurrencies I'm happy for you and
you just need to look at things and how
things work over your life investing
cycle so if I am investing from 20 to 60
70 that's 40 years usually in 40 years
we have as you said nine bull markets
and nine bare markets that's short-term
cycle then there is also the long-term
Deb cycle that we discussed at the
beginning which when it reverts it takes
20 30 years to get back to normal so you
have to understand cycles and you have
to do things that will increase your
wealth no matter what so I look at
owning businesses owning assets owning
more of those if the price crashes
reinvesting and just building that asset
pile over time okay let's go to the next
one
do you recommend holding cash as part of
a long-term
portfolio uh or should every dollar be
actively invested Maria from Florida I
prefer actively investing because over
the longterm cash is certain that it
will lose especially in the environment
we live in all its purchasing power all
the currencies and now I'm saying
something positive for Bitcoin holders
but all the currencies are made to go to
zero that's a given that's how the
economic system
is working and we all agree that so
currencies is a no unfortunately our
Pension funds have 50% of their assets
invested in bonds yielding nothing so
it's very important to own more assets
because you cannot let's say count on
the pension
there next
question s what are your top three
recommended books for someone who wants
to dive deep into value investing this
is Connor from Washington so I would
always recommend as a great book start
with the snowball Warren Buffett's
biography it's a fat book it's 700 pages
but you read and you get his mindset and
psychology that goes behind value
investing which is I think essential
just it's a great story about his life
then we have you can read margin of
safety by set claran if you just type it
pdf online in Google you will get the
whole PDF for free and that it's a
little bit old It Was Written 35 years
ago but it g gives you great insights
into the market into everything that's
going on just applied to a different
different time let me just chip in my
book modern value investing so that is
also something that gives you
a little bit more tools a little bit
more food for thought and the mindset
for let's say doing something that no
matter what happens to the markets you
do okay okay let's go to the next one I
was hoping you were going to say the
little book of Bitcoin by Anthony
scaramucci but I I didn't hear that Sven
I didn't hear Itor you you'll have to
send it to me and then I'll read it okay
sounds good how should investors manage
risks like currency fluctuations when
looking at stock
in Emerging Markets that's Eli from
United Kingdom the United Kingdom I have
analyzed currencies a lot and uh the
best thing I can say is sometimes you
win sometimes you lose for example now
the dollar is very strong and Emerging
Markets are cheap and now could be a
very interesting time if you want to
build a little bit of emerging value to
your portfolio with a strong dollar now
everything is way cheaper from States
you can play a little bit around those
let's say long-term Cycles but in
general buying a good good business
dividend yields I don't know in Emerging
Markets of six s% that are their normal
should compensate for all those
fluctuations over time and as I said
sometimes you win sometimes you lose all
right well Sven I I enjoyed having you
on I uh I think it's an important
message for people I I have I have found
in my my careers when when Warren
Buffett is selling uh we do have to take
a very close look at that uh and you
know having said that by his own
admission there's been certain things
that he's missed in his career uh as an
example uh I'm old enough to remember uh
the 2000.com crisis and the the 2000.com
crash where Amazon went down 90% I was
actually at the Sun Valley Allen and
Company conference uh when this took
place Mr bu gave a very big speech about
how to why to avoid these technology
stocks and simply uh to his credit he
said they were outside of his Circle or
his circumference of Competency and so
he said to avoid them uh and so I
avoided them uh most of them um but it
was it was probably the largest
investment idea of our time had you held
on to things like Amazon or purchased
Google on its IPO in ' 04 or others uh
these these companies over 25 years
became massive trillion dollar companies
so so I'm with you I I I I I think as a
value investor we have to study this
stuff uh but there's a lot of things
about the market that are tricky that
sometimes we don't we don't uh pick up
right away I'm gonna send you my book on
bitcoin Fen all right you got to read it
and then when you when you read it we
come back we have a discussion about it
is that okay good I'll also make a video
about it send it to me okay well I I
appreciate it thank you so much Sven
Carlson of modern value investing I hope
to get you back on um a brilliant
commentary today thank you thank you for
having me that's a wrap on another
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