Listen
Carl Stuart and Jimmy Maas talk about the importance of owning diversified, and guides audience through low-cost index funds, ETFs or mutual funds.
The full transcript of this episode of Money Talk with Carl Stuart is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.
KUT Announcer: Laurie Gallardo [00:00:01] This is a special broadcast of Money Talk with Carl Stewart. He is not live this week, so he’s not able to take your call. Text anytime though, and your question could be answered on a future episode. Carl Stewart is an investment advisor representative of Stewart Investment Advisors. Now, here’s Carl.
Carl Stuart [00:00:21] Welcome to Money Talk, I’m Carl Stewart and you’re listening to KUT 90.5 and the KUT App. This is where I would normally encourage you to call or text, but not today. We’re doing another of our deeply important and very popular series with my friend Jimmy Moss asking me questions. Jimmy!
Jimmy Maas [00:00:44] Carl, I have a question for you that you’re not going to be able to answer because we’re taping this well in advance. How are those Hawkeyes doing? Ha ha ha ha!
Carl Stuart [00:00:53] So the next, when we’re taping this in advance, they look unbeatable. They run 47 to something and to zero and 52 to zero. But the next two Saturdays will be Michigan at Michigan and Ohio State and Iowa City. And let’s just think they might be two and three at the end of the day. They’re still unbeatables. Still unbeatabl. That’s exactly right.
Jimmy Maas [00:01:15] Still unbeatable. Right. Undefeated through the end of your trip. That’s right. No, let’s talk about, you talk a lot about exchange traded funds. I do. Mutual funds. Yes. These pool of stocks together in one investment vehicle that you can buy for a fraction of that. Yes. You know, you get your piece of that pie. Yes. And you make your money grow. What happens if I am maybe feeling a little more adventurous and I have a good amount of money, I’m not saying, you know, some, and I, I, I get excited about maybe buying one piece. How do I graduate from, you know, mutual fund ETF land into stock picking and that kind of.
Carl Stuart [00:02:06] Yeah, yeah. So I don’t know that I would use the word graduate because graduate implies that you’ve moved to some higher level and I would suggest that that’s not my experience. Okay. So here’s how I got my word choice and I apologize. That’s quite all right. Here’s how i got to this. As I disclosed in our last time together, we moved here in 1978. Back then we were called stock brokers. So I went into training because I didn’t know one from the other no stock from a bond. And so we were considered stock pickers and the company I worked for had this strong research department and they would recommend stocks. And so I figured well they know what they’re doing. So I remember this the kind of thing you don’t forget. We participated in bringing a company public it was twenty four dollars per share of the initial public offering. I probably had a handful of clients, they’re mostly probably college friends and relatives, and I suggested they buy it and they did, and ultimately it went from 24 to $1.25. Then the company recommended a particular computer company, and all the quote, older brokers, which is what I became, not a broker now, but at that time is what we were. They said, oh, this is a great idea. I remember my clients bought the stock somewhere between 30 and $35 this year. The company went bankrupt. And I said to my wife, I think I may have made a career mistake. Now, this was while Austin Real Estate and Southwest Real Estate was booming. And the other guys who were my age looked to me to be making a lot of money and all I’m doing is losing my clients’ money. I made a decision. That when you own an individual stock, you are going to either do far better than a broad-based mutual fund, or you are gonna do likely far worse. I’m lucky, I didn’t seem lucky at the time, I learned the far worst part, and so I said, I’m not a stock picker, and by the way, if I wanna own international stocks, nobody knows how to pick a stock in Spain or Sweden or wherever. So that’s when I gravitated to mutual funds. And I didn’t buy just one. I bought four different funds with four different investment approaches and left them alone. And guess what? People stopped losing all their money and they made money. Now, full stop. I have had friends and clients who love picking individual stocks. I remember having a client back in the 80s. She loved Texas companies. She loved Church’s Fried Chicken, La Quinta Motors. Doesn’t. Exactly. Church’s. La Quintamotor. Meet that person. La Quinto Motor Inn’s, Datapoint, Southwest Airlines, a couple of those companies a bankrupt. Uh, Luby’s, Braniff, you know, yeah, certainly Braniff Texas International. So, um, which is this huge variability of return and You can’t, and that’s the biggest risk. The second risk, I remember this vividly. During the time that Dell Computer was skyrocketing, best performing stock in the standard of 40, 500, changed the face of Central Texas, created a new word, DeLionaire. Okay, did so well. People would call me on the radio and say, what in the heck is wrong with Whole Foods Market? I go down there, it’s packed, and the stock just lays there, it doesn’t move. And what eventually happened was Dell collapsed in price and Mr. Dell took the company private. People had permanent loss of capital and Whole Foods did great. So not only can you lose a lot or all of your money, but you can be right about the company and the market doesn’t care. It doesn’t care until it does. So then there’s the risk of being in something nothing wrong with the company, but it can lay there for years. Stock markets going up when you’re in a broad-based fund. That’s my experience. Now, I will tell you because we have such a high-tech exposure in central Texas, you work at the right tech company and all you do is own that company’s stock. Will it make you a wealthy person? The answer is yes, but the tech industry is well known for massive layoffs also. We just saw here in Austin Oracle laying off thousands of people so You can you can it’s a little bit like roulette you get the right if red 24 comes up you get a lot of money
Jimmy Maas [00:07:21] Yeah, that, but there are, it feels like, I don’t know if there actually are, the data will tell me, you look at the data, I do not necessarily on a daily basis, but there some individual stocks that feel like you’re picking kind of the market, if you will, like if you were to, I don’t know, I’m just pointing out some obvious big ones like Apple or Google or Microsoft or these large, large mega companies. So what’s your
Carl Stuart [00:07:47] So what you’re buying there is you’re buying large companies with good earnings in a specific sector or industry. Fine. As long as that sector or the industry is in favor. So let me just give you. Certainly. Damn
Jimmy Maas [00:08:04] I mean, there’s countless examples of people that were on top of the world, Sears and Roebuck and- Yeah, and they’re gone. Yeah, that are gone.
Carl Stuart [00:08:11] Yeah, so tech will eventually have a very bad period of time. It happened from 1995 until March of 2000. The Standard and Poor 500 was up over 20% a year. Five years. It was fantastic. It peaked in March of 2000 and it to come back to that level again, 15 years. 15 years you could have owned those tech stocks and not made any money when other kinds of and he stood well. Meanwhile, Dal was . Continually pushing new highs in that, in the intervening 10 years or 15 years. So the so-called value stocks, dividend paying companies, they had their day in the sun after they had been dead in the water while the tech stocks were terrific. And then, of course, the
Jimmy Maas [00:08:58] real estate crisis, then everybody kind of put their head in the sand for a little bit.
Carl Stuart [00:09:02] Exactly. And you saw real estate. If you had a home in California, I remember I was at a conference in Las Vegas and I happened to engage a conversation. They have all these beautiful watch stores and jewelry stores and I just had some time and I was talking to a young woman. She was a Russian emigrate. She and her husband had a house in Las vegas and she told me that the The mortgage lender forgave $100,000 of their mortgage. Why? Because the mortgage lender knew that if they possessed that home they couldn’t sell it. They were prepared to knock down, discount the amount of the mortgage if she and her husband would make the new payments because the market was upside down. That occurred. We were lucky in central Texas that did not occur here.
Jimmy Maas [00:09:55] I used the word graduate earlier because I do think that there is a certain amount of sophistication required and maybe even minimums required to move into.
Carl Stuart [00:10:09] Individual stock well let me let me interrupt you and say that’s one of the good bad good things and bad things this democratization of investing there are these applications like Robinhood where according to the paper a lot of young people like to I would call gamble sure picks pick stocks they can pick stocks on their on their mobile device yeah so yes that does
Jimmy Maas [00:10:33] lower the bar, but I mean, they’re to do it right. Oh, that’s true. Well, it does require some a different amount of knowledge. And do you have people that come to you and say, I think I’m ready to try this aspect? Or? Or is this a no go? I tell them.
Carl Stuart [00:10:55] I tell them, I tell him the story. I just, okay. All right. So you’re just, yeah, this is my experience. It’s not a theory. If you want to go do that, be my guest, go do that. Don’t talk to me about it. Right. So.
Jimmy Maas [00:11:08] Carl’s advice, long standing, instead of buying a piece of one company, buy a piece of a lot of companies. Of a piece. Of a peace of a piece, of a peace, of many many many pieces of companies Right, that’s exactly right. You are, you’ve been doing this a long time, has someone come to you and said I I have this strange investment opportunity. And when I say that, does something come to mind immediately? And what should I do? Should I act? My uncle, he has this thing in Greece that he’s working on.
Carl Stuart [00:11:50] Yeah, we’re talking private investments and from a high level, if you’re looking at it, it’s not because you want to help your buddy out, one of your friends from college and you just want to give them some money because they’re starting something. You have to believe that you’re going to have a better return on your money than you can get in the stock market because you can do what we just talked about and you can buy the Fidelity or Schwab or Vanguard total stock market on a piece of thousands of companies or hundreds of companies. So you’re gonna do something that’s far riskier. You should be confident that you are going to make a lot more money to justify that risk. That’s called the liquidity premium which I was about. The second thing is… Do you have the experience or the capacity to analyze what this person’s talking about? So if… That’s an important thing because it’s huge. And EIs are most private investments that most human beings see, they seldom have deep knowledge. Not only of what this company is going to do, but of the broader, what’s going on around the world with this company. And we saw earlier in the year, a bunch of software companies really declined sharply because people started to say, wait a minute, artificial intelligence is gonna start doing some of this stuff, which they have been selling and making money on. So stuff comes out, you know, of left field, so to speak. And you, the eyes of you knowing all that and making the intelligent and just is really, really low. Now… And I suppose if it’s a business you understand, let’s just say let’s go back to our favorite dry cleaning establishment. So if you and I have a track record of successful dry cleaning establishments and we’d like to expand. Yeah, we want another location. Yeah. We can go to our friends and say, look, here’s our income statement. Here, let me show you how we’re doing. In these two locations. We think we can have a similar profitability and return over here in this location, but we don’t have enough money to do that. Would you like to come alongside us and be an investor in this deal? The way I drew that picture, that’s a pretty understandable thing, as opposed to I think I’ve found the cure to the common cold. I mean you just don’t have the ability to evaluate that.
Jimmy Maas [00:14:53] If we have a dry cleaning business and we’re gonna have a satellite office where all we do is press pants. Because that’s the future. Everyone wants press pants Just wrinkle them in the morning, bring it to us. We’ll press them for the afternoon. What an opportunity. Yeah, and that’s, I don’t understand maybe press pants as much as I understand the dry cleaning business I might be less inclined. Yeah, I agree. We should probably take a little break here, and I have a question for you when you come
Carl Stuart [00:15:23] Well we’re having a lot of fun today, we’ll have some more so stick around, we will be right back.
KUT Announcer: Mike Lee [00:15:30] If you’re a regular KUT listener, you know by now that member support makes everything we do possible. And you know all about becoming a sustaining member. But you might not know about another way to support the reliable news on KUT. If you have a donor-advised fund, you can support the station by recommending a grant to KUT! It’s a great way to show your support and to help ensure that KUT is your reliable news source. And it is way easier than it sounds. Find out more at KUT dot org slash legacy.
KUT Announcer: Laurie Gallardo [00:16:02] Welcome back to a special edition of Money Talk with Karl Stewart. Just a reminder, he is not live this week, so he is NOT taking calls for this show. Now back to Karl, joined by KUT’s Jimmy Maas.
Carl Stuart [00:16:17] Welcome back. You’re listening to Money Talk on KUT 90.5 and the KUT app, a special edition today. My friend Jimmy Moss and I are here having a good time. Jimmy.
Jimmy Maas [00:16:29] Um, we were, we mentioned ETFs, mutual funds. Why are these so advantageous as far as we’ll start first with the upfront fees and what makes them more advantageous than, um, than other.
Carl Stuart [00:16:46] Classes. Mm-hmm. So… And this has evolved over time. This was not always the case. So when mutual funds first started, it was in the 1930s. And the idea was that you would have, you would raise money and buy a portfolio of stocks, started with a company in Massachusetts Financial Services in Boston. And the people who ran the funds made a very good living. And pretty expensive for the shareholder but the share holder was getting something that she or he could not do on their own. So there was value there. Over my career there has been a democratization, an ability for individual listeners to money talk, to get broad diversification at a much lower cost. So it started. A fellow named Jack Bogle, who worked at an asset manager in Boston called Wellington, and he went to his bosses. He said, I’ve got this idea, why don’t we contribute, why didn’t we start a fund that just matches a big stock index, let’s say the Standard& Poor 500. And apparently they said, nah, what a dumb idea, it’ll never work. And so he said, okay, I’ll go off on my own. And he founded Vanguard. And his concept was, yes, you can have stock pickers, but it was his belief that for most investments, for most investors, owning the broad market was going to get that person the best return. And because he wasn’t paying, a lot of MBAs and finance majors and highly paid people. Don’t forget the quants. Yes. You get the quant in there. This is before the quante. Yeah. He just ran it with computers so the operating expenses were a fraction of what we call active management. And this is true for bonds as well as stocks. And so it took hold, but it didn’t mean that it wiped out the other side. FEDOLITY A huge asset manager in Boston was an active manager. They had mutual funds in stocks and bonds where human beings, highly compensated, very smart people, pick stocks and pick bonds. There is an ongoing debate whether one’s better than the other. The one that just follows an index is called passive for obvious reasons, and the one No, there’s buying and selling, it’s called active. Most people in the academy, like at the University of Texas, fall, in my experience, fall into the passive is better, but there are trillions of dollars on the active side. Here’s my experience. If you’re going to have an active manager, and let’s take these two different ways, stocks and bonds. If you are going to an active major in stocks, you don’t want them. To own the S&P 500 because then just buy the darned exchange traded fund and pay 0.03%. So you want them to, if you will, lean into the wind. You want them have a portfolio of maybe 35 or 50 or 60 stocks, not 500. So when they do that, in my experience, some of them tend to do much, much better than the index in good times, because all they own. Were those names you said earlier. Or some of them do better in bad times because they have more defensive stocks. And so what I prefer is to have the majority of my stock money in those indexes. And if I can find managers that either A, outperform in good times, or B, outperform at bad times, then I get to decide it’s worth paying the extra expenses. But if I get an active manager who basically delivers almost the same return as an underlying index, it’s pretty hard to justify paying that price. Now let’s talk about bonds. But you’re not gonna know. Well. You are, because you’re a track worker. Yes, they do have a track. Yeah, I’m gonna know, yeah. And that’s part of the whole selection process. Here’s where the debate gets, I think, much more interesting on the bond side. You can buy an exchange traded fund that follows the biggest index, the kind of standard and poor 500 for bonds is called the Bloomberg aggregate bond index. You can buy that in an exchange traded fund for three basis points next to nothing and you will get what that index is. However The bond market is different than the stock market. So a lot of bonds that are out there are not part of the Bloomberg aggregate bond index. So you can have an active manager who says, you know, I think these treasuries are more expensive than these Fannie Mae and Freddie Mac bonds. So you have more active management opportunity in my experience, that’s all I’m talking about, my experience, in active management. In bonds than you do in stocks. Yeah, go ahead.
Jimmy Maas [00:22:31] So you have, so we kind of touched on the fee, but that is three-tenths of a percent. It’s even less than that. Oh, okay. It’s three-one-hundreds. I said tenths. Yeah, well, three- one-hundered. It was not zero-point-three percent, zero- point-zero-three. Right, yeah. Zero-point zero-three percent of what you invest is the fee. So that seems fairly attractive as far as a price goes. Right and you have but is Well, just to play devil’s advocate, if we’re trying to get pieces of pieces of pieces of things, are we not hedging a little bit by putting a little bit inactive and a little Yes, you are. You are hedging. That’s exactly what you’re doing. Would that not be a prudent strategy or?
Carl Stuart [00:23:17] I happen to like that strategy, but it’s an ongoing debate. There are some people who say, Carl, no, just stick with the indexes. And then there are other people who would say, no. Have like an index, but let’s overlay that with, let’s make sure we have more companies that meet our valuation criteria, but we’re going to put them in tiny pieces. So this, it’s complicated. You can apply the straight index. You can buy something that’s similar to an index but has some active management, and you can buy active management.
Jimmy Maas [00:23:52] And now there are different types of things you get with your ETFs. They’re, you know, there’s a spider, there is, you know, they’re
Carl Stuart [00:24:00] Yeah, that’s just the name of the sponsor so spider is State Street a big one is I shares That’s Black Rock and then of course the big purveyors like Schwab and Fidelity and Vanguard have their own ETFs when they will have Within that a package of large cap Mid-cap small caps depends on the index right not necessarily So let’s take the big popular ones. Let’s take the total stock market Okay, it’s a US stock market. The way that works is every day, every minute of every trading day, the percentage of that index that’s in any particular company stock is a function of the price per share times the number of shares outstanding. So when you have a long period where one industry dominates like we’ve been experiencing. You’ll have companies like Nvidia, which become bigger and bigger parts of that index, because as it goes up, the market value goes up and its percentage of the pie, the slice of the pi gets larger. That’s called market capitalization weighted. That’s the most common. That’s someone, in my experience, that is the most popular, that a lot of academic derived people believe you should do. But you can slice and dice this because there are companies and Vanguard does this and Russell does this and others do this. They’ll say, no, we’re just gonna do an index of small companies. Or we’re gonna do an index of just companies that we think are value companies. No, we can just do an index of companies that are growth companies. So value companies may not have any tech, the growth companies might. The minute you do that, in my opinion, you’re making an active decision. You’re not getting the market. You’re getting a slice of the market so you can express an opinion. The argument for doing this is you say, I think I want to buy something that’s out of favor. Well, I noticed that these large companies, large cap stocks are doing really well and these small cap stocks are not doing very well. I’m gonna own this broad index, which will get me the large companies. I’m going to take an index over here of small cap stocks. I don’t have to worry about which companies they are. I’ll let Russell or Vanguard figure that out. That’s what I was thinking about, like have a Russell 2000. Yes, you got it. Russell 2000 is the 2000 smallest market cap stock.
Jimmy Maas [00:26:42] And you might get in that the growth of someone who gets the wind behind them. Exactly. And they emerge into those other. That’s absolutely the case. In fact.
Carl Stuart [00:26:55] Russell, as I understand it, periodically says, okay, this company’s now such a large company, we’re moving it up into the Russell 1000.
Jimmy Maas [00:27:03] Yeah, and that’s, in some ways, yes, it’s, I mean, when you start thinking about all the companies that are out there, we just named like five, but you know, there are a lot of companies out there and it gets really quick before you start filling up the 500 and who gets relegated and promoted out of, into and out of the back end of the S&P 500. And there are lot of of companies that, you’re not gonna see that astronomical growth, unless you start at a an earlier point in their life cycle, you know, that way, I don’t know. So I guess my point is, should I be thinking about that when I’m trying to sort of plan for retirement, when I am trying to use your ETF strategy, your mutual fund strategy?
Carl Stuart [00:27:51] Mm-hmm.
Jimmy Maas [00:27:52] Should I think about allocating a certain portion into growth potential, maybe not growth stocks, but the potential for growth.
Carl Stuart [00:28:05] The quick answer is probably not. Okay. Not going to pay off for me. Not unless you have the time and the interest to really study it, or you have an advisor who really studies it. Okay.
Jimmy Maas [00:28:16] Okay, so those are still actively managed. I’m not going to find an ETF that just…
Carl Stuart [00:28:22] Well, there’s a recent article that showed that a couple of really high tech stocks were in the Russell small cap value stock because one of their selection criteria was price to book value and these companies had were semiconductor manufacturers, so they had assets a software company doesn’t have physical assets, but Taiwan Semiconductor, Samsung, Intel, they have billions of dollars of plant, plant and equipment. So when their stock falls and their asset value stays the same, they look really cheap. But a software company can fall, it still looks expensive because its price versus its assets is still very high. That’s the kind of tricky stuff we’re talking about. It’s not simple.
Jimmy Maas [00:29:09] Uh, another type of thing that you can get a mutual fund, per se, of?
Carl Stuart [00:29:20] Derivatives. So derivatives sometimes, like coming out of a financial crisis, have a bad name. All they mean is the price of this particular security is derived from the price something else. So. Let’s go back to what we talked about previously when we were talking about indexed annuities. How do they do this? That it doesn’t go down when the stock market goes down, it goes up some when the market goes up. They engage in options which are derivatives based on the price of let’s say the Standard& Poor 500. And they put together various kinds of options called puts and calls. To protect it on the downside and give up some of the gain on the upside. Those are derivatives. So they’re not in and of themselves good or bad. So I’ll give you an example. And I talk about this a bit on Money Talk and nobody talks about this. There is a very old strategy trading the four global liquid asset classes, stocks, bonds, commodities, and currencies. Here’s where something you said a while ago makes a big difference today, quantitative research. Computers, large language models. So these entities have been around a long time. Back in the day before computers, if my grandfather, who was what we call a dirt farmer in northeast Missouri, he grew soybeans and corn. If he wanted to guarantee the price he was going to get at harvest, he could sell that harvest, even though it wasn’t even maybe out of the ground, and somebody on the other side would pay him, I’m going to pay you this amount, whether or not the going market rate six months from now is higher or lower. So the buyer might be, let’s just say, General Mills. They wanted to know when that corn’s going to be there, at what price, because they’re pricing their cereal on that. He locked in the price. If he had a great, if harvest prices were higher, too bad. If prices were lower, well, he was glad he did. So that created a contract. I promised to deliver this many bushels of corn. You promised to pay me this much per bushel. That was the beginning of it. It still exists today, whether it’s copper or gold or cocoa or whatever it is. So you can trade those contracts. So. That’s a derivative because the value of the contract is determined by the value of the underlying asset. Ladies and gentlemen, we just explained futures.
Jimmy Maas [00:32:12] In two minutes. That was pretty good. Thank you. It was pretty good. Pretty good. Now that that was very clear and very, very understandable. So we have cord futures. Yeah. And then when I’m buying corn futures.
Carl Stuart [00:32:30] Mm-hmm.
Jimmy Maas [00:32:31] I’m not buying corn. You’re buying your bet. I’m buying the future. I am buying. You’re buy, you’re buying.
Carl Stuart [00:32:39] Essentially trading that contract. Yes, exactly right. So a lot of contracts are never exercised. General Mills, in my example, actually exercises. They want the darn corn. Absolutely, yes. But between the time my grandfather sold that contract and the time that the corn’s harvested, anybody can buy and sell those contracts, just making bets on the outlook for corn to go up and here’s the key, or go down. They could actually make money by betting that something’s gonna go down So, and this is the best example, I mentioned this last Saturday, in 2008, one of the worst years in my career, US stocks were down 40%, foreign stocks 50%, real estate investment trusts 55%, high yield bonds 25%, oil went from $130 to $30. Everything went down. The index of strategies that do what we’re talking about is called the ST trend, because a trade that trend. Trend index was up 17% up that’s why because they could make money as the assets decrease
Jimmy Maas [00:33:46] Because the it’s it they’re just skimming the bet so they’re not there, but there doesn’t matter what happens
Carl Stuart [00:33:52] They want to follow the trend, that’s why they’re called trend following strategies.
Jimmy Maas [00:34:00] And within this, there are ETFs that allow you to buy your own piece of a piece of piece of a group of futures contracts.
Carl Stuart [00:34:13] Simply managed futures without…
Jimmy Maas [00:34:15] Never having to take delivery of a barrel of
Carl Stuart [00:34:18] A barrel of West Texas Sweet. Not going to be on your garage door next week, and there’s not going to any Cocoa record either. No.
Jimmy Maas [00:34:28] Do you do you ever find yourself down that aisle of the ETF?
Carl Stuart [00:34:33] Yes, I do. Okay. Yeah, I think this is something that’s not, shall we say, for the faint of heart or the amateur, but I think that ability to deliver a positive return when things are going bad, use the term hedge. It helps reduce your losses, which means when the inevitable upturn happens again, You’ll get back quicker because you didn’t go down as far. Now it’s a bit like buying homeowners insurance. I tell people many years ago. We had hail damage and my roof I had a metal roof and the claim was $140,000 and I had to pay $14,000 because that was the way that the contract was written. I was really glad I had that policy. Now I haven’t had that kind of claim since then. I don’t want to have that claim again, but it doesn’t mean I’m not going to have homeowners insurance. So when you own trend following in a mutual fund format, there will be years where you go, why in the world am I buying this? It’s just laying an egg, and then there’s going to be hail damage, like in 2022.
Jimmy Maas [00:35:47] You hear about stuff where this works out for companies a lot of times, or Southwest Airlines used to buy the fuel, buy the airline fuel ahead of time, future contract on that, and they take delivery and inevitably, well, they did well many years where they would come in cheaper than what they would have had to pay at market. I think of late, that strategy has not quite worked out the way.
Carl Stuart [00:36:11] Well not for Southwest, but if you thought the Warringer-Ryman was going to… Certainly not for diesel, maybe… If you owned the diesel contract… That’s true. Then you’ve made it. If you own diesel at $4, and you’re going to have it delivered to you at$ 4, and it’s $6.40 in the marketplace, you look pretty smart. You are doing quite well.
Jimmy Maas [00:36:28] However, you got to take a you might be thinking about that price in the future as your new contract Well, that is that I’m gonna ask you one more Thing about derivatives while we’re here because I mean when else are we ever gonna get know that’s right I didn’t think we’re gonna get in futures contracts, but
Carl Stuart [00:36:48] pink sheets. This is, I’ve been around so long. Back in the day, there was actually, they were about, I don’t know, 18 inches long and about 6 inches wide, and they were just thin pieces of paper and they were colored pink. And they were listings of companies that didn’t qualify to trade on the New York Exchange, the American Exchange, or over the counter, the NASDAQ Exchange. So… If you wanted to buy this company, you had to go to the pink sheets, find out who made a market in that, and then call them and say, I want to buy a thousand shares of XYZ that was known as the home turf of fraudulent behavior because there was no oversight. You didn’t know what you were getting. You didn’t have the same kind of transparency around their audit, their balance sheet, all that. It was the Wild West back in those days.
Jimmy Maas [00:37:55] Those self storage auctions that you don’t know what’s inside. You just have to buy and determine.
Carl Stuart [00:38:02] Yeah, yeah, I did not even know those existed. You have lived such an interesting life.
Jimmy Maas [00:38:06] Well, listen, they have these auctions and when someone doesn’t pay their bill, the self storage unit, they auction off the, and then they’ll, they’ll take bids and then you buy what’s inside, side on scene. Could be gold bars. Could be used under. You never know and then depends on who used it. It depends. That’ll tell you how much that’s worth.
Carl Stuart [00:38:31] Yeah. Gee, I’m sorry I missed that opportunity.
Jimmy Maas [00:38:36] All kinds of investing opportunities here.
Carl Stuart [00:38:38] Right, you’re on Money Talk, I tell you, only on NPR do you get this kind of advice. Alright, we get to have one more break. Stick around, we’ll be back.
Jimmy Maas [00:38:52] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTX Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a non-profit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org
KUT Announcer: Laurie Gallardo [00:39:26] Welcome back to a special edition of Money Talk with Karl Stewart. Just a reminder, he is not live this week, so he is NOT taking calls for this show. Now, back to Karl, joined by KUT’s Jimmy Maas.
Carl Stuart [00:39:42] Welcome back. You’re listening to Money Talk on KUT 90.5 and the KUT app as we spend our last few minutes here together, our special edition with my good friend, Jimmy Moss. Jimmy? We talk a lot about democratization.
Jimmy Maas [00:39:57] Of investing and outside of listening to your program, which is an educational experience, I find. Thank you. How do we attain those skills that where we can start to feel comfortable making some of these decisions with confidence on our own rather than just sort of paralyzed by maybe analysis or whatever. Right.
Carl Stuart [00:40:25] I think you have to decide if you really wanna do this. Because like all knowledge, it’s highly valued and slowly obtained. There is no book in my experience that’s going to make you an experienced, knowledgeable investor. So that’s where you start. That’s why I say the phrase, if you have the time, interest, desire, because that’s what you have to have. And Over the decades that I’ve done money talk, this is a regular question. And what I say is generally a lot of investing books are trying to sell you something. And if it smells like they’re selling a particular way of doing things, be careful. Now, I will tell you what I did. So I got into this profession. I was a political science major. And so I had no academic background. Around. But I started reading the Wall Street Journal. And the great thing about the Wall street Journal, like all good journalism, they tell you at the beginning of the story what they’re gonna tell you. So if you take a subscription to that online, you read the front page down the left column, they tell what they think are the most interesting stories. 10 point. And then you go down, and you read that you read the first paragraph of the Story. If it’s interesting, you keep, you read it. If it is not, you move on. And what you will find, it’s almost Jimmy-like osmosis. Slowly you begin to have an informed view of what the heck is going on in the world from an economic standpoint. I would dare say that someone who’s been reading the journal for the last year knows about what is unusual happening in the Japanese bond market. Now that’s arcane stuff. It turns out it has an impact on our bond market. But you don’t know that. And if you don’t have an interest in understanding the ebb and flow of the global economy and the impact of so many things, then I don’t think you’re going to be a knowledgeable investor. So yes, you can read. As long as the book isn’t trying to sell you a point of view. You can go Google business books or investment, not business books, investment books, and that’s fine. But that gives you, if a good one, gives you a framework, but it doesn’t give you timely input as to what’s going on in the world that will impact your investment decisions. So that’s why, if you say, look, Carl, I’ve got a 401k, I’m in a target date fund like you and I talked about, and I’ve gotten an advisor and we’re gonna be in broadly based ETFs, or I’m doing this my own, I’m being in broadly-based ETFs and I don’t want any advice, let’s do that instead. That’s the democratization. If you say no, I wanna be a more informed person, and then I’ll decide, do I wanna then handle my own and I’m set of buying the Vanguard total stock market, I’m gonna buy the Russell 2000 value because this is my understanding of what’s been going on in the stock market. Or I’m not gonna buy this bond ETF, I talk about this on Money Talk, I’m going to buy a bond fund, only buy short-term bonds because I think interest rates are likely to go higher. Well, why do I think that? Because I learned that from reading the Wall Street Journal.
Jimmy Maas [00:44:23] And reading that, reading the Financial Times, reading these other publications, I’m not gonna suggest every one, but when I worked at Wall Street Journal, we called that bar on the left with all the stories. That’s the 10 point. I didn’t know that. And it’s under What’s News. Exactly. And it gives you the whole rundown of the day. And when I produced a show there, we also made sure that we included. Bits of those stories, it was just a cheat code for making the show because he wanted at least many of those things mentioned. You don’t have to mention everything. You don’t necessarily have to mentioned the Bavarian bond market because it’s a subset. It’s like the Texas Stock Exchange. No, no.
Carl Stuart [00:45:12] Yeah, no, but you know, I’m so glad you brought that up because I’ve frankly forgotten that you’d been at the journal So I want everyone to know that was not intentional, but there’s some magazine like Barron’s which is owned by the same company Don’t don’t read that unless you want to be deeply involved. That’s that’s designed for sophisticated investors
Jimmy Maas [00:45:29] And you can, but you develop a fluency. Yes. Just through osmosis. Yes, it’s osmoses. It’s not, it was never intended. Short version of this story is I went to New York to be a comedian and that was my day job. And I just became interested because it was something I could understand because it’s like, it. Business is just sports with, you know, people wearing fancier clothes to play. To play.
Carl Stuart [00:46:03] So.
Jimmy Maas [00:46:03] So, you know, there’s a score at the end of the day, and you know they’re winners and losers. That’s right. But you learn these things, you become fluent in what is happening. You can sort of see trends develop and you can watch, you can develop your own mental software if you will, that is giving you a green light or a red light and all those things that those new traders run around with. That’s knowledge. So, and what happens is over time you do possess, you end up, you don’t realize it, but you have more and you’re talking more about it and your friends are like, wow, I don’t understand what’s happening. Then you butt in and Johnny know it all and they look at you like, oh, sure, that guy. But it just occurs and it’s just because you put the time in and it just, it’s over time and just like long-term investing, it just putting in the time and getting, you will get a return. You will. Um, I thank you for sitting with me and, uh, teaching me and taking all my sad questions.
Carl Stuart [00:47:11] Running with it. Well, I really enjoy this and they’re not sad and they are not pedestrian and I just, this is so much fun at KUT and I know that we’re making a difference and we’re helping people because our listeners tell me that and so I really really appreciate that and as always at the end of the broadcast remind you that next Saturday at 5 be sure and tune in to Money Talk.
KUT Announcer: Laurie Gallardo [00:47:36] You’ve been listening to a special edition of Money Talk with Karl Stewart. Karl Stewart is an investment advisor representative of Stewart Investment Advisors. And this is KUT and KUT HD1 Austin.
This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.
