Interview With Jeff deGraaf: Masters in Business (Audio)

a technicians technician. He has a storied career, most notably his time as the chief technician at Lehman Brothers, where he famously resigned pretty much the day of Lehman's all time high. Jeff is now the founder and presidents and chief technical strategist of Renaissance Macro, better known as ren Mack, which is really an interesting shop that come binds both

macro analysis and technical analysis. In fact, one of the things that makes Jeff so unique is the fact that he has both a c f A and a CMT, which means that he is very schooled in both fundamental and technical analysis of of equities, and I think you'll

find his approach to be somewhat unique. The way ren Mack was built to create its own unique database is something that not a lot of companies can can lay claim to UH, and it's part of the reason that for the past decade or so he's been named one of the top and and in fact has been ranked number one by Institutional Investor for the space he covers. So, without any further ado, here is my conversation with Jeff de Graff this Masters in Business with Barry Ridholts on

Bloomberg Radio. My special guest this week is Jeff Degraff. He is the chairman and head technical analyst at Renaissance Macro. He has quite the storied background. Started out at Merrill Lynch, was at Lehman Brothers for a number of years, where he was not only chief technician but also on the firm's investment policy committee as a managing director. Moved to I s I in two thousand and seven before launching

his own firm in two thousand and eleven. UH. He is both a c f A and a CMT charterholder, a member of the New York Society of Securities Analysts and the m T A UH. He has been number one ranked in Institutional Investor magazine for the last twelve years. Ranked his number one technol analysts for the last eleven years. And we know he's a great technician because he resigned Lehman Brothers literally the day of the stocks all time high. Jeff de Ra, Welcome to Bloomberg. Thank you for having me.

So I've been following your work for a number of years. I have a lot of friends who are technicians, who who have nothing but good things to say about you. So let's jump right in to your background and talk a little bit about what makes what you do a little different than the average technicians. You describe yourself as

a macro analyst. What does that mean? Well, we um, you know, we we really pride ourselves on looking at the big picture and within that what I mean is currencies and and bond markets and commodity markets and then trying to put all the pieces together. I mean, I think the world's always appolosible. That's why I love this business. It's a it's a chess match, you know, and it's never different. It's never the same thing the same right, and so it's really it's it's you know, it's it's

upon us. Um. You know. This weekend, great example, I go through about a thousand charts on the weekend, right, and I put a pile of charts, UM in the I need to figure this out pile, right, And there's usually you know, five to ten Why do Chinese steel stocks look good while the rest of the world doesn't, right, And so you know, and then we we then start

to backtrack and figure out what's going on. So I think, you know what what we do that's different is we believe in fundamentals, but we start with the charts, and I think that's the that's the difference. So that raises an interesting question. You're both a c f A, which stands for Chartered Financial Analysts, essentially the key to looking at stocks on a fundamental basis, officially a c f A charter holder which means you've gone per distance right

three tests, and a CMT Chartered Market technician. So that's relatively unusual, having both fundamental abilities and technicals. What what motivated you to go for both accreditation? Well, my my my background is formal education is in finance, so obviously that's more fundamental than technical. And and like everybody who comes through any business school, it was you know, relatively pooh pooed, uh, the art of technical analysis, UM, and so I bought into that as I you know, was

searching for grades more than anything else. And UM, you know, once I um got into the business, uh, it just found um that the technicians who I appreciated, Bob Farrell, who I grew up under, Steve Schaubin, who was my mentor at at Lehman Brothers, and just a fantastic individual and great technician. Um, I just I found that there was something to what they were saying. In fact, it was usually more prescient than what you're seeing out of the out of the fundamental side. So I picked up

the Edwards and McGee book. I read it. Um, it was interesting. I didn't you know, I didn't buy into it wholeheartedly, but certainly there were you know, parts of it that I appreciated and could see the light with. UM. I thought the the books, the Wiser books UM or the I think Schweizer, Swigger, UM, the Right Market Wizard books. So I thought those were fantastic. And what that did for me really solidified it was UM and I've always

been this type of person. It was about probability, right, and the best way for me to manage risk and thinking about it, whether it's at the poker table, the blackjack table, or in the markets was through technical analysis, and that just really hit me over the head. As as to the type of discipline essentially counting cards in the market, um is the last You start with the evidence in the data, you lay out what's most likely, least likely in everything in between, and that colors how

you see the markets. Yeah. Look, I I described a little differently the difference between the pot odds and the odds in my hand. Right, there's a certain probability of pulling a card to complete an inside flush or an inside straight. Pardon me, Um, if the opportunity to stay in the pot is low enough and the the reward is high enough. Absolutely those even though it might be a very slim chance of pulling that straight, the chance

to stay in makes an awful lot of sense. And that's how we think about You know, I took the m T A course with Ralph Acampora, and one of the lines that have stayed with me all these years has been fundamentals tell you what to buy, Technicals tell you when to buy. There's there's some truth to that. I would I would add to that though, too. Um. In fact, you know, it's just talking to somebody about this.

With gold, UM, oftentimes the technicals will tell you, um what to buy, and maybe you don't know the fundamental story, right. I mean, if you think about when Apple first broke out of this huge base formation, nobody had a clue about the iPhone, and I mean it just was unbelievable, you know, sort of the the the the the ramp and the product and changing the world. Same thing with gold today. You know, the gold trends have changed, UM, and they changed in the first quarter for US. But

you know, some me asked me, well, is it uh? Currencies? Is it uh? You know, negative interest rates. I don't know officially what the answer is, but the charts are telling you that something is out there that has a high probability of continuing. Let me ask you a simple question. What do most people misunderstand about technical analysis? I think, and this will you know, This will uh send shivers

down to some people's spines. I think people believe that technical analysis can predict the future, and I really don't see it as that. I see technical analysis as identifying trends, identifying opportunities within those trends, and taking advantage of them. So to say it's predicting the future. I think is is a little a little misguided. I'm very Rihults. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Jeff Degraff. He is the chairman and

head technical analyst. Is that your your property title? CEO and chairman? And yeah. Renaissance macro a uh, pretty much a global research shop that supports institutions, edge funds, commutual funds, et cetera. Let's jump right in. Let's jump right in why technicals work. And I think it's it's pretty interesting for the lay person, for the average investor who might be listening to this or some student in an NBA course where they tell you this stuff doesn't work, Explain

what is technical analysis and why does it work? Well? That there are definitely elements within technical analysis that I would even say probably don't work, and I want to be careful with some of those, and and and Elliott wave Fibonacci, some of the more fringe stuff, or just generally the patterns that some people there there are oscillations that people sort of believe must mean revert. And that's really you know, we've done a lot of work on that,

and that doesn't prove to be true. There there are certain conditions that you can overlay to help create better probabilities or opportunities. But really when it comes down to for us is is technical analysis works because it's about

trend analysis. And if you think about just the world in which we live, um, you know there are trends in place everywhere, right, I mean earnings are generally trending, um Uh, And so you know to expect that there's sort of this randomness and earnings there there isn't right,

there generally is a trend. Now, there might be missed opportunities in those earnings trends here and there, but for the most part, uh, you know, a company's fundamental trajectory will be a trend, and we're capturing that through price. And the idea is that the markets are efficient and so what you know, what I know from a fundamental

sense is probably already embedded in that price. And what we're doing is we're just simply measuring that price, taking that temperature and understanding or trying to understand whether or not the probabilities are for good continuation in that price or for a reversal in that price. So so the baseline assumption is that a trend in place, that momentum is going to continue until such time as something acts

to stop it. The probabilities, overwhelmingly, whether it's academic research our own research, are that there's a persistence and trends in the market. It's called momentum in a lot of in a lot of academic studies. Um. And it drives people nuts because quote unquote shouldn't work, right, But the reality is is that it does and um, and that's

what we exploit. Well, why shouldn't it work. Let's let's step back, because you're a big macro guy and you look at things from both the fundamental technical quant an economic perspective. Hey, every day people are earning money. That money gets shoveled into their four oh one case and elsewhere. Ultimately, there's only so many stocks in the universe that a fund manager with a given uh sector or topic or

charge is going to buy. And so he's gonna go back and keep buying his favorite names over and over. I mean, that's it's a great point that the academics would say. Um, there's the efficient market hypothesis, which says that the um. You know, the the weak form, the strong form, that that information should already be discounted in the market price. The reality is, is it just it just isn't right. It's sort of kind of eventually more

or less efficient, but it's not instantly efficient. You have there are too many people who have been consistently beating the markets. I know the academics like to just shrug it off and say outlawyers run off, but there are just too many Howard marks and too many Warren buffets, even though we're talking, you know, a few dozen, but they shouldn't exist, and they do, and and that that sort of begets that perfectly efficient thing. So what do

you think is more important? Trends or mean reversion without question trend um If you look at mean reversion without the presence of trend in other words, trying to identify mean reversion without looking at first what the underlying trend is um, it is quickly a recipe and a system

for losses um. The trends are historically um and this is a crossed assets it's not just equities, but the trends are historically prescient in giving you some foresight into the next move higher and that's that can be anything from intra day to to you know, long term, multi multi year. You know what we find the sweet spot um, And this isn't you know, I'm not I'm not breaking

any rules here or breaking any new ground. But we find that from three months, uh, three months in other words, one month, two months, three months, uh, the returns of of equities over that period um tend to me mean reverting. In other words, if I have strong one month performance, the probability of me having another outperformance the next month

is actually pretty low. UM. If I start getting into six month twelve month time frames and look out for the next six to twelve months, that probability actually shifts to being more momentum oriented. Right, So you want to be careful when people talk about, well, I'm not a trend foller, I'm not a momentum player. You know, you really have to define what your time frame is because if you're a swing trader, if you're a short term player,

then you can be anti momentum. But I wouldn't suggest that, you know, you use twelve month or nine month momentum and try to fade that. Historically that doesn't work out for so long. How does valuation fit into into your analysis? Well, let's let's take valuation and lump it with fundamental analysis. And and we would look at UM fundamental analysis as UM one silo in what we call conditional factors. These are things that tend to support a bull phase or

tend to support a bear phase. So you have these conditions, valuation being one, UM that certainly would be more supportive of a bull phase, presuming there's uh, there's good valuation. I would put things like credit, sentiment, seasonality. All these would be conditions that that support a bull or bear phase. UM. Think about it. If you will like the amount of gas in the tank, it sort of tells you how far you can go. UM. The other side of that is momentum and trend, and we think about that is

how hot the spark is in the engine. Each one of these independently is useless, right, But it's the combination of both that's important. So if I've got strong conditions, if I've got a lot of barishness, I've got good valuation, I've got seasonality, credit conditions are good, and I've got that hot spark, I've got momentum, I've got trend. That's a great combination. So for us, that's about position sizing, right, that's a bigger call. That's something that we're more comfortable in,

will make a bigger bet with. If I've got the market today, if I've got a hot spark, in other words, we've got good trend, we've got good momentum, but the way that we see the fuel in the tank is being maybe a quarter full. I'll still play, but I have to understand that the probabilities of this being an O nine type of trend change or an OH three type of trend change really are are are low. How does sector work figure into your macro approach? Do you

look at specific market sectors technology, healthcare, energy? Absolutely? We think you know, we're known for market calls. I mean, that's sort of what people want to hear. But the reality is the way that we really make money air through sectors. And uh. We we look at sector relative performance,

we global relative performance. So we bring it all together and find that there's a huge uh correlation between between regional markets and the sectors um and so we'll we'll use all that to identify where the best and where the worst sectors are, and we quantify the process. We have ways in which we've quantified, so it's not Jeff de graph We can got, you know, in a bad

mood someday and saying everything looks terrible. Um, we haven't quantified, so we can back test it, and we can give people the confidence and assuredness that hey, if you follow this system, here's what you're looking at in terms of probabilities. I'm Barry Rihults. You're listening to Masters in Business on Bloomberg Radio. My special guests this week is Jeff DeGraf. He is a technician extraordinaire and and I jokingly started the show by saying he resigned Lehman Brothers pretty much

to the day of it's all time high. That's how we know he's a really good technician. But that actually is a true anecdote. You did move to I s I pretty much early two oh seven thousand seven, when February oh seven was my resignation, and that's pretty much the top sick and it was the it was my origination letter was the day after the high in the stock price. So that's lucky, not good, But that is

a true story. I love that story that I've said that to people and They're like, no, that can't be him, Like no, no, he's a really good technician. He saw that that trend break and he said that sad, I'm out of here. Um. But it's kind of interesting because you left for I s A. You were there for a couple of years. Ed him and another guy who thirty plush years number one ranked. We found him on

the show. He's great. But at a time when when commission dollars are plumbering, when research budgets are really being constrained, you decide to launch a new research farm, right, what was the thinking like making that leap? Well, you know, look, the research budgets are contracting, but when you're when you're bloated and have you know, too much capacity, that's a bigger problem. When you're starting with eight people, which we did uh and are now up to um. You know,

that's a that's a different that's a different game. And so you know, focusing on one of the keys to starting ren MAC was, uh, we wanted to build a world class database and you know, you just have to do that yourself. You can't do it under another another

entity or you're basically building it for somebody else. And so the idea was build a world class database, quantify approach this in a much different way to work into people's process so that they have another overlay look of the street, spend its time and I don't falls them for this on fundamental research and the nitty gritty the quote unquote knowing the company is better than anybody else.

But the reality is is not enough time is spent in the process of just understanding what the macro environment is, what the trends are. And so from our standpoint, we want to be able to quantify that for people so that they didn't have to become technicians, but they could look at it and say, okay, I understand that the risks are high in technology, that the opportunity set is actually high and in adustrials and have some quantification around that.

And that's really what we provide. So n MAC is creating a dimensional analysis that simply isn't available to from other researches. Is that what sets you guys apart from everyone else. Absolutely, I think that's that's that's a huge part of it. And and how does one combine economics, quant fundamentals and technicals in one package. Well, we we

don't do the fundamental side per se UM. We have Neil Datta who does our our economic side, and that's Look, there's a lot of high frequency data in economics and and even more so when you think about the globe UH and those are important data points. So what we do is we use those data points UM, we test those data points. We look at them within the context

of what's happening to trends to see if they're useful. Again, some of those conditional factors that I spoke about in the earlier segment UM and that's how we we we marry it together in terms of this UM conditional elements. One of the things that you're known for is changing the weight of certain indicators depending on whether or not we're in a bullish or bearish market. Few people managed to do this. Well, how do you go about approaching that? You have to quantify it. You can't do it by

the seat of your pants. You have to have UM, a quantification of the discipline, and you have to test that over time. And we've done that. And so a big one for us is our trend model UM, where we have basically a bullish bearish trend UM. It can go neutral, but we don't really have a neutral state. We'd like to have either black or white. And what we find is that other indicators that if you looked at over the entire spectrum of bullish and bearish might

not be worth a damn. But when you break it down between bearish and bullish, UM, some indicators work very very well in a bear state. Other indicators work very very well in a bull state, but they don't work well across those different states. So for us, the quantification trend is a big one. The quantification of trend and then understanding what conditions work within that trend are a huge part of what we do. So what do you do in a crisis? We saw the oh eight o

nine crisis ramping up. Essentially all the correlations went to one and it seemed like you were either in bonds or equity like products and there was nothing in between. How do you analyze as those sort of circumstances. Well, we we have ways to measure sentiment, which obviously was a disaster. I mean people were apocalyptic as we like

to call it at the time. UM, we have ways to measure the UM, the severity of the downtrend, the risk adjusted returns UM, and we look at those and when they're they're so bad, um believe it or not, our system flags it. So we have an understanding that there's probably some capitulation taking place. And then we look at the credit markets. Credit markets are a huge part of our input that I don't think a lot of

people pay as much attention to as they should. And look, the credit markets made their low UH in November two thousand and eight, and we're healing for a good three months prior to the equity low. Right, So when we looked at that that combination of things going on, saying, boy, credits getting better, but the equity markets are turning in a new low. There some opportunity here. And while we were warming up to equities again, we needed that spark.

We needed to see that that engine spark. And that's what we saw in the early part of March of that year with these big breath days in this thrust. That's the that's the spark that we needed to say, Hey, these conditions are in place for what should be um a pretty impressive rally. I'm Barry Ridholtz. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Jeff DeGraf. He is the founder and CEO of and head to technician at Renaissance Macro Analysis. Am I

pronouncing that right? We'll make it easy rend mac. Jeff has been number one ranked by Institutional Investor magazine for the past twelve years as both a technical and macro analyst, probably best known for his years as the chief technician at Lehman Brothers. Let's talk a little bit about the macro, which is something that has been fascinating. It drives a lot of new stories. It makes a great narrative. You know, in my office we call certain people macro tourists. The

folks who dabble in macro. They have gotten killed over the past few years. What what is that about? Well, it's about opportunity and thinking that you know, you can you can use the news environment to make money, which is usually pretty difficult to the party. Yeah, getting back to the discounting mechanism, right, so, um, you know, I think that's one that's one area of of of trouble or or this problematic Uh, you know, look, the macro. The reason that we specialize in macro is because of

the street pays attention to their industry. They pay attention to their individual stocks, and they pay attention to their models. They don't really incorporate what's going on in the globe and whether or not the central bank assets are expanding or contracting, or you know, negative rates and the potential

impact of that. So what we're trying to do is really cut out that niche and give the opportunity to look for somebody who's got expertise and that who does this on a daily basis, so that they can incorporate that into their small little world which is really industry focused. So we've seen a number of hedge fund players the past few years really struggle. Warren Buffett just came out at the annual seen Berkshire shareholder meeting in response to a question said to people, Hey, it's a lot of

underperformance and it's a lot of excess fees. Uh, he's not a fan. Why have hedge funds been having so much difficulty in the present environment. Well, I think it's been policy related. And if you look at the excess returns on a volatility adjusted basis for for the S and P right the pure index um, they've been one of the five best periods that we've had since the nineteen twenties. It's a generational rally. People afford it the whole way up two hundred plus percent over six years.

That's a monster. You're also putting people into these index products where they're looking at these returns, right, and they're saying, again, why should I pay active management forget hedge funds, but just active management when I can buy an index product for fifteen basis points and called today and I'm actually outperforming most people. And that's fine, that happens, But that also happened at the end of right. That also happened

at the end of two thousand and seven. And so when we look at our metrics of how much fuels in the tank, this actually isn't the point where you want to start endorsing indexes. This is the point where you want to start endorsing active management hedge funds to look for an opportunity set um that will produce something that's better than what we think is is the the

excess returns on a volatility adjusted basis going forward. So, so you mentioned some of the signals that were coming from the credit market and elsewhere in oh eight oh nine, you know what did how did you analyze the financial crisis. What really stood out from that period that you're unique way of looking at markets UH was insightful. I think

there are two things. The first was, if you remember the UH, the internal hedge fund of bear Sterns blew up, and we were seeing that summer of oh seventh exactly, we're seeing that stress in the credit markets and the swap markets, particularly ahead of time, and UM, you know, it just worked its way down from tens to five statoos and and then sort of went away and said, well, what that's weird, Like there's always some you know, something goes kaboom here and then two weeks later we you know,

we yeah, right right, and then boom, you know, it happens UM. And then you have the continued deterioration UM in these in these financials on the way down. So you know, talking about big top formations and the things that you know, sort of traditional technical analysis looks at

those were in place in a lot of these financials. UH. In the in the mid part of two thousand and seven and obviously extending into two thousand and eight, UM, you had what was considered at the time the whale of of bear Stern we rallied off of that into the summer of oh eight, and then just you know, with this lethargy started to roll over again, which was the moment that you know, not all is well and then there may be some other fish to come up

to the surface here as well. I recall August oh eight, and you could just smell something was coming. It was. It was one of those things where, gee, this just I know that you're an evidence based guy. I like to think I'm an evidence based guy. But it was one of those moments over the past twenty years where you could say, see something wicked this way comes. You couldn't put a finger on it, but you knew it

was comment. And remember intra bank lending rates were spiking, the library ois spread was spiking, the euro basis swaps, so there were a lot of things that just said the mechanism was having trouble, that there was there was distrust amongst counterparties. Uh. And that's actually a much different scenario than we have today. While the European banks don't look good to us, the internal mechanism of that that

counterparty risk is actually in pretty good shape. You don't have the same and in the gears that you had in O eight oh nine. Now this just seems to be almost more I don't want to use the word systemic, but more sort of generational in terms of what's happening to banks that the you know, the banking business has just become a bad business. It's a secular change that some of its technology, some of it's the new generation

coming up that is distrustful. But it doesn't seem to be the same set sector that it was ten years ago, right, right, And we actually think that that's one of the reasons why we we looked at the starting Rendmack. We think that there's still opportunity for good research. Um, you know, particularly if you're willing to invest in it. The big banks just don't have that much interest in doing that here, not willing to put money and effort into into the research.

You would think that that's a potential cash cow for them, or has the industry changed so much that it no longer is well you know, Look, research was forever a byproduct of banking, right, and the settlement in early two thousand sort of drove a wedge between the official link between those two. So Ever, since then, research has always

been considered a cost center. Right, So there's been this juniorization of research taking place where people are swapping out senior analysts for junior analysts just to have the coverage helps the bank, but they don't have to pay for it. You know, look, we we we still believe in good old fashioned research and think that there's a premium to be had for that. And you know, our business is

proving that that's true. Had a conversation with someone who talked about how middle market and merchant banking has been abandoned by the large banks if they've moved upstream, and these guys are screaming for any sort of coverage uh, transactional bankers and and there's a dearth there. I wonder how much of an opportunity exists for either boutique or purpose specific research shops like your own that can help

fill in the void. But we certainly hope. So so let's talk a little bit about I. I where you've been ranked twelve years running? Is that right? I think that's right. That's an incredible track record tool mass to what do you And for people who may not be familiar with institutional investor, people, UH vote and they actually vote based to some degree on their assets under management and the commissions they spend. And they specifically say this

is our favorite economists. That what's been ed Hyman for thirty five years running, the joke being he's actually not an economist. Um, just play one on TV and you've been numbered one for twelve years running as a macro analysts and eleven years as a technolonalyst. Is that right? That that's quite a track record to what do you to blame or credit that? Yeah? I guess what we try to do is we try to be as intellectually honest as we possibly can. Um. We are very very

committed to making people money. UM. That is I mean that is job one as we see it, UM. And uh, I think you know the other important part of it is we we try to quantify the process. We try to demystify the technical process. And so you know, if you don't have a lot of technical experience, UM, we don't try to use the jargon e words. We try to say, hey, here's you know, here are the probabilities of this taking place based on these these certain factors

of which they are technical. And so I think a lot of that has to do with the quantification, the demystification of the of the process. So I went out on Twitter over the weekend and said, hey, I'm interviewing Jeff degraph. Any questions and a few interesting things popped up from from some technicians on Twitter. One of the ones I liked was, how do you, as an analyst put a new and intriguing lens on the macro review when so much of it is is will trod uh Land,

So many people have have our covering macro. How do you keep it fresh and interesting and valuable. Yeah, well, we we rely on our database, and we rely on our computer programmers, and um, we rely on the uh quantification of the data. Um. I mean, I'll give you a great example. We you know, our single stock database goes back to the existence of the SMP, back to the early nineteen sixties. So when we go through and look out, hey, do do breakouts work? Do breakdowns work?

How does this, you know, play itself out? We're not talking about the next or last ten years or fifteen years. We're really talking about, you know, over longer than my

lifespan so far. Um, you know, the the beginning of the SMP some fifty five plus years and so, Um, you know, I think that's one of the things that that differentiates us and puts a different spin on things, is that when you get the work from us, you've got the totality of work, and you know, we'll lay it out and say, hey, this works or this doesn't work, or this works, but only in these conditions, and um, you know, not many people are doing that. We've been

speaking with Jeff DeGraf of ren Mack. Uh. Jeff, where can people find your work if they want to read more about what you guys do? Our website ww dot ren mac dot com. If you enjoy this conversation, be sure and check out our podcast extras, where we keep the tape rolling and continue chatting about all things market related. Uh, be sure and check out all of our previous conversations. You can find them on Apple iTunes, SoundCloud and on

Bloomberg dot com. Check out my daily column on Bloomberg View dot com or follow me on Twitter at rit Halts. I'm Barry Hults. You've been listening to Masters and Business on Bloomberg Radio. Are you looking to take your business to the next level? The accounting, tax and advisory professionals from Cone Resnick can guide you. Cone Resnick delivers industry expertise and forward thinking perspective that can help turn business

possibilities into business opportunities. Look ahead, gain insight, imagine more. Is your business ready to break through? Learn more at cone resnick dot com Slash Breakthrough cone Resnick Accounting, Tax Advisory. Welcome to the podcast portion of our conversation, Jeff, thank you so much for doing this. Now I get to take off my headphones. I normally have these little headphones that are very unobtrusive, but um, I wasn't in the office Friday. I forgot to bring them in, so I'm

a little bit of a mess today. Um, really, thank you so much for doing this. I have a few people who are serious uh technicians. I think J. C. Perett's how do you speak at an m T A event might have been been here. He was like, dude, so exciting to listen to Jeff. I'm like, all right, give me a couple of questions. So some of those questions were his, Um, you studied finance in college. Did you know from day one you wanted to go right into uh, right onto Wall Street? Yeah? Yeah, it was.

It was pretty easy. I like the I mean look, I was trying to get out of Michigan so at a kalamazoo kalamazoo. Um. But you know, I liked the intellectual challenge. I like the lifestyle. I remember the first interview. I was in Chicago looking at an opportunity and the first interview, Um, the guy said, Uh, you'll never meet an industry where there's the funniest and smartest people at the same time. That's interesting. I said, sign me up.

You're right. So I enjoyed that. That that's really interesting. There are a number of hilarious people in this industry. Most people are not familiar with them. Um, but they're out there and they definitely have a uh, there's some sense of games. My my partner, uh, Josh Brown. People don't realize this guy is hilarious, and people simply have no idea how funny is although I think on Twitter people have finally, uh finally figured that out. So you

go straight to Wall Street. You were Merrill Lynch in the early days, is that right? Yea early days, and then I moved over to Lehman Brothers under Steve Schaubin, who had been at Meryl. So I knew Steve from my Merril days. Uh started out doing international work at Lehman Brothers and then moved into the hot seat in in two thousand there as chief chief technician at Lehman. So what were the golden days of Lehman Brothers? Like, Oh,

it was you know, I was too young to know better. Um, yeah, I mean the eight to two thousand was just unbelievable. It was it was. It was so much fun. It was so fun to come into the to the office. Lehman Brothers had a great culture. Um. So that was yeah, yeah, yeah, I mean it was just it was and it was the little train who thought they could right and so just people were you know, hungry, and uh, it was it was just it was fun. We were all climbing

in the right direction. Um, little train. There were the fourth fourth largest investment bank. They dominated mortgage underwriting. They were a substantial force for a long time. But remember that wasn't a big deal until the mid offs, right, so nobody realized until a little there were there were early signs that there were issues there. Oh two oh three things just got talk about looking at at data. One of my favorite charts has always been UM meeting

income to Meetian home price. And I was looking at this long before the collapse, and you could see you were three standard deviations away from the norm. So either everybody's going to get a raise or something bad is going to happen. It was pretty much one or the other. Um. Did you ever spend much time under Dick fold And and meet meet him, work with him or was he off in the corner office? I mean I meant him a few times and it wasn't the big place. There wasn't. Yeah,

there wasn't daily interaction. Tell us about the research process there? How How was that was pretty much traditional Wall Street research at at Lehman, Yeah it was, but it was you know, they were good, hungry young analysts. Um my president now Steve hash who's president of of Ren mack Um, actually ran the research department there. Um, we invested in up in commerce. I mean we just believe in you know, good smart young thinkers. And uh is another one was

was that Meryl Lordly and you brought him along as well? Absolutely, So that's you know, that's how we think about the world. Where where's the rest of your team from? Oh, it's all over the map. Uh Some I s I sales people a lot of people that have been just from different parts of the of the business. Um, yeah, all all different walks of life. So what's the plan for a relatively you know, you're five years old just about

is that right? Relatively young, fast growing company. How do you see this playing at for someone who's not yet fifty? What do you want to do with this company? Uh? Look, I'm I'm a big believer in the research process and while others are sort of moving away from it, you know, call it straw hats in January. I think that there's opportunity there for the right people. It's not just plug and play and you know, hope for the best. I think you have to get the right people in there.

But there's still I mean, we see it in the business. There's still a demand and for good, um, thoughtful analysts, right, not just people that do stock research, but people that think differently, do the hard work, roll up their sleeves,

you know, understand the company. There's there's there's interest there. Now, what we're what we want to do and make sure that we do with this is that it ties into the macro play, right, So it's not just covering semiconductors, but the semiconductors from a broader standpoint, and how and what that means for the macro world. You know, there's there's a thesis kicking around that following the early two thousand analysts settlement with the New York State Attorney General.

Part of the settlement was a mandate that large banks funds independent third party research, and you and that that mandate has now ended. So you had this huge boom throughout the aughts of independent research, some of which was pretty good, some of which was of dubious value, but hey, there was a mandate and we had money to spend, go spend it. That has run its course, and that seems to be at least in part behind some of

the shakeout that's happened in the research space. But what's left are the companies that people are sending research dollars to, whether they have to or not. They're the companies they find value at and want to buy purchase their research U I s I. There's a run of them that have have been around for a while and are likely to continue being around. Which is a long winded way to get to the question of how do you see the rest of the shakeout in research playing out. I mean,

it's a it's a great question. I think you're gonna end up with um with the traditional banks again moving towards that juniorization and meaning they'll they'll swap out a high paid senior analyst with a junior guy without a lot of experience but doesn't demand a big check, and so they still have coverage. But you know, it's not it's not. Uh. I'm trying to think of a classic example of an analyst who who was the axe on a particular stock or in a particular sector. But Rick

Sherlan's on on Microsoft or Charlie Wolf on Apple. They're handful of guys who knew it better than anybody. That era seems to be coming to an end. Yeah, I think so for the big banks, but there's still that opportunity set for the independence right now, a number of firms forget the macro space that that that we focus on. But um, you've got it for media, You've got it for industrials, you you've had it for financials. So you know, even these silos, Um, Dana Telsey came out of Bear Sterns.

She's tag right on housing, Dana is on retail. So people who have an expertise in the space that becomes their area. That's right, That's right, that's that's kind of that's kind of fascinating that that's we didn't really see that twenty or so years ago, or did we UM my letter writers and things. But I think there's there's a few things there. One is that the the execution business, right, having a broker dealing the execution business through technology has

gotten much simpler. Right, So this whole best execution I mean Ren Mack, little old Renmac can provide UM the best execution because we we basically use UM. The other big banks al goes, right, so we we come in and and and and uh sort of you know, from a from a from a darker perspective from the outside, people don't know exactly who's trading what, but you know,

we know from our desk, the you know. The The other part of that is the the technology has allowed distribution UM to be a lot cheaper than it was. I mean, I remember when I started UM. We would send faxes, you know, and it was priced per sheet, per per recipient, right, So I mean there was a there was a half a million dollars. I'm serious, there was a half a million dollar cost and distributing our research because we had to pay the long distance fee

and the facts fees. And you know, once the proliferation of email came about, writing a program to just convert that to a PDF and sending it out was simple, so facts as you're really talking late eighties, early nineties. By the mid nineties email was starting to pick up a bit. It was but to have research done, you know in a way that um, you know we're sending

big PDFs over That's exactly right, that's exactly right. That was a bandwidth issue which wasn't solved bill after global crossing in Metromedia, fiber collapsed and left all this dark fibers that are so expensive to build free and or at least cheap for everybody else to pick up on on their bones. Except supply will create demand. And well that's the story of every major technology boom is after

the bus, you have all this in expensive infrastructure. So that leads to the obvious question, which you alluded to previously, how has tech anology change the way you do business? Well? Uh, doing business or doing analysis? I think there are two different things, right, Um, you know, look, business has done you know, in the same in the same way. I mean, obviously it's relationships and you're you know, you understand what

the clients are looking for. And UM, I mean I don't think that that will ever go aware certainly shouldn't UM. In terms of the analysis, UM. You know, I think one of the problems that you end up with is UM. You know, you give people the opportunity to sort of do things, and they think they can do it right, and they don't have the background or the understanding, UM to fully take advantage of what some of the technology can do. UM. And so for instance, let me interrupt

you there. So in the mid to late nineties and early two thousands, you could get all manner of charts for free everywhere online, right, and everyone fancied themselves a technician. Most were not. Right. So is that democratization by technology? UM?

Is that a problem that people actually think they could do things when there's a handful of technicians who came out of that era who are really good and a number of people who you know, they they think they're technicians, but they're just you know, exhibiting confirmation biased I have this. Let me go find a chart that I own this, let me find something that that confirms my prior position. I think, I think, but I think that happens with almost anything that's out there, right, I mean, I think

I can retile my bathroom. I can't retie my bathroom, right, I mean that's there are YouTube videos that will show you how to do it, but it's still not going to look as good as if I pay the guy to do it, right, And that's why you hire a problem, right exactly. So it's the you know, it's really the same thing in any in any business, and uh um, you know, we we find we find similar you know, similar situations. But you know what we're doing which is

so unique is again we're quantifying that process. So instead of drawing a trend line or um, you know, saying it's overbater over sold, we contextualize that and we show you know, what that really means in terms of the history and whether or not it's valuable. And that's what you know, that's what the amateurs and frankly a lot of the pros don't even do. And so um, that's one thing that really sets us apart. So you're using technology, um in a very significant way. You've built this database.

What did you use for sources to put that together? How long did it take to clean up that database to get it to do what you want? How many different components are you tracking in that? Tell us a little bit about the secret sauce um as much as you're willing to write keeping it secret um. Look, it's you know, we use great we use we use CRISP data,

CRISP price data um. And we've got that again going back, you know, s and P ninety going back to the mid the mid nineteen twenties and for people don't understand Chris but comes out of the University of Chicago, if memory serves, and really a deep and fairly clean database, uh of of market information. I think it goes all

the way back to the twenties. Something thinking of the SMP ninety back to the twenties, which is, whenever you see the SMP five hundred quoted beyond it's it's the predecessor, which was in the SNP five. Even the SMP five hundred was in the SMP fire two. Sometime in the latent, I'm trying to remember when they changed the waiting sector that all went away in the eighties. Sometimes ye so changes and and has certainly look at that, and we look at the various waitings over time. UM. We use

option data UM for a big part of our sentiment work. UM. We incorporate fundamental data UM from various various sources UM. And then UM we also, which I think uniquely, we bring in economic data so that we can see what that looks like in relation to these other things that we're looking at. Technically four stocks, Right, So does p M I work cure does the UM you know, do the UH the H four data from the FED? Does that have any influence? And so UM always looking, always adding,

always building, and uh CFTC data we use that as well. So, so let's talk about economic data. UM. What is actually going on in terms of I'm not looking for a forecast to the future historically, what is the correlation between changes in the overall economy, either for the better or wars and markets. I've always looked at markets leading economic data, although not by as much as some people imagine. Well

that's true. I mean, look, economic data is certainly UM less noisy believe it or not, UM, but it also lags. I mean, there's a reason they are leading indicators coincidental indicators and lagging indicators right and meaning leading the cycle or lagging the cycle. And look, the reason that business is so hard. If you can just look at economic data and forecast the US in p correctly, it'd be easy. It just it doesn't happen. Everybody's going to be rich,

right exactly. So you know what we look at is historically the market has sniffed things out. Now, it's gotten it wrong before. But as I like to say that, you know, the market will fib but it won't be a chronic liar, right, And so you know, it's a great line. You have to be careful of that. But the reality is that the market gets it right, and the market gets it right better than the p m I gets it right. It gets it right better than

the employment data gets it right, etcetera. So that's why it's really important from our standpoint to you know, put your ear on the track, understand or try to understand you know what's coming down then the pipe. Um. But you know, from our advantage point, it's a very difficult and challenging environment trying to do that with just economic data.

And that's probably why so many people, uh always go to the quote by Samuelson, which is, marketing indices have forecast nine of the past four recessions markets will swing wildly. They're noisy, but they're going to do a better job than the average person scratching their chin and saying, here's here's what this this month's non farm payer all means. Yeah. But and let's you know, let's take it to the next step to what do I really care about the

GDP number? If I'm invested in the SMP, I'm not right, I'm not I'm not invested in I don't have a GDP swap, right. In other words, GDP up over three percent and I make money that has nothing to do with that. I want to know what's going to happen to the SMP, right, And so you know, maybe we're not in recession, but you still have a correction or bear market in the STP. That's important, right, And so from our standpoint, you know, the work on uh, getting

the economy right. I get it from the perspective of the nation, and certainly I appreciate that. But from the perspective of the investor, what I'm really trying to do is get the SNP right. You know, and the what I can tell you is getting the economy right has very little to do with getting the S P right historically.

That that is a theme that I've heard from guests on the show for the past couple of years is well, the economy is interesting and the market is interesting, and on occasion they seem to be insane, but most of the time one goes one way and the other is just off uh in its own path, and and trying to use the economy to forecast the market is just

a fool's Errand it certainly seems that way. We want to know what's going on, there's no doubt about it, but to to draw the link between the economy and saying that that that's gonna mandate the S and P does X good luck. So before I go to my favorite questions, I asked all my guests one last Twitter question. Someone had asked, so, why not manage a fund? Why not run money or put together e t F Y be an analyst? So I do this question all the time. That's one of the reasons why we started run Back,

to be honest with you. So we we have a small albeit small um. We have a rend Mack Capital Um, where we haven't actively raised money, we have a ongoing stress of you that's in that mostly partner money right now. Um, but that's that's definitely uh, you know stage Renmack two point oh, that's in that. In that zone, there are people who left big firms to launch their own research shop. Rich Bernstein probably most notable, who's now running you know,

three or four billion dollars. There's there's definitely a path to that. And I love the idea of having that pile of money which generates revenue which then can be plowed right back into making the research faster, sexy, or more interesting. There's a lot of stuff you can do when you have that much a u M with a fee on it. It just lets you plout right back into the business. And we want to be careful. I mean,

obviously we don't want to have conflicts there. But what we do is, you know, we eat our own cooking. And um, it's a quantitative process. We think about it very quantitatively. It's not you know, hey, I like that idea or that, it's it's what is the system spit out? How does that overlay with these things? And then here's how we're managing that portfolio. So the question that always used to come up on the old UM research desks was idea generation. Hey, what's what's the idea of generation?

Machine looked like, you guys don't really do that. It's it's pretty much spitting out from that database. Well, it's idea generation is just not you know, it's just not a noodling over it every single day and saying, hey, you know, what are the what are this? What's this? And that um it's looking at it now. It's important though, is that you know, we we understand through our research that there are points where UM, certain things will perform

better UM in certain environments. Right, So a great example, UM, you know, shorts right here in this environment are not performing well, and we actually track that on a daily basis to see, hey, if you were to to be a seller of a breakdown, what's the performance. I mean, they're just they're just getting steamrolled. And that's actually an

important becomes an important market indicator. But it also gives us some idea that the breakdowns in this environment have actually been a source of alpha UM, that breakouts are working, that overbought conditions aren't a place to be selling UM,

they're actually a reflection of the momentum. So our idea generation is a combination of using some traditional and nontraditional techniques frankly, but then overlaying those and understanding how those work throughout history and where we should be at any given point in time. So, I know, I say, the show's UH tagline is no forecast, no stock picks. So I'm gonna ask this question slightly differently. I've been hearing for I don't know, five six years, this rally is overboard,

it's artificial, it's fed induced. It's gonna end any day now, or so I've heard every day for the past five years. So where do you see us within the overall market cycle? And where does this end? Or can this just continue into such point as something comes along to stop it? Well, look, I I view the world as this ever expanding UH sample of the population, right, So you know the reality is as well, we have really good data as good

or data is as good as anyone else is. You know, the markets and rough rice back in the you know, the Chinese in the fifteenth century. I don't have that data. So maybe something happened that was completely different that you know, would skew other things. But what I can tell you is if you look over the last nine years UH, and you look at risk adjusted returns for the SMP versus the risk free rate, and you measure those, we are in UM, you know, the ninety percentile of what

you'd expect for excess returns. If you look at those other periods of time, the forward returns are not something that you want to write home about. In fact, you'd want to steer yourself towards that that active management, not towards passive management. So I, you know, I view this as the fuel in the tank is relatively slight UM. But within that context, it's important to recognize that momentum has been good. The trends for equities are positive UM.

And so while I think the path at least resistance in the near term is higher by near term I mean three to six, maybe twelve months UM, the amount of fuel we have to really propel it at this stage still seems to be relatively lacking. So this is not in our view. This turn was not some historic low that's going to provide UM, you know, very good

UH risk adjusted returns going forward. I think it's enough to probably catch people off sides get people to reposition and then you know, come back and uh and give us a tougher environment. In two thousand and seventeen, what is additional fuel that could keep the momentum going because because it's we've seen profits sort of top out and start to roll over a bit. Um. Energy prices never low energy prices never really provided the too consumers that

they normally do. In theory, it help them pay down some debt, a little cash in their pocket. But we didn't see a surgeon retail spending UM. And we have an election coming up in November. What could change the dynamic that says, hey, this could go on for years, not quarters, no great question. It's usually something in the credit cycle, right so it could be QUEI four. I don't think that's likely, but that's you know, let's let's

keep our our minds open. It could be fiscal stimulus UM, which both sides have been talking about fairly uh consistently. Right now, we have the credit cycle is flat that you know if you look at global central bank balance sheets, UM. So we don't concern ourselves as much with the rates as we do. What's happening to the composition of the balance sheet, right, So an expanding balance sheet is obviously

credit creation. A contracting balance sheet is credit deterioration or destruction. UM. Global balance sheets as we measure them are about flat year over year, and that's actually one of the lowest levels that we've seen in the last fifteen years. So you know, changing that dynamic would be important. The Chinese with the FX reserves stabilizing would be one part. UM. Sovereign wealth funds not pulling UH their their wealth out of of the U S asset markets UM, that would

be another point. UM. So you know, there's a lot of different dynamics that take place with this, but credit is usually at the forefront of it, and i'd say non financial leverage that we as we look at it, which is flattened here. If we can start to see that uptick would be would be helpful as well. Last politically related question, UM, we keep hearing and again both sides talking about a tax holiday to repatriate some of the tens of trillions of corporate dollars that are overseas.

UM does at least two trillion just out of the SNP five and I've seen estimates as high as ten trillion. If whoever gets elected in November passes something like that. Is that a temporary blip. Does that have the potential to stimulate the economy here? Does that hurt Europe and Asia where the money might be sitting. What's the impact

of that big repatriation assuming it actually happens. Yeah, I mean, look, when you when you withdraw UM money from one system to another, there usually as a transfer there, right, And so you're talking about tighter credit conditions and looser credit conditions. And by the way, the thinking behind this just to you mentioned infrastructure before the deal is the Democrats want

to big infrastructure bill, bridges, roads, electrical grid, etcetera. The Republicans want to change the corporate tax rate and or repatriate the overseas dollar, but temporary tax holiday, maybe you take tax at at six percent, five percent, something like that. So if there's a deal struck that that's where I was leading from with that. I mean, that's you know, is that a positive? Is that a negative? Is it

globally neutral viewed as a positive for the US? I mean this is not my area of expertise, but any means, but I would I would it as a positive for the US. UM and then the question is is how is that capital utilized? Right? Is it? You know, is it really going into property, plant, equipment, R and D spending? Look, I think the reality is the trajectory is the trajectory. I don't think of a boon. Uh if if companies thought that they could earn positive returns on projects, they

do it. I mean, for God's sakes, interest rates are you know, next to nothing, So it's not it's not a huge hurdle here. You don't see a lot of CAPEX spending, although some people have have said that's misleading when you look at it as a percentage of GDP or as a percentage of other activity, it's actually at a fairly high rate. I think you'd probably go to corporate bybex really more so than than Capex. Really that that would be interesting. Let's in the last fifteen minutes

or so, we have get to our standard questions. We we talked about what you did before UH Wall Street, which was college. Who are your early mentors Bob Ferrell, uh Steve Shoubin. Let's talk about Bob Farrell a little bit because Dave Rosenberg is a friend another guy who has him as a mentor. I've had heard his name come up from Ralph Akimpora has mentioned him. A number

of people have mentioned, well he was the first. Remember he was the first one to actually um had a technical analysis department and Marylands right back in the fifties and sixties. Yeah. Um. And just a sweetheart of a guy and very intuitive, a great amount of experience and

just understanding of the business. And what I really appreciated about Bob's perspective is he lived and you know, didn't grow up in but lived through um, you know, the tumultuous times of the late sixties, the seventies and the you know, I mean horrendous markets almost as bad as though I don't know people risk adjusted. Absolutely it was right, um, no doubt about it. So when you know, when you have somebody who's gone through that, there's a perspective that

they bring. You know, I can read about it all I want, but when you're living it, it's completely different. Right. So this just a very unique perspective that um, you know that I really appreciated and and found found useful. Steve Schobin, who was started in the in the Mary Lynch Technical Analysis Department, then left for Lehman brothers in the mid nineties, who I eventually joined in the late nineties at Lehman. UM was equally as um as intuitive and Uh well he started a little later. I think

he started in sixty eight. UM had a very very good perspective, and I worked more closely with Steve Um. His ability to um understand and really synthesized things qualitatively was unmatched from anybody I've worked with since. UM. He just had a very good intuition about the market. And I was far more quantitative than Steve, but his intuition. I certainly learned a lot from uh in Uh in my years working with him, and a great guy. So beyond Steve, if you're out there beyond beyond mentors, what

other investors influenced your approach to the markets? Well, you know, without being specific about people, I think, what's what's interesting about the business, and you know, at whether it was at Meryl or Lehman or even at Rehnmac now UM, what I find is and very refreshing is it's the people that UM are very very successful, who are interested

in our work. Right. In other words, it's not the hotshot m b A who you know learned the same thing that everybody does, that technical analysis is just a bunch of bunk. You know, their quote unquote smarter than the market, and they'll get it all figured out. It's the season professional with the scars and the battle wounds who are always interested in our perspective because they've seen it before, right, they understand that there's something more to

the business. And you know, you can get into this debate between art and science, and I get it, and I do think that technical analysis probably relies too much on art, fundamental analysis relies probably too much on science. Um. We try to blend the two, right, taking the I understand there's something here, let's try to quantify it and

do something around that. So um and look, even in fundamental analysis, there's an art to understanding where the kink in the hockey stick of growth is right, or what the difference between K and G in terms of the cost of capital and and the growth rate is. You know, so there's there's an art to everything that that's done. We just try to quantify it to the extent that we can. Um And so you know, when I look at the people that read our research and and that

I'm good friends with in the business. Um, you know, there are people that I'm proud to have his clients. I mean, they're they're they're successful people. And I think you go back to the you know, to the Wizards of Wall Street books, and you know, I learned a lot from Richard Dennis and his Turtle system and just the way that they think about things right and stand people on it. It means it's quantitative and it's not purely in art. There has to be rules you can

teach me. Yeah, And I think look, as as much as anything, what we try to do is we try to remain disciplined, right, And I think discipline is and people in the business understand that, but it's underrated amongst the investing public. I think, without question it's I think

that I think it's underrated amongst the entire street. Is how how important and underutilized discipline is, right, And the problem being is that when you quantify it, you also quantify what your loss is going to be right, and so you know that you're not always going to be right, but you have to be willing to be wrong by this much. And most people say, I don't want to be wrong by this much right, And so instead of quantifying it. They'll just do it by the seat of

their pants. So I can do it successfully, some can't. I'd rather quantify it and say, hey, here's where I am, here's my risk profile. Now what can I do to maybe further mitigate that, or how do you know, how can I position it so that I'm I'm willing to accept that and move on knowing that what I call terminal wealth is going to be far better than if I were to just index or something along those lines.

The quote I read this week, and I don't remember where, what book or what publication I read this was we learned nothing from our winners. It's our losers that teach us. And there's those battle scars. You don't get those. The worst thing that can happen to a nubie investor is a winning streak. They learned nothing from it, and they start to think they're they're brilliant. You mentioned Turtle Traders and and market Wizards. That's the perfect transition to the

next question. By the way, we've had Schwager on he's fantastic, and I don't know if you know Mike Koval's book Total Traders. He was really interesting. He's been entranced by Dennis's concept of let's raise them the way they raise turtles in these farms in Singapore which are used as a as a food source. If we can raise turtles, we can raise traders. And and let's so let's talk about some of your favorite books. The first book I read in when I got into the business was Market Wizards,

and it was absolutely fascinating. You imply, um, you enjoyed the book as well. Yeah, at least two of them. I think there's three in order read to Market Wizards, New Market Wizards, and head Fun Wizards. Think yet, but so be it? Um, you know that that to me, I thought was sort of bringing theoretical to reality. Right, there's always the difference of you know, up on the chalkboard, it looks nice, but you know, in the trenches, how

does this really play out? And that was you know, using both you had fundamental traders there, you had technical traders there get some that did a combination. Uh, and obviously all did it disciplined. By the way, what you mentioned is a theme that runs throughout the whids to every you absolutely have to have it without question. What what other books are standouts to you that either were influential,

or just that you really enjoyed a great deal. I mean, this is probably a little bit more controversial, but I will say that i've i've certainly um internalized the thought process of the Austrian cycle of economics. UM. Not that it's always right, I wouldn't, I wouldn't think about it that way, but in terms of sort of grounding yourself and understanding that trees don't grow to the sky. You can't dig your way to China no matter how hard

you try. I think it's just a good understanding not only of credit of money UH and the influence on the economy over time and the business cycle. No, no doubt about that. UM any other books before we move on to our two favorite questions, I think any book on market history is fantastic, just to again try to internalize, you know, and understand what Bob Ferrell knew from living it.

The more you can understand the history of the markets, the more you'll find that things aren't aren't changing, they're staying the same. Give me a few I have a few favorites of my own, and the reminiscence of a stock operators classic the same around the same period that came out. You would appreciate this if you haven't read this. I'm fond of talking about Richard Wykoff's How I Trade Stocks and Bonds. If you swap out telephone wire for Internet,

It's like it was written yesterday. Absolutely, it's amazing more and changed the question. I've recently started, um actually fondly reading the minutes from Federal Reserve meetings, really because the same thing right back, way back, way back to the thirties, right, no kidding, because you'll find that they're you know, we like to think that they're they're driving silly cars and wearing wool suits in the summer, and they don't have a clue. I mean, they're very thoughtful there as as

of course they are, right. The Lords of Banking really makes that clear that book. Really, if you thought these are just a bunch of idiots flailing about, that will disabuse you of those notes. And and remember at the time, their technology that they had was superior to anything that they had thirty years prior. Right, So it's not like we're suddenly so much smarter because of all this stuff.

It's just, you know, there are certain things that are just unknowable and and you find that in the business, So I think that's interesting. Um there's a good book called UMU, A Nation of Deadbeats, which which is a just a very good history. I'm not a fan of the title, but it's a very good history of the US economic cycles boom busts, and takes us through with a lot of interesting anecdotes about the you know, how the green bag became the green back, and and just

you know, some interesting anecdotes about the US specifically. That title reminded me of a book I used for research some years ago about the nineteenth century banking in the United States called a Nation of counterfeiters, and all these banks would issue these notes wildcatting and eventually walk away from him. Eventually, that's why we ended up with a federal reserve. So our last two questions my favorite two

questions I asked all of my guests. So a millennial or a recent college graduate comes to you and says, hey, Jeff, I'm thinking about going into finance. What sort of advice would you give them? Just get experience, get your feet wet, get your feet wet, get your feet wet. The second, and from from my perspective, UM I really don't hire people unless you're programmers. You have to have just a solid understanding of programming because that's really where the power is,

you know. Um. So you know, if you're coming out and you're you're committed to the business and you want to show the commitment to the business as a you know, as a young fresh graduate, I'd say getting rolled in the c f A program as soon as you possibly can show that this is where you want to be.

Obviously it's more specific than than an NBA program. Um. In fact of my my alma mater I um uh, you know, I really encouraged the students to to get their feet wet with the cf A program while they're in college and then you know, just gives them a leg up as they get out. Um to understand, um, you know to prospective employers that hey, I'm serious about this business and I've invested my resources and time to do this. Um. But programming history and just you know, commitment,

get involved. And our final question, what is it that you know about investing today? You wish you knew twenty something years ago when you began. That's a great question, I think, um, instead of I knew about this, but how about the appreciation of this. I think it is probably a better word way to think about it is

the absolute power of compound interest, right. I mean, you know, you can look at the tables, you can do all the forward valuation calculations you want and see how you can tune a thousand dollars into something you know, extraordinary. But the power of living for twenty years and seeing that work is astounding, and I think it's underappreciated by the masses. Humans have a hard time conceptualizing long periods of time. And I'm not talking eons and billions of

years on an astronomical level, just your own lifetime. Hey, if I do this for thirty years, here's the net. My father in law was in town this weekend. He showed me a picture of his his Mustang that was brand new when he bought it in ninety five, and he said, I just saw it an eBay for a little under a hundred thousand dollars and so, I you know, I did the quick math on it, and uh, it worked out to about a seven and a half annualized rate of return. It would have done better in the market,

just right. But you know, but now that it seem like a little better, but it seems like a big number, and you know that's the beauty of compounding. You just don't realize what, Hey, sixty five mustang, you're talking almost fifty years ago, more than fifty years ago. That that's a fascinating thing. Well, Jeff, thank you so much for doing this experisode. Generous with your time. I'm sure people, especially the technicians out there, are going to be fascinated

by this. Uh. If you've enjoyed this conversation, be sure and look up an Inch or down an Inch on Apple iTunes and you can see the other ninety or so um conversations we've had with various notables in the financial industry. I would be remiss if I did not thank my booker and audio engineer, Taylor Riggs for helping to organize this. Uh. My head of research is Michael

bat Nick, and Charlie Vollmer is our producer. You've been listening to Masters in Business on Bloomberg Radio look Ahead, imagine more, gain insight for your industry with forward thinking advice from the professionals at Cone Resnick. Is your business ready to break through? Find out more at Cone Resnick dot com. Slash breakthrough