Betty Liu on market impacts from the coronavirus outbreak | Money in :60 | GZERO Media

I’m Betty Liu with your Money In 60 Seconds. So, the impact of the virus has pretty much been felt in the global markets. We’re now back up to around record territory, erasing most of the losses. Initially when US officials reported the second virus outbreak in the US, the markets fell. And in fact, the S&P fell the most in three months. So, in the early 2000s, a SARS outbreak actually hit the markets even more. We saw the S&P fall 13 percent based on the outbreak. But economists say it’s really not an apples to apples comparison because at the time when SARS was happening, we were in a very different economic time. That’s your Money In 60 Seconds.

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How I Turned Thousands into Millions in the Stock Market

– So I would prefer to have zero positions scanning the whole penny
stock battleground. Looking for a good play where
the odds are on my side. (upbeat music) – You started out with $12,000 roughly. Many of the attendees might have that or have less. So you did it with that
12,000 back in ’98. Do you think it’s feasible
today to start out with that small account and repeat or similar success to what you had? – Yeah I think it’s possible and I think that it is
doable if you study, if you have the right mentality– – And if you had a small
account would you do the same thing again? – I would do the exact same thing. I you know if god forbid I lost all my money I would go back to the beginning and it actually
be a good challenge. I would live off ramen, I’d live in a box. I would only miss
air-conditioning and fast wifi. Those are two things I
can’t live without right now but aside from that you
have so much opportunity right now with the bull market and possibly a bear market
in the next few years. There’s gonna be so much volatility. The only question is are
you prepared because sadly too many people are unprepared. Even if there’s a perfect play, they haven’t studied the past so for me I’m basically a glorified history teacher. I have 6,000 video lessons
going back over 10 years now. I show all my trades
going back 20 plus years. Why is something from seven years ago still relevant today? Because again these patterns repeat. And some of you guys– – Sometimes it’s the same tickers. – Same tickers, same
sectors, same patterns. – Five years later it
can be the same ticker. – Cause again it’s greed
it comes down to the media hyping stuff up. The media just wants maximum clicks. So if you start thinking in terms of, not necessarily fake news, but just being cynical with your approach to media and not necessarily believing it. They’re just gonna create click-bait so anything they talk about is gonna be exaggerated. And if you start thinking oh
this article is exaggerated this article is exaggerated
let me see how it affects theses stocks. Or again you have all these idiots who are interested in buying the one you know (mumbles) not doing the research, not realizing that the
company has no cash. And if the stock does go up they’re gonna do a financing so it’s gonna crash. So a lot of people are
just looking at penny stocks the wrong way. And you can take advantage of that by looking at it the right
way and being meticulous. – So I think the number one reason and again maybe many here
I’ve been there before. I think the number one
reason low price stocks get such a bad rap, for
lack of a better term, is people buy that and then they become the bag holder. They buy the idea lots of
times your up your up 50, 100 percent and then it
crashes the next day your red. So if you are a bag
holder we won’t ask you to raise your hand. If you’re out there your holding– – Raise your hand if you ever had a big (mumbles) and you didn’t take it. – Okay so if you– – It’s okay be proud we’re
all in this together. – If you are a bag holder in a penny stock what should you do tomorrow morning? – So for me if I ever have
any big loss well you know I usually don’t because
I follow rule number one and cut losses quickly but I’m human I might make a mistake. I might slip. I’m pretty clumsy and be
in a coma for two weeks and then wake up to a big loss. I would still cut that loss immediately because it’s not just about that loss. It’s not about the money. It’s the mentality okay . If you have to think
of losses like cancer. And you need to cut
that shit out of you as soon as possible before
it infects the rest of your body or your life. Big losses kill your confidence. They kill your account. And while your sitting
on this one loss you know stewing about it like
miserable you might miss a good opportunity because your so focused on something that doesn’t have good odds. For me sometimes the best
trade is no trade, right? So I don’t need to trade all the time. I’m always looking for a good trade. So I would prefer to have zero positions scanning the whole
penny stock battleground looking for a good play where the odds are on my side. If your in a play doesn’t
matter even if this stock is gonna come back. Your mind set is so messed up with that you are not in control anymore. You need to recognize that and you need to get out it’s like a bad breakup, right. Like you have a bad breakup you don’t ask the next person you see
“hey will you marry me?”. No your mind-set is
all messed up after the bad break-up you need to calm down. You need to go to Vegas. Go have fun for a little bit. (laughing) – But yeah that’s one of
the biggest things I think so many you know that’s why penny stocks get a bad rap. People over stay they
have that long term loss. And then it just gobbles
up your buying power. I mean if your down
40% on some penny stock when the next good one
comes along you got a few hundred dollars of buying
power because your all in this grinder that just keeps going lower. And don’t discount the
fact of that mental cap. Hey we’ve all been there. You open up that brokerage
account and your like “god damn it there’s that
big red number again”. Get rid of that . The sooner you end that bad relationship the sooner– – I can make a food analogy. It’s like a heavy thanksgiving dinner. When you have the turkey. You have the stuffing. You have the pumpkin pie. You had another pumpkin
pie because it’s delicious. You have the cheesy bread. And you just feel like
death like you gotta go to the bathroom and
you need to let it out. You don’t want that you don’t want that meal you know soaking you down
for all of December, right? You gotta go to the bathroom get it out and look
forward to the next day. Go to the gym. – I love your analogies, Tim. That one was a (mumbles). – That worked? – Who liked that analogy? – And you got that one yeah! – That one worked that
was one of the best. – Oh what ever that’s one of the worst. – Get out of here. (laughing) – I have to make a lot of analogies because you know I’m self taught. So I taught myself through thinking about penny stocks like these
real world examples. And I mean it exists, right. I feel like crap after
thanksgiving dinner. It’s delicious but I fell like crap and I have to let it out. (upbeat music) Hey Tim Sykes millionaire
mentor and trader. Thank you for watching my videos. I hope that they help you. I want to share everything that
I’ve learned over the years. You can check out more
videos right over there. And also click subscribe
so that you can watch all of these videos, get that knowledge, and become my next millionaire student.

Why It’s So Hard to Beat the Market P1 | Common Sense Investing with Ben Felix

Active fund managers want earn better returns
than the market, while taking less risk. I’ve talked about the shift toward index
funds in Canada and the U.S., and how the prolonged poor performance of active funds
is a driving force of that shift. While it seems logical that fund managers,
some of the smartest, highest paid, and best equipped people on the planet, should be able
to use their resources to create a favourable result for investors, the data simply does
not support their ability to do so. On average, active fund managers consistently
underperform the market. If these people are so smart… why is it not showing up in returns? I’m Ben Felix, Associate Portfolio Manager
at PWL Capital. In part 1 of this two-part episode of Common
Sense Investing, I’m going to tell you some of the reasons why it’s so hard for active
managers to beat the market. William Sharpe’s 1991 paper The Arithmetic
of Active Management, published in the Financial Analyst’s Journal, is a great starting point
in explaining the challenge that active managers face. It’s pretty simple. Actively managed funds, on average, have significantly
higher fees than passively managed funds. Quick side note: Canadian mutual funds have
some of the highest fund fees in the world, with an average of 2.35%. Contrast that with the fact that you could
build a couch potato ETF portfolio for as low as 0.16%. So back to William Sharpe. His 1991 paper said: Before costs, the return
on the average actively managed dollar will equal the return on the average passively
managed dollar. This makes perfect sense because there is
one global market, and, in aggregate, all passive and active funds are investing in
that same market. Sharpe went on to say that after costs, the
return on the average actively managed dollar will be less than the return on the average
passively managed dollar – same returns before fees, but lower returns after fees due to
higher fees. If fees were not in the picture, you might
expect about half of active managers to be able to beat the market. Add fees in, and that number drops to less
than half at best. Ok, so the average active manager is unlikely
to beat the market in a given year due to fees. But who’s going to hire an average active
manager? The idea of manager skill has been the subject
of a lot of research. In a 1997 paper published in the Journal of
Finance, Mark Carhart explained that investment expenses and exposure to certain risks almost
completely explain persistence in equity mutual funds returns. So, if there’s little to no evidence of managers skill it means that the managers who have done well may have just been lucky
in the past. Finding the manager who has done well in the
past and will continue to do well is a gamble, not a guarantee. Are they skilled, or are you giving your money
to someone who has been lucky? An important distinction here is that when
we are talking about skill, we only care about relative skill. Any mutual fund manager is likely to be intelligent,
well-read, and competent, but they need to be more intelligent, well-read, and competent
than the other manager on the other side of the trades that they’re making. Any time a manager sells a stock that they
think will do poorly, another manager is buying it because they think it will do well. Only one of them will be right. The investment management industry is full
of PhDs, CFA charterholders, and MBAs. Currently, most of the world’s stocks are
owned by institutions rather than individuals. Most trades are a bet between two highly skilled
professionsls. The level of competition is exceptional. As more and more skilled managers enter the
active management business, luck becomes increasingly important as a determinant of their success. Supporting this idea, in a 2013 paper, Pastor,
Stambaugh, and Taylor found that the increasing size of the actively managed fund industry
has a negative impact on active funds’ performance. More skilled competition is making it increasingly
challenging to generate higher returns. Let’s say that you do find a skilled manager. They have had a few good years, but you can
tell that they are skilled rather than lucky. So… You invest your money in their fund. So do a lot of other people, because the performance
is good. Fairly quickly, the fund will grow to a point
where the manager’s skill becomes less useful, or even useless, because there is so much
money that needs to be invested. It’s one thing for a skilled manager to
find a few good stocks to invest a few million dollars in, but if a fund has a few billion
dollars to invest, the manager may have trouble being different from the market. When that happens, the investors in that fund
end up with a really expensive index fund, known as a closet index fund. The math just doesn’t work out
for the average active manager, and finding a manager that will be consistently above
average is extremely difficult in today’s increasingly competitive environment. Even if a manager is successful in generating
higher returns, their success will be their own downfall. In my next video, I will be talking about
one more reason that causes many actively managed funds to underperform. My name is Ben Felix of PWL Capital and this
is Common Sense Investing. I’ll be talking about this and many other
common sense investing topics in this series, so subscribe and click the bell for updates. I’d also love to hear from you as to what
topics you’d like me to cover.

How Pearl Pay Founders Met

Mabuhay! I’m Spark! the Pearl Pay idea
started in 2015 under the simple premise of if China UnionPay
and India RuPay, the Philippines should have Pearl Pay. I am Nap! I moved to
Philippines from UK. Having cashless in London
I’m saturated with the country’s dependency with cash. When I met Spark
he shared his vision to me and started the venture together.
Pio here! I am Software Architect. I consulted Spark on building and e-wallet
platform to my surprise Spark has already a presentation in his laptop since that
day we’ve been working full time for Pearl Pay. My name is Adrian! my name is
Jerwin! me and Jerwin have been friends since childhood. We’ve been part of Pearl Pay
with Spark, Pio with Nap because of our similar mindsets and values and our
frustrations with the cash dominant fragmented financial services here (Philippines).
We are Pearl Pay! The better way!

Stock Market and Political Predictions for 2020 (w/ Jason Trennert & Vincent Catalano)

VINCENT CATALANO: Jason, welcome to Real Vision. JASON TRENNERT: Thank you for having me. VINCENT CATALANO: Tell us a little bit about
Strategas, besides the fact of the name, and get into the definition that came from it,
Strategas is what? JASON TRENNERT: Yeah, so Strategas. We’re a research firm that focuses on macro-economic
research, economics, policy, technical analysis, fixed income strategy, and it’s also a broker
dealer. In addition to research analysts, we also
have sales traders, and institutional salesman. Basically what we do is we write reports on
these big picture things. We publish them and then we travel around
the country and the world to tell institutional investors what we’re thinking. VINCENT CATALANO: That’s fantastic. You are, your role is? JASON TRENNERT: I’m the chairman of the company
and also the chief investment strategist. I mainly focused on the equity markets, but
try to also pull everything together. VINCENT CATALANO: One of the founders? JASON TRENNERT: One of the founders, that’s
right. I started in 2006. I had worked at Heiman for about 15 years
at a place called ISI Group from ’91 to 2006. Then my partners Nick Bohnsack, and Don Rissmiller,
they joined me and we started Strategas in 2006. VINCENT CATALANO: That’s fabulous. Want to start off talking about the markets,
overall, the equity markets. One of the things that stood out to me and
key reason to discuss with you today is earlier in this year on CNBC, one of the hosts there
was pressing you and Rich Bernstein. Where’s the market going to go? What’s the price going to be at? Where are we going to end up? That thing and Rich deferred, demurred. You said, “All right, I’ll give you a–“,
and you gave a number. The number was, I think for the S&P, which
was at the time around 2600 or something like that, you said in the neighborhood of like,
3000. In fact, you gave a specific number, 3005. JASON TRENNERT: Yeah. Oh, wow. That implies a certain expertise I don’t have
but at least I was bullish, at least that was on the right direction. VINCENT CATALANO: No, right direction. Yeah, definitely on the amplitude of the low
was pretty close to it. Here we are coming to the end of 2019, where
do you see the equity markets today? Valuation was tough before and more so now. JASON TRENNERT: The hard part now is the market
is not cheap by any normal standard. I don’t also think it’s particularly expensive
given where interest rates and inflation are. We’re using, just to use round numbers, about
$175 for S&P 500 operating earnings. If you put an 18 multiple on that, which I
think is fair, given where again 10-year Treasury yields and inflation is, it would tell you
the market right now is fully valued, but not overvalued. VINCENT CATALANO: Not Cape like overvalued. JASON TRENNERT: Not Cape like overvalued. I’m not sure I’m a big fan of Cape, frankly,
especially with interest rates this low to begin with. We were talking this morning in our– we have
morning meeting every morning at 7:30 where we all get together and we discuss the market’s
direction and what’s happening. Our view is largely that if we’re going to
be wrong on the market, it’s likely that the market’s going to continue to strengthen more
than people think that markets rarely stop at fair value. They tend to get overvalued before bull markets
end, and even though– again, it’s pretty fully valued right now, with the Fed on hold
for most of next year, it’s certainly hard to be short, it would be my view. VINCENT CATALANO: Earning’s looking pretty
good going into next year, at least the next 12 months. In any event, interest rates being low. That suggests to me that you guys use something
along the lines of a discounted cash flow model for value. JASON TRENNERT: Yeah, we do the earnings on
a bottom up basis, really from a sector level so that not bottom up all 500 S&P 500 companies,
but we do it sector by sector and we build it up from there and come up with an earnings
estimate for the year. Then we use a variety of econometric models
to forecast the multiple. Frankly, right now, the models spit out what
I would say was almost socially unacceptable numbers of 20 or 21, or 22 times earnings
just because you have secularly low interest rates and inflation. Probably we don’t want to bite on that too
much because generally speaking, it’s hard to get a multiple more than 19 or 20 on a
sustainable basis but by the same token, 18, or 19, is perfectly reasonable. Again, we’d rather be a little cautious and
be wrong by market moving up the other way as opposed to being too galosh and have the
market call the wrong way. VINCENT CATALANO: At an 18 multiple, that
sounds a little bit like the rule of 20. JASON TRENNERT: Yeah, that’s a fair– the
rule of 20 was created by my old boss, Jim Maltz and he had found over time, over a long
period of time, that if you added up the multiple of the S&P 500 and inflation, that on average,
the sum of those two items equal 20, over long periods of time. We have very sophisticated models that look
at all sorts of things. Then we have the rule of 20, and I’d have
to say that the rule 20 is just as good as some of the very sophisticated econometric
models. They’re largely getting at the same thing,
which is largely the idea that when you’re discounted cash flows by lower interest rates,
the net present value is quite a bit higher. That’s largely what it’s getting to. VINCENT CATALANO: Now, you referenced the
Fed and low interest rates and all, where do you see rates going into the next year,
which is a big factor all the way around economically in the financial market? JASON TRENNERT: Yeah. Well, short rates in my view are going to
stay in the current range. The Fed just met last week, second week of
December. You’re going to between 1.50 and 1.75, the
Fed has made it pretty clear, too, they’re not going to change until inflation is above
2 and looks like it’s going to stay above 2%. Right now, with inflation about 1.50, little
more than 1.50, that doesn’t seem to be likely anytime soon. I think the Fed is done for next year. Long rates, on the other hand, though, I think
should start to drift higher. Frankly, I think it’s a good thing if they’re
drifting higher because it’s a reflection of real GDP growth, as opposed to inflation. It’s hard to forecast inflation right now,
in my opinion. Our expectation is that a stronger global
economy next year will allow interest rates to move higher, and that actually winds up
being good for S&P 500 operating earnings because a steeper yield curve tends to be
good for financials. VINCENT CATALANO: That yield curve being more
positively sloped is a reflection of an economy, US and worldwide, that’s in better shape? JASON TRENNERT: That’s in better shape. Again, you have decent growth with low inflation. It’s really a Goldilocks type scenario. I think, again, next year is an election year,
too, as if we can’t forget, but the Fed probably doesn’t want to be too involved, wants to
be less involved than it has been over the last few years, probably doesn’t want to get
the president involved. They don’t need to. Again, they’re in a position now where inflation
is so tamed that I don’t think they have to worry too much about inflation getting away
from them, running away from them, and they can take their time with the next move. VINCENT CATALANO: Tell us about the political
scene because you guys covered that as well. Dan Clifton. JASON TRENNERT: Yep. Daniel Clifton. VINCENT CATALANO: Down there in Washington
and what’s your firm’s perspective on that? Implications economically and implications
for the market? JASON TRENNERT: Yeah, we’ve been in– and
I was saying before, we’ve had plenty of bad calls, but one of the good calls we’ve had
was on this idea of populism being something that can last. We were pretty early on in taking Donald Trump
seriously as a presidential candidate, pretty early on taking Brexit seriously as a potential
outcome. We’re still very much of the view that populism
is an enduring political theme. One thing I feel strongly about is that whoever
next president is, it will be a populist. The question is, is it the right of center
populace that’s in the presidency now, or is it a left of center populist, like a Bernie
Sanders or Elizabeth Warren? I think the days of– for the time being,
the days of having an establishment candidate are probably pretty unlikely, in my opinion,
and I think that it’s largely reflective of concerns that everyday people have that are
not largely and they have not really been met by the orthodoxy of the bigger parties. VINCENT CATALANO: That argues against someone
like a Joe Biden. JASON TRENNERT: Like a Joe Biden, in my opinion,
he may very well win the nomination but I think if he ran against Donald Trump, he might
have a decent chance of beating him but I think Donald Trump would win. Listen, incumbents have a hard time losing
anyway. Incumbents particularly have a hard time losing
when the economy is as strong as it is now. Now, there’s 10 months in– VINCENT CATALANO:
In any number of events. JASON TRENNERT: 10 months is an eternity,
especially these days in a 24-hour news cycle. Our best guess is that the status quo will
prevail, which is to say that Donald Trump will be reelected, that the Democrats will
keep hold of the house and the Republicans will keep control of the Senate. In our opinion, that’s the most likely outcome. By the same token, it’s pretty a 50/50 country,
and anything could happen but economy, in my opinion, will be the single most important
factor in terms of who gets elected next. VINCENT CATALANO: It’d be interesting to see
what the consequences of that would be worldwide. JASON TRENNERT: Donald Trump being reelected? VINCENT CATALANO: That’s correct. In other words, 2016 wasn’t an aberration,
it is what is. JASON TRENNERT: Yeah. My opinion, Brexit, what’s happening in Italy,
what’s happening in a lot of the regional elections in Europe I think give you a pretty
strong indication that 2016 wasn’t an aberration, that there are a lot of secular pieties on
both the left and the right that have been followed by the establishment candidates,
by establishment parties, that average people are saying this just doesn’t work for us. You could go through whether it’s free trade
with a country that’s not really interested in free trade, like China or open borders
or formal Care Act or wars, endless wars and all these sorts of things average people were
starting to question and they want something different. VINCENT CATALANO: Do you think that the, in
the US, the Democrats basically with their embrace of let’s call it the coastal elites,
so to speak, and in particular, Wall Street and Silicon Valley, do you think that that
is a dynamic that’s there that the democrats are missing? JASON TRENNERT: That’s my opinion. I grew up in– both my parents were Democrats
and I was a Democrat for a while, but it was very different party at that point, it was
largely for working men, working women. It was largely anti-communist, if you had
a strong religious faith, you didn’t feel that you were necessarily excluded. The party has changed a lot now and we could
debate those things, but I could say there’s a lot of people who have those opinions now
that might not feel that at home in the Democratic Party, and I think that’s one of the issues. I think that’s part of the why Donald Trump
won, he recognized that and recognized that there are certain longing for something. That’s why I think Joe Biden would probably
have the best chance of beating Donald Trump because I think he has that every man type
of feel. I think he would have a better shot at winning
than either Sanders or Warren. VINCENT CATALANO: How do you blend longer
term trends and themes with shorter term business cycle related issues? How do you mesh the two together? Because I get a sense that you do that you
do look at both. How do you develop that into an investment
methodology? JASON TRENNERT: Yeah. Well, that’s a great question. Because it is a constant struggle, and it’s
mainly because our clients are professional investors so to be frank, the main thing we’re
trying to get first is the next six to 12 months, just trying to make sure our clients
stay employed. Then in turn, keep us employed, because one
of the hard parts about the investment business, particularly when it comes to stocks and stocks
are the longest duration assets you can get really, maybe aside from real estate. Yet most people who manage stocks are managed
at best, or evaluated on a once a year basis. Then some hedge funds are evaluated on a monthly
basis. It’s an almost impossible task for the professional
investor today, in my opinion, that they again have our trading at very long duration assets
and yet, they’re held of this very short term standard. We try to give the longer term themes and
we publish separate reports on the longer term themes once every quarter, where we try
to give people say these are big, long term things to think about whether it might be
populism or whether it might be the convergence between the public and private equity markets
or very, very long term ideas. We publish those on a quarterly basis to make
sure people know what we’re thinking about those things but we also publish every day
about what’s happening every day and what we think is the most likely outcome on a shorter
to intermediate timeframe. VINCENT CATALANO: See, I think that that’s
one of the great value propositions of Strategas, is the fact that you do reconcile the long
term framework, so to speak, with the short term practical elements of it. What you said before about professional investors
that they’re judged on a shorter term basis, they’re in long duration assets, for the most
part, judged on a short term basis in many cases. Which is a difficult balancing act to do and
the thing I’ve always been struck by is that Strategas, my sense is that you guys have
your ear to that ground better than pretty much anybody. JASON TRENNERT: Well, that’s a very nice thing
to say. It’s actually, in my opinion, is one of the
great compliments you could give our firm. I think if we do that well, it’s largely because
we– for better or worse, we travel all the time meaning I’d say for worse because I have
to go through TSA or the airport. For better, once you get to wherever you’re
going– which I travel 70, 75 days a year and will be in everywhere from- – being everywhere
from Des Moines to London to Singapore and balance. My partners travel more than I do if you can
believe it, they’re a little younger than I am. The bad thing about that is time away from
your family and it’s not easy physically. The good thing though is that you meet a lot
of different types of investors and not just hedge funds here in New York. You also meet mutual fund managers in Boston
and state pension plans and the middle part of the country and then you might deal with
a big bank in Europe or big public pension plan in Australia, those types of things. You have a good idea of where people are positioned
and how people are thinking and it keeps your mind fresh too, because you’re not just talking
to each other, which is one of the biggest, let’s say one of the biggest risk in the investment
businesses, you just spent a lot of time talking to other people that have the same idea as
you do, or the same similar backgrounds or similar circumstances. VINCENT CATALANO: How do you factor that into,
or do you not factor that into your estimates of where the financial markets will be? That dynamic of what they’re thinking etc. JASON TRENNERT: Yeah, I wouldn’t say it’s
not, certainly not. There’s no mathematical way we do it, but
we do meet every day as a firm. We have a morning meeting, as I said, at 7:30
every morning and we share all the time what we’re hearing from the road, and the questions
that were being asked by investors and that the questions that were being asked by professional
investors inform a lot of our written work because again, if you spend a couple of days
on the road, let’s say in Texas, you’ll find that you’ll get the same two or three questions
in almost every meeting or something that’s on people’s minds. That will be the basis for the next report,
we say we should look into– we might not know the answer, well, likely not know the
answer. Then we’ll do the research and we’ll say this
is actually what happens. This is how long it takes between the first
Fed easing and the next Fed tightening on average, how long does that take? A lot of things along those lines, what happens
when the dollar strengthens or when the dollar weakens as it relates to earnings or sector
weightings or things along those lines? VINCENT CATALANO: That then gets fed back
into the decision process? JASON TRENNERT: Exactly. VINCENT CATALANO: What happens if you had
a view, a consensus view, let’s call it out there, of professional investors, some of
which may carry more weight than others in your mind in terms of their insights and their
views? If that is in conflict, let’s say, with the
fundamental valuation work that you’ve done with maybe the technical market intelligence
that’s there, what happens with that? Does that tilt, you say, oh, well, we believe
this but this element here is a dynamic? JASON TRENNERT: Well, I have to say as always,
as a basis for all the things we do I have to say is, it’s long enough to know that you
have to be humble in this business because it’s a very humbling business. We’re never– I would say the style of the
firm is decidedly never to pound the table on anything. We are always thinking about ways when we
put on any new call. Before we put it on, we think about how we
might be wrong and what would cause us to change our mind before the trade is put on
or before the idea is established because it becomes important because you want to be
able to recognize when you’re wrong quickly as opposed to just trying to paper over it
or make other excuses for it. Our clients, mercifully, our clients give
us a lot of benefit for showing our work. Like as long as it’s well thought out and
well-reasoned, our clients cut us wide slack when we’re wrong. Again, we try to have this discipline of when
we are wrong, admitting it quickly and moving on and getting onto something where we might
have an edge. VINCENT CATALANO: That comment reminds me
of something that Byron Wien of Morgan Stanley, one said at a CFA market forecast event that
I did, when he was asked the question why are we doing this forecast for the year ahead? He said, it’s not the specific forecast for
the number, it’s the process that you put into it in understanding. That sounds like what you just said. JASON TRENNERT: I think that’s right. I think Wall Street or in the investment business,
it can be sometimes when people are not involved in the business, it can seem rather dry or
very uncreative. Yet I think the investment business in many
ways is more and more intellectually stimulating businesses there can be because virtually,
everything can have an investment implications. It can be very creative business in its own
way. If you’re a news junkie like I am, you spend
a lot of time learning about all sorts of different things, not just political events,
but scientific events or social movements, all of those things can go into higher thinking. It’s important. I view it that way, something where you’re
constantly learning and trying to test your thesis and all the rest. VINCENT CATALANO: Social Science with money. JASON TRENNERT: Yeah. I think the problems– it is a social science,
and the problems in the financial markets come when people try to make it a hard science
I find. That’s when people like long term capital
trying to make it a hard science, people that packaged mortgage backed securities and credit
default swaps, they try to make it a hard science like you put a little bit of a beaker
A and a beaker B and it equals beaker C, all the time. The thing is when you’re dealing with human
beings, it doesn’t work that way. That’s one of the things I have to say worries
me a little bit about this Fed. I feel more confident in the past Fed, Bernanke
Fed and the Yellen Fed, like I worry quite a bit that they viewed their role as really
almost as chemists, or hard scientists, where, if you do enough of one thing, it will always
turn out the way you expect it and it just doesn’t. When you’re dealing with human beings, of
course, it doesn’t work that way. VINCENT CATALANO: I want to get to a couple
of actionable items and areas that your friend was looking at. Before we do, I’d like to get your views on
private equity. Quite a bit of money is going in that direction. Institutional investors are shifting money
more so than at any point in the past into private equity. First, what’s your view in general of private
equity as an investment vehicle alternative? Then secondly, I’d like to get your thoughts
on what you think the motivating factor might be for institutional investors going into
private equity that might include the whole issue of required rates of return, and not
being able to hit it when you have interest rates at 2% and 3% and you got mark to market
with that, and then you have private equity that’s [indiscernible] your thoughts on private
equity. JASON TRENNERT: Well, I have to say in terms
of just being frank about it, we have no private equity clients. Consider the source. All of my clients are public equity or public
market clients. I want to be fair, or just tell you where
my biases might lie, but I’m very skeptical about private equity, the future returns of
private equity being anything like what they were in the past. David Swensen really put private equity on
the map in terms of an institutional asset class. What he discovered was that there was a discount
for illiquid private companies, or that there was a liquidity premium for publicly traded
companies. He said, I can buy these assets, and I can
buy them in the private markets at a discount and eventually, they’ll either be public and
so on, I’ll make a lot of money. That made a lot of sense. He made a lot of money doing it, but of course,
he was the first person to do it. Now, you’re 25 years removed from when David
Swensen really started doing that and there are now 7000 private equity funds that have
about $3 trillion in assets. In my opinion you’re running out of– and
valuations, in my opinion, are not cheap anymore. I would argue that there’s actually an illiquidity
premium now over the public markets. Part of this and this gets into your second
question, which is why are people throwing so much money there? Frankly I think people are chasing performance
and I would also say that there’s an opacity of the private markets that is very appealing
if you don’t want to be embarrassed or fired. Not to be overly cynical about it, but your
average public pension plan has an investment return assumption of 7.50%. Very hard to do that when 10-year Treasury
yields are below 2% and the long term average returns of public equities are 7, pretty hard
to get to 7.50. The only way you can really get that is through
leverage. That’s what private equity provides. It also though, it provides the best leverage
because it moves much more slowly, the marks move much more slowly and so you’re more unlikely
to be embarrassed again or fired by having very outsized allocations to private equity. VINCENT CATALANO: That aspect that, you brought
this up several time now, that aspect is I think really underappreciated by many investors. That dynamic of the potential of career suicide,
of getting fired, it’s almost as though– okay, I’ve refrained from saying this or making
this connection but it’s just such a fun thing I think to do, CFA equal CYA. JASON TRENNERT: Yeah. Well, listen, I think all of us and no matter
what line of work we’re in, job number one is keeping your job. I think that we’re just human beings. We’re all part of the same hypocrisies. You have to just recognize that and try to
use it to your advantage and it doesn’t mean that people were all– no, it doesn’t mean
you’re bad people or– VINCENT CATALANO: No nefarious reasons. JASON TRENNERT: There’s no nefarious reasons
but there is a reality of the institutional investment business which, again, is as career
as a central part of it. Just like anyone else in any other profession
has the same tensions, that this just happens to be with other people’s money that tells
they’re different. VINCENT CATALANO: That’s a great, great point. Last item, actionable ideas. Sector coping style investing, asset allocation. Give us some thoughts on Strategas as you
where I might want to be for 2020. We had Rich Bernstein on the program here
a couple of months ago and late cycle investing was his thing that he was emphasizing, your
thoughts on where we’re at and where we ought to be as investors? JASON TRENNERT: Yeah, I would say in that
regard, we have a little bit of a different view than Rich and that I’m not convinced
where his late cycle as it might seem, I know the business expansion is 10 years old. It might seem late, but I also think that
the real Fed Funds Rate is zero. Usually what ends recoveries is the Fed killing
it. Inflation rises where the Fed killing it and
here because of financial repression, you’re pretty far away from that. What we’re telling our clients to do is to
get more cyclical. We’ve told them to really get more, we told
them to buy financials, we’re overweight four sectors, financials, industrials, technology
and telecom. We’re of the view that actually next year,
the global economy will pick up. That’s largely because a lot of the trade
tensions will largely be behind us, at least as far as it relates to business confidence. In my opinion, the trade war, in some ways,
it’s sterilized some of the benefits of the tax cut that you got at the end of 2017. That was good for capital spending for a year
but then it faded because businesses got scared because of trade. If trade is behind us, there is a chance that
business confidence picks up, capital spending picks up and also global economic activity
picks up and that should be good for those sectors. VINCENT CATALANO: Anything in terms of the–
any thoughts in terms of the global markets, emerging markets, frontier, Europe? JASON TRENNERT: Europe in my opinion is probably
as a trade, as more of a trade or a tactical approach let’s say for a year, six months
to a year as opposed to secular, I like you’re up quite a bit because in some ways, I tend
to think it almost got hurt the most between the tensions between China and the US just
because it’s so trade oriented, it’s so geared towards trade, it should benefit the most
if global growth starts to pick up. The question will be longer term, whether
Europe makes the structural changes it needs to pave the way for long lasting growth, but
for next year, at least in my opinion, Europe looks quite good. VINCENT CATALANO: That’s terrific. Thanks so much, Jason. JASON TRENNERT: Thank you. I appreciate it. VINCENT CATALANO: All the best in the year
ahead. JASON TRENNERT: Thank you. Thanks a lot. Thanks for having me. Appreciate it.

Do I Need to Pay Federal Taxes? (Tax Basics 2/3)

Meet Ray. Ray is an incoming senior at State University
who just finished up a summer internship at Corporate Co. Ray had a great experience,
and made a lot of money, so he thinks he might have to submit a tax return. There’s just one problem. Ray has no idea where to start. What should he do? Well, for starters, Ray needs to figure out
whether or not he even needs to file a tax return. While this sounds complicated, it’s actually
quite simple. If Ray’s income exceeds a certain threshold,
he’ll need to file a tax return. Otherwise, he generally won’t. So what’s the threshold? Well, as of 2015, single, independent individuals
with gross income above $10,300 must file tax returns. While that may seems sizeable, keep in mind
gross income includes every major form of income, such as earned income, like from wages
and self- employment, and unearned income, like from investments and interest, so almost
everyone will clear the threshold. But that’s not the only criteria. If you have $400 worth of net earnings from
self-employment, you’ll have to file a tax return, even if you don’t meet the overall
income threshold. Finally, we come to dependents. They must also file a tax return, so long
as they exceed one of the following criteria as of 2015: $6,300 in earned income $1,050
in unearned income, $400 in net earnings from self employment, or, wait for it, gross income
that exceeds the larger of these two criteria: • $1,050
• Or earned income, up to a limit of $5,950, plus $350. We know this may all seem overwhelming. But don’t worry. The IRS actually has a great “Do I Need
to File” Tool that will walk you step by step through this entire process, even covering
scenarios too complex to explain here. But let’s get back to Ray. Where does he fall? Well, Ray is an independent with $30,000 in
gross income, so he’ll definitely have to file a federal and state tax return. The due date for this is usually April 15th,
but Ray can generally start as soon as mid to late January. Finally, even if Ray didn’t meet the income
threshold, he may still want to file a tax return. That’s because if he worked as a traditional
employee throughout the course of the year, income would have been withheld from his paycheck
by his employer, and the only way to get that money back would be by filing a tax return. Hopefully you and Ray now better understand
whether or not you need to file a tax return. Be sure to check out our next video, where
you’ll learn how to actually pay your taxes, and be sure to check out our website, where
you can find more educational material and free recommendations for great tax-filing

A Better way to Pay Bills

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But the painful fact is My money’s always taken. Vampire party, join the club.
Auction off a pint of blood. If you’ve got some spare, selling eggs
Gives your genome lots of legs! They call me Penny Pincher,
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The bills I need to pay— Ugh, there’s got to be a better way! Visit

How paperless procure-to-pay can save time, money, and the economy | European CEO

European CEO: Paying invoices on time doesn’t
seem like too much to ask. But in Europe, more than 40 percent of invoices are paid late, according to a report. What can businesses do? Joining me is Richard Hurwitz, CEO of business
transaction experts Tungsten. Richard: 40 percent is incredibly high.
What can businesses do? Richard Hurwitz: You’re right Paul. In today’s increasingly competitive and global
economic environment, that kind of leakage… businesses just can’t afford it. After all, it’s the velocity of working capital
that we’re talking about here; the grease that really has an economy grow or not. The problem is that too many of these businesses
are relying on manual, paper-based AP processes. Yet we live in a world where
digital technologies are revolutionising the way
that businesses operate. Too often, those technologies are being applied
to the front office, not to the back office. European CEO: So the solution you’re suggesting
is digitisation and automation; removing the human element from the process as much as
possible. Richard Hurwitz: Exactly right. In fact, removing paper from the payables
process is really a no-brainer. Those benefits are highly demonstrable – in
fact, quantifiable. And I’ll give you a for-instance. With one complex buying organisation, prior
to joining the Tungsten Network, they had 148 FTEs in their payables department. Today they have 108; they’ve redeployed people
more effectively in other areas. Prior to joining the network it took them
21 days to process an invoice; today, 4.5. Prior to joining the network they had an error
rate of 17-18 percent; today, 0.25 percent. Our client base consists of the most complex
buying organisations on the planet. These are brands that you and I know and work
with and buy from every single day. And we have about 60 percent of the FTSE 100
and Fortune 500. And they’re a very demanding customer base. Security and risk of fraud is one of the highest
considerations they look at when they consider joining a network like Tungsten’s, so we pride
ourselves on providing trusted connections that streamline their transactions and are
cross-border compliant. So we are ISO certified, we are ISAE certified;
we work in a compliant manner across 48 countries. We believe in helping businesses do business
better, over the most safe, secure network that there is on the planet. European CEO: You’re talking about the Tungsten
Network; because your customers do become part of a network. How does that make the invoice process easier
for both sides? Richard Hurwitz: You’re in essence connecting
a corporation across continents to all of its entities, and then to its supply chain. The global supply chain is coming to a portal,
Tungsten’s real estate, in order to input invoices, in order to check on the status
of those invoices. And it’s very easy for us now to overlay into
that a host of other applications. So you and I think of an iPhone as a platform onto which we take down a host of value-added applications. We’re doing the exact same thing at Tungsten. And one form of a value-added application
is the ability for the global supply chain to come to that portal – now, right in that
same space, they can assess how many invoices are outstanding, what the value of those are,
when those are going to be paid. And with the click of a button, secure capital
against those invoices. Same day. No documentation, no reps and warranties,
no recourse. And 100 percent advance rates. That’s not available to them anywhere else. This is enhancing the velocity at which working
capital gets back into our economies, and that’s good for global growth. European CEO: Invoice finance really is a
growing alternative source of finance for a lot of SMEs; talk to me about the growth
there, how big has it been? Richard Hurwitz: I’ll tell you some statistics! For those suppliers that are making use of
our functionality, they continue to use it. In fact they take down about 80 percent of all
of their invoices that are available for financing. They use it over and over again. We continue to see our outstandings grow month-to-month. And just recently at Tungsten we’ve had a
very prominent leader join our organisation to help us grow our invoice financing business. So Prabhat Vira has joined us from HSBC Bank,
where he ran its trade finance business in the Americas for many years. European CEO: So how did you develop your
offering? Richard Hurwitz: The incumbent players, the
banks, tend to serve the largest, most strategic vendors for these buyers. The group that needs the capital most is underserved. And that’s our small and medium sized enterprises. Banks here in the UK, and in the US, are not
making loans as readily to small business. The underwriting requirements are much more
onerous. Yet they have these assets in the form of
receivables – which as you’ve earlier pointed out are taking longer to be paid. And now they have the ability, the small business,
to finance that receivable in a very low-friction manner through the Tungsten Network. That’s where Tungsten plays.
That’s where the volume sits. What we’re doing is providing a very disruptive
approach to a conventional set of activities. And we’re doing that through digital technologies. European CEO: Going back to your platform
then; what other apps can we expect to see? Richard Hurwitz: So, we’re looking for the
opportunity to add value to the network in areas that are adjacent to that procure-to-pay
workstream that we play in. For example, of the $200bn of flows that Tungsten
processed last year, a full third of it was in multiple currencies. So think of a Mexican supplier delivering
corn to Kellogg’s. Kellogg’s may pay that invoice in dollars;
the vendor is then standing up, going down the street, converting that to pesos. Instead, today, on the Tungsten Network, they
can do it right at their desktop, with less friction. So that’s another example of where we’re adding value. European CEO: Richard, thank you very much. Richard Hurwitz: Paul, thank you. Thanks for watching. You can find out more about procure-to-pay
solutions at And please subscribe for the latest business,
finance and strategic insights transforming Europe.