ReSolve Riffs on ‘Bubbles, Manias & Fraud’ with Jamie Catherwood

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day.

2020 has been a year like no other in living memory. Though the global pandemic has obviously been the most important story of the year (and quite possibly of a generation), stocks have rallied to new all-time highs, companies have raised record amounts of capital and the technology sector has minted a handful of TRILLION-dollar firms. Though some investors find this fitting with the ‘new normal’, others are convinced this is the ‘mother of all bubbles’.

To make sense of these unusual times, there’s nothing like a good dose of historical perspective. For the final show of the year, financial historian Jamie Catherwood (O’Shaughnessy Asset Management & Investor Amnesia) joined us for a great conversation that included:

  • The origins of capital markets and its countless manias
  • The South Sea Bubble, John Law and the Mississippi Company
  • Why the history of the Dutch Tulip Mania has been widely exaggerated
  • Charlie Munger’s three I’s – innovators, imitators and idiots
  • How wars invariably lead to periods of low interest rates (and eventually bubbles)
  • Yield-seeking in the 18th and 19th century – and plenty of sovereign debt defaults

Jamie shared numerous interesting anecdotes that seem to draw clear parallels to the current environment – which has been described by some as ‘the golden age of fraud’. You can find more of these in his new course.

Happy Holidays! Thank you for watching and listening. See you in January.

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Jamie Catherwood
Client Portfolio Associate
at O’Shaughnessy Asset Management

Jamie is responsible for helping clients understand O’Shaughnessy Asset Management’s philosophy and process. Jamie produces research content related to the history of financial markets.

He has been invited to guest lecture at the Yale School of Management and appeared on Bloomberg TV to discuss his financial market history. Prior to joining OSAM, Jamie worked as an Analyst at Arthur J. Gallagher.

Jamie attended King’s College London and holds a B.A. in History.

TRANSCRIPT

Mike:00:01:37That is nice. Nice one.

Jamie:00:01:41

Richard:00:01:42Cheers, boys.

Rodrigo:00:01:44Yeah. Cheers. Jamie, thank you for having you bud. Thank you for being on.

Jamie:00:01:47Thanks for having me around.

Richard:00:01:50Yeah, hard to think of a more fitting topic than financial history for the last show of the year.

Mike:00:01:56And the decade. I got bubbly going today boys. Got a little bit of Prosecco … to celebrate the year roll. I’m Mr. Fancy Pants today. In honor of-

Rodrigo:00:02:06Is this the last one of the year? I guess it is.

Mike:00:02:07Yeah, this is the last Riffs because next time it’s Christmas, and then New Year’s. I’ll do one on New Year’s if you want to do one on New Year’s I’m down. I’m down to do it.

Rodrigo:00:02:15I like the idea.

Mike:00:02:16All right. We got a really cool guest too. I love Jamie, and probably the youngest looking historian ever. But don’t worry, the father time will take care of that. We’ll have a far ranging, wide ranging conversations day as usual. None of this is financial advice. If you want that, go to competent professionals. With that, I’m going to turn it over, Jamie, maybe you take a moment and introduce yourself, you’ll do a better job than us. Give us a little bit about your background.

Backgrounder

Jamie:00:02:47Yeah. I’m a self-proclaimed history nerd, specifically financial history. A day job outside of being a nerd is I’m an Associate at O’Shaughnessy Asset Management which is a quantitative long only equity firm based out of Stamford, Connecticut. But the reason I’m here today is I was a history major in college and I graduated from King’s College London in 2017 and when I came back to the States I got a job in asset management. I kind of joined this weird Twitter sphere that we’re all involved in finance Twitter, but I noticed that there are a lot of people putting out content similar to what we’re doing today, and a lot of people were writing and after I graduated, I didn’t have really a reason anymore to still be writing essays and articles which is what I did non-stop for three years for my degree. So I figured maybe I’ll put out like a five part series or something on interesting characters or moments in financial history and I’ll see if anyone is interested in that. To my total surprise, people were interested and it seemed pretty niche. I was not expecting that many people to read it. The last two years now I’ve just been doing more and more as I continue to figure out what people like to learn and how they learn about financial history and it’s been crazy. I’ve been very fortunate to find a niche that other people are already covering and it was one that played to my kind of niche set of skills which is enjoying digging through archives and writing about it.

Mike:00:04:28Now you are the chief history officer of O’Shaughnessyand not a badhistory officer.

Richard:00:04:34When we say financial history. Sorry.

Mike:00:04:36Go ahead.

Richard:00:04:36I was just going to ask how far back does it go when you’re actually thinking about some form of properly organized finance?

The History of History

Jamie:00:04:46Well, again, there’s some kind of aspects of that which is up to interpretation. The first modern Stock Exchange was in Amsterdam and that opened in 1602 I believe. It might have been 1609. One of those dates is when the East India Company was founded and the other one is when the stock exchange opened. But there are still some examples. Actually Mike Green who I know you guys have had on, he sent me an article recently. Now every time I say this, he’s in the back of my mind, like telling me that that it’s not true. But some historians argue that there was a form of a stock exchange in ancient Rome where shares of these Roman tax kind of corporations that were basically outside government contractors that collected all the Empire’s tax revenues. There’s some evidence of shares of these corporations trading in the Roman Forum but then other historians say that’s not true and it’s like a misinterpretation of Latin text. But theoretically, it could go back to ancient Rome.

Richard:00:05:47I thought I remembered seeing you cite a tablet of ancient Mesopotamia.

Jamie:00:05:52Yeah. That’s true. I guess I was thinking more like stocks and investing, but yeah, there’s a ton of stuff in ancient Mesopotamia, the tablet you’re referring to is like early financial planning tool. I call it the first FinTech platform, which is literally a tablet. But yeah, that was a tool that was forecasting the growth of a herd, it’s a different kind of herd of cattle, different asset, but same concepts from like 2100 BC.

Rodrigo:00:06:23Right. That’s fascinating. What I’ve been curious is I’ve seen your career develop quite quickly. I think we met at the March For the Fallen three years ago and then very quickly you created that connection with all the major FinTech people and you went off like a rocket. As you developed into your career of Chief Historical Officer, what is it that you think the O’Shaughnessy team wants people to get out of your content? Because you’re teaching history, you’re putting it out there, what is your goal? What is the overarching mission of putting that out there in terms of investment? Or is it just pure entertainment?

Jamie:00:07:12Well, for me, that’s like a blend because it’s entertaining to me whatever I’m writing about related to history, but I’m writing a lot outside of just history. Obviously, I particularly love writing about financial history and figuring out a way to mix that with our actual research content. But in general, I think the value of a liberal arts degree or a history degree is really all you’re doing for your entire degree is taking a ton of information, going through it, synthesizing what’s important and distilling it down into your own argument and narrative that you’re hoping to persuade someone to your point of view. You’re just swapping out like, at O’Shaughnessy I’m just swapping out the historical sources I was using in college for a more wonky data and stuff and factor decile spreads instead of primary sources from the 18th century. So, at O’Shaughnessy it’s a lot of just using the writing muscle more than financial history but for the history stuff, I think it’s helpful especially at a quant firm where with fundamental managers, like in my first job, I was working at an institutional pension consultant and we were having manager meetings all the time because we were doing the due diligence on them and when you’re meeting with a fundamental manager, a typical discretionary manager, and they have stories for all the stocks in their portfolio, it’s kind of easier to be convinced by them or persuaded why a stock is doing X, Y, or Z, like why their performance is down or up, what have you. But for a quant, to other quants and people are into that kind of stuff, if you show them all your data, they can make sense of that but when you have a client whose portfolio is down and lagging the benchmark, and then you just show them a bunch of like decile spreads, it’s not as convincing, their needs, like even if you’re trying to win over a prospect or show why your process is powerful and leads to alpha over time, putting stuff in perspective. The way I do this through history is often helpful.

Like last year, I did a series called “The Factor Archives“, where the history factor or value investing their own shareholder yield and just looking at the first dividends and the East India Company and how even back then dividends were associated with investors at that time, they associated it with good management let alone just like we’re receiving cash, but that’s what underpins our use of shareholder yield today. Just like putting all that into context is helpful.

Mike:00:09:54That’s really great. When you think back your history Jamie, everyone talks about the first Stock Exchange and I can actually wonder about – I would assume, so I’m going to make some assumptions and throw them at you and you can correct them all. I’m going to assume generally speaking, the first markets that would have existed would have been more commodity related. Grains, rice, something like that evolving. When did they evolve? Do you know when they evolved more to incorporate businesses or sort of discounted cash flow type assets? Then an ancilla, next question is when did government bonds become something that existed and when did the risk free rate change the calculations? I guess, if even it’s an extension of the cash flow question. When there were cash flow assets how did they discount those in times before they had a potential risk free rate? When did governments provide bonds in the context of risk free rate? Have you got any insights there? I’ve always I’ve always wondered about that. I just don’t know.

The Evolution of the Exchange

Jamie00:11:04Yes. I can answer some of those and I can point you in the direction of papers that will give you better answers. I know the papers off hand but in terms of commodities exchanges I know in Asia there was the dojima rice exchange. I don’t know when that was, but way earlier than the Stock Exchange. I want to say that was like 1200s or 1100s if I am not wrong.

Mike:00:11:33We are fast and loose gear with the facts, just throw them out here.We can back them in the show notes.

Jamie:00:11:38In Amsterdam, actually in Antwerp, there was the first kind of legitimate commodities exchange and that was in the 1500s. That proceeded the Amsterdam Stock Exchange by 100 or 200 years and in terms of government bonds, I think the first kind of legitimate government bond issuance that we would recognize in some form, was still very different but was from 12th century Venice or Genoa, but somewhere in Italy in the 12th or 13th century I want to say. That’s also at the same time, it’s like the Medici’s and all those super families were in existence. Then for like more modern debt though, I would say in the 1690s was when the Bank of England was founded and that was occurring at a time where there’s a crazy tech bubble going on, if you can believe it, in 1690s. In this course I’ve just launched a professor called M.Murphy from the University of Hertfordshire, she gives a lecture on this bubble and creation of first traded government debt. The Bank of England, the bubble started because there was a treasure hunt which sounds crazy, but there’s a treasure hunt and the way it was financed was through a joint stock company. So the small group of investors in London financed this guy’s voyage who I basically have heard for a long time, there was a sunken Spanish ship that had been sailing back from somewhere and it had a ton of gold and jewels on it and sunk and they heard people on the docks talk about it, I guess, finally he was like screw it, I’m going to go actually see if this is there. So, these financers, finance to the ship, cargo et cetera to fund the journey and he found it and it led to I think they found like 36 tons of treasure which is just I can’t even really picture how much that is. And the investors who backed the journey made like 10,000% returns. And when word of that spread, there was this boom in diving technology companies which were a bunch of new kind of joint stock companies because people had seen you can form a company this way, and look how successful it was. Then there’s just this boom in joint stock companies but particularly for these diving engine technology companies that would let you hunt for treasure longer by like-

Rodrigo:00:14:09Couple of two by fours in a piece of glass.

Jamie:00:14:11Yeah. Essentially, there are these weird diving apparatuses that would let you breathe longer underwater and it’s just a very simple thesis of if you can breathe underwater longer, you can search for treasure longer, which means you have a better chance of finding treasure, and none of them ever found treasure. They were all unsuccessful. But this was occurring at the time when a British had just finished their Seven Years, Seven or Nine Years War with France and so they had a ton of debt and they needed to refinance and take care of this outstanding debt they had to pay. And so, rates were lowered and then when all the speculation occurred, then the Bank of England saw this mania occurring and realized that if they offered slightly higher yields then they could get a ton of money from these investors and so the Bank of England set up I think it was called, literally the Millionaire Fund or something. But essentially it was a bond offering and this is like the Bank of England first came into existence and started issuing debt and a lot of those investors that we’re going crazy for these technology stocks pivoted towards this higher yielding-

Rodrigo:00:15:24That was 1690?

Jamie:00:15:26Yeah.

Rodrigo:00:15:28Okay, that makes sense. I’ve seen charts go back that far for UK gilts.

Mike:00:15:34Fast forward 500 years and you got SPACs. Boom.

Jamie:00:15:37And I can’t remember there was more questions along with the last ones.

Jamie:00:15:41Ah no, that was it. It was that commodities over to sort of the cash flow assets. Then bonds, when did we see government bonds manifest in the first time? Really when did we start to see if you know the integration of government bonds as a comparison asset, I guess it is. Like assets today compete against each other, there is this kind of cash flow links but is there any idea there? Obviously, I actually forgot about the need for civilization to have war which always creates the opportunity for some debt and then the spoils of war. But any linkages there that you can point to or?

Bubbles and Wars

Jamie:00:16:22Yes. Almost every bubble in history is preceded by an expensive war. It happens again in the 1720s in the South Sea bubble, the 1820s at the Napoleonic Wars, and just like so on, it’s always related. But you’re right that in 1720 I don’t know how much you can really read into it because South Sea mania at the time, but there was evidence of from that point up until like the late 19th century, investors largely viewed stocks as just a riskier form of bond and the main comparison was comparing the dividend yield and the corporate bond yield or bond yield on government bonds, consoles in the case of the UK. It wasn’t until like the 1920s or so that people realized, not realize but started giving more credence to the fact that with stocks you actually had capital gains potential and not just focusing on the dividend yield.  But you’re totally right that for hundreds of years the main kind of comparison was looking at the dividend yield available on whatever corporate stock you were looking at versus the government yield, or even the corporate bond for that same company. It was in the US in the 20s, Irving Fisher wrote a book, can’t remember the name, but he started focusing on earnings and the power of earnings and in the US, the quality of information on financial statements was so much higher than in England, that price to earnings and other earnings based metrics started to become much more widely used while in the UK, everything was almost dividend based and much more focused on that, up until even like the 1950s or 60s when some changes in financial disclosures came into play.

Mike:00:18:18Is that is that the Fisher that Buffett always says he’s part Fisher, part Graham?

Jamie:00:18:22Fisher is like the ultimate, he is like a growth at any price, like he pay whatever to get some slice of future growth. So, he could have said that but yeah, I only know this off memory because it was in my Sunday reads of two weeks ago, but I can send you the paper. There’s a guy who literally looks at the evolution of valuation and equity investing since like the 18th century.

Richard:00:18:47I was just going to ask him outside of the obvious manias and bubbles and some of the anecdotes that we’re all sort of familiar with to some extent going back into history, what are some of the stories that you’ve learned that have captured your imagination that are not as well known about the history of finance and just the investors’ behavior which would dovetail a little bit with what we’re experiencing today?

The Three I’s

Jamie:00:19:15Yeah, I think that one of the most interesting themes that clearly replays itself throughout history and is actually one that you can notice, like reoccurring, is this idea which I’ve written about called the three I’s, which is the innovators and then imitators and then idiots. Again, like I already told you, the 1690s tech bubble story there is the innovator who goes out and finds the treasure, comes back crazy returns and there’s an explosion in diving technology companies that are trying to imitate that success and then the idiots are the groups of those companies that were just total frauds that had no intention of actually ever producing a piece of technology but they just claimed to have a patent and like issued stocks to gullible investors that bottom up. In the 1820s, you have similar dynamic, there was an explosion in Latin American mining companies because there was just a kind of period of success or independence from Spain in a bunch of these former colonies and once that happens, a lot of these new country or newly independent countries came to England for financing and there are some successful mining exploration companies but also British investors started just snatching up the much higher yielding debt of these countries because again, at that time after the Napoleonic Wars, the interest rates on bonds in the UK fell dramatically and so there was a hunt for yield which is a very common theme in history and it got to the point where amidst all this kind of mania people were getting excited about the successful mining stocks that had IPO’d so far. There was a guy named Gregor McGregor who invented a fake country and successful-

Rodrigo:00:21:09Not a real…

Richard:00:21:13Something I want to hear, a seriousstory.

Jamie:00:21:17Yeah, it does not get more Scottish than Gregor McGregor. He had fought in the Venezuelan War of Independence. I don’t remember why he was there. But for some reason, he was involved in it even though a super Scottish guy. After the war ended, he just kept sailing around and eventually he happened upon, I think it was off the coast of Honduras, like a small uninhabited island that was just jungle, like it was not in any way developed but he decided that that island was going to be the country of Poier and he decided that he was the Grand Prince. So he sailed back to London and when he arrived there, it was in a period where again, English investors were just snatching up high yielding debt of other countries like Peru, whatever. To be fair to the average British investor in 1825, like how are you going to know that that country’s fake? You’re not going to have been to any of them, you probably don’t know anyone that’s ever been there. So, sounds like it could be from that region, Poier. I don’t know. So, he goes back, and he tells everyone in London about this utopia that has a parliamentary building that’s beautiful, a Cathedral and a Opera House and mines that are just brimming with gold and silver and it’s just a jungle. That’s it. He floats like, I think it got up to the equivalent like a billion dollars’ worth of debt in today’s terms. He floated on the London Stock Exchange, he actually convinced 300 Scottish settlers to actually buy up land and go move there. I think like six ships arrived eventually and 80% of the people that went died, it was just the worst in history.

Rodrigo:00:23:01The consequences of a fraud back then were much more dire than they are today. Brutal. What’s crazy about all these stories is how everything has changed and yet nothing has changed.

Jamie:00:23:15Yeah. So for me it’s like, when I was reading about that and later you have the British bicycle mania in the 1890s where 670 bicycle companies went public in two years, we think that like the EV boom now is crazy. Imagine if in two years 670 electric vehicle companies went public, like it would be insane. Again, this was after a technological revolution had occurred, which sounds crazy because we’re talking about bicycles, but it went from those massive Penny-farthings where you had the huge front tire and then the tiny back tire, they figured out how to make the modern looking bicycle and the British public just fell in love with them and so production and new bicycle companies just ramped up. But then, again, after there was some initial success and good returns in the existing public bicycle companies, then as investors were searching for more shares of these bicycle companies there was always going to be a group of stock promoters that were more than willing to just come up with new bicycle companies and float shares to take advantage of the situation. So you had this boom and obviously almost all of those companies did not produce a product or produce anywhere near the returns of the first movers and you had fraud that was ramping and so I compared this recently, this kind of trend of the innovator, imitator, idiot to electric vehicle mania this year where I don’t think it’s a coincidence that all these new EV startups in SPACs and everything have come after at a lag because that’s always how it happens. Tesla’s like ridiculous soaring returns earlier in the year, and so it’s also like a name brand company that you don’t really have to be into the markets to know. Everyone knows what Tesla is and sees it and thinks that Elon Musk is great. So, once they hear the stocks gone up like hundreds of percent they think where, can I find the next Tesla, and to Nikola, and all these other EV companies. So that three I’s progression definitely played out faster and there’s more to go but Nikola is obviously the idiot in this progression and it only took a matter of months for that to play out.

Richard:00:25:34Is it Nikola or the investors that are buying into?

Jamie:00:25:38That’s true? I guess it’s a bit of both.

Rodrigo:00:25:42But it’s just how it all rhymes. I just love the idea of bicycles being high tech. You know what? In your recent article on the Cleveland stock market, how they were the VCs of the time and the companies that we’re talking about were all utility companies, right? Like TriCity and … that exist today back then where that’s what you want to invest in.

Jamie:00:26:16And what’s like crazy about that article which I didn’t realize is, again, they were the VCs of the day and it was the Silicon Valley, which is crazy is Cleveland. But the VCs at that time, the differences in investing today, no one would think of VCs and associate that with dividends. Like no VC investor is looking for dividends. But major distinction they made at the time was that even though there was a Cleveland stock exchange that was founded, it was basically only established because brokers in the Cleveland area at the time were trying to figure out some way to take advantage of all this innovation and success going on in the area but most companies didn’t actually float on the exchange, which today would be the logical next step. That’s the exit for a VC fund. But they said at the time that most of these VC investors, the way that they were looking to recoup their money was through long term business growth and recouping their investment through dividends which was just like total opposite of what you would expect today is, I find that fascinating.

Rodrigo:00:27:21

Mike:00:27:24Cleveland was almostprobably the richest place in America through the robber baron era, wasn’t it?

Jamie:00:27:29Yeah, exactly.

Mike:00:27:31So where there’s money.

Rodrigo:00:27:33Yeah. What was interesting there from the article was that New York Stock Exchange was dominated by railroad companies at the time and while the Cleveland Stock Exchange was dominated by the available companies in the beginning, 10 years later, it only had 50% railroads and the rest were these type of innovative utility companies.

Jamie:00:27:55I think the most famous one was Brush Electric and it at one point had built like 88% of the nation’s arc, like lamps that would you have like on street walks and stuff. And so totally boring companies but innovative for the day.

Mike:00:28:11What are the other- Are there any other initial conditions that you have noticed in your studies regarding the manias and the fraud? The three I’s is sort of a really big success, the divers, the Tesla’s, I think that there was the Diamond Fields Resources, there’s big discovery of nickel in Canada, and then Bre-X came after that and everyone was so hungry in Canada for the next big discovery, they were ripe for a potential fraud. Is there any other like easy money? I guess we’ve sort of said, okay, postwar you’ve got this easy bit of money so you’ve got excess liquidity running? Is there any other commonalities that you’ve pulled together as you’ve weaved this tapestry?

Jamie:00:29:00I’d say that’s definitely the most kind of easily recognizable one is war and then following war government trying to refinance and just figure out how to pay off the debt. So the rates are low and investors are forced to search for income and returns elsewhere which inevitably pushes them into riskier assets and-

Mike:00:29:24Forces them to the casino tables.

Jamie:00:29:27Yeah, it’s easy for people to start companies that are not necessarily sound companies to invest in. So you see that and then also, a lot of times, there’s some new financial contraption like an Investment Trust or SPAC…

Mike:00:29:44Some sort of financial innovation.

Jamie:00:29:46Yeah.

Mike:00:29:46Yeah. Go ahead. Talk about that because I think that’s-

SPACs

Jamie:00:29:52 What SPACs even there’s – is like examples of SPACs going back to the South Sea bubble. One of the interesting things at that time was that basically to be able to have tradable shares and go public you had to receive a royal patent from the government and/or a Royal Charter. And unless you had that it was illegal to have any kind of tradable shares. So what some kind of savvy financiers were doing was buying companies that had an existing charter and then just totally doing something else. So, I kind of made the comparison that’s like SPAC, one of them was like a York Water Company where it was literally just handling waterways and boring stuff like that for a city, I think it was York, but the guy who then acquired the company decided that – I can’t remember exactly, but basically something had happened in Scotland where there was suddenly all of these grand estates that were vacant and his plan was to basically sell them, like buy up those properties, sell them, and then use that to fund some type of new weird annuity product that he was going to sell. But this was all being done by a water company. So, it’s just like this idea, I’m going to buy this company and then do something completely different with it, which seems kind of analogous to today where we do not like, you don’t know what’s going to do, you just trust me that I’m going to turn it into a totally different company and it’s going to work out well.

Rodrigo:00:31:32Yeah. It’s interesting how this has been around for a while. But again, it’s like what catches fire? It seems like SPACs are catching fire. I remember talking about SPACs when I first got into the industry. Nobody can make them work and all of a sudden, there’s this fervor for SPACs, and every SPAC seems to be fantastic and amazing and everybody’s investing money into it. What happening today that’s forcing those SPACs to be so coveted.

Jamie:00:32:03I definitely think obviously that there is a ton of just mania going on with SPACs. But I’ve evolved my thinking a little bit to the point where I understand it more because Michael … put out like a insanely good as always 80 page report, I can’t remember the title, but it was just talking about the progression from public to private markets over the last decades.

Rodrigo:00:32:29That was agreat piece.

Jamie:00:32:31Yeah. And once I read that I started thinking about it more and it kind of made more sense because for the last decade or two, definitely from the last decade, there’s just been a constantly the idea, one, you have a couple different trends, one, less companies are going public, they’re staying private longer and all the big institutions are moving into private equity, private debt and that was for a long time sexiest place to be which obviously for the average retail investor you can’t access that. And with VC, so many of the flashy hot tech companies are all staying private longer. They don’t want to go public. It wasn’t until recently that some of them started going public. So for the average retail investor you’ve had a winnowing pool of publicly listed stocks to choose from, and try and generate excess returns and then also, this whole time you’re watching this whole side of the market that you can’t access, be where like all the alpha is and all the kind of like sexy tech names are and you can’t get any of that action and so with SPACs I feel like part of it is just the thrill of finally being able to access in some way this private market because indirectly you can basically invest in like a Bush League VC Fund where you’re just giving them money and then betting that they can find a coolest future successful private company and then bring it to market. But obviously, it’s actually very different than VC funds. But if you look at it through that lens, I feel like it makes sense why retail investors are just so crazy about SPACs. It’s like-

Rodrigo:00:34:15VC for the masses, yeah.

Richard:00:34:18The issuing companies are also going to-

Jamie:00:34:20…DTC play.

Rodrigo:00:34:22That’s right.

Richard:00:34:23I’m sure the issuing companies are also eager to bypass the middlemen, pay less fees going public, the regulatory hurdles for them as well I believe are much lower than a proper IPO. It’s the era of easy money, right? Which is what I wanted to ask you, taking a couple steps back outside the, sort of equity world and trying to get a sense of where we might be in drawing analogies through history. You’re talking about how wars usually beget low interest rates but we find ourselves to be in the lowest point in interest rates in history without any war-

Mike:00:35:06What do you mean? There’s a war on virus, we’re under attack.

Richard:00:35:10Yeah. But we were there before. The pandemic was the catalyst, but we were experiencing something that’s been going on for the past 30, 40 years.

Mike:00:35:19… sounds like that. That’s fine.

Richard:00:35:21Yeah, that’s fine. So, what kind of analogies would you draw? Obviously, the 1918 year is where everybody would go for the Spanish flu. But trying to understand in terms of the system, a lot of people talk about a paradigm shift and an exhaustion of the system. How might you draw a parallel through other points in history?

Jamie:00:35:42It’s an interesting point that I haven’t looked into as much but now after this I’m going to because I feel like today the conversation around rates and inflation is dominated by the kind of technological innovations that have kept prices low for key categories because of how much productivity and technology has progressed. So we’re also having less war. It’d be interesting to look back and see how much of technology has played a role in periods where rates were low, and whether that’s masked by just the constant war for centuries? But I don’t have a good answer to that. But it’s interesting-

Mike:00:36:26You know what would be interesting too is how much has war had an implication on technology development.

Rodrigo:00:36:35We know that.

Mike:00:36:37Nothing motivates like a deadline of having to survive as a tribe.

Rodrigo:00:36:41Well, think about the technology, let’s talk about this COVID war. But if you actually think about it from that perspective, the amount of communal mental energy, just focused on solving one problem has created new tech that would have been unpalatable to discover this, this ability to create this mRNA vaccine.

Jamie:00:37:08That’s been in the works for seven years I was reading.

Rodrigo:00:37:12And they fixed in once everybody focuses on one thing, like they focused on the atomic bomb, like focusing on the vaccine today. You create these side businesses or new technology that’s going to feed the industry for years to come. It is like a war in tech in that perspective. There’s going to be some massive winners out of this if there aren’t already.

Jamie:00:37:36Speaking of war and tech, because Facebook is running ads today talking about helping small businesses fight Apple’s terrible policies, which is very ironic campaign for Facebook to take.

Mike:00:37:49We do have a question from Lautaro Parada on what makes a Bubble Pop. We have talked a little bit about how they form, what is the initial conditions that create this huge bubble opportunity to prosper and get hurt? What are the conditions where you start to see that fall apart? What should investors be looking at? Are there any examples that you might point to today that might look a little bubbly, if you will?

The Sound of Bubbles Popping

Jamie:00:38:25I feel like in history that a lot of the time it’s either, and it could be one of few things, but one of the obvious answers is an unexpected hike in rates, where suddenly financing becomes more difficult and companies become unable to pay their debts. But also, in history there’s a very common trend of whatever the new kind of sexy investment is of the day, there’s often one large bank that is way too levered and exposed to that new investment and if something goes wrong, even if it is related to rates being hiked and then that company or even that sector that they’re one bank is heavily exposed to falters and fails, then that brings down the system. Like in the 1870s that happened with, I can’t remember the name but with the railways, where it was great. And again in 1890, there was the Barron’s crisis where even history repeated within 70 years. Again, British investors were just flocking to high yielding emerging market debt because rates were low and they’re going into Latin America again for these high-

Mike:00:39:43Don’t trust those Latinos.

Richard:00:39:47It’s always Argentina. It’s always Argentina.

Mike:00:39:50… it’s Argentina.

Rodrigo:00:39:56First you mispronounce our question askers name.

Mike:00:40:00I’m sorry.

Rodrigo:00:40:01Latoro Parada let me just fix that problem. And then after you do that you rail on you rail on about South America?

Mike:00:40:10I didn’t rail.

Rodrigo:00:40:10Riding high yield investments…

Mike:00:40:13Income. We’re providing income for retirees if you don’t mind.

Rodrigo:00:40:17Right…

Richard:00:40:17We’re helping out those gringos

Jamie:00:40:19Yeah, it’s something like 14, I actually might have. Yeah, I have…maybe two seconds. Goetzmann had an article this professor from Yale, he’s like the godfather of financial history and he had one talking about like modern portfolio theory for the British investor in the 1890s. And some of the yields on these were just like crazy. I think British bond yields at the time were offering like 2.2% and these Latin American bonds were offering 14% or something like that. And it’s just like, well, this is obvious what-

Mike:00:40:58That was like four years ago. Literally, within the last five years.

Rodrigo:00:41:03Quote me an example of this. Like this idea of…You correct me if I’m wrong, Richard. But you guys, investors in Brazil we’re getting paid ridiculous yields on these TIPS.

Jamie:00:41:16In the 90s.

Rodrigo:00:41:19So every Argentine just owned bonds that yielded 16 to 20% for years. So there was no point in being a thoughtful asset manager and saying, listen, I think if I try really, really hard, I might give you a four to 6% annualized rate of return, just get out of my country. And today, what are the yields are in Brazil right now?

Richard:00:41:41It’s quite low. It’s mid to low single digit. I think it’s like prime, is like 3%. A couple years before I left for Toronto, a couple of years before I moved, it was around 14. But if you go back to the 1990s, so not that far ago, it was up in the 30% range. 30 to 40% range.

Rodrigo:00:42:00Andthese are TIPS

Richard:00:42:02No. I’m not talking about nominal. I’m talking about the nominal. So, the TIPS in Brazil, they do have a different dynamic and are slightly different than the North American TIPS that we’re familiar with. But one of the interesting things that I remember reading was that it’s often the case that when the majority of the holders of the sovereign debt are local holders, it’s much less likely that there’s going to be a default. So the fact of the matter is, Argentina particularly was always issuing for foreign holders. And it’s much easier for you to default if you’re not going to be incurring the wrath of your local citizenry.

Rodrigo:00:42:42Your voters.

Richard:00:42:42Right. They were all across the ocean and back in the day, it was much harder for them to come and enforce. So Argentina has defaulted I think nine times in the last 150 years, something crazy like that. I’m sure Jamie would have that.

Jamie:00:42:56I don’t have that and I’m bummed I can’t find that in my stack, the thing I was looking for. But it was like 14%, I don’t remember what country but in a Latin American country. 1890 was the first time that Argentina defaulted on its debt.

Rodrigo:00:43:14No, No, I’m not Argentine…

Richard:00:43:17

Rodrigo:00:43:20Always rail on the Argentine’s.

Jamie:00:43:22 That brought down Barron’s Bank in 1890s, as what’s called the Barron’s Crisis, and it like really just brought the whole system to a collapse. Now, it’s like the kind of first instance of an EM crisis.

Mike:00:43:38It’s hard to fathom though, especially as the system has gotten more and more integrated with larger and larger financial players, but it’s hard to step away from the poker table. If all your buddies are making money and financial innovation is occurring. How do you rationalize to your shareholders that you’re not going to participate, that you’re not going to take the bonus that you’re not going to be involved at all?

Jamie:00:44:02My favourite quote-

Rodrigo:00:44:02

Jamie:00:44:06Yeah, one of my favourite quotes was from The Economist, that thing in like the 1860s, and it said, with good information and cheap money a man can go broke in a week. That’s very relevant for today. You have an edge and there’s cheap money but-

Mike:00:44:24 Did you ever find…We were talking about sort of these varying degrees of, I guess bubbles, but did you ever come across or can you think of any innovations that were truly spectacular but didn’t encounter a bubble necessarily? Is there a thing like that, that just flies under the radar where we’re not looking for it?

Jamie:00:44:44I’m sure there is and I will remember as soon as we get off this call, but there are a lot of…To kind of avoid your question because I don’t have a great answer.

Mike:00:44:54No. I’m spit-balling so…

Rodrigo:00:44:54Its okay.

Jamie:00:45:00…that to. There are like technologies that produced the bubble but the after-effects were still a huge benefit to society, like the tech bubble and even-

Mike:00:45:10The railroads.

Jamie:00:45:10Yeah, that was gonna be my parallel. So there’s interesting examples like that where it wasn’t just a totally-

Mike:00:45:22It wasn’t a scuba gear boom of 1693.

Jamie:00:45:24Yeah. I don’t know how much that led to but the railway is definitely for a huge kind of obviously, it laid the infrastructure for transportation in America. And the tech bubble did the same with internet infrastructure. So there can sometimes be lasting benefits of bubbles despite what happens to-

Mike:00:45:45Lovely. Have you ever also looked at the robber barons were the last time we had this kind of concentration of wealth? And so, you have the technological revolution, industrial revolution. Is there anything else like that you’ve seen through history where these innovations are accruing to a small number of people or is there any correlation there, causation there? Or any notices of that type of thing through history or?

Jamie:00:46:15Yeah. I think it’s related. Our co-Chief Investment Officer, O’Sam, Chris Meredith and I worked out I helped him he wrote the paper, I did a little bit of help on the research for the history stuff, the papers called “Value’s Dead”. It was looking back at using Carlota Perez. She’s a professor I think at Cornell, but her technological revolutions framework, and she has this whole progression where I can’t remember the stages, but basically the way it begins and each technological revolution is, there’s the innovation and then there’s kind of widespread, not widespread but fast, like frenzy of adoption of that new technology and whatever sector it’s relevant to or whatever sector it was kind of born out of. And then once word spreads wider, the financial capital and actual productive capital, so the actual companies start to decouple and that’s where you get the bubble. And then there’s usually a turning point which is a crash of some sorts and then after that, that technology gets diffused across broader sectors. Then it’s in that stage, we were looking at it through the lens of value versus growth and first stage that’s obviously where growth dominates value. But then after the crash, when that technology gets diffused across the broader economy, that’s when value stocks tend to outperform. And so, we looked at is the boom in the combustion engine in the early 1900s and up until it started to appear, we looked at it and like 1908, I think was the Model T when that came out. And the innovation though was the internal combustion engine and all of that excitement and growth was within the manufacturing sector. If you look at the portfolio breakdown by sector of what a value and growth portfolio would have looked like in that day, like manufacturing growth portfolio is just like all manufacturing.

So once you had this boom in auto stocks and it was all based around an internal combustion engine, that made things cheaper, Henry Ford’s Model T, like the price just progressively kept going down and down. The railroads which were heavily exposed in value, like value portfolios, is that’s what they were predominantly holding, they suffer heavily because suddenly trucking was a cheaper option for companies to transport their goods. So value just really lagged growth and during that period because it’s all concentrated that growth in one sector, there are a lot of oligopolies and kind of monopolies that form. And then after the crash though, railroads adopted that internal combustion technology and they switched in the early 30s to like all the dieselization of railroads, and that brought their price point down. So railroads were then more competitive than trucks. And there is a famous example of Southern Railway, I think in the 15 years before the crash, which was the turning point and it had underperformed by 80% or something. And then once they made that switch and adopted the new technology, it went on for like 8,000% over the next 15 years. And that was pretty common across railroad stocks that adopted the new technology. So today, the comparison we made is, we’ve all heard the phrase like every company is a software company, where it’s not tech companies that are using software heavily especially in COVID. So many traditional brick and mortar retail stores have been forced to adopt an e-commerce presence because otherwise they literally couldn’t sell anything during a lockdown.

Rodrigo:00:50:00Table stakes.

Jamie:00:50:02Sorry.

Rodrigo:00:50:04But it’s table stakes.

Jamie:00:50:05Yeah.

Mike:00:50:07Rod, you’re echoing for some reason.

Jamie:00:50:08So it’ll be interesting to see how that plays out. I don’t know if Target’s going 8,000% in the next 15 years. But it’ll be interesting to see like Domino’s, that stock has crushed it and a lot of it is due to the delivery network that they’ve set up and the technology behind that. So just interesting to see that diffusion across the economy of more previously just tech dominant technology.

Mike:00:50:36So where are we in that process with respect to block chain?

Jamie:00:50:40I don’t know. I’m not the person to ask about crypto.

Mike:00:50:43Come on. You brought the framework, break it down for us. Speculate.

Tesla Puts?

Rodrigo:00:50:48Let’s stick with cars for a second. One of the questions is something to the effect of when are we buying, who’s buying puts on Tesla? You wrote an article maybe last year? I don’t even remember, but it talked a little bit about Tesla the manufacturer and was it Tesla itself then had these constant innovations that he was getting financing for that never came to fruition? Can you tell us?

Jamie:00:51:15Yeah, the key-

Rodrigo:00:51:16A lot of … sometimes that people think are there? That’s like the thing guys. Everybody relax.

Jamie:00:51:22There’s a couple interesting things with electric cars and the story you’re referring to is the Keeley Motor Company, which is I think that must have been like the 1880s or 1890s. But the electric vehicle is not new. The electric vehicle, the first one that was produced was produced 50 years before the internal combustion engine. So it was actually the original car. So it’s not like a new thing. It’s actually just making like a century long comeback story. By 1912, there were I think 36,000 electric cars on the road, Henry Ford’s wife drove an electric car. I wrote a paper about or somebody Reid sent out this in August, but like Baker Electrics, Jay Leno actually a couple years ago he has one, of course, because he’s Jay Leno. And he took it out for like a test drive and showing everything about is a real 1909 Baker Electric. But again, because there was excitement around driving and new automobiles, there are a lot of fraudulent companies. So one of them was the Keeley Motor Company and this wasn’t related to cars, but it was still a kind of, I can’t remember what he called it. I think it was the perpetual motion machine-

Rodrigo:00:52:36The perpetual motion machine. That’s right.

Jamie:00:52:39And is this like revolutionary new type of engine. And he claimed that off a single quart of water that a steamship could be powered like for a return trip from New York to Liverpool and back off a single quart of water, like that’s all it would need. Obviously, investors who believed him were like, wow, this is the next thing so they invested and for 26 years he kept up the ruse and kept just announcing other exciting projects whenever investors would start demanding evidence that he was ever going to produce a product or something related to this perpetual motion machine. He never brought anything to market in 26 years, and they didn’t figure out his kind of lies and just network of deceit until he died and they went through his laboratory and they saw all the tubes leading nowhere and how he had fooled all the investors. It’s like the same tactics and I guess you could accuse Elon Musk- I mean Elon Musk has obviously built a product and brought something to market but just the tactics of every time he didn’t meet something he said he’s going to meet is like-

Mike:00:53:47If you take a body panel off, you see a Nissan LEAF underneath.

Rodrigo:00:53:53That’s right. I just love it. I guess the name perpetual motion machine is almost probably 90% of its success. Has a lot of great marketing, great salesperson. That really doesn’t look like a great salesperson. Do I want to buy puts on Tesla? Hell no. Are you kidding me with that type of branding? That’s like suicide. You guys might all be right, but there’s no way.

Jamie:00:54:17Just their stock price is a perpetual motion.

Rodrigo:00:54:18… like having the perpetual motion of the stock price going up.

Mike:00:54:27I’m immediately shorting some shares, calling my broker for a borrow.

Rodrigo:00:54:31Classic Philbrick, but you have to do everything.

Richard:00:54:34So with all your financial history perspective, I now you don’t want to dive too deep into the Bitcoin craze or the crypto mania if you want to call it that, but we might draw a few parallels. Everyone thinks about the Tulip Mania, but we are experiencing some. No. You’re shaking your head.

Tulip Mania

Mike:00:54:54No. He’s got some top comments on the tulip mania. You can’t just throw Tulip Mania around like that. It’s not even that great. Dude, he’s done the research, First of all let’s fact check you.

Jamie:00:55:05Now this is a area where I can confidently fact check because I know that I have the data on my side. So basically you don’t know what you just walked into. So I’m sorry you’re gonna regret mentioning Tulip Mania. But now you’re going to be like, why is this guy talking about Tulip Mania for five minutes? So the book that everybody loves, Charles McKay’s Popular Delusions in the Madness of Crowds, or whatever the exact title is, is interesting work. I mean, it’s not all wrong but so much of it is just based on totally terrible historical source work. So, what happened is during Tulip Mania, there is no question that there was ridiculous buying and selling of tulips that we consider high prices. But first what you should consider is compare that with the art market. People are buying and selling paintings and some of them like modern art you see is how is that worth $8 million, or whatever. It’s all kind of relative and if you view tulips at the time which is how they viewed him as like this luxury asset, because it was all coming from these new trade routes that were being opened up and these tulips were coming through and it was like a luxury thing to be interested in just like artwork today, or sculptures, whatever.

Richard:00:56:26Scarcity, right? All hinging on scarcity.

Jamie:00:56:30Interest in like beauty and it’s something that like really, only luxury class were buying. But what the problem came from is that the merchant class was becoming interested in tulips and they began cultivating them and came like a popular trade and the rich elite did not like it that suddenly these merchants were starting to make money off of this and kind of progress up the societal status chain, and is really just like the new money, like these people were landed gentry, like these people are not classy they should not be in the same social rank as us just because they started making money off tulips. So what happened was, this wealthy elite class started circulating all these pamphlets that were just propaganda saying things like these merchant men are trading tulips all day at the tavern, like getting blind drunk while their families and kids starve at home because they’re losing all their money on tulips. All this was circulated just to get the general public’s like, the tulip trade to be negative and have a blowback against this whole trade. And that’s where you go-

Richard:00:57:49Deflate the bubble?

Jamie:00:57:50What?

Richard:00:57:52Were trying to deflate the bubble, essentially-

Jamie:00:57:55 Yeah, like the fact that these merchants that were predominantly making money off of this trade, because they’re the ones actually like running the tulip market. It’s like tulip trade, that they were suddenly being able to make money and move up the social rank because they had this money to be involved with the old money like elite class. So yeah, they tried to put a stop to this trade in general by circulating these pamphlets and then that’s where you get the stories men committing suicide because they went broke and bankrupt trading tulips or they were talking about like the story of tulips trading for the price of houses that comes from these pamphlets. And there’s all purposely over the top and apocryphal in almost all cases because there was propaganda geared to make people say, this is insanity. The problem is that Charles Mackay, he based almost all his work and research on Tulip Mania from I think it was an 18th century German author who sourced all of his stuff from these pamphlets. But he got those pamphlets and interpreted them as fact and just said everything described in this pamphlet happened. And so he wrote about it and then that passed down to Charles Mackay. And now that’s why today, everyone thinks that these insane stories are true and they’re not. Anne Goldgar who is actually a professor at my alma mater at King’s College London until this year, she’s now at the University of Southern California. She wrote a book called Tulip Mania, which is amazing book. And she basically in much better words describes what I just described. In her research I think, in Charles McKay’s book, he claims that one tulip was traded like 40 times or something, and she spent years in Dutch archives looking through and the longest string of transactions she ever found for a single tulip was five. There’s so many of these stories and-

Richard:00:59:52So the price patterns that are commonly believed to have happened and that’s why I brought it up because it was trying to see whether you might have other parallels throughout history of what we’re witnessing with crypto and I guess with some of the tech stocks and to maybe try and get a bit of perspective on that. That price pattern of the tulips is widely overblown.

Jamie:01:00:15Again, there was still some expensive prices being paid for tulips, but it is not anywhere near. And the other thing is that I haven’t read the book in like a year and a half. So I’ll probably botch part of this but the way that many of the contracts worked was you would buy the right second option, buy the right to pay for that tulip in the spring, but you would enter into the contract in the fall. And essentially what would happen is that like, I also have not a horticultural expert, but I think they would like then put the tulips underground, bury them for the winter to then dig back up in the spring. So when you entered into the contract, you’re buying the right to buy that tulip but you might have entered into at a ridiculously high price. But that by no means meant that anyone actually ever paid that price because come spring, you didn’t necessarily buy that tulip. So a lot of the crazy prices that are listed as having occurred didn’t actually happen. But there are some crazy instances where when people knew that they had a particularly rare type of tulip, like the color or whatever and that what it produced would also be valuable, and they didn’t want it to spread and they wanted that scarcity they would like poke holes in the bulb while they planted it throughout the winter so that whoever had bought it when they like brought it up in the spring, it was just like worthless because they had just destroyed it before putting it in the ground without them knowing.

Richard:01:01:50So tulips aside.  Are there any other insistence throughout history where you can find some crazy price patterns that you can sort of draw an analogue with what we’re witnessing today to sort of try to place us within the-

Mike:01:02:07Witnessing inwhat?

Richard:01:02:07I don’t know. You tell me Mike.

Mike:01:02:08 No, I’m asking. We’re witnessing in crypto.

Richard:01:02:13Crypto technology. I’m just wondering-

Mike:01:02:15It’s just anormal. Just a normal…

Richard:01:02:18You don’t need to talk your book Mike.

Jamie:01:02:23I don’t know about crypto. But like with the EV stocks, I feel like the bicycle boom is a pretty good reference because in the bicycle boom and all these kind of manias, it’s always at a lag. The returns on one axis and then the number of companies starting and going public. It’s always at a lag and that’s what we’re seeing today. Is like Tesla, crazy returns and then slight lag, boom and new EV companies. Bitcoin I don’t have a good one but the one thing I’d say is that there is no shortage of crazy currencies in history. So if you believe that it has value, then that’s really all that matters.

The Mississippi Company

Rodrigo:01:03:05Did you ever read much about John Law and the Mississippi Company. It was around the same time as the South Sea bubble. Because that has a bit more to do with monetary policy as well because he was basically the Central Bank Governor of France?

Jamie:01:03:21Yeah. He’s basically like the today. I’m sure someone who knows more about this than me will correct me. But it seemed he was essentially like the treasury secretary, the head of the Fed and like if he was the CEO of Goldman Sachs, like he was just like, everything.

Rodrigo:01:03:39And he was also –

Richard:01:03:41Tax collector.

Rodrigo:01:03:46 But he was like they were looking for him because he committed a crime in Scotland or in England. I can’t remember. So during this whole period, France had basically taken him in and let him run the country.

Jamie:01:03:58Yeah, he was like the degenerate gambler and I think he might have had an affair with like the Dukes wife. It was something with a Duke. Like he either during a gambling session. She did the Duke or somewhere, I don’t know. But something happened. I felt like the wife was involved for some reason.I don’t know why I’m-

Mike:01:04:23Can you even say that?

Jamie:01:04:25It went south for Law and the Duke I think he was sentenced to death and then he escaped from prison and fled to Amsterdam. And then he came up with his idea for what they call John Law’s System. He had this whole system and he pitched it to a couple countries and they all were like no and then France because they had just gotten really expensive or they were very open to the idea of his new magical system that would help them reduce their financial burden and pay off their debt.

Mike:01:05:04Didn’t it sound like MMT?

Jamie:01:05:06Yeah.

Richard:01:05:07Well. No way, … printing money and that’s how we finance most of everything.

Jamie:01:05:14Yeah. He set up the Mississippi Company and basically the scheme was, and parts of it makes sense, or at least theoretically why the government have been open to this. I think the debt that the government needed to pay was that something like say it was a 4% yield or something that was the debt that they needed to pay from financing the war. The Mississippi Company essentially the scheme was they offered investors to be able to pay with the government debt that they held, pay for Mississippi Company stock and then the Mississippi Company would lend the proceeds to the government at like 2% rate or something which brought down the cost for the government dramatically and then they’ll just like real linchpin though, is that people needed to pay for the shares with their existing government debt. And that would reduce the amount of debt but that was where all the shenanigans with convincing people to buy it and John Law doing crazy things to keep the price elevated-. But there was one time where people started getting skittish about the fact that there was not this amount of gold that Law claimed that there was backing these banknotes he was circulating and pumping. So, what he did is he hired a bunch of homeless people to parade through the streets with axes and like pickaxes and all this mining equipment on their back as if they had just come from the mines and just to re instil the people’s confidence in the fact that there’s a ton of gold like look, we got all these people coming back for all this gold, like clearly there’s gold, look at it.

Rodrigo:01:07:15

Richard:01:07:18No gold …

Rodrigo:01:07:17I think I read that book by the book on John Law 10 years ago and it’s one of my favorite stories. It’s a short, I don’t know which book I read. I’m sure there’s many books on John Law but this is just a fascinating thing that happened at a high level like you’re dealing with government companies, individuals, manias. And back then I guess it was easier for one man to do it but I could easily create parallelisms as to the orchestration currently between big companies, big banks, big governments, money printing and trying to keep that perpetual money machine going. It’s a highly recommended read.

Jamie:01:08:00Yeah. His story is crazy but what’s really insane too is that that was in like 1719 entering 1720 and British and French obviously have a history of not getting along very well and maybe looking condescendingly at their neighbors. So the whole time this Mississippi fiasco was going on the British were like we are just French idiots, like their whole system’s in disarray and then six months later, they do the same exact scheme just slightly different with the sassy, literally same thing like alright, give us your debt and we’ll give you a South Sea stock and-

Mike:01:08:40If that’s the key. That’s what does it. You see it that over there and you’re not going to miss the next one.

Jamie:01:08:45What was crazy is that they saw it implode and then they still are full speed ahead.

Rodrigo:01:08:50They are on way out. Empty. It’s the only way out. Got to do it.

The Investor Amnesia Course

Mike:01:08:54So Jamie, maybe if you can, give a quick summary of your Investor Amnesia Course and where people can find it and maybe just highlight what’s your favourite part of that of course journey that you’ve that you’ve built and offered the universe for its consumption.

Jamie:01:09:18Yeah. I just launched this course late last month and if you’ve enjoyed basically any of the stories today, then you will like the course because they’re all, every bit of information that I got today was from the people that are teaching this course. The course it’s called Bubbles, Manias and Frauds and it has seven outside lecturers from a mixture of professional investors, TV pundits to actual academic and highly respected financial historians, and they are all teaching one topic that they are particularly knowledgeable on related to bubbles, manias or fraud. If you are interested in the course it’s $99 but if you put in the code history rhymes at checkout, it’ll be 10% off.

Mike:01:10:07That’s thanks to ReSolve Riffs everyone . That’s thanks to ReSolve Riffs.

Jamie:01:10:11If you follow me on Twitter you can see it in my pinned tweet @investoramnesia but if you also just search Investor Amnesia Course it’s the first option. And my favorite would probably be Jim Chanos. Obviously legendary short seller did a master class lecture, he teaches a course at Yale called the history of financial fraud. In this course, he does the history of US fraud, he calls it     “ The Greatest Hits of Corporate Fraud in the US 1983 to 2008” . What the course is, I think it’s like an hour or the lecture is an hour and 20 minutes, broken up into smaller videos and it’s the world’s most famous short seller literally walking through each case study of his most famous shorts and examples of fraud since 1983. So he walks through, and each case like, Baldwin United was his first and he goes through saying what kind of led him to digging deeper into that company, what they were doing wrong, what the instance of fraud was but it covers Baldwin United, Enron obviously, WorldCom, Tyco, Boston Chicken, Commodore, Lehman, AIG, et cetera and that was just crazy because nowhere else are you going to get that sort of master class lecture from an expert like that.

Mike:01:11:36Worth the 90 bucks…

Rodrigo:01:11:37Like the South Sea bubble series and the …

Jamie:01:11:43Yeah. Everything I said about the South Sea bubble, William Goetzmann, who I referenced earlier as the godfather of financial history. He is well and truly the GOAT. He has a long conversation with me on the South Sea bubble and Mississippi Company. There’s a lecture on the Brewery Bubble, which we didn’t talk about, but that’s when like 300 brewers went public in the 1890s after Guinness went public in 1886 and there’s talk also bicycle mania, the 1690s tech bubble I talked about, Anne Murphy teaches a lecture on that. Railway mania, got a lecture on that. Basically everything. So definitely check it out.

Mike:01:12:27Great.

Rodrigo:01:12:27Yeah. And the goal is really I guess to the more you know about your history, hopefully the less you repeat it – not a difficult thing to do.

Jamie:01:12:37I will say that I feel like it’s easier to not get swept up in manias. If you read about so many examples of manias. Obviously it still happens, or we wouldn’t keep having them but I-

Mike:01:12:48How do you differentiate between the bubble and the true innovative genius that creates a new wave.

Richard:01:12:54Talking his book again. Not again.

Rodrigo:01:12:59That’s a great-, I was reading a quote from Melancon … yesterday that said, man operates in a fog. And I’m paraphrasing, I don’t remember exactly, but it said, man operates in a fog and he stumbles down a path through life. But when he looks back, he sees the man, he sees the path, but no fog.

Mike:01:13:19Bang on.

Rodrigo:01:13:19The goal here is try to recognise by looking at history. There’s a fog. Understand the fog is a real thing and see if you can recognise a bit more of the mistakes that we see people all levels to be able to-

Jamie:01:13:40That’s a much better analogy than the one I use. I tend to think of history as a compass where it’s not like a GPS or roadmap where you like you said don’t know exactly where everything’s going to go in the future just because you looked at the past but directionally you can at least point yourself in the right direction by understanding what’s happened.

Mike:01:14:00I think for $9.95 Rodrigo will allow you to use that and add it to your course.

Rodrigo:01:14:05$99.95. And if you put code “Rodsthebest” I will-

Mike:01:14:16I will personally write you a holiday card.

Rodrigo:01:14:19Awesome. Jamie I thinks it’s been great to see you grow since the day that we first spent solid hour hiking with March for the Fallen and what you’ve been able to accomplish in such a short period of time, keep it up awesome content, if you’re not following Jamie you should definitely do that tout de suite. And I’m going to sign up for the course right now. I’m not even going to ask for the discount.

Jamie:01:14:45Well, thank you. Thank you guys so much for having me on and it’s seems like ages ago that we did that hike. What a day, and stay in touch. Thanks again.

Mike:01:14:55Eight or nine months to the next one.

Jamie:01:14:56Yeah.

Mike:01:14:56Cheers Jamie.

Richard:01:14:57Happy holidays all.

Rodrigo:01:14:59Cheers everybody.

Jamie:01:14:59Happy holidays.

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