May 14, 2014; Valuing Wall Street with Andrew Smithers

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

Kevin: David, Andrew Smithers is an interesting guy.

David: Andrew Smithers, our guest today, is Chairman of Smithers and Company, and a leading expert on financial economics, global asset allocation. He has been writing. His family goes back, not only decades, but I believe centuries, into the financial industry in the UK. I’ve been reading him for 12-15 years. His book, Valuing Wall Street, was very critical to the things that I was reading and thinking about back in 2000, 2001, 2002. His most recently published book, The Road to Recovery, is a book that looks at how far off the mark current monetary and fiscal policy is, if you, in fact, want to create recovery.

Echoing the November conversation we talked about value as a measure of risk, and value as a prospect for the long-term returns of the equity markets, and we looked at a number of things. I included some conversational pieces on the Dow-gold ratio, and as I discussed with Russell Napier later that evening. Psychology and sociology are not two areas where Andrew Smithers really has much interest. If it’s not math, it’s not of interest at all. So we do have an interesting perspective from him, a critique, if you will, of the Dow-gold ratio I think you will find interesting.

Last, but not least, we discussed education, how important your education is. And it is one of the reasons why I have Smithers on the program, then and now. Valuing Wall Street was a book that he wrote in 1999. It’s a book that needs to be read, it’s a book that needs to be studied. It’s a book that may make the difference between long-term investment success, or lack thereof, as we come into the next few years.

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Thank you again for joining the conversation. We had a conversation in early November and we discussed a whole host of things, all familiar to you: Tobin’s Q, cyclically adjusted price earnings ratio, or Shiller’s PE. What we have seen since then is that the Fed has delivered on its promise to reduce QE, and they are still keeping rates unnaturally low. That’s the position the Fed is comfortable with for the foreseeable future. So, in essence, we still have the coup de whisky still in play, a combination that is, from a historical standpoint, still very much accommodative. QE1 was very effective, QE2 and 3 were less effective, or even ineffective. Have we reached sort of the last call? Are they finished? What other extraordinary measures might we see in play?

Andrew Smithers: Well, the consensus view, and the Fed’s view, I think, are different. The consensus view was expressed the other day by former governor Masaaki Shirakawa, of the Bank of Japan, who in a speech that he made only about 10 days ago, I think, remarked that he thought that it was now generally agreed, at least in its latter stages, that QE had, in effect, raised asset prices, but had done nothing for the economy. That is my view, as well. It is a quite common view. I think the Fed still believes that QE helps the economy, or possibly it is that they’ve got themselves in a position where they find it very difficult to get out of it without damaging the economy, which is not quite the same thing, but probably produces much the same answer.

David: You should never get yourself into something you can’t get yourself out of.

Andrew: Indeed.

David: They might not have considered the exit strategy.

Andrew: They seem to be short of an exit strategy, or six.

David: Let’s discuss Q and the Shiller PE again. I think it’s so important. It was interesting, I did a Fox business interview about two weeks ago. I was on with two other guests, and we nearly went to fisticuffs. We weren’t all in the same studio or we might have, at least intellectually and verbally. Their resistance to the idea of a cyclically adjusted price earnings multiple was profound. First, they stated, it never changes, and is an unreliable measure, and then they went on to say if you look at the price earnings multiple, it is actually the case that the market is very well-priced right now, and offers plenty of opportunity on the upside. And these are professional money managers. I tried to take the other side of that argument, but I think you could do so more eloquently.

Andrew: I don’t know if you saw, but John Authors recently did a two-part program on a thing which I called hindsight value. I might be a bore, among other things, tomorrow, a day of teaching, on this whole subject. Hindsight value is an invention of Stephen Wright, and I once described it as brilliant, which I think it is. What it does is to say, obviously very sensibly, if you have enough past data, you would basically know when the markets were cheap and when they were expensive. For example, we know that the market was expensive in 1929 because anybody buying shares then had a rotten time. Equally, we know it was cheap in 1932. And that broad qualitative judgment can be refined down into a quantitative one.

The important thing here, to realize, of course, is that you cannot judge a market indicator by claiming that it will be a very good predictor of the market’s performance over, say, the next ten years, because you may have predicted the market is going to be even more overvalued, or even less undervalued, or what have you. Clearly, the market, in ten years’ time, on its own, is not a good indicator of anything. What Stephen, therefore, said is, let’s be sensible about this. Let us not take one year, but let us take the returns from a given date, over the next 1, 2, 3, X number of years, and average them out. So you have what would happen to an average investor, you might say. And you can do that. And the first thing we did was to look at how that measured up, and what was the right time horizon. And I recently went through, and John was showing this in his view, if you take the next ten years and average them out, and compare them with, say, the next 30, you will get some very different values. Clearly, ten years is not enough. It doesn’t give you a reliable fix. If you take 50 years and compare them with 30, however, it’s very, very close, indeed. You’re not really going to improve much if you take more than 30 years’ data. And since you want as much information as you can, and the shorter the time period that you can usefully use is better, so 30 years in the best time period to use. And that means that we can judge the value of markets from 1900, or whenever your data starts, to at least 1983, which is 30 years ago. And having got that information, you can measure what any particular year gave you, on average, over the next 30, and you can compare these, one with another, and you find duly, as you would expect, 1929 was a very expensive year, because the subsequent returns were on average very bad, 1932 was very good. And you can do this for the whole series. So now we know whether these things were good or bad value in the past.

And the next thing we did was to compare this with other indicators of value. If the indicator of value fits, with hindsight you can say it at least passes one necessary test, and I tested various things. It was interesting, next year’s earnings is about the worst indicator you could possibly use. There were some outrageously bad decisions. I forget what the actual years were, 1921 was very, very cheap, and looked expensive, or the other way around, I can’t remember, there are a whole series of them. But what you can show by this is that using this year’s earnings, or next year’s earnings, or the dividend, or even tracking long-term returns, are quite useless from the point of view of fit. CAPE isn’t all that good. It’s pretty good, but Q is really pretty sound.

David: Again, CAPE is the cyclically adjusted price earnings multiple which factors in inflation, and then creates basically a ten-year rolling average.

Andrew: It doesn’t have to be ten years, and in fact, Professor Todd, Duke, has shown you actually get better results when you use longer periods, but it’s the industry standard, so let’s use it. So, in your discussions, when they claimed that CAPE was useless and [unclear] profits were good, are simply being completely illogical. And the reason people are completely illogical, there are several possibles. You can assume they’re just plain stupid, which is probably unkind, or you can assume that they are anxious to have the answer they want, which is actually even more unkind. In my view, it is better to be stupid than to be intellectually dishonest, but of course, other people have different views.

David: (laughter) Well, it was an interesting conversation, and I don’t think I brought them to my side in terms of…

Andrew: It’s no good expecting people … if people have got a livelihood based on a false assumption, the chances of them changing the false assumption and ruining their livelihood are probably quite low.

David: Which will get to a question I had for you earlier, and it is an attempt at intellectual honesty, to bring your opinion into something that I have presumptions about, and would like for you to weigh in on, but more on that later.

Market swing, from one extreme to the other: You’ve said that Q doesn’t make one a great deal of money, but it can keep you from losing a great deal of money. Let’s talk about that.

Andrew: Yes, once you’ve found a valuation indicator, which, like you indicate, gives you good predictive powers of future returns, it’s only one of the five tests which Stephen and I developed for a valid indicator, but it’s there. One of the other indicators is that it musn’t give you too good an answer. If you knew, not just that markets were overvalued, but that overvalued markets were going to go down, I think even fund managers would notice. And therefore, the thing wouldn’t work because you’d always be at fair value. There must be very smart limitations to the ability of anyone to arbitrage something for it to work. So value gives you a measure of risk, you might say, and it gives you a useful fix on long-term returns, but it gives you nothing which is going to be of much value to the sort of people who are trying to beat the market over the short term.

David: It recalls Charles Goodhart’s law. He suggested that a target becomes irrelevant once people turn it into a target.

Andrew: It would, indeed, in this instance, yes, be impossible if everyone knew this worked and believed in it, then the market would be beautifully flat and always selling at fair value.

David: So, we can be grateful that not everyone is reading your book and Stephen Wright’s book.

Andrew: I don’t know. It might be a very interesting world. It would be much less risky. The crashes of history have come, I think, myself, under two conditions: Excessive debt, and collapses of asset prices. And if you aren’t going to get any collapse of asset prices, then the macro-prudential committee of the Bank of England could stop worrying.

David: I think of the market as an emotional pendulum. It swings from the extremes of greed to fear. Your picture of the markets is that of an elastic band. Valuations can be stretched, and like that elastic band, the more stretch, to an extreme, the greater the snap-back toward normal valuations. That is, perhaps, why values are never accurate.

Andrew: Like elastic bands, the greater snap-back toward undervaluation, from overvaluation, to under. It goes too far.

David: With either picture in mind, does this lend itself to the idea that there are times to simply be out of the market?

Andrew: Yes, but you have to have quite a lot of discipline and a long-term view. Some work that I did with a young lady at the IMF, Ting Ting Shu [spelling unconfirmed], we did some cost analysis, and this world isn’t necessarily going to be exactly the same in the future as it has been, but it looked to us, from the [unclear] we analyzed, that if you had an overvalued market, something like 50% plus, it would be sensible to have a substantial amount of liquidity in your portfolio. But oddly enough, you don’t want to go too liquid too soon. You want to wait until the market is 30-50% overvalued before you get out, and even at 50-70% you don’t really want to be more than about 40% liquid. Because the problem is that if the over valuation lasts for a long time, and you’re in cash, you are probably going to be losing every year a little bit compared with being in the market.

David: So you have the example of Greenspan expressing concern in 1996, the irrational exuberance comments, and things did, indeed, become far more irrationally exuberant from there. The last time we spoke you mentioned moving to cash, and this being a time where the probability of supporting lower equity exposure and market risk, they’ve have actually increased since November. If you are looking at Q, if you are looking at the cyclically adjusted price earnings multiple, over valuation has increased since then.

I asked you, at the time, your thoughts on gold, and I want to talk through a ratio and get your thought on it, because, as you discussed, moving to cash back in November, and we consider the time frames over the last century, when a cash position was compelling, made me think of this chart, and I’d like to look at this together. It’s a long-term chart of the Dow-gold ratio, and the time frames that you mentioned, starting in 1900, the Dow divided by the price of gold, gave you very high valuations in stocks, and relatively speaking, gold was inexpensive, as you headed into 1929, and then you reverted back in the crash to a very low ratio.

We marched that direction again where it appears 1949, certainly not an extreme, but we marched through to 1968, where the Dow-gold ratio reached an extreme, gold being under valued, or of low value, and equities being at their peak in terms of that secular trend, and we reverted back by 1980 to, again, very high values for gold and low values in the equity markets, again, just brought around volatility in the ratio, bringing it to a low number. Then, with the greatest overvaluation in the century, in equities, by the year 2000, we also saw the purchasing power of the Dow at the largest, or the greatest number we had ever seen. And that was at a 43-to-1 Dow-gold ratio. We’ve dropped to six, it’s currently about 12, and this idea of moving to cash is compelling, and I’ve quoted you countless times since November, not only moving to cash, but Andrew Smithers says to move to cash, and your reasons why. When we look at gold, we consider it, perhaps, a cash alternative, and I guess that depends on your definition of money, and your theory of money, but looking at this kind of relationship, the swings from greed to fear, people clamored for control and wanted more gold, and less stocks, at the same time, and thus the ratio’s swings from one extreme to the other. Would it make sense to capitalize on that? Again, taking the broad perspective that you do, when it’s time to move out of equities, salting a portfolio with ounces. In the past, it looks to have made sense. I could be accused of data mining here, but what would you say in terms of, again, at least the qualitative side of the hindsight value here.

Andrew: Well, you’ve put your finger on the spot. One of the things that Stephen and I teach is that the ratio should be a good predictor of future returns and one question one would ask yourself is, have future returns been as well predicted by this ratio as they have been predicted by cyclically adjusted PEs or Q? I can’t tell you. I don’t know, because I haven’t tested it. But I suspect, not very good, as a comparison, because of the way in which gold behaves in a very different form in different circumstances. I think 1980 is a very good example, when very high interest rates and fears of inflation were offsetting each other, and probably gold seemed just too expensive to hold, and then have 13% on your money. So I don’t know, it doesn’t seem to me to have qualities that I would like, the indicator. I would worry about its data mining qualities, because you have to explain rather better than you’ve so far been able to, why.

But to be quite honest, it doesn’t mean it might not work. For example, it seems to me that if fears of inflation pick up, people might become more interested in gold, and they might become very much worried about the stock market, so it may work, but I wouldn’t, myself, wish to use it. I just don’t find gold something which is easy to predict. Not only easy to predict in the short-run, but the very long run. It seems to me it gives a long, milder, negative real return, most of the data that I see. That doesn’t strike me as a particularly good thing, you know.

David: Sure. Gold, I agree is difficult to predict. Is human nature easier to predict?

Andrew: I don’t try. (laughter) I don’t do much prediction. In fact, of all the faults of Smithers and Co., prediction is not one of them. We don’t do forecasts. We try to explain, rather than forecast.

David: The chart is just a reflection of pricing over a long period of time.

Andrew: Absolutely, and charts do provide lovely information. Why do you use the Dow, for example?

David: The Dow gives us a picture back to the 1800s.

Andrew: Oh I see, yes, it’s a very bad index.

David: I agree.

Andrew: My first thought was [unclear], what are we doing here with the Dow?

David: If we could use the S&P and go even farther back in time, we would.

Andrew: You would, right.

David: And you see a similar trend, although you can’t go back as far.

Andrew: No. That’s one thing. The other is, are you using the nominal index, or are you using the income reinvested, because in the 19th century, roughly speaking, the index didn’t rise at all, but it still gave every bit as much return as it did in the 20th.

David: So what’s interesting about that is, this is the nominal index, and if you take this back to the 1800s, you see much more of a flat line. Gold was a part of the monetary system at that time.

Andrew: Well, yes, it does that, too. But I would suggest it would be quite a good idea, if you want to pursue this, I would use indices with money reinvested, because they tell the time you’ve got on it, not what happened to the index, because it’s no worse to get a 20% return from a dividend than from a price change.

David: Sure, sure. Well, I just reflected from November, and have had this come to mind a number of times, the periods of overvaluation corresponded to the undervaluation in gold.

Andrew: Well, it may well have done, but it doesn’t look to me as if it was a terribly good fit like that. The over valuation in 1929, of you take the very peak in September, was a lot greater than the over valuation of the market in 1968. We know, actually, from 1968 we’ve got quite a number of years. We haven’t got the whole 30 years, but we have got a full 30 years data from 1929, and you know, it gave an awful return.

David: That was the question I wanted to run past you that I thought, again, in the vein of intellectual honesty, I wanted you to weigh in on.

I read your book, Valuing Wall Street a number of years ago, and it was so different than anything that I had encountered. When I started to work on Wall Street, the first book that they gave me was Jeremy Siegel’s, Stocks for the Long Run. I know that you have some respect for Jeremy Siegel, and for Siegel’s Constant, and that does factor into some of your analysis, but the notion of always owning stocks, we talked about that a few minutes ago. There are times when you simply don’t own stocks, you should not own, at least, the quantities that you should in a certain period.

Valuing Wall Street is a book that I think everyone should read. It’s not particularly popular with Wall Street, for reasons that I don’t fully understand. If they wanted to appreciate the market as it functions, as opposed to the way they need it to function, perhaps you’d have a greater following there. For the individual investor who wants to think for themselves, I would put this at the top of the list, in sort of a Top 5, or Top 10 category of books that you can read relating to investing, understanding value, etc. With that approach, I would describe it as dispassionate, very quantitative, there is the qualitative aspect to it, but at the end of the day you are making clear-headed decisions based on data. Is that a fair assessment of it?

Andrew: Yes, indeed. I remember once somebody saying to me that people who use data were simply trying to forecast the future from the past. And I said I did think that forecasting the future from the past was something one should do with great care, but I didn’t think there was an alternative. (laughter) At least, nobody’s ever mentioned one to me. So, if one is interested, and it’s impossible to invest without being interested in the future, you have to be a close student of the past.

David: When you look at where we are today in the financial markets, there has been some repair from the 2008 and 2009 period, and yet…

Andrew: In what respect?

David: Confidence.

Andrew: Oh, I see. Yes. No, no, so not the runup to the 2008 or 2009, but yes, confidence is high.

David: Since then, there is a perception of a return to normalcy. That may not, in fact, be the case if you are looking at sort of the guts of the financial market, and leverage ratios, and off-balance sheet assets held by banks, derivatives books which are counted in strange ways. The advice that you gave in November. You said your family was used to hearing it, and probably would roll their eyes at hearing it again, but it was time to be in cash. You qualified that today, saying, “100% in cash? Maybe you need something invested in equities.”

Andrew: Oh, I see, that was a purely statistical thing for people invested in the long-term, not individuals. Individuals can’t invest in the long-term, we don’t live long enough. (laughter) But the point that I was making in that instance was work designed specifically for foundations, and very long-dated pension funds or something, but basically, it was about investing for foundations. When you are investing for yourself, the time horizon that you have is very important. If you are young and you reinvest when the market goes down you can buy more, and you’ve got a savings flow. But if you are a youngish chap like me, of 76, you have to take a slightly more cautious approach, because you may not be around long enough to benefit from the recovery.

David: Yes, that point is made very clear and someone retiring and benefitting from a run-up in price, if there should be a change in market dynamics and a swift slide downward, your retirement date, even by a few months, could mean that you don’t have the resources that you need to retire.

Andrew: Indeed. A feature of markets is that bull markets go up more slowly than bear markets go down, or it has been, anyway.

David: So on a personal basis, you still are comfortable with a large position in cash.

Andrew: Oh yes, personally, yes. But most of my clients are fund managers who have a much shorter time horizon, and I’ve been saying for years now I think that the market, and I’ve been doing it [unclear] a day, the market, in my view, in that horizon, is expensive, and will more likely go up than not, and that’s what I’ve been saying for their time horizons.

David: So it’s expensive, and more likely to go up.

Andrew: Than not, yes. And I’ve been saying that for several years now. So as far as I can see, and I’ve been analyzing as best I can for the moment, the things that drive the market in the short run, in my view, are two key things, corporate buying and quantitative easing. And this is interesting, as in America we have both the quantitative easing and the wonderful effect on the stock market. In Japan, it’s more difficult. Corporations are not the buyers of shares they are in America.

David: Specifically, you’re talking about share buy-back schemes, as corporate buying?

Andrew: Corporate buying takes really three forms and a negative form. Corporate buying may be buy-backs. It’s new issues in a negative form.

David: That would be negative.

Andrew: And it’s acquisitions paid for by debt. And the data that is published by the Federal Reserve puts all those into one package, and they show net issues being negative or positive. And in recent years they’ve been heavily negative. U.S. companies have been buying back shares in recent years, up to 4% per annum GDP. I think it’s most recently been running in the middle, 2½. The same in the U.K., even higher. And this is absolutely vitally important for the stock market, because if you track, in recent years, corporate buying in the stock market, they have gone up and down very much together, and Stephen Wright an Donald Robinson have done some long-term work on this. The share split isn’t just a new thing. They have look at a combination of dividends and buy-backs to say that when the yield is very high on that basis, and 1929 was a very good example. Issues flooded the market in 1929, so it was a negative year. At the moment, these things are in place, and the great driving force for them is in place, too. The reason that companies buy back shares and don’t invest is because management is paid to buy back shares and not to invest.

David: That goes back to the issue we talked about in November, in terms of the dark side of corporate remuneration schemes.

Andrew: That’s right. This is the central thesis of my new book, The Road to Recovery. Those incentives are still very firmly in place.

David: While I highly recommend The Road to Recovery, I just want our listeners to begin with Valuing Wall Street, because it’s one of those pillars, and then The Road to Recovery certainly offers a new set of value, but I think Valuing Wall Street, I think, is fundamental.

Andrew: Thank you very much. But I mentioned that because I have views about the long-term, and I don’t predict the short-term. But I do think that there are quite a number of strong reasons for thinking that the bull market is not necessarily going to die a sudden death in the short-run. I don’t think that’s the case. But it doesn’t mean that for somebody, certainly of my age, who is uncertain, even of his own predictions, when I say we don’t make forecasts, we’re cautious about them, it wouldn’t be very sensible to hold a lot of cash.

David: Several things that I interpret from that: Number one, you are 76, with market experience, and many years of study, and I think you are right in assuming that the market can go farther than it makes sense to go, in terms of valuation of price. So, yes, it could go higher, and is likely to go higher. But it is still very significant to me what you do with your own money, not just because you’re 76 and don’t want to pretend like you’re 56 and have to make it back, because you can’t borrow 20 years from the past. You have what you have. And I think that your instincts are as good as they were in 1999, looking at the market and seeing it being overvalued, and suggesting that people move out of the market.

Now, the reality is, you started writing that book and researching that book maybe a year or two years before that, meaning that you saw overvaluation in a time frame when it was truly overvalued, and it continued even more so until the point where it was unsustainable. I don’t know what that point is, and no one does know what that point is. We looked at the Dow-gold ratio chart to see it go from 28 in 1968, to 43, almost unfathomable, going to levels that it had never seen before, looking at the price-earnings ratio, looking at the cyclically adjusted price-earnings ratio, looking at Q, and these were values, as you mentioned then, 2½ to 3 times anything we had seen in the past. So how far can it go? Always farther than you thought, or you could have imagined. But I still would come back to, not a traded position. There are people who might look at your research and say, “Yes, but that’s not helpful this week. I tend to encourage our clients to think about managing wealth, not for the next quarter, but for the next quarter century, including as long a timeframe as possible, And that may mean thinking intergenerationally about wealth, and not necessarily about retirement, or what have you.

Andrew: You’re in the foundation group. But then, as I say, remember, and though, of course, on the whole, free of any tax, unfortunately, can have quite a big impact on the way you make returns out of markets.

David: So, you would say that large institutions would be comfortable moving to cash now, not looking at the opportunity cost of missing some upside in the markets?

Andrew: I think it very much depends on the time horizon of their clients. It is no good being right, and suffering for it, you know. There is this big problem that most fund managers have a conflict of interest between their business and the concern for their clients, and they have to recognize this, and sensible ones do.

David: Jeremy Grantham, I recall, in 1999, a full six months before the peak, started moving his clients to cash, and he didn’t lose money that year, but he underperformed the market because of it, and the gratefulness of his clients was expressed in this way: 65% of his assets under management disappeared in the year 2000. Now, over the following years, 2002, 2003, and 2004, I think he gained back those clients because they realized that he had their interests in mind, and, as a fund manager, was willing to take professional risk to do the right thing. He did the right thing and was punished for it, and it’s an odd thanks. So, as you say, the market is structured in such a way that if a fund manager does the right thing, there may be odd thanks.

Andrew: I probably did this before, but Valuing Wall Street came out in March 2000, and as you rightly said, this had nothing to do with timing of the market. It was very largely dependent, actually, on the publisher’s schedule, rather than ours. But it turned out that it was probably almost the top of the market. But we worked out that, given your elastic, because the market was so over-priced, probably more than it had ever been in history, even just before the crash of Wall Street in September of 1929, in fact, clearly more than that. Even then, we said the chances of it going down over the next 12 months are probably only about 70%. And we said, if you were a fund manager, what would you do? The answer is, you’d probably go liquid, yourself, and stay fully invested with your clients, because a 30% chance of ruining your business is a bit high.

David: That is the way it would be reasoned.

Andrew: Yes. So it’s a tough world out there for the clients. (laughter) They have to do it for themselves. This is my view. My view is that the big decisions about whether to be invested in the market or not are best taken by the person who owns the money.

David: So, focusing on your own educational resources, I remember John Templeton suggested at one point that one of the greatest investments that you could make is in your own education, and it seems to me that your book factors into that, in the sense that if somebody wants to make wise decisions about the resources they manage, either for themselves, their own benefit, or future generations, they are not going to get advice from Wall Street. I sat on a plane over here from the U.S., and one of the stewardesses was sitting there across from me in the bulkhead, and she said, “Where are you going?” I said, “I’m going to talk to Andrew Smithers, of course.” Of course, she didn’t know who you were, unfortunately. But I explained to her, briefly, that there were good reasons to be concerned about the place that she was in the stock market. She said she was fully invested and could not afford to lose money, as she was getting ready to retire in the next two years. And I said, “You really should consider moving a portion of what you have, or all of what you have, to cash.” And she said, “Well, I need someone to advise me on this. And who should I go to? What brokerage firm can I go to? What fund manager can I go to? I have questions about how to get that done.” And I said, “You don’t understand. There is no one that you can go to, because I know what the standard response will be. I know what the answer will be. ‘You’d be a fool to be out of the stock market.’” And so, it was this moment when she looked at me and felt like there was nothing that she could do and therefore she probably wouldn’t do anything.

Andrew: Yes.

And I thought that was somewhat tragic, because her goal is to retire in the next two years and I don’t know that she will be able to. Maybe she will be able to.

Andrew: Well, we wish her luck, but my answer to that would be the best thing to do is read, Valuing Wall Street, because that’s what it is designed to do. And the other thing is, I agree with John Templeton, invest in your own education. And I’ll tell you, the best way of being educated, and paid for it, is to teach, (laughter) which is very, very good. If you teach something, the questions you get from the students – they are often very well educated in the business, so it’s very educational for me to teach it.

David: Well, again, we appreciate the continuation, the update, and look forward to future conversations, and hopefully, this last book won’t be your very last. You have a lot to teach and we look forward to what you share next.

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Well, I hope you enjoyed the harp music in the background, that is what was waiting for us at the Balmoral Hotel there in Edinburgh. And yes, I do think the educational focus, Valuing Wall Street is a very important book for you to read. It’s worth investing the time, energy, and effort to do so. We have a link on our website if you want to order it, and to consider what it looks like to, on a qualitative and quantitative basis, look at the stock market. I think Smithers’ contribution is very helpful. I would, of course, include many other things in the mix, looking at psychology, looking at sociology. Our approach is certainly more of an interdisciplinary approach, and one that I think adds to the complexity, and ultimately, the success of investing, today and into the future.