On this podcast, Karl welcomes Oliver Norman & Casey Keller to discuss their favorite books that would be great Christmas gifts for adults, kids, and grandkids.
Karl Eggerss: Hey, good morning, everybody. Welcome to the podcast. My name is Karl Eggerss. You have found Creating Richer Lives. If this is your first time, welcome aboard. Our telephone number, 2105260057, and our website is creatingricherlives.com, creatingricherlives.com. We’ve got a fun show for you today, because we’re going to bring in two guests. One of them, Oliver Norman, who has been on before, and Casey Keller, who has been on for years on the podcast, both of them are going to join me. I wanted to give you guys some Christmas gift ideas for gifts, and specifically some books. I wanted them to tell you some of their favorite educational finance books that could help you, maybe a child, maybe a grandchild. So we’re going to do that, we’re going to have a little bit of fun. So that will be coming up in just a minute.
Quickly let’s go over what was going on in the markets this week. We clearly continue to see COVID getting worse and worse. I was a victim myself, actually, last, I actually did the show last week, right smack dab in the middle of it, and I am recovering. See, this is the dedication that I have to you guys. I continue to power through and do the show regardless of my condition. But in all seriousness, flu symptoms, and really was like the flu for me in terms of what I experienced. But really lack of energy on the tail end of it, high fever, but really the energy’s coming back and hopefully get back in the swing of things pretty quickly. But I did continue to work, it just was very sluggish, just really was physically tired. So that was my personal experience with it.
Did find out somebody that I indirectly knew through a family member, a 47 year old, who passed away, and so you just don’t know about this thing, and it is scary, and as that continues to go through this country, the markets continue to go higher, because we’re getting so much closer to these vaccines, and that continues to really dominate.
The other dominating thing this week was really the fiscal stimulus package and whether we would get one or not. We’ve been talking about this for, what, seems like three months now, and of course the election threw a wrench into that, and now it seems like they’re making some progress. So let’s see if it gets done, because we got the jobs report on Friday, and it’s very clear the growth is slowing down. So the first derivative, we’re still growing, that’s good. The second derivative, which is the speed at which we’re growing, is slowing a bit. And we could see that in the jobs report, which was a little worse than expected.
So again, we’re recovering, it’s just slowing down, as we talked about in our economic review and outlook video that we did about a week ago, which is on our YouTube channel, on Creating Richer Lives. So we’ve been talking about this, and fiscal stimulus is needed, and hopefully it’s coming close. What’s ironic about it is when we get bad economic news, like we did on Friday, the markets go up even more, because they know maybe it’s getting the attention of lawmakers to get something done. It’s a very strange world we’re in. And we also did see interest rates kind of trying to [inaudible 00:04:05], trying to push through 1%, and we’re not quite there yet, but certainly headed that direction.
So for the week, what we did see was another strong weak, the Standard and Poor’s up a little less than 2%, the Dow Jones up about 1%. But again, look at some other areas. Value stocks up three and a half percent, gold miners up, silver stocks, energy stocks, very, very strong this week. When we look at the strongest areas, metals and mining up 8% this week, oil and gas equipment service area up 8%, semiconductors up 6%, high beta portfolio up 5%, there’s an ETF for that, energy four and a half percent, airlines up another 4%. So we’re getting just broad based participation. And again, people are starting to embrace the rally. Remember we had a lot of doubt, but they’re embracing it. And so again, we’re getting broad-based participation, and not really even a rotation, because you’re still seeing tech participate, but other things are catching up in terms of relative performance here recently, especially things like international stocks, which I’ve been bullish on for a long time, new highs out of emerging market stocks. So lot of good stuff going on in the markets, but did just want to take a brief moment to talk about the markets.
All right. As I mentioned at the top of the show, we’ve got two guests in. I’ve had two guests before, but I’ve never had two colleagues of Covenant at the same time. And they’re both people you’re familiar with. One is Casey Keller, who’s probably been the longest podcast guest for sure. The second one is Oliver Norman, who may have come on more than Casey. I don’t know, we’ll have to go back and check the tapes. But welcome to both of you guys. Y’all are battling out for who has been on the podcast the most. How many have you been on?
Casey Keller: 10, maybe eight to 10? Somewhere in that ballpark.
Karl Eggerss: Eight or 10 sounds right. Ollie, how about you?
Oliver Norman: Oh, we have a winner then. I’ve probably been on, what, maybe six, something like that.
Karl Eggerss: Something like that, but they’ve all been bunched together in 2020.
Oliver Norman: But in terms of quality, Casey’s just through the stratosphere. So yeah, don’t even worry. It’s not even a competition. So, [crosstalk 00:06:18] thanks for having me.
Karl Eggerss: Well, I wanted to bring you guys in, not only to have a little bit of fun, but we’re here in the holiday spirit, although it’s 2020, so it’s muted a little bit, but here we are in 2020, and we’re coming up on gift-giving season, Christmas, namely. And with that, I wanted to, you guys are readers, and I wanted for you guys to share some books that you have discovered over the years that you think might be helpful to our audience, and also what might be a good gift.
So these can be at different levels. They don’t have to all be high level sophisticated finance books, but hopefully something to do with improving people’s financial life. I know we’ve read some awesome ones on behavioral finance, some very practical ones. So I wanted to start there, and then we can see where this podcast goes. So Ollie, this was actually your idea a few weeks ago, when we did a discussion on an Oklahoma city radio station where we talked briefly about some of these. So it’s your idea. So let’s start with you. Tell me what’s, and maybe they don’t have to be in any particular order, but give me one that you think always sticks out when you think about a personal finance book.
Oliver Norman: The book that sticks out to me, and Karl, it does apply to personal finance, but what I love about it is the scope of application is way more far-reaching than just personal finance, so that’s The Compound Effect. The Compound Effect is an excellent book. And whether it’s applying to your finances, it was the first lesson I learned in my teenage years about the wonder of compound interest. And I see Casey smiling on camera as well. He knows what I’m talking about. And I remember reading if you save from the, a hundred dollars at the age of 18, and then by the time you retire at age 65, assuming a rate of return which is pretty generous in the market, so at the moment of 12%, you’re left with just shy of 2.8 million. 2.8 million.
And I was like, “Oh, wow!” So you can, this access to opportunity and enhancing your wealth, which leads to freedom, such as providing for your family and accomplishing philanthropic and legacy goals, et cetera, is really achievable, if you can have the discipline to save and just little things add up, and just to give you a personal story, if I may, as well, Karl, I remember when I was in my early teenage years, I’m from a very musical background though, I was brought up in the Salvation Army, and I played in the big brass bands, and I saw a xylophone player, and he came up on stage, and he played a xylophone solo called Sparks. I know, I was a really cool kid. But, and this xylophone solo, I listened to it, I was like, this is really cool. I’m going to do this one day. And I never, I couldn’t even play the xylophone at that point.
So anyway, about two years later, I went off to university, and I actually met the player, and he became my teacher. And I just started off, this is a piece which is just wickedly fast, it’s approximately 165 beats per minute, which is just electric. And of course I could, I could barely, I’m not even familiar with the xylophone, but I started off at about just taking the first eight measures at about 40 beats per minute, and every day, just for 15 minutes, I just worked on it. And eventually I went from eight measures to 16 to 24, and I went from 40 BPM to 41 to 42 every single day. And before I knew it, I was able, maybe about 10 months later, I was up in front of an audience playing this solo with the band which I played it. And it just made me realize that small things, whether it’s going on just a 20 minute walk every day, or practicing a xylophone, or just saving bit by bit each month, can have massive impacts long-term. So that was one of the biggest changing books for me.
Karl Eggerss: I just learned the other day, what four on the floor is.
Oliver Norman: Yes!
Karl Eggerss: Because my son, like you, is a drummer-
Oliver Norman: Yep.
Karl Eggerss: … and that’s, if you want a good song, and you just want to go to a classic, you do the four on the floor, right? Am I correct?
Oliver Norman: Exactly. Otherwise known, Karl, as the money beat, because it pays-
Karl Eggerss: That’s right.
Oliver Norman: … all the bills. That’s right.
Karl Eggerss: That’s correct.
Oliver Norman: Billy Jean, Staying Alive, all that good stuff. Yep.
Karl Eggerss: I like the fact that not only did you bring up a book, but you also told us about it, because some people may not get all these books, but these are lessons that you can be teaching your kids and your grandkids-
Oliver Norman: That’s [inaudible 00:10:57].
Karl Eggerss: … and compounding has got to be,
Karl Eggerss: Besides saving, compounding has got to be the number one thing you teach kids about, is if you don’t touch it, the compounding effect is huge. And you’re not talking about compound, like hiding gold and guns in a bunker. You’re talking about compounding like the power of math. Let’s be clear about that.
Oliver Norman: Exactly. That’s right. Thank you Karl. I did beginning the explaining, but I really appreciate that clarification. Yeah. Thank you. And that’s the compound effect by Darren Hardy.
Karl Eggerss: Gotcha. All right, Casey, you’re up.
Casey Keller: You know, for a personal fund, you asked about personal finance, right? Is that, was the-
Karl Eggerss: And including, I know you like a lot of the behavioral finance-type books, which I love too. It doesn’t have to be personal finance, but I think all of these books relate to people’s personal finance. You know, even if they’re an economics book.
Casey Keller: They do. And there’s certainly some behavioral ones, but I think since she originally asked about personal finance, I’ll start with, when I first started kind of getting interested in this industry and I was really intrigued with the stock market and I was just kind of trying to learn about things. There was a book I came across, which actually wasn’t stock market-related, but it was probably one everybody knows, it was Rich Dad, Poor Dad, years ago. And I liked that. I liked the concept of it. I thought that was a really good book. I love the concept of buying and building wealth through owning assets and not buying liabilities, and just kind of the concept of saving and not trying to do things, the traditional method of just doing the 401k and trying to think outside of that. But that was one that kind of got me started, but one of my favorites, and I didn’t actually, didn’t read this until a few years ago, somebody brought it to my attention, but I think a great personal finance book for just anybody to read because it’s in layman’s terms, and it’s told through a story, is called The Wealthy Barber.
And it’s really easy to follow because it’s basically kind of, it’s told like a story. There’s a young couple and they want to learn about how to navigate personal finance, anywhere from investments to life insurance, to all the different things that come along. And their dad said, they go to their dad and the dad goes, “No, you need to go talk to the barber in town. He’s kind of the knowledgeable person about finance.” And he’s just kind of got this knowledge and he’s got this reputation. And I won’t spoil it, but he does cover pretty much every facet of financial planning and it’s just spoken like a story and it just is easy to read. And it’s not like a dense finance book, which I think loses a lot of people. So that would be one. It was easy to read. The only thing is there’s probably like five updates or you got to, if you get the original one from the nineties, it’ll be a little outdated. So you got to probably look for the most recent edition, but I would put, I would suggest The Wealthy Barber. It was originally written by a guy named David Chilton.
Karl Eggerss: That’s good. Yeah. And you know, Rich Dad, Poor Dad was a book that, you know the premise, and I think it’s a really simple lesson for kids, is if I give you a dollar, you can take that dollar and spend it on something that is going to depreciate. A service, a consumable, it could be an electronic. Or you can put it in something that’s going to appreciate, stocks, bonds, real estate assets, which is what you said. And that fork in the road, what is this dollar going to do? Cars, depreciating asset. That is a really important lesson. And that’s really a simple lesson in that book. I would say one for me, and this sounds a little cliche, but there’s so many financial lessons in the Bible. When you think about Proverbs and all the various lessons in there, is a good starting point.
And there’s numerous other reasons why you might want to read that particular one. And that’s always on the Amazon bestseller list. So let’s not, and I think there are several authors as far as I know on that particular one, but one that I also like that I actually had my son read when he was a teenager, was The Automatic Millionaire. And this is a book I believe back from the early ’90s, David Bach. And there’s things in there talking about, obviously the latte factor, and, “Hey, you know, you go to Starbucks on the way to work every day and you spend five or six dollars on a coffee.” And to your point, Oli, imagine if that was put away in the compounding effect. But also, paying yourself first, putting things on autopilot, having your savings set up where you can actually have a checking account being swept over to a savings account or a mutual fund. That’s what 401ks do, right? This every two weeks, every two weeks. And then you’re free. If your bills are paid, you’re saving, and then you’re free to have some discretionary dollars that you can go spend on things and don’t feel guilty about it because you’ve already have everything else set on autopilot. So that’s another good one called The Automatic Millionaire, by David Bach, B-A-C-H, which has had several editions.
Oliver Norman: On your original question, there is a great book by Tim Ferriss called Tribe of Mentors. And one of the questions he actually asks, he reaches out to athletes, CEOs, business owners, and then he says, “What is the best $100 you’ve ever spent on an item?” And I was just curious, Karl and Casey, recently the best $100. And you can’t use, you can’t say, “Well, I put some money towards my kid’s college education.” You can’t use any of the finance answers, but just in terms of general things that have made your life easier, gadgets and all that fun stuff. And I know both of you are techies. So what’s the best $100 you’ve spent recently on an item?
Karl Eggerss: I would say, there’s a Chinese company that I love called Wyze Cam, W-Y-Z-E. And this company makes the most unbelievable electronics that are typically under $50, and their security cameras are in the $20, $30 range. High definition. Unbelievable. And they do all kinds of products now. So that is my favorite. Speaking of techie.
Casey Keller: Golly, you’re going to me get my bank account statement out to here.
Karl Eggerss: You’re not a coffee drinker, so it’s not coffee.
Casey Keller: No, I’m not a big gadget guy. I mean, I’m a little behind the curve, maybe on some of that stuff. The things that come to mind, I don’t know if these are great answers, but I got a subscription to an interesting website. If that counts. WhaleWisdom, they give you insight into hedge fund managers and different money managers, their holdings that they have at the end of the quarter. So you can kind of see what movements they’re making. I find it fascinating. I like to follow a few folks and see what they’re doing in their portfolio. So that was about a hundred bucks. It wasn’t really a gadget, but I thought it was, it’s fascinating. And just something I just did personally, because I just enjoy it.
The other thing is I took my son to a nice dinner recently. It’s probably a little more than a hundred bucks, but it was nice. I got a teenage son and it was nice to sit down and share that time with him and have a nice dinner.
Karl Eggerss: I need some details. What kind of food? You don’t need to give the name of the restaurant, but what kind of food are we talking about? Steaks?
Casey Keller: Yeah, steaks. He has never gone out and had a really nice steak. So I said, where he had a night out, I said, “Let’s go get a nice steak together.”
Karl Eggerss: See, my son would rather have a cheeseburger from fast food, one of our favorite fast food places, other than a steak. He’s just that kind of kid. I’m like, “Hey, you’re home from college. Let’s go celebrate.” And no, not through the drive-through window. We’re not doing that.
Casey Keller: It’s funny you say that because I probably could have saved a lot of money and my son would have been just as happy as your son doing the exact same thing, but I didn’t learn that until after the fact, but you know, it was still worth the money and it was still a great experience.
Karl Eggerss: Okay, I got an idea. My son can pick your son up. They can go do that. You and I go get a steak dinner.
Casey Keller: I love it. Yes.
Karl Eggerss: All right. All right. What’s next on, what about you Oli? What’s the $100 for you?
Oliver Norman: There is a headband, a Bluetooth headband, which I’ve got, it’s called an AcousticSheep, and you can fall asleep. I love listening to audio books and I generally fall asleep to a podcast or audio book. And I just kind of do that sleep timer where your phone just stops after 30 minutes or whatever. And that has been huge. Every night, I just put on this headband, I’m not going to be winning any beauty prizes anytime soon, but yes, it’s really fun. And that’s been a game changer for me, because I don’t disturb my wife as opposed to having it blaring from the phone.
Karl Eggerss: Sorry, you just gave me a great idea because hypothetically, if I was to wear a C-PAP and I had a C-PAP machine, just hypothetically, there’s no way for me to listen to music. There’s no way for me to listen to music inside of my C-PAP machine with the headband on, but that’s a good invention, is a Bluetooth C-PAP machine that has music being piped in. Because all I would hear hypothetically if I was wearing one would be air blowing all over the place.
Oliver Norman: Similar to Casey, I do like The Millionaire Next Door. That’s always a classic, just the people often surprise you, just those people who live the quieter life, and they’re not very overt with their wealth. And just again, just saving bit by bit over the long term and how to manage your finances in a responsible way, and making sure that your income doesn’t exceed your expenses. And just as that income grows, you just keep those expenses close to level or just going up marginally and just the effects that that can have. So Millionaire Next Door, really, really powerful book.
Karl Eggerss: Yeah. That was on my list as well. And I think, you know, it’s interesting because we meet a lot of people in all different situations and the people that are the millionaire next door, oftentimes don’t think of themselves as millionaires. And you have to tell them, “Hey, you’ve done pretty well for yourself.” And they always feel like they’re behind. Or why are my friends drive fancier cars? And I meet so many people that, and Casey can attest to this too, that come into our office that appear to be multimillionaires and they have great cashflow, but they don’t have a lot of assets because they’re really living beyond their means and if their cashflow stops, then their lifestyle is going to dramatically change because they just don’t have the delayed gratification that you see the millionaire next door tend to have. And there’s a lot of people like that. They have the fancy cars, they have a nice house, kids go to great schools, but there’s just not a lot of assets there. And so you’re worried about them retiring because they’re going to have to continue that income much longer than the millionaires that you’re talking about.
Oliver Norman: Exactly. Yeah. I think as well Karl the other one, which really impacted me in my teenage years was Think and Grow Rich by Napoleon Hill. It’s a classic, it’s from the 1930s, but just the idea, it really gives a sense of innovation and thinking about, “Oh, well, if I ever wanted to start my own business.” And just the impact of hard work and how that pays off in the long run is another powerful one. Think
Oliver Norman: Grow Rich by Napoleon Hill, a classic.
Karl Eggerss: That is a classic. Yeah. A lot of people liked that one. Casey, what about some behavioral finance ones? I know you’ve read some of those in the past and they don’t necessarily need to be all about that. But some that definitely touch on that, about our human behavior. It’s not just, if you’re an advisor, you don’t have these emotions, it’s being trained.
Casey Keller: Yeah. I’m trying to think of some good books. The one that comes to mind that… A lot of them are tough to read, honestly. They try to get into the science behind it, and they’re not easy reads like one that comes to mind is Thinking, Fast and Slow by Daniel Kahneman, that’s a tough read, but it’s fascinating. And he’s kind of the forefather of a lot of this research that came from behavioral finance. One that’s kind of a little later, I guess, some difference… Well, I should say another one of his colleagues wrote a book later called Misbehaving, Richard Thaler wrote that one. That’s a little easier to read and that’s a pretty good book. I really liked that one.
There’s lots of white papers and other things and resources that are shorter reads, that are probably on certain topics. But I think misbehaving would probably be at least a little bit easier to read and still get across a lot of the concepts because it is fascinating. I mean, we all have blind spots and we’re all human beings. And I think learning about if we’re all trying to be the best investors we can, what is it that we could potentially… What are our blind spots and what are things that we need to look out for in terms of landmines and things like that, that we might not even see.
Karl Eggerss: Yeah, it’s the risks we don’t see that we should try to prepare for. One of my favorite books, probably my favorite book on stock investing is one by Nick Murray who’s written a ton of books called Simple Wealth, Inevitable Wealth. And it’s really a great book on people that… It talks about stocks and the long history of stocks. And the fact that we know the returns that they produce over the longterm, and yet people still choose to avoid them and invest in the subpar things like bonds, cash, other inferior assets, frankly.
And it’s because of our fears. It’s because of maybe when we need the money, but usually it’s because people don’t understand it. And this book does a great job of explaining really what stocks are, how they work. And after you read it, you say to yourself, “Why don’t I have all my money in the stock market?” And it’s usually because of the volatility and the fear, but it’s a fascinating book. Simple Wealth, Inevitable Wealth by Nick Murray. As far as themes or ideas from these books we’ve touched on some, but when you guys have read all these different books, whether they’re finance books in college, or as Oli would say at university, when you’ve read these, or you’ve read some for your leisure, or as Oli would say your leisure, we talked about compounding, but what are some other lessons, regardless if you’re telling a twelve-year-old or if you were telling a 60-year-old, what are some key lessons that you grabbed from these books that really stick with you? And you talk to clients about these lessons.
Casey Keller: You know what? The first thing that comes to my mind, and it’s a challenging one that I don’t have a great answer other than just recognizing it and trying to be aware of it. But there’s a book called The Principle of The Path by Andy Stanley. And it’s describing this problem that we all face and it can be applied to investments or our lives that sometimes there’s a truth and there’s a path that we’re going down and maybe we don’t even know it or not. And we may or may not be aware of it, but it exists.
And if we don’t go off that path, we’re pretty much destined to follow into the trap or the consequences of that path. And I think in investments it applies in the sense that the less education you have, you may not know that there was bubbles in the past. So there’s traps and things that people can fall victim to that can be very damaging too well, and if you’re on that path, you may not know it, but I guess at least brings you awareness of that and going, “I’m on this path. This is how this has played out in history. Do I need to get off this path? Or is there something I need to change my behavior on?” And at least kind of asking yourself the tough questions and go, “Where does this lead to if I keep going down this? Are there any risk to what I’m doing?” And it’s not an easy question, but I think it really begs that question. And it’s a fascinating I guess take on that and how to deal with that.
Karl Eggerss: Whenever I meet a new client, I do tend to ask them, “Tell me a little bit about your upbringing in terms of money.” And usually their parents are going to be ultra conservative or their parents are going to be maybe a risk taker in their life and then their finances. And because I’m trying to see, did that go down to the next generation? And what am I dealing with here? Am I dealing with somebody that is a spender, a saver, a risk taker, ultra conservative, so they need some education about stocks and so forth. And so kind of to your point, they’re on that path sometimes because it’s just hereditary and it’s our job to give them facts and evidence to change their path potentially to help them become wealthier.
Casey Keller: Exactly. It’s a challenging task for sure. And probably one of the hardest things that we have to do as advisors and even looking in the mirror sometimes at ourselves, but definitely very important. And sometimes it could be one of the most important decisions you make if you can get off a path that’s harmful.
Karl Eggerss: Yeah. Oli?
Oliver Norman: You don’t have to be the next CPA or CFA, Chartered Financial Analysts, but make sure you don’t just bury your head in the sand when it comes to your finances. Understand what you have and then build from there. For me, couple of points: One, if you let it, that will choke you. Two, as your income goes up through life, try and keep your expenses close to level or don’t let it go up necessarily with that income. You want there to be a widening gap, which gives you more of a cushion. Three, sorry, teach your kids about finances. It’s very important. It’s so important that they know early on. I mean, we have kids going through school who know the periodic table, but they don’t understand how a bank account works and how interest is applied, et cetera.
So that’s massive as well. And also just be a lifelong learner. Every day I speak to my colleagues and learn something and make sure there’s… Karl going back to one of my favorite proverbs is there’s wisdom in the abundance of counselors. And just knowing who to reach out to and surround yourself by good people, knowledgeable people who have got a wealth of experiences is massive. And that’s one thing which I love about reading books. On a side note as well, just to drop another book in there, Never Split the Difference by Chris Voss. Chris Voss was the head hostage negotiator for the FBI. You got to get it on audible because the things like the voice inflections matter, and it’s an incredible read. This is one of the few books which I’ve read maybe about five times.
It’s absolutely captivating. And you may not think, “Oh, negotiation. Well, I don’t do much of that. I only do that when I buy a car.” No it’s apparent in everyday life. I negotiate with my five-year-old about bedtime every night. And this book certainly helped me. And then again, just kind of going back to some of the key things, make sure when even going into marriage, how do you handle money? How does your spouse handle money? Have you had an honest conversation around that? Because finances can permeate into so many other areas of your life and so you need to make sure you’re on the same page.
Karl Eggerss: Those are good. Going back to something Casey said, kind of about this path we’re on, I think it’s our job to help people do this, but for those listening, what are your natural tendencies? And if you know your natural tendencies, for example, I tend to get scared when the stock market goes down. Really go back and think, okay, what did I do in the past? What did I do in March? Did I start selling in March of 2020? Was I selling stuff because I was concerned that it was just going to keep on going and how did that work for me? And it’s not to beat yourself up, but it’s to prevent yourself from doing that in the future. And so I think we all have natural tendencies and some of us aren’t going to change that. For example, I love looking at stock charts and there’s certain patterns I look for that I look at and say, “That is a clear buy sign.”
It’s my job to go back and say, how many times did that actually work versus not? And maybe I’m looking at the chart incorrectly, and I got to be humble enough to say that didn’t work. And I think we all have our natural tendencies when it comes to buying investments or avoiding them, or hey, my neighbor keeps talking about the stock and I had this uneasiness, so I want to buy it. And that’s how we end up with stock bubbles. So I think analyzing yourself and your traits and figuring out is that a good trait or a bad trait? And try to get rid of the bad traits as much as possible. And maybe it’s keeping a journal through some of those times.
Casey Keller: Absolutely. Yeah. We all think we’re going to be the exception to the ruler. It’s not going to apply to us or we’re not going to fall victim to the path, I guess. And it’s so easy to do that. And it’s very hard to sometimes look in the mirror and then self-evaluate signs. It’s important, but challenging. And I think a journal, I think, Karl is a great idea, a great way to do that.
Karl Eggerss: Yeah. Well, it’s amazing too, because I get asked to do TV and radio a lot during the week. And so every time I get asked, there’s always some topics they want me to talk about. And it’s usually coming from people around the newsroom that know I’m coming on. And the topics that I get asked are things like, “Can you talk about penny stocks? And if that’s a good idea.” It’s these common things that our listeners here on the podcast probably know to stay away from. And it doesn’t work very well, but there’s this mentality out there. There’s still a get rich quick thing. And so I get asked about, “Hey, what do you think about penny stocks?” And my answer is, “That’s a good way to lose money.” And I get those questions all the time.
And so these things are still common out there. Even though we have evidence that you can invest in compounding and saving, there’s no quick solution, or there’s no silver bullet to getting rich quickly, but we all still want to do it. And the people listening to us all still want to do it, and they want to know what’s the next hot stock. No different when vaccines come out for COVID. Immediately I get emails, “Which one of these companies, Karl’s the one to invest in?” And I’m like, “Do
Karl Eggerss: … know the profit margin on these. Are these companies doing the country a solid essentially by offering these vaccines with very low margins? Have you seen the insider selling going on? If this is such a great drug wire, the insider selling? Have you looked at the company’s debt? All these different things that they had no idea about. It’s just about, “Well, surely that stock is going to go up because there’s a vaccine.” Those are the types of things that I think we’re trying to help people with and keep them on a straight path, because we’ve been doing this for thousands of clients, and we’ve never found some quick solution outside of maybe the lottery, which I think I’ve told many podcasts listeners in the past, I’ve worked with two lottery winners in my career and they were both disasters and they both turned out horribly. So that’s not even a good solution to your retirement, even if you did win.
Guys, what about some articles or some things that have popped out to you that again, from lessons, not necessarily having to refer to a specific article, but we’ve talked some about behavior, we’ve talked about Ollie giving some tips on things as far as practical things, keeping low debt, talking to your kids about this being a constant learner. Are there’s some articles recently that you guys have read that something stuck out to you?
Casey Keller: Yeah, Karl, I’ve mentioned it on this podcast before, so I hate to bring it up again, but it’s just my favorite. And it wasn’t recent, but I love this article. We call it the God portfolio, but I don’t even know what the title of the actual article, but I know it was written by Dr. West Gray. And I know basically the punchline is that even if you knew what the best stocks were ahead of time, chances are you probably weren’t going to stick with it because basically, the guy went back and looked at stocks and said, “In 1926, if we fast forward to 1931, that five-year period, we know what the best stocks were ahead of time. Let’s just go see what that trajectory was or that path was for you to hold those stocks to get the returns they would have generated and then kind of repeat every five years.”
And it’s very fascinating to show the kind of pain that it takes. Basically it’s revealing the truth that risk and return are related and you can’t escape. The better the returns you want, it doesn’t matter if it’s in real estate or stock market or whatever it is, you can’t escape the truth that risk and return are related. If you want to take on and get extraordinary returns, you’re going to have to put up with extraordinary volatility and things that most people are not going to want to put up with. There’s no free lunch on this deal. And that study was just fascinating to see what you would have had to endure to come up with the extraordinary returns, which by the way, were like 40% annualized when you did this study. But I just love that study. It was so eye and it just revealed the truth of investing so real to me.
Karl Eggerss: Yeah. I will replay that interview that we did. And we went into depth on that because it was one of the most eyeopening studies we’ve ever seen, the dramatic drops. And you take specific stocks, for example, like Netflix, which fell 40% in a day one time and had a 90% drawdown. You take Amazon during the dot-com bubble, a 90% drawdown. Most investors did not put up with that drop in order to get the gains in the subsequent years. Most people are buying those stocks as we speak at highs, not when they should be buying them near the lows. And unfortunately, it’s a human trait we all have. And you have to fight against that. But that article was fantastic.
Casey Keller: Yeah, I always think if we all want to pull off the equivalent of grand theft auto in the markets and get the 10, 15% returns with no risk and it just doesn’t exist.
Karl Eggerss: So as we wrap this up, Ollie, what’s been your best Christmas gift ever?
Oliver Norman: Hands down the Scalextrics set which I got when I was about five years old. It was fantastic. It was a Mini Cooper Scalextric set. Do you have Scalextrics in America? Do you know what I’m talking about with the little …
Karl Eggerss: I have no idea.
Oliver Norman: Oh, okay. So a little track and you get some remote controls and you put the two cars on the track. And that’s what it’s called in England. I don’t know what it’s called here. But yeah, that was super fun. Yeah. Hands down.
Karl Eggerss: I used to have those as well and they were awesome. And you could smell the actual rubber on the tires burning.
Oliver Norman: Yes, yes! And then there was one time for my birthday, I got an added piece called a chicane where the tracks come in and then go out again. Oh man, yeah. Then we were all really rocking. So yeah, that was good times. Good times.
Karl Eggerss: All right, Casey, what’s your favorite Christmas gift ever?
Casey Keller: Gift, man, I like experiences and the one that stands out right off the bat was getting to go snow skiing. My family took me snow ski probably I was in high school. My brother and I, we all went to Park City, Utah. It was an experience. It was awesome. It was so exciting to get on the plane, see snow. We don’t get to see snow much in Texas. So A, just seeing snow was awesome. And then B, getting to ski was just a great experience and I loved it. That’s the first thing that came to mind.
Karl Eggerss: I’ve never been snow skiing in my life. All my friends seem to do it every year. And somebody comes back with a torn ACL every year. And I’m thinking, “Why would I want to do that? Lug all this stuff around.” I don’t even like snow. So to me, I’m like, “Nah, that’s okay.” I will give you I think my best gift was probably a Green Machine, which it came from the Big Wheel family, but it wasn’t a traditional Big Wheel. All the sucker kids were driving around with a Big Wheel, which was whatever. Karl had the green machine, which was a three wheel and it had two levers and you would drive down the street and then you could do literally a 360 on this thing because the two wheels in the back. So the steering was in the back. And it was the most awesome thing.
Well, because I used it so much, the front tire would split. So yes, that’s the Green Machine. Ollie’s showing it. Yes, that is it. And it is awesome. Well, what they did was they got smart and they actually replaced the front tire with an actual bicycle tire. And so I actually ended up getting my son one all those many years later. And that was probably my best Christmas gift was the Green Machine because I would pretty much dominate the other kids in the neighborhood who had the old plain Big Wheels.
Awesome. All right, guys, well appreciate the insight, the books. As we transcribe the podcast, which we always do, I’ll have to try to have the books down in the show description or the transcription, if you will. And I just want to say, this is airing on my mom’s 85th birthday. So happy birthday. Yeah. And she does not miss a podcast by the way. She’s heard from the beginning all the way until now.
Oliver Norman: So Karl, what are you going to buy her for her birthday? One of these books?
Karl Eggerss: Well, I can’t tell you because then she’d hear it. And then yeah. She actually was the one that taught me about really saving because I think I mentioned, so my father passed away when I was seven. And so really she was the one that was like … We had to watch our money. And she was the one that taught me about savings, helped me open up my first savings account back when interest rates were actually something reasonable where you could actually see your interest building on your savings account. So she was the one that kind of got me into the saving mentality. But I was the one who got her into the stock market. So we’ve definitely helped each other out finance wise over the years.
All right, that was Oliver Norman and Casey Keller joining me. We appreciate it. You guys have a great weekend. Take care, everybody.
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