💹 Managing Market Volatility: Handling frothy valuations in today’s wild market (Badger values his whole portfolio!)
🧠 The Role of AI in Investing: How AI impacts valuation metrics, company performance, and its influence on investor sentiment.
📈 Using Options for Market Insurance: Monkey is hedging his portfolio risk by buying Palantir $PLTR PUTS, but Badger is still long!
🪙 Crypto Winter Is Coming: The importance of fundamentals, avoiding circus coins, and opportunities in Bitcoin $BTC and Chainlink $LINK
Listener Takeaways:
🔑 Start Your Investing Journey: Overcoming inertia and building wealth over time with consistent contributions.
🔑 Navigating Expensive Stocks: Tips on when to trim or hold stocks with sky-high valuations.
🔑 Patience and Theses: Why understanding and sticking to your investment thesis is key to long-term success.
🐾 Stock Safari: A look at InnoData $INOD and the private investment opportunities in ARKV, including SpaceX.
🌴 Thank you for supporting Wall Street Wildlife on Patreon! Your contributions are helping us make the show even better! 🦁
Sources:
Shannon’s Demon: https://www.richmondquant.com/news/2021/9/21/shannons-demon-amp-how-portfolio-returns-can-be-created-out-of-thin-air
Segments:
00:00 Introduction
03:11 AI and Market Adaptation
08:58 Using Options to Buy Portfolio Insurance $PLTR
21:19 Reverse DCF of Badger’s Whole Portfolio $ISRG $NET $IOT
30:10 Recent Market Movements and Personal Holdings $NET
42:38 Crypto Winter and Long-Term Strategies $BTC $LINK
48:29 Shannon’s Demon vs the Martingale Strategy
55:15 Stock Safari: InnoData $INOD
55:15 Stock Safari: ARK Venture Fund $ARKVX
—
E58 Volatility PLTR INOD ARKV Shannon’s Demon
[00:00:00] Luke: get the investing engine running and it doesn’t matter when you start, even if you bought one of the absolute peaks of the market, as long as you’re a long term investor and this is not money you need in the next five years, then the market is going to reward you in the very long term.
[00:00:14] Welcome to the Wall Street Wildlife podcast with Krzysztof and Luke. Today we are discussing wild valuations and what we’re doing about it. The future of technology everybody’s ignoring. How to make money out of volatility. Plus, Monkey had a huge two days and has made a massive comeback in The King of the Jungle. Look at him dancing. Well, you might dance. You’ve, you’ve made a huge comeback. Year two is looking like it’s yours, my friend. That’s fantastic.
[00:00:49] Krzysztof: so, so much fun in the last couple days. Pardon me, you jungle animals. I have a little bit of a cold, so I hope I don’t sound too nasally and annoying. Major, [00:01:00] props to our new Patreons. We’ve got capybaras and slothies and dolphins and all kinds of new animals. Sandu C, Alistair, Tom A, Vincent, Aaron W, Saskit, Sassikanth K, pardon me.
[00:01:19] we have an Arctic Fox, which is a delightful name, Adrian D, Ben, and Justin. So thank you, ladies and gentlemen. We are inching ever closer to breaking even. So that we’re not losing so much of our badger and monkey dollars every month to bring you the show. So thank you. And here’s one special thing I wanted to actually discuss. Arctic Fox from our side looks like it’s a gift that this person, this Fox was given a Patreon membership. And I couldn’t quite figure out [00:02:00] who gave it. I don’t know if there’s a special place for us to see that given that it’s the holidays. I love the idea of people looking for gifts. And maybe you might be 1 of those people.
[00:02:14] I say, hey, this is a cool community. We’re growing. So if you have. Maybe, a family member or a teenager were about to do, investing for kids show. Maybe this is a kind of cool gift you could give them so they could, join our community and learn how to invest. So
[00:02:31] Luke: Absolutely. Fantastic. Or like give money to charities and, you know, real wholesome organizations like perhaps first, but if you’ve done all your charitable stuff and you want to do some community stuff, then yeah, absolutely. We’d welcome a gift.
[00:02:45] Krzysztof: indeed, that’s a hell of a new Badger shirt. Badger.
[00:02:49] Luke: I’ve got one more for you. I’ve got one more for you, which we will see on our Christmas episode next week.
[00:02:54] Krzysztof: Oh man, you are totally outclassing me. I, wore my Slothy Wolverine shirt [00:03:00] again in honor of all the new sloths we have, So I’m nowhere near as cool as you. Actually, I’m pretty cool too. We’re both pretty, we’re both styling today.
[00:03:08] Luke: Should we get into the meat of today, of this week’s discussion, Krzysztof? And I think we’ve got this one in the roster as frothy valuations or increasing margins due to AI. Now you threw this one into the chat, but I’ve got a ton to talk about here as well.
[00:03:22] Krzysztof: Yeah. So. It seems like it’s in the air that the market, you know, this is a classic sign, right? When everybody, when people from normal people, family members start asking you about investing and it’s so, this is like clockwork, right? It happens like every three or four years, right? The market all of a sudden starts going up and finally, you know, people start, Hey, what’s this investing thing you have going on?
[00:03:47] So it’s kind of one of those classics feels like. Like, cycle tops. And, what I have to say about this is, redundant because I’ve been saying for a long time I’ve been worried about [00:04:00] valuation so I’ve been hanging out in the undervalued side of the investing world for over a year now. But I also think times are changing. And when times change, you need to adapt, right? You need to adapt the framework through the lens through which you see things. So typically the old measuring stick is something like PE rate ratios, the higher the price compared to the company’s earnings. And then, you know, it’s like one of these old stodgy metrics, but we have to remember now that AI is actually.
[00:04:33] Start to show its influence and one easy test case I’m thinking about is, okay, AI is going to replace some low level jobs. So what this means is that companies will lay off workers to be replaced by AI robots or whatever you want to think of them as, and that will drive down their cost of goods, meaning their profit, their margins will expand.
[00:04:59] Thank [00:05:00] you. So even though the price and earnings ratio might have gone up, the margins are getting better. So they’re keeping more of the profits of the company. So I think I’m saying is that there’s a new element here that we have to consider that just because one metric is more expensive doesn’t mean the company overall is more expensive, given the improvement in their.
[00:05:23] business performance that is starting to shape up. So it’s kind of a little bit more of the, we’ve got more variables to tend to now. It might not be as expensive as it looks on the surface.
[00:05:35] Luke: very hard to say, right? And this is the quandary that investors are in right now, because like many companies have sold the dream of AI. Not the least being NVIDIA, who are actually profiting from it, because they’re really selling, like, the hardware. but the question is, like, the purchasers of that NVIDIA hardware, and all the rest of it, are they actually realizing cost [00:06:00] savings?
[00:06:00] Because it makes sense, yeah, like you, the planner, I think, had, like, a press release a year ago saying that they were exiting, Like some major percentage of their call center, call operator staff because they’re replacing them with chatbots. and the technology is really getting there. So it makes sense in theory, but I’m not sure many companies are actually translating AI.
[00:06:26] Into true cost savings, but the comment makes sense. And I think maybe the quandary for investors is like that Jensen Hwang meme, AI, where there’s like people in like a church leaping around, right? Investors have got so overexcited about this thing and they like growth. Ratio, like the valuation ratios for any stock, which has got anything even vaguely adjacent to AI are through the roof because the market kind of expects the growth and the efficiency and everything else to come [00:07:00] from AI.
[00:07:02] If the comps, it’s like, it’s a little bit vapor y, it’s a little bit bubbly, but underpinning it is a real thing, which is hard to argue. AI is not real now. So it’s like, where do you draw that line? I’m certainly struggling with it in my portfolio. Like I’m looking at wildly overvalued. Companies that I own and trying to look for opportunities to either trim or in some cases, like sell stuff entirely, just because it’s got out of hand.
[00:07:26] Krzysztof: Yeah. You know what this reminds me of? Cloudflare in 2021.
[00:07:32] Luke: Are you’ve been spying on me literally before I played tennis today, I spent like two hours before that, like going over cloud for his latest quarter, listening to the earnings call and pulling the hair out going like, I can’t own this thing anymore. I got to sell it.
[00:07:47] Krzysztof: Yes, I hang out. I’m always in the bushes. That moving Bush, you see, I do with the little furry legs. That’s me. In [00:08:00] 2021, you know, for seven invest in Cloudflare was my first recommendation. Right. And then as soon as I recommended it popped. So everyone was excited. That was into the new stock market genius.
[00:08:09] But, it’s fascinating how this works. I love the company You know, it’s innovating and making a better internet yada but there is actually a limit there’s Infinity right infinite growth is not possible So when a stock gets to be valued or whatever its metrics were, they were absolutely insane.
[00:08:31] It was so high most over, it was the most overvalued stock by far in that era of 2021. And you know, in hindsight I was like, yay, I’m so smart and this is great. But you know, that’s obviously a cell signal. No company could be that priced for perfection, unless you are, I guess, the NVIDIA of the world. But how often do NVIDIAs come along, right?
[00:08:55] It’s a once in 25 years kind of thing. And so, I think [00:09:00] this is really timely because just this morning, before we started recording, I bought a put on Palantir, and I, last week, if you remember, I said I would wait for the momentum to break, according to classical technical analysis, and because I did that, I saved myself some money because Palantir went up even more.
[00:09:25] In the following week, but this time I broke that rule because I’m looking, I just did it. So I’m sort of breaking, a trader would consider this mistake because I kind of went on, it’s maybe, I don’t know if it’s impulse or intuition or experience or whatever, but like, I, woke up to pound tier. up at 82 a share.
[00:09:45] So last week it was like at 65 or something, right? When I was thinking of buying the puts and on the chart, you see gaps. There’s now a gap or two gaps. One is tiny. One is big. According to technical traders, All [00:10:00] gaps get filled eventually because algorithms do the trading and they need, they want those spaces in the chart where the price has gone up so much, it leaves a gap, right?
[00:10:12] The, thinking is eventually the price must revert before it goes back up anyway, because there’s gaps and stuff, I saw that and I’m looking at, I was looking at a, valuation metric over the weekend Palantir at that time, a couple of days ago was 49.
[00:10:30] It’s value at a 49. 3 X 25 estimated revenues. I think it’s now the, as of this morning, it must be in its fifties or something, which is over two and a half times the next highest SAS company. in IOT, Samsara, which you just sold, right, for valuation reasons. So, here’s what, so, the big question that we’re answering now is valuations are frothy, right?
[00:10:56] Here’s how I’m thinking about this put I bought. Let me spell it out for [00:11:00] beginners. I don’t want to, I guess, go too deep into options, but it is an option. I bought, technically, it’s a, June 20th, 25. That’s the date. price is 75. And I bought a put. That means I now have the right to sell 100 shares of Palantir at 75.
[00:11:26] And I have this right until June 20th. So it’s more than half a year away. So I’m betting In the sense that shares of Palantir will be less than 75. Because I paid 12. 95 per contract, per share, times 100, it cost me 1, 295 to buy this contract. So the break even is 1, 295. is 62. 05. Anything below that at expiration date will be profit. [00:12:00] Obviously a lot can happen in the next six months. I don’t have to wait until that date, but here’s my framework. And I tell me what you think about this, Luke. I actually, at this point in a market cycle, because of the lofty valuations, I am expecting this to not end up being, not to be a money making thing for me.
[00:12:22] I am okay. with losing this 1, 295. like I would expect my home insurance to expire worthless per year. I don’t want my house to burn down. I expect my house to stay standing and I’m okay given the insurance company, my money. And I’m thinking this because if in the next six months, the market stays lofty or there’s no major correction, then this put will expire worthless, but that also means the rest of my holdings.
[00:12:57] will be fine or higher. So [00:13:00] I’ll, in total, I’ll have more money and then I could re evaluate six months from now. But if from today, Out to June 20th, there’s a massive sell off. Then I’m betting that the company that has this most extended of valuations that’s been up on this completely hyperbolic, like run up that sometime between now and June, there’s going to be a 20, 30 percent correction.
[00:13:27] And because it’s a put in an option, it’s leveraged. I’m going to get paid way quicker and way more than, you know, than if I just loan borrowed the shares from, brokerage. So how’s that sound to you as a play?
[00:13:41] Luke: I looked into the same thing and I, I totally agree with your line of thinking, but I think I’ve got two problems with this particular put. And in the end I couldn’t find like a, an option. I couldn’t find an option to execute the thesis you’re describing that sort of made sense to me. Like the first one is [00:14:00] you’re taking, it’s a relatively short term bet, only, you know, June.
[00:14:04] So what, six and a bit months away, like the market could still continue to power and power for the next six months. And you see, you’re probably, you know, if this starts to turn worthless, then you probably have to buy like another insurance policy. So you’re paying, whatever, let’s say this is the right amount for you, you’re paying like a thousand and something bucks.
[00:14:23] every six months to maintain that insurance policy. Well, you probably still set it for something, but we’re just sort of, we’re saying that an outline, but the problem is as well, like this is a really expensive insurance policy, really, unless I’ve misunderstood it. Because as you say, like to Palantir’s price today is say 78 and change.
[00:14:43] You need the price to get below 62 in change for your option to start generating money.
[00:14:49] Krzysztof: So, wait, so this is this, I need to make this clear. Remember, this is where options stuff gets complicated because there’s time value. [00:15:00] So a lot of people misunderstand. They think that it’s only at the June
[00:15:04] Luke: You know, I understand before, though. Yeah. Sometime in the next six months. Yeah.
[00:15:07] Krzysztof: So in the six months, in fact, it’s interesting right now. I’m looking at the share price.
[00:15:13] It’s just, this is illustrative for what I’m about to say. I bought the, option early in the market open when Palantir was up a few percent. It is now today, at this moment down two and a half So from the time I bought it to there’s been call it a 5 percent drop in price. My option now is worth, I just made 10 percent today, right?
[00:15:45] 130 bucks. So that, that just means that I don’t simply because option is expires in June. That doesn’t matter. All I need is the price to wiggle in the next six months to the down direction [00:16:00] at any point. And it’s the insurance will pay. So it doesn’t really matter. It’s, and I thought six months is actually, you called it short term.
[00:16:09] And in one sense, it is short term, but in another sense, I don’t see a world in which. There’s seven months go by in the stock market and there’s not some event that, you know, triggers like a big sell
[00:16:22] Luke: I think again, I think I agree with you, but things could still like, if we’re honest, right. I think it’s pretty low probability outcome. Like all of these wild stocks we’re talking about, including Palantir and cloud flare and probably a bunch of others. I’m happy to dive into a minute. They could all have like another 50 percent upside, right?
[00:16:41] Who knows when this is going to run out of steam, right? I’ve been monitoring my Tesla. stock. and you know, since I started keeping a really close eye on it, that’s up like 40 percent in like a few months. Like everything is just nuts. and yeah, like if Palantir gets like a hundred dollars, like your, the value of your option is going to, the asset is going to fall out of it.[00:17:00]
[00:17:00] And I think my bigger problem was like your ups, your upside on this option is limited, right? Cause it’s the best case for you is the company goes to zero and then your option becomes worth. What, like 6, 200 bucks, because you get the right to sell it for 62, a hundred shares, one contract, and then the market value is zero.
[00:17:20] Obviously it’s not going to happen, but like, that’s the best case. So your best case is like you could make 6, 000 bucks, but your more likely case is, you’re going to sell at like a few hundred dollars up probably though, you know, if the market continues to come momentum, probably it’s going to, you know, you’re going to lose money on this.
[00:17:40] Sure. I did that. I expect this before buying it. I said to myself, given the size of my portfolio relative, how much is 1, 300? So to me, that’s not that much. So it’s like a small percentage, right? Therefore. How bad would it be if [00:18:00] this 1, 300 goes to zero?
[00:18:02] You know, point though, right? Because you’re right. Cause this is like a small fraction of your portfolio. Your upside is, I mean, it’s not going to be, you’re not going to make like 6, 200 on this because the stock is never going to go to zero, but if the stock goes to like 30, which is, you know, more than halving from where it is today, that’s like a significant drawdown.
[00:18:22] You probably realistically can’t hope for more than a 50 percent drawdown. So if it goes to like 30, 30 something bucks, you’re going to make like 2, 000 best case.
[00:18:33] Krzysztof: you’re making one error here. And that’s the, that has to do with time. Remember, that I don’t need it to say, even go to it doesn’t need to drop by a lot. It’s when it drops that also matters. So if in the next two months, it drops say down to 65. My option is going to, it’s not quite exponential, but the extent to which the value goes [00:19:00] up because there’s still a lot of time left affects it.
[00:19:03] So, it’s only in the last 30 days of the contract that the price needs to actually match
[00:19:10] Luke: Okay.
[00:19:10] Krzysztof: dollar for dollar. So, but the, I think the main point here is, you know, the frame of mind. I don’t care. It’s not, no. I don’t want it to go to zero, but now I have a little bit of an insurance policy that’s going to pay me when the market goes down.
[00:19:30] So if the market goes down, I made a little bit of money. If the market stays even or goes up further, I lose the insurance policy. The value of my portfolio is even higher, which is how insurance policies should work. And so it’s just one way. Some more advanced like strategies to kind of, hedge some bets.
[00:19:51] Luke: I suppose I was. Yeah. Okay. Okay. I’m not an options expert. Like you’re insuring a small part of your portfolio in some ways. So [00:20:00] when I was looking for something like that, like I was looking for a version of the insurance policy where I could perhaps have to pay quite a lot of money in real dollars, but I can really ensure like the whole of my portfolio and I just couldn’t find.
[00:20:13] An opportunity, like there seemed, you know, the options market is smart. There aren’t many dummies in there, or if there are, a bit like a poker game, right, they don’t last very long. and like there was a lot of downside potential priced into most of these frothy stocks from what I can tell. I couldn’t see any real bargains where, you know, you can pick something up for a couple of cents, like 10, 15 cents and actually buy potentially quite a lot of insurance as it were.
[00:20:39] Krzysztof: agreed option options. Market makers are sophisticated quant shops, so you’re not going to, the only way to gain an advantage in options is the same way you can for stock buying. When you genuinely understand a company that the market in the sense doesn’t
[00:20:56] Luke: Yeah.
[00:20:57] Krzysztof: Which happens all the time, but then you could, then there is [00:21:00] a, gap in price differential, but still, we don’t want to lose our listeners with too many, I guess, of these advanced level things, but, you know, hindsight will, reveal whether this, Palantir contract ends up being money making for me, but I think I’m right about the thought process.
[00:21:19] Luke: Yeah. Yeah. I agree. But yeah. let me show you something I’ve looked at as well. Cause I’m, I tried playing with the options thing. I couldn’t find something that I was comfortable with. So instead I’m just kind of insuring my portfolio by doing it the boring way by selling like the most expensive holdings I have.
[00:21:36] I’ll call it Luke’s portfolio valuation graphic for this section. So this, I went through my majority of my portfolio and I’ve calculated like a rough reverse discounted catch flow valuation.
[00:21:50] So without getting too much into the weeds about what that means, like here’s all my holdings. Any company that generates free cashflow, which is like the money left over after you [00:22:00] basically operate the business, that the board has like choices, what they can do is, that’s your free cashflow. And if you do a.
[00:22:07] Discounted cashflow analysis, like you’re working out the value of the company today based on all of its future cash flows, sort of, kind of like earnings, it’s like essentially like you’re trying to say what’s the company worth today, because I know it’s going to generate this much money for me over the next 10 years, typically, and a reverse discounted cashflow is a different way of doing the same thing.
[00:22:27] It’s quite a big shortcut. It’s got its limitations, but what it tells you, and this is what the percentages are in this little graphic, is. Approximately how much growth does the market expect today just based on the stock price? So to pull out an example, directionally, the market expects Tesla to generate 46.
[00:22:50] 88 percent growth in free cashflow year after year, like compounding, you know, nearly like 45%, 45%, 45 percent for the next 10 [00:23:00] years. And then you can start to just scratch your head and go like, does that make sense? So. and then you can see also like a couple of my little graphic here, which I have negative free cash flows.
[00:23:10] Like you can’t use these, you can’t use this approach for those, but companies like Samsara ticker IOT, like it doesn’t generate free cashflow because it’s a less mature company. It’s a younger company, but like I looked at other valuation metrics and that’s one that I sold a few days ago. I, announced it on, on the Patreon.
[00:23:30] and I’m now looking at this list and I’m saying like, where else can I sell on trim? And I’ve trimmed Palantir quite heavily. There’s a lot of momentum built into that. Like it’s hard to draw a clean line and say, you know, stuff at the top is expensive, stuff at the bottom is cheap, like Tesla, that it might not be unrealistic if they can actually solve autonomy and start rolling out Optimus that in the next 10 years, maybe they can compound like earnings, shortcut earnings [00:24:00] at over 40%, which makes this valuation actually reasonable.
[00:24:03] Cool. a company like Intuitive Surgical, like can they, they’re second on my list if you’re not on the YouTubes. Can they really grow their free cash flow at 40 something percent? Probably not. Like that’s a damn expensive company. Companies like Axon, can they grow free cash flow at 37 percent? Probably not.
[00:24:23] Like, I’ve got some core holdings here that I really believe in the future of, but I’m saying to myself, like, holy moly, they’re expensive and I think Cloudflare is the next one on my list. I think I’ve determined today I’m going to just exit that one entirely.
[00:24:37] Krzysztof: can I poke at you with intuitive surgical since that’s a magic fairy tale stock for
[00:24:42] Luke: Yeah. Yeah.
[00:24:43] Krzysztof: And I from what episodes maybe over a year ago, I squeezed your shoes about this one because Okay, let me put it to you this way. It’s, you know, what is it, David Sklansky and the, fundamental theorem of poker is like, if you knew [00:25:00] exactly how the, what the cards were, would you have played your hand in the same exact way?
[00:25:05] So let’s say it’s a year from now and you know, that intuitive surgical, growth rate is gonna, is like, I don’t know, I’m making the number up, 8%. Right for whatever in Would you still? Knowing that as a fact would you now today? Sell the majority of your shares In the portfolio, you have
[00:25:26] Luke: it’s a little bit of a misleading one in that graphic we just looked at because it’s not actually optimized for a key free cashflow. So you’ve got to use probably like price to earnings actually isn’t a decent, That’s probably a more reasonable way of looking at a company like that. but you know, coming away from the numbers, no, it’s not rational for me to have nearly a 16 percent allocation to intuitive today, but if I’d sold a year ago, I’d feel like a schmuck because it’s nearly doubled over the last year.
[00:25:54] So if I take a truly long term view, but right now there’s a lot of, [00:26:00] Optimism built into the valuations of nearly everything. And look, at the end of the day, you’ve got to own something, right? I don’t want to go to like a hundred percent cash and stick it all in like fixed income and guilts stuff.
[00:26:10] I want to own stocks.
[00:26:12] Krzysztof: coming to my world, coming to my so so I’ll press you on this a little further. why not? Why aren’t you thinking more? drastically like, oh, shit. I really should slash will reduce my. intuitive surgical by whatever 40 percent
[00:26:35] Luke: That was a very special case though. And as I said on previous points, right, that is, I accept that it’s a mistake. It’s a special case because I, want to write a book and I know what the title of the book is. And I think I can probably write this book in the 2040s and I want like a chapter of this fricking book to be like the first stock I ever bought that I never sold.
[00:26:56] And I want to be able to tell that story as part of the book. So [00:27:00] legacy for legacy reasons is why I don’t want to be touching that one.
[00:27:03] Krzysztof: so if you knew, okay, I said, let me re ask the same question I asked before.
[00:27:09] Luke: Yeah.
[00:27:09] Krzysztof: We know it’s a year from now and we now know using our time traveling machine that intuitive surgical fell 40 percent from today to next year. do you sell today? Knowing that?
[00:27:22] Luke: Cool. If I know that’s going to happen, then yeah, I sell, of course I do and I’ll buy back later. Yeah. Yeah.
[00:27:29] Krzysztof: Okay.
[00:27:29] Luke: Yeah. And I’m not,
[00:27:30] Krzysztof: So you’re in the
[00:27:31] Luke: might want to write the book, but I’m not a complete imbecile, but I don’t know that’s going to happen. I’m like, whenever. Like when I’ve spoken to industry experts in the past, we had a guy on the telescope investing podcast.
[00:27:43] Who’s really into med tech. I do super Romanian and he’s still, he’s got his self stack. He’s a good guy, smart guy. and he was like, he owned a lot of kind of micro caps in that space and he didn’t poo it, but he was like, you know, intuitive is a really expensive company and we talked about it a little bit on that podcast, you know, that’s [00:28:00] three years ago and the stock is.
[00:28:02] Like tripled or quadrupled since then, like it’s a company that’s always looked expensive. Anyway, I don’t want to be like defending intuitive. I shouldn’t have the allocation I have to it. and the like, dear listeners, like the essence of this, like half an hour rambling conversation really is stuff is really expensive.
[00:28:18] if that you should, this is the time when the active investor should be doing the most work. Right. Cause when valuations are through the floor and like everything’s going wrong, you know, the impact of your decisions is a little bit smaller. Obviously you need to manage your portfolio, but right now when stuff is crazy expensive and you can’t help but make money if you’re going long in stuff in almost anything.
[00:28:42] Like that’s time to be cautious and do the most work and like every day I’m going back and doing like refreshing my deep due diligence on a company I own just to challenge myself and say like, should I have this exposure to it?
[00:28:57] Krzysztof: And what makes our show so [00:29:00] great is that is what Badger just said is mostly true for his portfolio. On my side, things are not that expensive. And this is, but this is the beauty of investing is that, you know, we’re both painting masterpieces, but we’re doing it in such a different way. Badger stuff is legitimately, almost every single company is really, expensive.
[00:29:26] Mine, the only case I can make that for is Tesla. All my other companies are, I would argue still deeply undervalued. And so, there’s a lot of, you could always make money in the stock market. I think Badger is right to say, if you’re holding the expensive ones, now is a very good time to get active with that. If you’re following my playbook, Then you kind of don’t need to do much of anything besides watch if the thesis of my companies or I just watch them grow into their [00:30:00] more highly valued valuations.
[00:30:02] Luke: Fair enough. I guess that has happened for you in the last, what, last couple of weeks, you’ve had a pretty big couple of days. Do you want to tell us about that?
[00:30:11] Krzysztof: Sure, so our patrons know that I had quite a fun, what was it, Friday? It’s Thursday or Friday. I had a very strange two day period. So let me paint the picture. My biggest real world holding is Chainlink. And I’ve been holding Chainlink now for four years or so. So, you know, four years is a relatively long time, right?
[00:30:37] Like, I mean, it’s not, it’s something I’ve studied for a very long time. Know well. And all of a sudden, you know, there’s this stretch. It has the stretch of two or three days where it shoots up massively over a hundred percent since, was trading around like.
[00:30:54] 12, then it shot up to like 27. So that’s over a [00:31:00] hundred percent in, a very short time span. So that’s like, Ooh, yay. That’s exciting. You know, two days versus holding for four years. Right. It’s, you know, it’s fun. And then on the same day, next day, EOS finally closes at the damn department of energy loan.
[00:31:19] Doesn’t do much for the stock price. Cause it was all telegraphed, but that was a three year journey, right? which basically really de risks the company massively. So that’s a huge event for the company in terms of investability for institutions going forward. Stock does do all right. It’s really, now, it’s up quite a lot for me, near a hundred percent, I think for, king of the jungle.
[00:31:45] And if that’s not enough on the same morning, Coherus divested one of its major. Revenue producing FDA approved drugs which shot the price up something at one point. It was 70 up 70 [00:32:00] percent Lots of short shares hit so, you know I wake up in the morning and sometimes it’s hard to know which direction to look when so much So so much rocketry is going off at the same time What is the lesson here?
[00:32:16] Is there a lesson here?
[00:32:18] Luke: Well, like, I suppose. As you were saying that I was thinking, Oh, it’s kind of, I was playing tennis today with an airline pilot, this guy, one of my buddies from tennis. And, I suppose in some ways, like being a pilot of your portfolio is a bit like an aircraft because like, could it be years and years of just cruising at altitude and nothing’s going on, but suddenly you’ve got like, you know, now we’re landing, ah, there’s stuff happening.
[00:32:42] Krzysztof: Yeah, right, right. That’s the lesson. It’s like timeframes are weird and investing. Same analogy said for people who’ve gone to war that war is immense boredom, interrupted by sheer terror for moments. And if you think about what I just said, chainlink I’ve been holding for [00:33:00] four years, all of a sudden one day, it’s massive, like explosion, coherence, EO, same thing, years and years of stuff.
[00:33:06] stuff. Prices drop in. We’re hanging around and on the same exact day, everything kind of decides to explode. So you never know when things might happen because the market and prices is a complex system. So nobody could predict it. But I think the principle I’m talking about is. just because something isn’t happening yet doesn’t mean you’re wrong. You have to just kind of let the story play out and eventually, if you’re right, it will happen. But many investors get dispirited and they start questioning themselves. Was I wrong? Why is the price not moving? Why is this gap exist? Yada, And you just have to have, yeah, know what you own and the fortitude to do nothing until one day you wake up and everything’s blowing up.
[00:33:53] Luke: Yeah, I mean, there is a difference, right, between, like, if you accurately know the thesis is [00:34:00] intact, and like, you’re just waiting for the market to kind of catch up with you, the market’s understanding to catch up with your understanding of the trajectory, then that’s a good place to be. But if you’re, you know, if you’re sort of sitting around waiting to get even, or, you know, you’re waiting for, like, something that may never come, you know, waiting for this stock price is going down and down, and you’ve maybe blinded yourself to the reason why that might be the case, and it’s shrinking market share, like, I don’t know if this is a major red flag or not, but.
[00:34:28] cloud flare, like I went through their recent deck this morning, their, dollar base net retention, which is like, if you earn like a dollar from a certain customer this year, you want like a dollar base net retention of over a hundred percent. Cause that means you’re earning like, if you have, it’s 110%, you’re earning like 1, 10.
[00:34:47] And then the next year you get like, you know, another 10 percent again. So it’s like a good growth metric for sassy kind of companies. Like that’s there. Dollar based net retention is still over 100%, but it’s coming down. It’s down to like [00:35:00] 110. That’s almost getting into like warning territory. Like maybe the company is just like maxed out.
[00:35:06] And so, you know, it’s one of the, one of the things I look at when I’m monitoring the thesis, just to ask myself that question. Like, am I, have I already either realized or the gains on this thing already, or more to the analogy you’re sort of leaning into there, with like your coherencies and your other stocks, like the world thinks that these are going nowhere.
[00:35:28] If you genuinely know better, then your patients will eventually be rewarded. Although there is that saying, like the market can stay, or the market can stay wrong longer than you can stay solvent.
[00:35:39] Krzysztof: Yeah, that’s right. Irrational. Yeah, that’s right. But I also did another thing which our patrons, I was I was actually scared to do this, you know, not scared. Sorry. It was weird But you’ve been encouraging me to you know, also record some stuff And there, you know, it was raining outside and it was cold and [00:36:00] drizzly.
[00:36:00] And I wasn’t, you know, so I was like, okay, I’m going to do it. I’m going to do it. And I recorded myself talking to the camera, just talking to myself. And I went through all the trades I made because I made some big trades for the king of the jungle portfolio. Some of those cohere slots that I bought for some somewhere around 70 cents.
[00:36:18] We’re at that day up over 300 percent up to Coherence went above two dollars. So I trimmed a lot of Coherence and then I redistributed all of those funds into different positions in the King of the Jungle portfolio and I narrated that for our Patreon. So I felt like an idiot doing it but some of the feedback so far has been really supportive and really, kind like that.
[00:36:45] You know, maybe I should do it again, you know,
[00:36:49] Luke: Absolutely. it was really good. yeah, I got a lot, I had a lot of fun watching your video the next morning in bed and going, Oh yeah, look at this, my cohost doesn’t know what [00:37:00] he’s talking about. And you know, an observation I took from that was. Like I need to get out of your way, right?
[00:37:08] Sometimes, you know, you’re, you know, you’re doing this sort of exposition on the pod about a particular company. And I feel like I’m just rolling my eyes. I’m like, Oh, I’ve heard this before. You know, this is EOS shit co, you know, it’s just, it’s going nowhere. and you know, I’ve got to get out of your way and let you, let you talk because, you know, eventually you’ll get, it takes 20 minutes, but you’ll get to some really important.
[00:37:28] Krzysztof: well, eventually monkey will, say the thing might take him 20 minutes.
[00:37:36] Luke: Anyway, congratulations, and yeah, as we said in the intro, it definitely looks like King of the Jungle Round 2 is going your way, very much, very strongly. So, that’s great, that’s really good. I’m very happy to, having won Season 1 so magnificently, I’m happy to take a backseat in Season 2 if this is your year.
[00:37:54] Krzysztof: Well, what’s more exciting, I think, in general, is that massive gap that you could see on our [00:38:00] King of the Jungle spreadsheet before. I mean, there was a such a wide chasm. It was over 1000 something dollars, 1600, I think, at one point. Like a massive amount given where we started and as of right now, it’s closed down to about 700, which is still a lot in absolute terms, given that it’s only year one point, you know, we’re only beginning of year two, but given that I just did a little mental exercise, given that I now have, what is it?
[00:38:32] 350 shares of EOS. In that portfolio, I actually expect this is, I’m going to go on the record. I expect EOS to be in the 5 range within six months. So that’s 2 from here. That’s 700 bucks. Just that happening puts us in parity going forward. And that makes for a more exciting contest. So I like where we’re sitting.
[00:38:56] This is fun.
[00:38:57] Luke: Yeah, it’s good. It is good. And you know, this is very [00:39:00] much like relating back to what we were just talked about 10 minutes ago. Everything I own is objectively very expensive, like almost at the peak of where it’s probably going to get to, like who knows where we go from here. Whereas you, you believe like many of your holdings are very reasonably priced.
[00:39:15] So, you know, if those statements prove to be true, well, there’s, I haven’t got much upside, whereas you’ve got a ton. Yeah.
[00:39:23] Krzysztof: Yeah. And you know, this is, I think, little portion, of the show, what, I want to think of it as listener encouragement. If you have not yet started investing, do not think you’re too late. Remember, we started this portfolio with a thousand dollars. Right. And then we’ve just added a hundred bucks for year one, and now we started adding 200 at a time.
[00:39:48] Luke: Yeah.
[00:39:49] Krzysztof: All of a sudden I’m managing 3,200. You’re managing close to 4,000. Just if you start now, listeners, right? [00:40:00] And you get in this habit of monthly adding and following our strategies, meaning, doing your diligence, not following us blindly, but you know, listening to the principles we’re talking about.
[00:40:12] Then it’s not going to take long for your portfolios to be. sizable. We really don’t want anybody to feel like, Oh, they’re in year two. And now the ship has sailed. I know inertia in investing or getting started is one of the hardest things to overcome. So we want this to be encouraging for you. So hop on board, you know, now’s the
[00:40:36] Luke: Yeah, and, like if, whether you’re running like active money or passive money, like you’re in indexes or you’re actually in pick stock picking, like the most important thing is just to get started. my mom took a sort of notional allocation in my portfolio, right at the peak of like growth stock mania, kind of right at the start of 2022.
[00:40:56] And, you know, it’s in a spreadsheet, but it’s real [00:41:00] money. and, essentially it’s like. Of, it’s a mirror of my own transactions and it gives me an opportunity to like talk to her on WhatsApp or today we sold this, we added to this and, you know, seek her view and you know, like share what we’re doing.
[00:41:13] ’cause she’s very interested in this stuff. and, yeah, like, so essentially she bought in right at the peak of the 20 21, 20 22. like growth stock mania. And then she’s been underwater for like two and a bit years. Well, I was like delighted to be able to message her a couple of weeks ago and say, by the way, you know, you’re not just in the black now you’re up like 50 percent from where you started.
[00:41:38] and that was buying at the peak. Like the most important thing is get going. get the investing engine running and it doesn’t matter when you start, even if you bought one of the absolute peaks of the market, as long as you’re a long term investor and this is not money you need in the next five years, then the market is going to reward you in the very long term.
[00:41:58] Krzysztof: Absolutely. [00:42:00] Right. For those of you who want to know what exact trades I made, again, I spelled all that out on our Patreon page. So.
[00:42:08] Luke: And there is a, it’s quite a fun video. We were dropping, I guess, at Christmas time. We sat on this one for quite a few months. It was filmed in Austin, but we’ll be releasing that to our Patreons in, still on Christmas day show you Christmas gift. So, go get over there and sign up, or send a gift to a friend.
[00:42:29] And you’ve got to check out, monkey and badgers antics in the nightclubs of Austin.
[00:42:35] Krzysztof: Indeed, that was so much fun. All right.
[00:42:38] Luke: So hey Krzysztof, coming back to our Patreon and a great question we got from SR on the Patreon and he or she asked about crypto and is the crypto winter inevitable? What your views on that?
[00:42:51] Krzysztof: I think so because the market moves in cycles Well, crypto has its own jargon because there’s a lot of kind of memish things going [00:43:00] on over in that side of investing because most of it is circusy. And this is why crypto still has a very bad name because 95 percent of the projects are closer to gambling. Then anything else, but it’s exciting.
[00:43:15] And so when things go up, everybody’s happy pouring immense amount of money, but what goes up must come down, especially if there’s nothing fundamental holding it up. And when things come crashing down in crypto, it’s called winter, which kind of makes sense. Right. But we’ve seen this in Bitcoin prices.
[00:43:37] Even though, Bitcoin has been the best performing asset in a while, there’s been massive swings down. So I think what our patron is asking really is, Okay, things are really hot. Everything seems like it’s going up. Is it inevitable that there’s going to be a crash? My take is yes. Markets go in cycles, especially these kinds of markets.[00:44:00]
[00:44:00] However, I think there’s a more important point that’s to me, a given. I don’t mess with the garbage, so I, just don’t really care that things are going to move in cycles
[00:44:13] Luke: you didn’t buy, you didn’t buy any Hawktour coin?
[00:44:17] Krzysztof: Oh my God. That’s so sad. It’s so sad. It’s so sad that people actually buy this stuff and lose real money. I mean, it’s just it just boggles my mind. So yeah, when I own Chainlink and when I own Bitcoin, I know eventually the fundamentals are what determine the price. And if it drops 30%, I don’t care. I’m going to buy more dollar cost average and so forth.
[00:44:45] If I’m holding any of the other garbage, which is predominantly what people hold, then when winter comes around, it wipes you out entirely and there’s no coming back from it. So winter is coming. It always does. [00:45:00] And avoid the garbage. This way won’t matter to you. And if you hold the good stuff, then you can take advantage of the lower prices like you do with stock equities.
[00:45:11] Luke: Yep, fair enough. And it’s a bit like stocks, right? Because if you know a correction is coming, you still need to, like, you don’t know when, right? And there could still be a massive upside, so you can’t sit on the sidelines, because you might be sat on the sidelines forever. Like, not forever, You know, you’ll never, it’s very hard.
[00:45:29] It’s going to be almost impossible to time the bottom. That’s probably the bigger point. So even if you knew crypto winter’s coming and you’re like, okay, I’m going to buy Bitcoin when it crashes, like you won’t know when the very bottom is. And if you’re in that mindset of like waiting for something, you’re probably going to miss that thing you’ve been waiting for.
[00:45:49] So it’s just too difficult. It’s much easier just to own it. And just like. Put your hands over your eyes and ignore it for like a couple of decades as long as you’re monitoring the thesis and make [00:46:00] sure It’s like still a good investment
[00:46:02] Krzysztof: Exactly. And I’ll actually make a weird analogy. It just came, it came to me. I hope it’s useful enough. I’m sort of thinking that Bitcoin right now at this moment is similar to Tesla shares, meaning that they’re very expensive, relatively speaking, but it’s something I know I want to hold for the next 10 years.
[00:46:22] So I don’t really care what the cycles are between the prices. Whereas for me, the only other crypto I own is Chainlink. And I think that’s massively undervalued, despite it being in your time highs over the last three years. So, that’s because I understand its fundamentals. So I don’t really care that other garbage is doing whatever the garbage hype cycles are.
[00:46:50] And so for me, owning Chainlink is sort of like owning coherence or owning relay therapeutics because I know [00:47:00] that it’s cheap only because people don’t understand it enough and they haven’t You know, market hasn’t had enough time to let the thesis play out.
[00:47:08] Luke: fair enough. Like I’m not a crypto guy. I own some and I now own, you know, Bitcoin and Chainlink because you twisted my arm on it a little bit. well, yeah, and we do have next week an episode interview with a Chainlink expert. So I’m looking forward to learning about this damn thing I’ve bought.
[00:47:26] don’t, do investing this way guys. but, you know, I find it impossible to get any sense of the value of stuff like this because, You know, it’s not like Bitcoin doesn’t generate earnings, right? You can’t value it in that way. So it’s a very different world. Yeah. Anyway.
[00:47:42] Krzysztof: Yeah, right. we will talk, to my chain link guy. However, I’ll plant the seed now, for you mastercard and visa. You understand you were banker, right? MasterCard and Visa take a tiny, little, percentage of millions of transactions, [00:48:00] right?
[00:48:00] Luke: Not so tiny. It’s actually a decent chunk. Yeah.
[00:48:02] Krzysztof: Okay. It’s a chunk, right? And they’re what?
[00:48:05] Hundreds of a billion dollars market cap, right? Chainlink’s gonna do the same thing, except for everything, and they’re, that’s what, it’s, some people, right, it’s hard to believe, but that’s, what’s starting to play out, so, stay tuned, but it’s not that hard to understand Chainlink from that perspective.
[00:48:27] Luke: Look forward to it. All right. Shall I tell you about how to generate money out of volatility? Okay. so this is something called Shannon’s Demon, which is quite an interesting kind of mathematical, I don’t know, like thing that I read about on a great website called Banker on Fire, which I’ve now suddenly become quite a big fan of.
[00:48:52] So, Krzysztofr, let’s play a little game. If I gave you a hundred dollars and I told you. whenever you flip this [00:49:00] coin, if you flip it heads, you’re going to add 50%. So you go from a hundred bucks to 150 bucks. And whenever it comes down tails, you’re going to lose 33. 3%. And it essentially is like, you know, if you, gained 50 percent or lost 50%, like you’re going to degrade into the gutter, right?
[00:49:18] Because you’ll go up to 150, then you go down to 75 and you’re going to oscillate into zero. So we’ve just, we’ve artificially created the situation where. You’ll go from 150, sorry, a hundred up to 150, and then you lose a third. So back to a hundred. So it’s already, it’s kind of, it’s weighted in your favor, but it’s a bit like investing because in the long run stocks go up and the upside in the long run is bigger than the downside in the long run.
[00:49:44] so if you were to flip this coin and let’s say you had unlimited money and you could wear the volatility, then you keep flipping heads and tails, and over the very, very long run, you’ll have. exactly the hundred dollars that you started with. Does that make sense? Yep. Sometimes you win 50 [00:50:00] bucks, sometimes you lose 50 bucks and you just bounce around that.
[00:50:03] If you change nothing else except that in between each coin flip, you take half of your money and you stick it in cash, like in the bank as it were, and you wager the other half, like intuitively you would think that shouldn’t make any difference. I’m just betting like less of the money. But in fact, that does make a difference and it converts the volatility of going up and down by 50 percent and down by 33 and a third percent.
[00:50:34] It converts some of that volatility and it kind of banks it. cause you’re, banking your win as it were. So again, as long as you have unlimited money and you can’t get wiped out by like a sequence of. like tails, then in the long run, you will make money and nothing’s really changed other than you were hiving off some part of your cash in between each coin flip.
[00:50:59] Does that sort of make sense? [00:51:00] Probably explained it badly, but if you’re on YouTube, you can see the graphic and it explains the story more clearly.
[00:51:04] Krzysztof: Let me ask you, tell me, I want to ask you if this is a good sort of analogy. Sometimes when I’m at the blackjack table, and I think if I just keep doubling the size of the bet, you know, I’ll win eventually. And I never, I didn’t look into it mathematically. Isn’t that a correct strategy of sorts that as long as you have a kind of infinite supply, if I keep playing the hands.
[00:51:29] Eventually I’ll make money and I could just walk away. Is that sort of similar? Or is
[00:51:34] Luke: little bit. Different. And so that’s called something called Martin Gale, which is a very well known. It’s in fact, it’s such a well known strategy. I’m going to go off on a tangent here. Forgive me. Like my grandparents used to have a roulette table at home. It was like this crazy games table that converted into felt for cards and drafts and dominoes.
[00:51:54] And it was quite a nice, like roulette wheel underneath. And my brother and I would literally just sit on vacation when [00:52:00] we’re staying with them, when we play like roulette against each other, just for kicks. And I discovered. That strategy, which it turns out is well known by gamblers in time immemorial.
[00:52:10] And it’s called Martingale. And the reason Martingale doesn’t work because in theory it does, but it’s like the caveat you gave is the reason it doesn’t work because you don’t have. unlimited money or you bump, if you, let’s say you have to keep doubling your bet every time you lose, even if you started with like 10 bucks.
[00:52:31] Like double, at some point you’ll run into the casino’s house limit, which exists specifically to stop someone doing this. And eventually, you know, you want to double to say a 10, 000 bet, but like the house line is like 5, 000. And at that point you can’t escalate anymore, but typically you lose your money before you hit that.
[00:52:51] Limit,
[00:52:52] Krzysztof: that makes sense? Okay. So, so it’s the idea then is it more accurate to say than as long as you have [00:53:00] active money on the side because you’re sort of, you know, Taking some out from the volatility. You’ll always be able to, like that the strategy described works because you could always have enough cash to take advantage of the volatility.
[00:53:15] You’re not just losing it.
[00:53:16] Luke: but in this particular thing, like you’re never reinvesting that money. You’re sticking it like in the bank, in the Shannon’s Demon sort of simple story. And it’s just, you know, money that you’ve. you’ve hived off from the coin flipping, but I think there is a nice analogy directly into investing here.
[00:53:34] And I think this is kind of how I manage my portfolio. And maybe, you know, when, the numbers get a little bit bigger, it’s probably what everyone intuitively starts doing. which is, yeah, you know, you essentially having like a cash allocation and when stocks get incredibly bubbly and expensive, like the conversation we’re having right now, earlier on the pod, Taking some money off the table, essentially [00:54:00] like converting that volatility into money in the bank account, but I won’t touch again because it’s paying like my living expenses and other stuff.
[00:54:08] and then continuing to gamble like the analogy doesn’t quite hold up, but continues to gamble with the rest of it. So, yeah, I think that the sort of the, key sort of conclusion of the maths here, and it was a mathematician, Shannon, who came up with this idea was that if you have you have volatility, you know, like stocks, things, well, it could be anything, things where there’s a probability chance of maybe a winning and a losing outcome, one version of it.
[00:54:36] even if in true terms you have no net gain or loss, if you just follow this kind of approach, the nature of the math is you can generate a return from those things that don’t actually generate a return. at a fundamental level, just by managing your money, your portfolio in this manner.
[00:54:58] Krzysztof: Cool. [00:55:00] Awesome. been doing it all along. Well done.
[00:55:02] Luke: I’ve, I’ve already explained it really badly, but we’ll drop a link to the Banker on Fire article in the show notes and go check it out.
[00:55:08] Hey, Krzysztof, then, so should we, should we wrap up a long discussion and go on Safari with a couple of companies?
[00:55:15] Krzysztof: Sure, I have one for you. warning here, I have done almost a exact minimal amount of research about this. So this is real surface level, but it piqued my interest because this company, I ticker I N O D InnoData, released this. Earnings early November stock price went up massively in this morning Of course before we started recording the stock price was up another 25 It’s floated back down but inno data Really wowed me because they had a year over year 136 percent increase in revenue.
[00:55:57] So anytime you start seeing that kind of [00:56:00] massive acceleration, yours perk up, this is growth investing one on one. And this is a company that from my shallow understanding helps other companies massage their data to make their AI stuff more powerful. So it’s almost like I think of them as a kind of data kind of concierge where it’s like, okay, we have all this data. How do we. package it and how do we interpret it and their consultants and there are all kinds of things that is way above my pay grade because I am not an AI analyst. So I can’t tell you how it works, but they have recently signed up according to their third quarter earnings release, seven, I’m sorry, five of the seven, magnificent seven companies to work on what’s called, yeah, AI generative AI.
[00:56:55] So anytime I’m thinking if, what is it meta and [00:57:00] Facebook and Amazon or whatever, I think, Microsoft might be higher you as a little 1 billion small market cap company to work on your AI data problems. You’re doing something right. You’re doing something very right. And so this is now in my current sweet spot of small cap.
[00:57:21] Under 2 billion in valuation, obvious proof point in major customers that are big league and massive revenue acceleration. So check them out ticker. I N O D N O data. let’s see where, they go from here.
[00:57:38] Luke: Pretty good. And you were kind enough to help me pick my stock Safari pick for this week because I was a bit unprepared and didn’t have one. and it’s quite an interesting idea and I’m, I do not recommend this, but I think it is useful to talk about it just a little bit. It’s. You’ve heard me on the pod before go on about ARK, Invest, the Cathie Woods, like [00:58:00] collection of motley funds that are like massively underperforming the market.
[00:58:05] and they’re just doing a very bad, they do great research, but they just do a very poor job of managing these funds. Well, they have a venture fund called ARK V and I mentioned a few weeks ago, I’m now a SpaceX shareholder, at least I hope I am. I don’t know for sure, which is the nature of venture investing sometimes.
[00:58:25] Like I won’t really know until the SPV I’m invested in decides to exit and then I’ll find out, do I really have an allocation,
[00:58:34] Krzysztof: right. All you listeners at home. Don’t try or don’t try this at home. You don’t want to not know if you own
[00:58:40] something. why, like ask the lawyers. Yeah. so, but it is quite, it’s quite hard to get access to stuff like that. Like the, There are lesser valued venture or private companies, which are slightly easier to get access to, but SpaceX has got some quite material, like qualifying criteria to [00:59:00] buy stock, depending on how it’s structured.
[00:59:02] Luke: and I can’t in all, good conscience recommend the way I did it, but there are other ways to buy SpaceX. And, this is one of them. So if you were to buy. Not shares in because it’s not really a like a properly publicly listed. You can buy and sell stock. It’s a closed ended fund, which means like Kathy and the gang have this thing.
[00:59:23] They call it arc V, but it’s a bit different to the other arc investments. Essentially. It’s like a pot of money. And, every quarter, once a quarter, they sort of open it up. to existing shareholders, I’m going to shortcut by using that term, to be able to sell some of their stock. It’s not really stock, but they can sell like their ownership holding.
[00:59:43] So it’s not like you can go and buy and sell it whenever you like. It’s like one, four times a year, you get like the day where you can sell, like divest your shares. And there’s no like price from day to day because these are all private companies. The biggest holding in this [01:00:00] fund, which is why I’m talking about it now is SpaceX. So if you were to buy. a piece of ARK fee then currently 12. 4 percent of your money is in SpaceX along with a bunch of other firms, actually, which all look pretty reputable. It’s quite a decent list. Companies like OpenAI, Anthropic, Discord, Databricks. There’s some decent names in there. I don’t recommend this though.
[01:00:23] I don’t think Cathy’s outfit have any kind of track record of credibility in their public market investing. So I don’t know why there would be any better In private market and I don’t really like the idea of this, interval fund, and one of the reasons I don’t is the way it’s structured, and I literally just glanced at the prospectus 10 minutes before we started recording today, they hold around 5 percent of the floats. So there’s probably a couple of billion dollars in this thing. I don’t know for sure. they hold 5 percent of those funds [01:01:00] available to be sold or, you know, to be, to buy back off investors once a quarter. Like if there is a, essentially like a run on the bank with this thing. And, everybody wants to run for the exits and sell their ARKV like only the first 5 percent of sellers are going to be able to sell in that quarterly period.
[01:01:20] And then that’s it. Like the game is up and they have no more float to be able to, or ability to buy back your shares off of you. And I don’t like the idea of that. Like if you’re going to be a private market investor, buy it, like buy it the hard way. Recognize you’re probably setting fire to your money.
[01:01:39] If you can find a way to buy the thing you want to buy. And you have no control, no ability to sell. You have to wait for a liquidity event essentially. and that’s the typical way you access stuff like this. Now I did notice, that, SoFi in, if you’re a US SoFi Customer, which I believe you are, I’m not, [01:02:00] SoFi now allows you to buy SpaceX directly in some manner.
[01:02:03] I don’t know how they’ve done that, but that’s probably worth looking into if you wanted this name in particular.
[01:02:08] Krzysztof: yeah. Though, also cursory glance. Showed me that you need a minimum of 25, 000, and there’s all sorts of restrictions, and it’s, advanced level stuff, so, It’s not appealing to me.
[01:02:22] Luke: Fair enough. Anyway, that was my, that was my Safari thing. Not really a stock. ARKV. I don’t recommend it though.
[01:02:28] Good chat. As ever, Christoph, this could be challenging for our longest episode ever. And there’s like a bunch of stuff on the roster that we didn’t even get to. Like we were going to talk about the future of technology and we didn’t even touch that damn topic. Anyway, shortcut, it’s AR glasses, but we’ll talk about it in a few weeks time.
[01:02:43] Krzysztof: Yeah, I guess, to our Spotify listeners or podcast listeners and YouTube listeners. I just want to be go on a record to say that this past week over on our patron page. I’ve had an absolute blast talking to [01:03:00] individual members and just actually we have the community thing vibe going there. People are introducing themselves.
[01:03:06] We’re just, having a good time. And so if you’re curious and want to support our show, head over to patreon. com slash wallstreetwildlife, all one word, find your inner jungle animal and say hello.
[01:03:22] Luke: great stuff. Well, until next week, and I think we do have our special, hopefully our chain link expert, and I guess it’s gonna be our Christmas episode as well next week. So looking forward to that. One second, understand what damn Christmas present I bought myself. Are you ready to become a beast of an investor?
[01:03:42] Krzysztof: Your jungle journey starts here. Yeah
[01:03:47] [01:04:00]
