📉 Market Madness: Navigating the Crash – In this special episode, we dissect the recent market turmoil and share our survival strategies. Is this the beginning of a recession or just another buying opportunity? We explore different perspectives on handling market chaos.
🧠 The Psychology of Market Fear – Every investor faces fear during market downturns. We discuss how to transform fear into opportunity instead of panic, and why emotional discipline is crucial when your portfolio drops more than your annual salary in a single day.
💰 Free Cash Flow: The Ultimate Survival Metric – Why free cash flow becomes even more critical during recessionary times, and how to spot companies with the financial strength to weather the storm and potentially emerge stronger.
🔍 Value Hunting in the Carnage – Luke shares his analytical approach to finding quality companies at reasonable valuations when everything is selling off. Is NVIDIA already a bargain compared to the 2022 correction, and how is Tesla valued right now? $NVDA $TSLA
🚀 High-Risk, High-Reward Bets – Krzysztof reveals his contrarian strategy of targeting pre-revenue companies with strong cash positions and promising futures, including detailed analysis of Relay Therapeutics and its potential 10x opportunity. $RLAY
💡 New Investor Starter Guide – Practical advice for those just beginning their investing journey during volatile times, including the importance of dollar-cost averaging, starting with small positions, and having the right time horizon.
Segments:
00:00:00 Introduction to Market Turmoil
00:01:12 Welcome and Opening Thoughts
00:02:00 Personal Updates and Life Perspective
00:09:47 Current Market Conditions Overview
00:13:00 Focusing on What You Can Control
00:16:00 Understanding the Medium-Term Outlook
00:27:31 Practical Investing Strategies in Volatility
00:33:00 Free Cash Flow Analysis Explained
00:44:00 Finding Value in Market Corrections $NVDA $TSLA
00:50:42 Krzysztof’s Contrarian Strategy
00:54:00 Relay Therapeutics Deep Dive $RLAY
01:00:00 Pre-Revenue Companies in Difficult Times
01:02:30 Luke’s Cash Position Management Strategy
01:11:00 Advice for New Investors
01:19:48 Managing Emotions in Volatile Markets
01:26:00 Final Thoughts and Conclusion
E75 Market Crash Survival Guide – with ads
[00:00:00] Luke: The market is in turmoil and chaos, and this is such an important conversation.
[00:00:05] Krzysztof: remembering how important it is to care about one another in each moment because we don’t know how many we have left.
[00:00:14] Luke: There’s an interesting kind of humorous slash bad element here. ’cause I was thinking, well, like if anyone could get a picture of my granny and they either want to sell me something they want to scam me.
[00:00:27] Krzysztof: And that all this money business, from our perspective, I think I speak for both of us, is to make more of those moments available to us.
[00:00:37] Luke: Every day for several days, like my portfolio has been down like way more than my annual salary ever was. And that’s like day after day after day. Um, and so that, that is, that’s a fearful moment, clearly.
[00:00:52] Krzysztof: but in the moment, how many people are actually able to act on that?
[00:00:56] Luke: cause in the end, stocks go up as long as you’re invested in good [00:01:00] quality companies. For an advertising free version of the show, check out patreon.com/wall Street Wildlife.
[00:01:12] Luke: Hello and welcome to the latest edition of Wall Street Wildlife. We are pulling our hair out. The market is in turmoil and chaos, and this is such an important conversation. We’re gonna get this one out live to our Patreons today. The rest of you all are gonna get it seven days later ’cause it gets nicely edited.
[00:01:30] Krzysztof: Yeah. When it’s old and stale, the rest of you’ll get it. But our patreon’s over patreon.com/wall Street Wildlife get the good stuff like caught off the presses, uh, badger we had, before we start talking about the chaos and turmoil out in the world, you shared with me that you had some, some meaningful stuff happening over your side of the pond in your, in your life.
What’s going on? What happened this weekend?
[00:01:55] Luke: yes, I, I guess we both did. Um, mine’s a, mine’s a kind of [00:02:00] interesting mine. Happy occasion. Tinged with some. sort of interestingness. So it was my 55th wedding anniversary, uh, maybe like a week or two ago. And had a big party for about 40 or 50 friends. My brother and I usually do like a double act speech at these kind of things.
Um, and this time we managed to ferret out a whole bunch of their old wedding photos. So these are like stills from 55 years ago. Um, and we got the wedding video, which is like really poor quality, like sinny camera star footage. You can barely see it. And it’s, it was restored like 10 years ago, but they, they just couldn’t do a very good job with the quality of the footage. I, over the last couple of weeks, I used of different a i a tools to restore the footage. Well, actually more importantly, to take the stills, tidy them up and create, um. Like [00:03:00] bring some of the still photos to life with the power of ai. was really interesting. Like I’ve, I feel like I’ve played with that five or six of these tools now.
The one I really got a lot of value out was cling.ai, K-L-I-N-G. But like the best tools change almost every day. So like, do your own research. It, it was quite an emotional into the speech. Um, like we had a lot of, um, like bringing like their lives to life from these still images. And it kind of closed with the video closed with both my parents mothers.
’cause it was like Mother’s Day a few weeks ago. They’re, they’re the dearly departed, I don’t have any grandparents kicking around anymore. but like then probably the nicest video was my, my mum’s mum kind of waving goodbye at the end. Um, and it looked beautiful. It looked super authentic. It’s just like her and her garden as the camera, the AI camera. of rotates around her the whole room [00:04:00] fell apart into tears. And it just made me think, um, like it was really quite a beautiful thing. Wouldn’t be meaningful to anybody else, only to the family really, and to like friends that knew my grandmother. Um, but be able to create this amazing emotional moment technology. it just made me, made me think about a few different things. Really. Like, this is incredible storytelling tools now, like with a bit of video editing, which I’m pretty proficient in, even though we happily thanks to our Patreons outsource the video editing for the podcast. Um, but I kind of know how to use these tools. Um, and now taking like the output of ai, which, you know, I’ve, I’ve created like a whole bunch of five and ten second clips. You’ve gotta, you’ve gotta use video editing. You’ve gotta chop out bits. And, you know, sometimes, like my mom and dad were. Uh, at the, at the aisle, it was like a picture of the, of the, the, the actual, the, the main piece of the wedding ceremony.
And I [00:05:00] animated that with ai and as my dad kind of lifts the veil off it, it, or, uh, it looks like my mum is marrying like another woman. ’cause AI has kind of reimagined the back of my dad’s head ’cause he’s got kind of long hair in the, in the early seventies. So, um, yeah, you gotta like, you gotta trim and be artful, but the, um, but you can create some really incredible, um, um, like bringing memories to life. And I, I might loop back on this later as well in the conversation ’cause I think there’s also an interesting, well, let’s just say it now. There’s an interesting kind of humorous slash bad element here. ’cause I was thinking, well, like if anyone could get a picture of my granny and they either want to sell me something they want to scam me. you know, suddenly it’s quite easy to take these tools and I, you know, someone else could create, you know, my wee nanny sitting there trying to sell me whatever, like latest crypto scam it might be. And I [00:06:00] might be more inclined to fall for it. Like, who owns that imagery?
[00:06:03] Krzysztof: I just saw the path to my future riches, come up with my, my latest crypto scheme and then send, send Badger a couple of prime chosen emotional. Yeah, right on. So, uh, you know, I haven’t seen what you’re talking about exactly. I could imagine it though. On Apple, you know, there’s, uh, the ability to, I guess, I don’t know if it’s on Apple or Android, both, but you know, each photo that you take, it’s actually recording something like eight seconds or however long you’re looking at it.
So some of them have that live thing where when you it, it first looks like a still photo, but when you click on it, it kind of has a little movement captured. And if you press on it long enough, it makes a sticker. You can make a sticker out of it. So I have a photo like that of, my better half, kind of sitting with bunk my dog.
But then when you click on it, you could see she’s rubbing his belly and he’s kind of, [00:07:00] you know, comes to life. And it’s always there in my sticker file. Makes a huge difference. Like if the impact, the, the, uh, the heart thing, like, you know, from still to life. I imagine what you experienced is just.
Magnitudes of degrees more powerful than,
[00:07:19] Luke: Uh, you, I, I guess so. Yeah. Yeah. Um, but you sent, you sent me also quite a nice photo, uh, just yesterday. So, um, you wanna tell us a little bit about that?
[00:07:29] Krzysztof: yeah. Uh, so our listeners know that one of my closest friends died at age 46 a couple weeks ago, and I went to the, a funeral service, uh, this weekend. And this is all going to be cliched stuff, but as I spoke in his memory, what I spoke about was that he had a really amazing gift of sincerely reaching out to people.
To me specifically, [00:08:00] that’s all I could speak about, over decades of our life together from when we were 10 years old to our end. That, um, that willingness to connect, that willingness to say, Hey, how are you? It’s been, you know, five months since we last talked is one of the most precious things in life.
And he died in his sleep, basically. I mean, not, you know, it’s, it was, there was no warning, there was nothing. You just didn’t wake up one day. And, um, in as much as death is painful, remembering how important it is to care about one another in each moment because we don’t know how many we have left. And that all this money business, from our perspective, I think I speak for both of us, is to make more of those moments available to us.
So that we spend more time [00:09:00] with people we care and love about. We take more trips, we can take more time of our day. ’cause that’s what life is. Money is just an imaginary tool for, you know, I mean past a certain kind of survival point. So I had my, my heart felt full. It felt, it felt, you know, not, not so much.
I mean, there’s the loss element, but the, the memories and, and the, the care that I was able to re remember that went into our friendship
[00:09:33] Luke: Yep.
[00:09:33] Krzysztof: was a real gift. So,
[00:09:35] Luke: Yeah. You know, we’ve all gotta, gotta prioritize the things. We’ve gotta figure out what’s most important to us and then try and create a life where we can prioritize those things for, or the bad.
[00:09:47] Krzysztof: So Badger shall we talk about how we’re gonna make more money so we have more love in our lives.
[00:09:53] Luke: I, I’m, I mean, judging at you, I’m, I’m sort of marking the funeral of my portfolio right now. [00:10:00] I don’t think AI is gonna bring it back to life.
[00:10:03] Krzysztof: Although, uh, it’s nine 19 on Monday morning right now, you know, futures opened up. Uh, before going to bed, I saw that Japan’s market was crashing and Europe’s market, it was down significantly and US futures started deep in the red. Right now I’m looking at, uh, the, my portfolio and everything is up massively green.
So, yeah, just in the last. I don’t know, five minutes. So I don’t know what, so basically I don’t know what I’m Right. And actually I, you know, before going to bed, uh, I stupidly opened my mouth, uh, and said, uhoh looks like, you know, we’re gonna have another major catastrophic thing. And then my better half started panicking, you know, saying things like, oh shit, what about my pension?
What about 4 0 1 Ks? And so I wa I tried to walk [00:11:00] back my stupid comment before bed and saying, okay, look, you know, in the end, we just don’t know. Maybe the massive, maybe the market’s gonna end up massively green. Of course. I didn’t believe that. ’cause, you know, but here we are. Here we are. Right? So, uh, who knows how long this will last, right?
Obviously. So I thought, I thought I kind of suggested that we talk, we spend this episode, do it real kinda live, send it out to our Patreons, you know, shortly after we. We finished talking because these are the moments that really can make one’s investing returns terrific, or completely destroy your portfolio or something somewhere in the middle.
Let’s start maybe by recapping what you’ve read about the tariff stuff over the weekend. I’ll tell you what I’ve, what I’ve seen with the caveat of course, that my mind was sort of elsewhere this particular weekend, so maybe I’m not as informed as I could be, [00:12:00] would you, what do you, uh, how are you sensing things?
What do you see out is happening out there?
[00:12:07] Luke: Yeah, I, I just don’t know. So I, I wrote an article, a special report for, uh, wall Street Wildlife Patreons, and I published like an excerpt of that to Twitter on Friday, I think. ’cause we were getting questions from our Patreons on the community, like, what’s going on? What, what can we do about it? I honestly don’t know, like I’m not an econo economist. I wouldn’t dare try and forecast what’s going on in like, the White House and what the discussions are between like the Treasury Secretary and the Fed and Trump and like various other power brokers. Um, I’ve tried to focus my own thinking more on, I. Like, the stuff I can control and the things I can control are like my reaction to the situation. and then my investment [00:13:00] decisions and kind of where I spend, where I kind of my mental energy. And I think, let me recap a little bit from this article. I, I, I put out on Friday because like the, the act of writing something like this helps you kind of catalyze your own thoughts. And I wrote a whole load about why I thought stuff was going on, and then I’m just like, I’m not an expert on this.
And I just threw away like a whole bunch. I, I do think there is a plan here and I do think the us what’s happening, it’s easy to look at it and go, this is a complete disaster, a debacle. Um, and I. Like mistake, serious, serious mistakes have been made. Like that might be true. I don’t know. But I think there is a rationale. if, if something big and cataclysmic was not almost done deliberately now, and it happens to have been through like the mechanism of [00:14:00] tariffs, um, then probably something much worse would happen at some unknown point in the future because of like the debt crisis that the US is in. So I’m not like, I, I don’t hate this situation.
I think this is actually possibly for the best, but it could go disastrously wrong. Like there’s, an expert. Like there’s a very narrow course that has to be walked by the administration here, um, to kind of bring the world out the other side cleanly. I don’t know if, if we’ll be successful in doing that. But putting all that aside, Like, what, what are the things I do know, I do know that in the short term it’s gonna be fricking messy and I’m not gonna, I’m not gonna make any reliable predictions about which way the stock market’s gonna go. I’m shocked. You said the market was up big this morning. I didn’t expect that. Um, I haven’t looked, ’cause I kind of stopped looking at my portfolio a little bit as best I can, because I’m trying to minimize my own volatility. [00:15:00] Um, so I know the short term is gonna be chaos and confusion and impossible to predict. know the long term, in the long term, which could be eight to 10 years, stocks will be higher than they were like on the 1st of April before the chaos kind of hit liberation day. Um, and so the, I think the bit where I’m trying to make some professional decisions is more the medium term. Like how should I structure my portfolio? I. To take advantage of where I think the sectors I like, which are mostly like tech, tech and MedTech and AI and FinTech, those kind of sectors, how should I position my portfolio to get, take advantage of there over the, let’s say the two to five year timeframe?
That kind of ballpark, that’s what I consider to be the medium term. Maybe like one year to three years. Like there’s somewhere some mishmash there. And I do have some thoughts on [00:16:00] like what the medium term could look like, but let me give you some air time first as well.
[00:16:03] Krzysztof: Okay. Right. We’ll get into some specifics of specific companies and I, I think our approaches in, in this moment are a little different. I wanna zoom way out and say.
I don’t see capitalism itself ending well. So we have, you know, we’ve tried two, two approaches. We’ve tried the communist approach that was absolutely disastrous. Uh, the capitalistic approach, we could cease the cracks. Widening just, they, they keep widening and widening between the people that have the capital and the people that don’t.
And my own crystal ball says that at some point, but this point might be five years, 10 years, 20 years, 50 years, a hundred years from now. At which point, it’s not necessarily relevant for us. But for our, uh, future [00:17:00] generations, it will be something needs to break where this system needs to be completely re not, I’m sorry, not completely.
It has to evolve into some new thing that humans have not yet exactly figured out. Or the people with power and capital have to figure out how to distribute it more equally. Usually right between, if I think of capitalism and communism is the extreme polls, right? The, the truth or the best system will be somewhere in the middle and we haven’t attained that.
So in these moments, I don’t think this is, I, I’ll be shocked if this is actually the beginning of the call. It great capitulation doesn’t feel like it to me, this feels to me like another moment in which we do what we’ve done for the last what many decades, which is kick the can down the road and say, let the future generation sort it out.
And so I kind of think what will ultimately happen is some version of more quantitative easing. That’s kind of what Trump [00:18:00] wants. You want to lower the rates, there’s gonna be more money printing and it’ll probably reignite the cycle one more time or two more times to the upside, but with greater and greater pressure on the people that, that don’t have assets.
So the people that have equities, those will go up and assets will go up. We’ve seen the cycle play out so many times already. It’s just that, that, that, um, yeah. I guess the inflationary pressures on the people who have the least with the least room to breathe get squeezed more and more and more.
That’s kind of my prediction of sorts on the great big meta level. It’s not great now, but we’ll repeat what we’ve done. The specific thing I want to say is that. Trump, the, the, the move here is obviously what you would call what? A hard nose negotiation, like a negotiation from like with a club and you, [00:19:00] you basically trying to bring the world to the, to its knees and a lot of assumptions are being brought to the table.
I’m not an expert negotiator, so I don’t, nor game theory. I don’t know how the game theory stuff plays out. I don’t know if we even need game theory stuff. Right? But we know that if if this negotiator comes to the table and says, do this or else right? Or else everybody’s economy is going to melt down, then I really don’t know in terms of probability, whether this is smart or whether this is kind of, has, has an obvious out outcome in the sense that if there is not much choice, then why wouldn’t you know the world kind of.
Bend, so, uh, to the will of the, of the one with the club. It doesn’t seem obviously like a sustainable situation. I, I, uh, let me actually, let me backtrack and say, the great fear the world has now is that this will be a global, [00:20:00] like, uh, escalating trade war that just continues to escalate and escalate and therefore decimate economies and bring a global recession into being, right.
[00:20:11] Luke: Yeah.
[00:20:12] Krzysztof: The, but if the strong arm negotiation tactic works or works enough, then it’s as you said, right, maybe it needed, maybe this moment needed, this kind of like brutal realignment somehow, and people weren’t going to do out of their own goodwill, but given no choice, so to speak, or little choice. Maybe it’s, maybe this will be for the best.
The one thing that I wonder about in terms of the US is this is, I, I buy actually the need to bring back significant manufacturing, to the us. I’m, I’m all for that because it creates jobs and builds infrastructure and all that. But some of the stuff I read, Luke suggests that bringing manufacturing back [00:21:00] is not an overnight thing.
[00:21:01] Luke: Yeah, of course. Yeah.
[00:21:03] Krzysztof: You’re not just going to revitalize, uh, the whole foundation on which, you know, found, uh, the whole build. I mean, I, uh, how long did China have to establish its sort of manufacturing dominance? It we’re talking about like five year blocks minimum, right? Five, 10 year blocks. So what might happen from, from this tactic to when the manufacturing stuff might actually show up?
It might be, we’re talking years for sure.
[00:21:35] Luke: if, if it even really happens because I saw an interesting opinion, like why would a company like a ton of CapEx in building factories and like training people and like getting their domestic manufacturing set up if like the, the e economics of trade makes sense. There’s a reason why say Vietnam is a net exporter, [00:22:00] um, because they have like lower cost of labor. And so I. You know, these are, these are not jobs that there are certain things you cannot produce cost effectively in North America. And so if you, if you kind of, you can’t force, but if you were to try and create a whole bunch of artificial incentives to gap that manufacturing created in North America, and maybe you made it make economic sense, well, like Trump isn’t gonna be around forever. even if he manages to get a third term right? This, uh, incentives are put in place could easily just get rolled back again. And then you’re back to the baseline of, well, it just makes economic sense if there were no, like artificial price, type things happening, it makes economic sense to develop certain kinds of materials or textiles or outputs in different parts of the world that have like certain advantages because of proximity to raw materials or the type of labor or the skills that are available. [00:23:00] And so what would companies invest in building that manufacturing capability if it suddenly becomes like a white elephant at the end of the Republican term? I dunno.
[00:23:10] Krzysztof: I and I, I, God, I even hate complicating an already immensely complicated picture, which obviously no one really knows the outcome of. But then I think about Tesla’s AI robots, and what if, what if we’re actually entering on a verge of some completely new paradigm that, right, that completely changes the world.
That’s just never happened before, like the steam engine with a printing press or whatever. And that somehow, I mean, maybe the way out of this is somehow that that stuff is close enough that if you have robots building stuff and you have Elon who has the ear of. You, you know, basically the entire world and country and we start seeing the stuff.
Maybe, uh, manufacturing is somehow saved or [00:24:00] it’s just a whole different beast at this point in time. And so AI to the rescue,
[00:24:05] Luke: I
[00:24:06] Krzysztof: I don’t know.
[00:24:06] Luke: totally agree. I’ve been, so that’s been like the focus of my little bits of research over the last 72 hours, just starting to look at companies that are in manufacturing automation. Um, and it, it may not even be like the Elon style Optimus robots. It might just be, you know, highly automated production lines and controllers. things like, um, like Nvidia Omniverse, like other partners of them that are in that space, like anybody who’s working in an area that can, like, what’s the Elon term? Like build the machine that builds a machine. If you can do that much faster and more optimally and a few, a small number of humans in like an oversight role can manage like thousands of like bits of technology to [00:25:00] create a different kind of manufacturing that’s far less human intensive. I totally agree. That makes a lot of sense.
[00:25:07] Krzysztof: Yeah, so I guess, what’s the takeaway? I’m sitting at the edge of my seat. I. wondering right now, I have, I really have one question I’m gonna repeat myself. I wonder if this is the moment for this kind of hard line negotiation tactic, and I can’t predict whether it will be effective or not, but I think there’s a chance it might be and a chance.
Well, if it’s not, then we’re seriously in the big, big mess. So maybe, I guess, I don’t know if this is game theory stuff, but everyone’s gonna do probably what’s in, in their own self-interest. And if their own self-interest is to negotiate with the bully, then they’ll, they’ll do it right.
[00:25:49] Luke: Yeah, who knows? Who knows? Like we’ve already seen some reciprocal tariffs getting, uh, announced by China. Um, the, the where the US kind [00:26:00] of has the power here because they are. They do have a massive trade deficit with a lot of these countries. The ones, like the countries that are hit the hardest like China because there is a trade deficit.
IE, the US imports more Chinese goods than it than stuff it exports to China. So if you are like the buyer essentially, and this you, it’s a highly simplified version of this relationship. Well, you know, you potentially have quite a lot of power.
[00:26:27] Krzysztof: Yeah. Uh, I think China is the one, is the wild card that’s separate from the rest of the world, not least because of their now amazing manufacturing capacities and they’ve been playing. They’re good at playing the long game, the rest of the world, I think, my guess is will more than likely negotiate something.
[00:26:47] Luke: yeah.
[00:26:48] Krzysztof: Right. Much, much less leverage. Uh, but yes. Okay.
[00:27:00]
[00:27:31] Luke: Like the bit I said where I like, I don’t feel like I have any expertise and I, I don’t feel like we, I can make predictions. we try and bring it back to the stuff that we can control and like if you are an investor, how should you be thinking about this stuff? Like,
[00:27:48] Krzysztof: Yeah, I think that’s the most practical stuff. Let’s start with emotional bit first and hopefully, right. If, if our Patreons are listened to this today, [00:28:00] then I approach moments like this now at this point, knowing that this too shall pass even though it doesn’t feel like it in this moment. And there’s always a way to make money in the market.
So. If you’re not making money in the market, that’s because your strategy was not optimal for the moment. And that’s not to say not to blame anybody, but it’s, you know, uh, it’s always possible to do well. And in moments of volatility, I think you said it best, uh, I think on our Patreon, that when everybody’s panicking, everything is being sold indiscriminately the baby out with the bathwater cliche.
So if and I exceed that, that’s true. So I think my job first is just don’t panic and see volatility as the way [00:29:00] that alpha increases. As long as you then do the work. And as per our conversation later in the show, I. You know, uh, find what principles, find what areas you wanna look at and, and start, uh, investigating.
Not out of panic, but out of deliberate consideration. And we’ll talk about the specifics, but there’s no re I mean, I wanna say there’s no reason to panic. No. There is a reason to panic when you’re losing a lot of money and you’re losing, you know, you’re seeing the, the value of your assets drop. That is panic inducing.
So let’s not be cute and say there’s no reason to panic, but, but wiser is the actionable stuff that you, when you don’t lose your head out of the panic, you can take advantage of this stuff.
[00:29:50] Luke: Yeah, maybe we should distinguish between fear and panic because I think, it’s natural to be fearful at times like [00:30:00] this, like literally. Every day for several days, like my portfolio has been down like way more than my annual salary ever was. And that’s like day after day after day. Um, and so that, that is, that’s a fearful moment, clearly. Um, but you, if you can channel that fear into like, I’ve got this, I had a plan for this, I’m ready for it. I know I’m gonna respond to this, not react to it, it doesn’t become panic. It becomes potentially opportunity. And if nothing else, it becomes okay, I’m just gonna do nothing and like cling on for dear life.
You know, maybe that’s your response to it. And that’s actually a pretty reasonable response. The only way you really get in trouble is you make, like you react and then you make a bad decision, which might be. Selling something. It might be like panic buying stuff that you think is going down and you end up with your money [00:31:00] invested in like places that don’t necessarily make sense for the time
[00:31:04] Krzysztof: Yeah, right. And caveat here is neither you nor I have a crystal ball. So the best we can do and what we’ll hope to do, I guess with the remainder of this show is explain why we think our path is I. A wise course open to critique, and then we’ll see what the future holds. Right. If we knew what the free, how things would unfold, this wouldn’t be much of a problem.
Uh, but Right. But the value of some of a conversation like this is poking holes. Right. And it’s to be open to critique and, and feedback. Uh, so you wanna talk about some specifics, like what you’re thinking about, of buying or not buying or holding out. I know on our Paton, you’ve still, you even, yeah. You, you have not made any purchases, uh, posts the beginning of the [00:32:00] sell off.
[00:32:00] Luke: Correct. to acknowledge it. I did the one thing I said I was on Patreon I was going to do, which I did this morning ’cause it’s a new tax year in the uk, is I diversified about a third of my Bitcoin into Chainlink. So now I’m probably overall sort of two thirds bitcoin, one third chain link in my, but overall, that’s like a small proportion of the overall portfolio. but I said I do that ’cause I just wanted to do that and I can realize like my. gains allowance for the new tax year by doing some of that. So that’s a good thing to do. I have a whole bunch of stuff that I shared on Patreon in the Badger and Monkey Trades channel, which is open to our dolphins and above. I haven’t acted on any of those yet. But I’m happy to share on the pod now ’cause I’ve shared it already a few days ago. like the companies I’m thinking about how I’m like, I don’t do like, I suppose I’m gonna [00:33:00] say stuff that I, I might regret ’cause I don’t like having like price targets and you know, like triggers to act.
I’d rather more have a plan and then like add to my favorite companies at decent value points. But do that kind of slowly. I have, so let me show you something. So. Here is my whole portfolio and I’ve got a couple of lenses over this.
So, um, first big column with the pretty colors is like a reverse DCF discounted cash flow. So this is actually based on valuations on Friday, the, whatever that was the 4th of April. So already like a little bit out of date.
[00:33:43] Krzysztof: Actually badger, if I may just, uh, interrupt. Not many. Not everyone really, I think has a good feel for why free cash flow is the metric that you choose or why it’s such a important metric. Do you wanna say a little something [00:34:00] about Yeah. About what it means in layman’s terms?
[00:34:04] Luke: and I think it’s, yeah, that’s a good idea and I think it’s, it is more easy, even more important at times like this when we might be falling into a recession. So, and I dunno if we will caveat, but we might. Um, like if you run a company, like you take, you do sales and you take in revenue, then you have to, like, maybe for every widget you sell, you have like some cost of goods sold.
Like maybe we’re selling mugs and it costs me like, I don’t know, $3 to make a mug, but I sell the mug for $5. So there’s like my, um, gross profit is like the $2 per mug. And then after that got all my operational costs. So it might be like, you know, my head office and my sales and marketing people and like a whole bunch of other costs to do with like running the firm.
That’s like my, eventually I get down to like my operating profit. and there’s a bunch of other stuff [00:35:00] around like depreciation and taxes and stuff like that, but essentially like in that waterfall of money comes in and then how much money I have left over as the board of the company to decide what to do with, um. For sort of slightly complex reasons, like somewhere in that waterfall towards the end, what’s known as the free cash flow. So this is like, you’ve essentially run your business and you’ve built like your factories and your CapEx and you’ve paid your people and you’ve, you’re manufacturing and you’re selling your stuff. cash flow is the money you have left over that you can decide what to do with, you know, you might do a buyback and buy back some stock. You might pay a dividend, you might invest in maybe acquiring another com a competitor or entering a new market. Or maybe you’ll build like another factory. You know, you, it’s like the free money that the board can decide how it’s gonna play it. And ideally company is generating lots and lots of free cash [00:36:00] flow and it makes it agile and it’s like a truly profitable company. Um, and it gives the company like optionality, like a well run company with lots of free cash flows. Fantastic. And it’s particularly fantastic if we are in like recessionary times. know which way interest rates are going. They were coming down. Hopefully the actions that have just been taken bring interest rates down further, which will support growth stocks. But if your interest rates go up again, if companies have net debt, their debt’s gonna cost them more to like refinance and to maybe raise new money. So in a recessionary environment, it could be quite painful if you are, if you are essentially not, I’m just gonna shortcut and say like not profitable if you’re not generating free cash flow because you might have to go and borrow money as opposed to your business generates money. And then you can kind of grow the business and do smart things and maybe be predatory on your weaker [00:37:00] competitors who don’t have free cash flow. So I really like free cash flow, particularly at times like this because it makes the company self-sufficient.
[00:37:09] Krzysztof: Uh, great. And I wanna add one nuance. Often you’ll see people talking about operating cash flow as well, so it’s, there’s free cash flow and operating cash flow. And I think of it as, uh, using a water metaphor that operating cash flow is in a sense. Um, when you turn on water and you have, uh, you have like a bathtub underneath it, if your business is healthy, then the water starts rising, right?
And so, uh, it shows you basically how much money your business is making just by doing what it does by turning on the faucets, right? So, so, but then, um, the water just sitting there [00:38:00] sits there, right? So. You want to use that water for something and investing into your own business. CapEx might be one of those things, right?
You might need to, right? If you’re in a cutthroat environment, you might, you don’t really have a choice but to buy more plants or hire more people, right? So free cash flow is how much water you have left over after you’ve done what your business needs to grow. And often I think of that as the money going back into the pockets of investors, like dividends and stuff like that.
So both are really important to measure the health of the business. Uh, free cash flows, just like you were saying us, you taking the water from the tub and then drinking it. Um, so anyway,
[00:38:52] Luke: Yep. Great. Good.
[00:38:54] Krzysztof: okay.
[00:38:54] Luke: So, so we, so it’s a, it’s a useful metric. let’s go back and look at this graphic of my [00:39:00] portfolio. So that colorful column that is the, a reverse discounted cash flow estimate. Like these, these are all just wild gus and a reverse DCF is essentially based on the company’s share price today and a few other metrics like cash flow and number of shares and market cap. Um, what growth does the market expect from that company? And you can kind of do like a reverse engineered version of a valuation where you say, okay, so know Tesla, it’s like the top of my list, the, the valuation on Friday, the 4th of April based on my assumptions. The market expected, 43.75% growth year over year in Tesla’s free cash flow for at least the next 10 years. and then you can ask yourself, does that seem reasonable? And that probably does not seem reasonable for a company [00:40:00] like Tesla for it to grow free cash flow, almost like for over 40% year after year after year. So then in my mind, that would be like, expensive, as expensive. Um, the market seems to agree from lots of other reasons, which like, Tesla’s valuation has kind of cratering down. So I’ve got a couple of other columns on here that, this is really bad quality shortcut analysis, but let me just share what my thinking is here for your opinion and feel free to throw slings and arrows at it. so forgetting the reverse DCF, like if I just pull. The price to free cash flow on a trailing basis.
So IE um, how much, let’s stick with Tesla. How much free cash flow did Tesla actually generate in the last 12 months? That’s what trailing means. And then, so the current market cap of Tesla is about 236 times that number. [00:41:00] So, you know, if nothing else you could kind of interpret that as saying if you were a Tesla investor for 236 years, it would eventually generate enough free cash flow com over that period to like cover the co the value of the entire company.
So that’s a, that’s a big number. 200, 200 times free cash flow. And there’s lots of reasons why Tesla might be a bad example for this ’cause it may probably not optimize for free cash flow right now ’cause they’re spending a ton of money on building like GI factories and other stuff. But we’re just giving like an example. Now the last time, here’s my really bad shortcut analysis. The last time were super pessimistic about growth stocks was kind of 20 22, 20 23, like 2020 and 2021. Growth stocks went on a charge. 2020 end of 2021, the ass fell out of the market. Everyone suddenly panicked and, uh, went risk off and growth stocks fell for the F floor. [00:42:00] So I’ve literally, in fact, let me show you what I’ve done, um, by doing a screen share of favorite portfolio charting tool. Fin chat. Uh, there we go. I have literally gone through a bunch of my key holdings and here’s one, which this is Nvidia, this particular one, I’m just taking a look. This is gonna sound, this is gonna seem so dumb. NVIDIA’s price to free cash flow over the last couple of years. And in fin chat, you know, you can exchange like the amount of time, but I was mostly interested in that 2022 period and I’ve just eyeballed it and gone. Okay. What was the peak of pessimism for Nvidia Stock? On a free cash flow basis, and you can’t use this for everything, but I think Nvidia you probably can use free cash flow it was about 44, 45 times free cash flow, which was kind of October, 2022. [00:43:00] So then I’m, I’ve just gone through like a bunch of my holdings and said, if, if Nvidia at the p last peak of pessimism in 2022 was about 45 times free cash flow, but where, how does today’s valuation compare with that? if we go back to my, valuation graphic, well Nvidia, I. Is what was trading on Friday at 44 times free cash flow. Actually, if we, if we look at it today, it looks like it’s 38 times free cash flow. actually on a free cash flow basis, Nvidia now seems to be cheaper than the last time we were pessimistic about stocks. So massive shortcut might be a, a company I want to think about adding some new money to. And I’ve done that for probably half of my holdings where I think they might be interesting investment ideas right now. [00:44:00] going back to the valuation graphic, what that, right hand column is stuff I’ve marked as now essentially very hand wavy is ballpark, possibly decent value now based on, where its free cash show was. Last time we were pessimistic about it. And then some things have still have a heck of a way to fall and maybe to pick on one of those in particular, um, Enterprise. I’ve loved that stock for some time. It’s part of a bet you and I have Axon versus eos on Friday with like cratering of axons value. Um, it’s still trading 124 times free cash flow last time we were pessimistic about it, it got down to like 60 something times free cash flow. So that’s still arguably quite an expensive stock,
[00:44:55] Krzysztof: Mm-hmm.
[00:44:56] Luke: some stuff potentially is looking a little cheaper. [00:45:00] Like Nvidia, like Mercado Libre, um, Amazon is getting there. So these are the, uh, this is the kind of analysis I’m doing right now just to try and get a feel for like where everything is in my portfolio.
[00:45:17] Krzysztof: Right. I love this method. At least it gives you some comparisons, right? So it’s not in the, in the vacuum. The only pushback, uh, I would give is, well, one, you admitted it yourself, that you have to take all of these models with 20 pounds of salt because a tiny adjustment to whatever assumption changes at the numbers drastically.
But in my experience with previous major market corrections, things can always go way lower than we think. So the multiples at some point. Just start, uh, you know, you think it’s cheap now, or fairly priced [00:46:00] now, but when the system corrects the baby with the bath water thing happens. So I’m looking at even the companies that you have marked as now good to go.
Now I’m like, Hmm, yeah, tempting, but could it be even 50% lower than this? Of course,
[00:46:19] Luke: Of course. Yeah. Yeah. But then the other thing to remember, ’cause this is all in the context of, because what does the world look like now? Like if we stuck with Nvidia, the world is quite a different place today than it was in 2022 when we were last pessimistic about Nvidia. And arguably there is like much clearer pathway to huge demand.
So these companies are not the same companies. Like the,
[00:46:43] Krzysztof: right.
[00:46:43] Luke: valuation like in 2022, right? It was a, probably a couple of hundred billion dollars. Now it’s like multi-trillion dollars. So, yeah, you gotta look at all of this stuff together and just kind of, that’s the art of investing. So what I’m trying to do [00:47:00] is just have a few data points. So that I can sleep on each night I try and fathom out whether it’s time to start buying some of these stocks now.
[00:47:09] Krzysztof: And so what’s interesting for me when I talk about my strategy, which is quite different from this, I have almost, uh, I don’t have any interest, I have very little interest in this moment to buy a company like Axon or CrowdStrike or Amazon for the reason I just mentioned. If I’m, if I’m right, they’re gonna be way cheaper if I’m wrong, than I have my own strategy to fall back on.
But I am interested in. Well, maybe at the extremes, for example, Mercado Libre, because it’s so relatively cheap, um, meaning based on the assumed discount rate, growth rate of what, three point percent? So the assumptions are just really tempting, [00:48:00] but it’s the companies that like Nvidia and Tesla that, uh, I still remain ambivalently intrigued by because of the world if the paradigm shift is happening the way we think.
And based on, you know, like the, the latest NVIDIA conference where Jensen was talking about just how, uh, unabated the demand remains and the increased power of everything, right? The, the whole paradigm stuff shift is not slowing down. And so I guess I’m saying, I’m putting narrative first. In my, in my decision making out of, based on your strategy.
So I’m staying away from the ones that are still still pricey because they could fall more. But the ones that are carrying the back, the world on their back, I’m more tempted by those.
[00:48:53] Luke: Can you give us any examples?
[00:48:56] Krzysztof: Uh, I’m, I was actually [00:49:00] debating this morning, adding, using the remain remaining 50 bananas I have in the King of the jungle portfolio to buy half a share of Nvidia because, uh, pre-market, it was down to, uh, while prices arbitrary, but it was something like $88. I don’t know what the market cap of $88 was, but from the peak, uh, it reached what, one 40, close to one 50, right?
It was close to one 50 at peak. So eight, you know, from one 50 down to 88 on a company that is as strong as ever in terms of product demand. That started feeling like we’re entering, solid valuation territory. So I was tempted by that, but I, I held off because I think my, I’m more tempted by my, by my current strategy.
Is there anything you, you wanna talk, say more about?
[00:49:59] Luke: [00:50:00] I, I, I think I’ve got some comments about your strategy. ’cause I think, I’m guessing what it is. When you tell us your specific strategy, ’cause I know your, um, you’re looking at like a different type of company at times, like now.
[00:50:13] Krzysztof: Yeah. So when I look at my top five holdings of King, of the Jungle, Tesla is the outlier. Actually, it’s not top five, but Tesla is in there. We already talked about Tesla, so let’s leave it out. I’m making what feel to me like. 10 x bets on companies that don’t yet have revenue. Therefore, there’s no multiple compression to be had.
So it’s all
[00:50:42] Luke: We’re like infinite times sales.
[00:50:47] Krzysztof: right, we’re infinite time sell. So in some ways it’s,
the critique to me is obvious. I mean, maybe I, I, I don’t know if I wanna ruin your fund and, and critique the strategy myself, but you know, when you’re not yet making any money, it’s [00:51:00] even more risky and dangerous. Right?
[00:51:02] Luke: Yeah.
[00:51:03] Krzysztof: But in times like these, when I get a sense that the multiples don’t, you know, could continue contracting and who knows how much further, whereas the narrative piece of things, to me, as long as the company executes, if those remain the same.
And those, the companies I’m looking at are not really affected by the tariffs, but the price is dropping anyway. I sense that there’s a widening gap of disconnect between the future value of this company and the market, throwing everything out indiscriminately. And so I, I, so, my big, actually, let me actually let me walk, walk, walk, step by step.
The four I want, the, the four main ones that I added to recently, once the market corrections started eos, [00:52:00] my top holding was actually up for the week. So in as one minor, uh, case point, the market looked at its narrative and said, because it’s domestic made and because there’s such. Increasing need for the product.
We’re, we’re not gonna sell off, like we’re selling all the other companies. Uh, and today it’s up a little bit at the moment, so that’s sort of like no money yet, but the narrative is great. Same thing for a STS where it’s all about the execution of the launches and the, but the potential worth of this company is so much more, so much higher than its current valuation.
And everything is actually accelerating in its favor in terms of how they’re executing the contracts and all of that. So it seems like another case where whether the price goes up or down has nothing to do with the tariffs, and [00:53:00] I’m actually excited that the price is going down ’cause I wa wanted way more shares.
So my investment strategy here actually got better, uh, more favorable, the one that I was, I’m most prepared to talk about today. This is the one that I think I’m most open to critique, but it’s the one I’ve given the most thought to. Let me spell out some specifics about this company, Luke, just so we’re not talking about a vacuum.
About some, you know, uh, random biotech, real life therapeutics basically has now is holding what could be a potentially really valuable asset that helps with breast cancer. Okay. So we know breast cancer is a major, major thing in market and it’s life or death. We also know tariffs have nothing to do with biotech stuff, uh, other than, I guess [00:54:00] macro situation and like how hard it is to get capital.
But the, the, the company will or won’t make it tariff based on its data. So right now Relay Therapeutics is down to something like a $330 market cap. It has $780 million on its balance sheet. So you’re, you’re getting, so basically the market is saying they’re gonna burn through their cash faster than they can make it down the road.
That’s why the, uh, uh, that’s kind of the market’s view. The specific I wanted to call out is that there’s something in this field called the progression-free survival rate. So when you give somebody a cancer drug and you run the data trial on it, you get to see from the time patients take this drug, how much time passes where the disease doesn’t get any worse.
The current, [00:55:00] the current, uh, top of the line treatment. Is, uh, a company called True Cap. I think I’m pronouncing that right, where the PFS progression-free survival rate is 5.5 months. Okay. The last data that Relay Therapeutics got from their data trials was their molecule is at 11.4 months. So double, it’s twice as good as the current best competitor the FDA has been known to, to even say, okay, we have enough data.
Stop it. You’re good to go when it’s basically two x around two x. So Relay Therapeutics basically has to get through one more clinical trial, and then it might be enough for the FDA to say you’re good to go. And that’s what it’s looking like right now. 11.4 versus 5.5. [00:56:00] Okay. Based on the numbers reduced, based on meaning on true pack’s current sales.
We know that the market cap, I mean the, the, the value for this drug is about $5 billion. Just this drug alone versus current market valuation of 330 million and cash enough cash, 780 million to last it through, uh, sometime into 28. So three years from now. We also found out last week, or sometime on Friday, I think that relay, uh, let go of 70 people, which is, you know, sad obviously for, uh, the, its employees.
But from a business standpoint, they’re really managing their cash very tightly. They know the stakes and they’re not, they, they’re just not gonna lose this game basically. Data in hand matter of time. [00:57:00] So with or without the tariffs, Luke, this company wasn’t being measured on the tariffs at all. Right? But all of a sudden it’s dropped 60%.
The only problem here for Relay is what I would call cost opportunity or timing stuff. We know investors know that the relay is not gonna have new data for, call it a year and change. That’s not exactly right, but for simplicity’s sake, right? We have more time to sit on our, on our hands, especially before commercialization.
So why would people, buyers step in now to buy it now? Right? The answer is they’re not. That’s why the price keeps dropping. Right. But now at some point I’m asking, I’m saying to myself as somebody that recently for the King of the Jungle, bought more shares. I was like, well, okay, why do I, do I wanna be the fool that’s one of the few buyers when everybody else is indiscriminately se selling it?
And my answer, [00:58:00] well, you know, it’s not an easy answer, but I decided, no, yeah, let me be the fool because, and this might feel ironic to you, I didn’t wanna necessarily market time. I basically said, I know that in two or three years if everything basically stays the same from to get to 5 billion from 300, that’s now a 20 x or something like that, right?
So why don’t I start adding to my position at these valuations that have nothing to do with the panic selling going on? And if it keeps dropping lower, I’ll keep accumulating and maybe I’ll get to my retire early stack way, way earlier than I thought I would, because this is kind of a gift. So I’m sort of sitting here like saying my strategy to maybe sum it up is I don’t wanna get necessarily cute in predicting when some big buyer’s gonna step in, see what it, [00:59:00] what, you know, the biotechs experts see and start swooping it up and bidding it up.
Again. I know the data. I, uh, I trust the data. Why not now?
[00:59:11] Luke: I think that’s very fair. Yeah, I, I had a, I had a, I had a concern when we were chatting pre episode about you saying you are like, you are gonna power into a bunch of pre-revenue companies, my criticism. It apply to this one. Once you showed me the numbers on fin chat just now, because like, the problem with being a pre-revenue company like, you need money.
You, you want like a burn rate. And the idea is, you know, you need money, you have to raise money somehow so you can keep the company going. So eventually you can launch a product and have revenue and then you become mature and, you know, eventually, like one day you’re Johnson and Johnson, if you’re like a biotech. there’s only really like a couple, but there’s really two main ways companies raise money. One is by issuing [01:00:00] debt by they take out a loan. And then the other one is by issuing stock. Uh, IE like selling more shares into the market and raise money from investors. Um, so in, in like volatile, difficult, maybe recessionary times interest rates do start climbing back up again, it’s gonna be fricking expensive for companies to issue debt. that’s gonna kill like a bunch of smaller, like non-profitable, not even pre-revenue, but non-profitable companies. Um, it’s gonna force those companies potentially to issue way more stock, which means that current investors get uh, what’s the term? Liquidate? Not liquidated.
[01:00:44] Krzysztof: Or diluted to hell.
[01:00:46] Luke: Diluted. That’s the term. Yeah. They get diluted and, and obliterated. Um, so like tough times reward like the strongest. And they punish the weakest. So pre-revenue companies are among the weakest like players in [01:01:00] the space. But the reason Relay Therapeutics gets a pass on this one is they just seem to have a ton of cash. Maybe they’ve done the dilution already
[01:01:10] Krzysztof: In fact, yeah, let me speak to that. Uh, a couple months ago when they got the latest batch of really good data, the stock shot up to nine bucks per share. And I think they issued a bunch more share. They diluted at $7 a share. So think about in hindsight, we were all damn diluted the di dilution, right? But now in hindsight, that’s seven versus a dollar 80 at the moment.
So that was, looks like genius, but management knew this was, you know, a necessary thing. So, uh, this applies also by the way to a STS because they have, I. They just played the, it’s, they have such top ma, top notch management. They secured, they’re sitting on about a billion in cash. And um, so basically all of these companies that I’m looking at have preventively [01:02:00] set themselves up for success despite the tariff stuff.
And all that I’m seeing is a widening and widening gap between what I think of as the more likely outcome in this precipitously drop in share price. So I’m trying to gobble up share, well, not gobble up isn’t quite the right word, but I’m Okay adding now, even though they could drop further.
[01:02:22] Luke: So let’s, so that, that’s good. And I, I support like both of those. ’cause you’re right, A STS also very well capitalized. Why don’t we talk for a bit about like, how we are playing, uh, not even the stocks we’re choosing, just how we’re kind of managing our, well, let me explain what I’m doing. ’cause maybe you’re not doing the same thing.
It might not apply to you. Like, I went, got to 25% cash in my portfolio in kind of January, February time, knowing that something was gonna happen. Like I had no idea I was, I could never have predicted like the impact of the tariffs thing. I know Trump talked about tariffs a lot, [01:03:00] but I didn’t know it was gonna go. quite as badly as it has gone, but things just seemed overvalued. So when things were overvalued, I raised money and I got to 25% cash because my portfolio has been like cratering, like everything else has gone down. That cash is up to like 27% now. Just ’cause cash has stayed the same, everything else has fallen apart. So, um, like I’m, I, I said earlier, like some of the stocks I’m thinking about buying back into, but I’m gonna do this incredibly slowly. So at some point I will decide to start reinvesting. That’s not today. It might be tomorrow. I just don’t know. Right. But I’m just gonna keep an eye on where valuations are. And when I start reinvesting though, I’m gonna do it super gradually and I’m probably gonna then spend a year bringing myself from cash back down slowly towards maybe 15% cash, maybe 10% cash, depending on how cheap stuff [01:04:00] looks. And I’ll probably never go below 10% cash because that gives me like, a couple of years worth of kind of spending money to run my life. so, my plan, like very gradual slow reinvestment over at least a one year period. And I’ll probably do, like every quarter I’ll just kind of do a checkpoint and say, is this the right strategy? Should I change my strategy?
[01:04:24] Krzysztof: And this is useful because your situation, your, your financial situation depends on this. Whereas I think, I think our listeners should look at what I’m doing with the King of Jungle portfolio as my best live model for how I’m thinking about this. The $200 is to remind everyone. An arbitrary figure that’s meant to signify a, an amount of money that I don’t need to live on, that is regular coming in.
I can expect another 200 [01:05:00] next month, and if it goes to zero, I’ll still be okay. All of that, all of those parameters are in place. And so far, so I, I kind of broke in my mind, Luke, I broke up the $200 in almost like quarter chunks, like $50, $50, $50. So I didn’t spend it all at once. But then, you know, first of the month the money came in and we had that major drop.
I think I spent about 60, then we had another 6% drop or 5% drop. I spent another 60 say, um, now I have about.
[01:05:33] Luke: in. ’cause I wanna make it really crystal clear like I. You know, you, you have a job, you are a professor, and you have, like, you, you are other sort of sources of income. This, the King of the jungle portfolio isn’t material to you, but this is like a proxy for how you are thinking about investing
[01:05:50] Krzysztof: Correct.
[01:05:51] Luke: of the things you’re doing in your real money portfolio. ‘ cause you don’t talk about your real money portfolio so much, whereas it’s much more of like my focus.
[01:05:59] Krzysztof: [01:06:00] Right, exactly.
[01:06:01] Luke: if you listen to Christophe and going, well, like, who cares about $200? It’s not, it’s $200. It’s like, this is the way you are thinking about investing and you’re making kind of similar-ish moves in your real portfolio that you don’t talk about.
[01:06:15] Krzysztof: Exactly, exactly. So to reiterate, the $200, you could add a zero to it if you want. You could take off a zero and have it be 20 bucks. It doesn’t matter. But it represents the kind of money that is not nothing. But I’m choosing basically not to market time because of the research, because on the back of my research.
I have a fundamental confidence in these companies and I’m kind of taking the almost quarter approach, right? 25% today. Okay. Market dropped again, 25%. Okay. Market dropped again another 25%, and now I’m down, unfortunately to only another, whatever, 47 bucks or [01:07:00] something. So today I’ll be looking at my shares in, uh, debate whether or not I wanna add any more today or wait a little while, but I don’t wanna get cute because the value is very, uh, apparent to me already.
[01:07:14] Luke: So really, really very different styles and perhaps, perhaps dictated by like, like how, like the, the sort of meaning of the portfolio in your life. Like you, if your portfolio went literally to zero and vanished, like, you are fine, you’ve still got an income and you’ve got some property in like different kinds of assets. If my portfolio vanished, I’d have to go and get a fricking job, like it would
[01:07:39] Krzysztof: Oh no.
[01:07:40] Luke: my life. So, so that’s why we’ve got like these different perspectives and it’s why you can’t just copy what any other investor does. You’ve gotta look at your own portfolio and your investment decisions in the context of. your lifestyle. But I think a good guideline that you and I both adhere to and all of our listeners [01:08:00] should adhere to is like this, investing money should not be money you need in the next five years. So if you’ve got an income, maybe it’s not, if you don’t have like a regular income, you need to have like a couple of years worth of spending money stashed away, like a bigger emergency fund in essence, um, so that you don’t let the fear translate into panic when things like today happen.
[01:08:25] Krzysztof: In fact, uh, this is so important. Anyone listen to us right now. We really want you to take this in deeply. Badger, you know the difference playing at a poker table when you know if you lose. You’re totally, totally fine. Almost like you treat it as play money in a certain mind frame, right? Versus if you’re playing as an amateur, that’s kind of white knuckling it and the last thing you wanna do is lose your money.
So then, so then any good poker player, sniffs the fact that you are overly tight or [01:09:00] overly risk averse and they’ll just push you around. Right? But to play real poker, you in a sense have to not have, you basically have to have let go of your fear. You have to just make the best decisions that the cards and the, and the situation tell you to make.
Right? Fear be damned. And sometimes you’ll win, sometimes you’ll lose, but you’ll, you’ll have done the process the correct way. The King of the Jungle portfolio, for me is a perfect model. That’s why I think it’s, it’s good that we, we do this. I do not worry if that $200 every month I put in goes to zero.
But I believe it’s gonna make much more of itself. So, um. I feel almost like free to buy a company like Relay, even though nobody else, nobody else wants it. So that’s the other thing, sorry, it’s a little bit of a tangent, but it, it is, in moments like this with Relay, such a great test case where that contrarian thing that I often speak about, this feels like one of the best moments [01:10:00] that it’s, it’s on display.
it doesn’t, it doesn’t really matter to me knowing that the market, that there are no buyers because I know what I know. So for, I mean, God, I don’t know, maybe that sounds a little arrogant, but the, I mean, at some point the data is what the data is, and to me it’s a matter of time and patience. And not, you know, being greedy when others are fearful, blah, blah, blah, blah.
You hear that so, so much. But in the moment, how many people are actually able to act on that?
[01:10:35] Luke: Yep. Hey, here’s a, here’s a kind of a tangent, but it might, might actually help this conversation. have got, a good friend I reconnected with recently and she is just starting to invest. She started listening to the podcast, Alice. Hi. Um, and so we’ve been chatting on WhatsApp and I’m trying to, you know, [01:11:00] point her at various episodes and conversations that might help her kind of get set up and get started. And, and Alice is like young and got an income. Like she’s, you know, she’s in a good place in life. Like she’s, so, she’s very different to, uh, my dad and his two best mates who I saw yesterday. And they also want to start investing. They haven’t invested before, but I. know, they’re in their seventies and so it’s a very different paradigm to Alice who’s like less than half their age. Um, but all of these individuals want to get started investing. So putting their individual situations aside, like what advice would you give to a new investor? Let’s say you’ve been listening to this podcast and you haven’t done what we’ve been bloody telling you to do, like just get started, you still haven’t got started. How would you get started today given kind of what’s happening in the market?
[01:11:54] Krzysztof: Are you talking about actually like things like set up your account and fund your account kind of stuff.
[01:11:59] Luke: so we’ve done all that. [01:12:00] Done. maybe, um, you’ve got some money that you want to invest and given like, and it’s like Monday and stocks are up, but like Thursday and Friday, stocks were down Big Lee. Um, how would you play it if you’re a new investor? You don’t have, and I think, I’m not trying to lead the witness here, but. These, these individuals have, have very, they will have no experience of the kind of market conditions we’re in right now.
[01:12:26] Krzysztof: So let me, right, let me talk this through by saying the first question I think that has to be answered. You got to give, uh, each investor has to have some sort of goal line in mind because to be 70 is different to be from being 20. Right. Uh, but it’s not foretold. It’s, it’s not, I don’t wanna make any assumptions.
Maybe somebody in their seventies needs a lot of money really quickly, or maybe they just need enough. But who, who am I to say I [01:13:00] can’t judge? Right. Maybe the 20-year-old. I mean, everyone, because everyone’s situation is different. So I think first the answer is how much, what is your goal? What is, let’s call, you wanna make $10,000, you have a thousand and you wanna make 10, so you want a 10 x Right.
Or you’ll be okay with just, I. Much slower rate of growth. Well, that answer is really important because if I, based on what I was saying today, if my best, let’s say elevator pitch, stock pitch. If you find me in the elevator and, oh, you, you talk about stocks, what should I buy right now? Top of my mind is relay, right?
Because I was just spent all morning talking about it. It’s not obvious to me whether I could say to the 7-year-old invest in relay because, well, they don’t make any money yet, and maybe the drug collapses and maybe that goes to zero. So for the 70-year-old, maybe that would be [01:14:00] devastating. But if they’ve already lived a full life, right?
And now this is kind of like overtime and bonus money, right? Just, and they really wanna whatever, buy a little cottage in the, uh, on some little island. But there’s no way to ever they’re going to do that unless they kind of unquote win the lottery. They’re willing to sort of go for it. Then I’ll say, you know, hell yeah, buy, you know, 20% in relay and then buy 20% in a STS and you know, walk, you know, like, but so context dependent.
That’s how it’s start.
[01:14:35] Luke: Yeah, I, I agree. That’s good advice. And I think that same thing I. Still applies. Like don’t be investing money you think you’ll need in the next five years if it’s literally like if you are. Um, so there’s the two parameters there aren’t there. Like if you are young and you have like decades ahead of you, it doesn’t matter what stocks do over the next couple of years.
’cause in the end, stocks go up as long as you’re invested in good quality [01:15:00] companies.
[01:15:00] Krzysztof: Yes. Um, oh, second. Uh oh, I’m sorry. Did you, did you finish? You didn’t finish yet. Sorry.
[01:15:08] Luke: I’ll, let me try and finish that thought if it still makes sense. I don’t know. Um, and then the other kind of parameter is like, uh, if you don’t have decades ahead of you and you’re looking to have a return over, say. At least a five year timeframe. Like you cannot be an investor if you’re looking at a lower than a five year timeframe, in my opinion. well just make sure then that, whereas the 20-year-old might have like, actually put quite a lot of money in ’cause they can withstand the volatility. you are older and your investment horizon is shorter, just make sure it’s money that if it literally like worst case goes to zero, it’s not gonna impact your lifestyle.
[01:15:48] Krzysztof: Correct. Let me reprise some advice we gave on our How to Get Started episode for Parents and Children. Listen to that again. [01:16:00] Uh, dear listeners, if you haven’t, I’m a big fan of the just Get Started principle, which might mean you buy, you, you put in some really minimal amount of money, but it’s real. And then you could easily buy, let’s say something like one placeholder share of the companies that most interest you and that you’ve done research on.
And you’ve looked at our portfolios and you’ve named, okay, you like, you like this relay idea and you like this, you like Axon and you, you know, uh, badgers now talking about Mercado Libre a lot, actually, Mercado Libre is an outlier ’cause the share price is so expensive. But, um, you could mathematically finagle that, but you basically just start by buying one share as placeholders so that you, you literally get in yourself into the game.
Now you have a tiny stake and you could begin your process then as opposed to thinking, I have to wait [01:17:00] until I have X number of dollars, and only then will I start to get in the game now today. Right.
[01:17:05] Luke: Agree with that. And then maybe let’s, let’s take that a bit further then. So get started. Get like a basic stake in a bunch of companies you might be interested in. ’cause it motivates you to then do your research, which might mean like listening to this podcast week after week. It might, if ideally it means going and looking at the investor relations page for the companies, maybe watching their last earnings call, reading the slide deck. Maybe starting to do some of your own research on kind of competitors and where the market’s going. this, this is all the, it’s kind of like the, it sounds like work, but if you’re gonna be an investor, like you have to turn that stuff into the fun stuff. Like, I really enjoy doing that. Um, because you know, you, if you, if you’re successful, you feel like, oh yeah, I was like outsmarted the market.
Like I saw something the market didn’t. and uh, yeah, like that. So that’s your process now. I dunno if you’re gonna say the [01:18:00] thing I wanted you to say. So I’m gonna say it instead and you can disagree with me if you like. So, um,
[01:18:04] Krzysztof: I have something on the tip of my tongue. Are you gonna say Go ahead.
[01:18:07] Luke: so, uh, we’ll go, no, you go first then.
[01:18:11] Krzysztof: The other obvi to, to me obvious thing was in our community, we have some posts now of people talking about, uh, what six companies most interest you right now. Right. If you could build a portfolio from scratch, and we’re starting to have a conversation around that, I, if I had, if I’m listening to this, that’s my next step is I would go join our community.
And these people, these people who have been investing for a long time, they’ve already done a lot of filtering for you, and they’re saying, this is where you should start investigating. So out of the thousands of companies available, oh, look, here’s X, Y, and Z, and then you do. What you were just talking about, but now you’re part of a larger [01:19:00] group and surrounded by people that, that all wanna succeed in this way and you’re not alone and that’s gonna keep you in the game longer so that the, yeah.
[01:19:09] Luke: that’s good. Yeah. Like, yeah, investing is better with friends. Um, so that and being in different kinds of investing community or even just chatting to other investors on, ideally not on like Instagram and Facebook and TikTok ’cause there’s just a bunch of really shit advice on those platforms. But there is really good quality advice on X you previously known as Twitter, if you’re not, you know, like a, a social media guy. Just, I mean, just start reading like the news, un filtering it skeptically and saying, you know, is there, is there a, are they just trying to sell newspapers or actually they’re telling me something useful. Um,
[01:19:48] Krzysztof: Alright.
[01:19:48] Luke: but so, okay. That wasn’t the thing I wanted to say because the thing I wanted to say was, if you’re getting started in a more sedate market, like your emotions probably aren’t gonna be [01:20:00] tested, but at times, like now your emotions are gonna be tested you might feel like a schmuck ’cause you didn’t invest enough and then suddenly stocks went up and you’re like, oh, I missed out. And then you end up not investing ’cause you’re like, oh, I missed the boat. Like. Shortcut, you did not miss the boat. or you might be fearful and feel like a schmuck because you invested and then stocks went down and you’re like, oh, I, you know, I was too soon or I invested too much money. like, it’s hard.
Investing is hard and Christophe and I and anybody else has been investing. You know, you’ve, most investors who listen to this probably experienced 2022. Some of us experienced 2008, and then some, like really gray haired listeners might have experienced like 2001. Like, we’ve seen this before. And once you’ve got the battle scars, like you kind of know how it plays out and you have the confidence to watch your portfolio like it, watch its pants fall [01:21:00] down go, it is, this is gonna be okay.
Like, I, I just need to stick to my process, keep checking, manage my portfolio. I. But let time play out. I’ve seen it get destroyed and I’ve seen it come back to higher points again, and this that’s gonna happen again this time. But you have the confidence of having seen the story play out. If you’re a new investor today, you don’t have that experience.
You’re just kind of relying on people telling you that, and you know, you, you are right to be skeptical and say, oh, maybe these guys are just trying to like sell a podcast. Right. They’re just, they haven’t
[01:21:33] Krzysztof: Yeah.
[01:21:33] Luke: this shit.
[01:21:34] Krzysztof: Well, yeah, and, and you talked about this on Patreon. Because we’re limited humans who have to respond to each daily news cycle. We think in terms of days, often the minimum, I think quality investing block time, I would say is three years. [01:22:00] Sometimes I put a dash dash, but just think to yourself right now that it’s April 7th, 2025, you won’t really know, truly know whether the decision you’ve made today, whether it was right or wrong until 2028, give or take, right?
I mean, some things might blow up before then or but, and so that should really change how you approach this.
[01:22:26] Luke: Yeah. Yeah, totally. Totally. You are. Yeah, that’s, that’s a really good point. You don’t even know if you’re a good investor. Until many years have elapsed, like really like a whole cycle, which is more like seven to 10 years. You don’t really know if you’re beating the market or not. Um, anyway, there is a tact.
There are some tactics you can use though, even if you have zero experience that’s to just dollar cost average. So I don’t know how much money my dad and his buddies or Alice were investing, but let’s say you’re investing, I don’t know. [01:23:00] Well, the UK ISR allowance is 20,000 pounds. So let’s say they’re all investing half of that.
I’m just gonna make a number up 10 grand each. Right? It’s volatile times. You don’t have any experience of this stuff. You pick out your 10 favorite companies. You get started as Christoph says, you just buy. I don’t really like the buy one share. I know he likes that, but I might say, you know, buy, buy like a small but meaningful stake.
So if you, if your portfolio say the money you’re gonna invest is 10 grand, maybe to get started, you might take. 2000 pounds of that, you’ve got 8,000 pounds in cash. The first you get started by putting that 2000 pounds, 200 pounds into each of your 10 companies that you chose. So I’m waving my hands a bit, but something like that. then next month, or maybe in next quarter, depending on how kind of the world is going, invest another 2000 and then give it another couple of months and invest another 2000 and then just spread it out over [01:24:00] months, a year, like a period of time. That means that if stocks go down the next, in a, in a few months time, when you buy again, if stocks have gone down lower, like you are buying at a cheaper valuations, that’s good.
Like you’re getting better value for the next tranche of money. And if stocks has gone up, well that’s good as well because the stuff you invested before has gone up and now you’re like, you’re like, oh, I can see the journey working. So eventually what you’re doing is by buying. Over the a longer period is you’re reducing some of that volatility and you’re kind of averaging the price of the stuff you’re buying.
[01:24:37] Krzysztof: Bingo. So Badger, we’ve talked, I think we’ve, we’ve talked, we’re blue in the face, right? Um, the markets. What’s the, what’s the TLDR. Nobody knows how this is gonna turn out. Nobody knows what tomorrow will bring. We do know that if you buy quality companies after having done your [01:25:00] work, and you’ve talked about it with your fellow jungle animals, you have, you are putting the probabilities in your favor.
And over a three to five year block of time, if you keep following the correct process with probabilities in your favor, just like in poker, the same people keep winning over and over again because it’s, uh, it’s a matter of time and you just kind of, uh, double down right now on the virtue of patience in the case of not wanting to do too much too soon.
And on the other hand, to, to sort of state the other side, check that risk aversion part of you that feels really scared, like a scary little bunny wants to hide somewhere. And see if you could kind of find the heart of a lion in you after having, you know, done the work and be willing to say, no, this is the situation.
Others are panicking. I’m not gonna panic, and I’m, I’m gonna [01:26:00] just take a good bet. You know, make a, make a decent bet at this because the odds are in my favor and repeat.
[01:26:06] Luke: Yep. And times like these are the best times. As an investor, it might feel like they’re the worst times. These are the best times to be an investor. It’s so counterintuitive. This is really like the investments you make. When valuations are depressed and like, as I said earlier, like not everything is cheap.
Some stocks I’m looking at are still overvalued. I certainly think some of my holdings are gonna get much uglier before they get better, but as things get cheaper, the investment decisions, when you start topping stuff up, those are the ones that really make a difference when the cycle turns and growth comes back, which might be next year or it might not be for 10 years. Right. So,
[01:26:51] Krzysztof: Right on.
[01:26:53] Luke: Yeah. Yeah.
[01:26:54] Krzysztof: Yeah. And so I guess, um, I guess, yeah, that, that, that’s plenty, that’s [01:27:00] plenty of jungle wisdom for today, right? Uh, the market right now, what, an hour and a half after we started is now more mixed, so I think we’re back in the red. So God, God only knows what, what’s happened in the world in the hour.
We were recording this, but, um, uh, we’ll see you on the chat, right? We’ll see all our Patreons in our chat lounge. Please check us out at Wall Street Wildlife, I’m sorry, patreon.com/wall, Streete Wildlife. Say hello. Tell us what you’re worried about, what you’re doing, and, and we’re in it together.
[01:27:35] Luke: And we did both look at, uh, an extract from fin chat.io earlier this episode that is our favorite portfolio tracking, like stock analysis tool you can get in normal times. There’s a, there’s a discount and I know that we’re recording on the seventh. I think when this episode goes live is gonna be the 15th and I think they may have announced their, [01:28:00] uh, quite an exciting discount.
If you go to fin chat.io/wildlife at any other time in the year, you’re gonna get a 15% discount. Off of a plan with Fin Chat. I mean, you can just go check it out. Even the free version is really, really good. Um, but you’ll get a discount of 15%. I think there’s, they’re planning to do a 25% discount, and that might be live right now when you’re hearing this episode, if it’s mid-April.
So, uh, go check out finra.io, fin chat.io/wildlife, and if you see that 25% there, like it’s a good time to click the buy button.
[01:28:39] Krzysztof: are you ready to become a beast of an investor?
[01:28:43] Luke: Don’t get scared. Your journey starts here.
[01:29:00]
