Ep708: Phil Bak – Be Slow to Jump Onto Bandwagons

Andrew Stotz 00:01
At low fellow risk takers and welcome to my worst investment ever, stories of loss to keep you winning. In our community, we know that to win in investing, you must take risks, but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives to join me, go to my worst investment ever.com and sign up for the free weekly become a better investor newsletter where I share how to reduce risk and create grow and protect your wealth. Fellow risk takers this is your worst podcast chose Andrew Stotz from a Stotz Academy, and I'm here with featured guest, Phil Bak. Phil, are you ready to join the mission?

Phil Bak 00:43
Let's do it. Absolutely.

Andrew Stotz 00:47
So let me introduce you to the audience. Phil is the CEO of Armada ETFs, a REIT specially asset manager that delivers customized solutions to REIT investors through ETFs, SMEs and proprietary AI and machine learning REIT valuation models. And for my mother who's listening, mom, that means he does a lot of smart stuff. Phil has previously served as a co founder and CEO of exponential ETFs, acquired by title Financial Group, Chief Investment Officer at Signal advisors and managing director at the New York Stock Exchange. Phil is the author of two patents on innovative ETF structures, and his lead market structure enhancements that have become industry standard, Phil has been featured in top tier media outlets such as Wall Street Journal, Bloomberg, CNBC, Financial Times, and Reuters. Phil is the host of the Phil bot podcast and writes regularly on substack. Phil taking a minute and tell us about the unique value you are bringing to this wonderful world.

Phil Bak 01:52
unique value other than my, my lovely head of hair, I would say, you know, I think I have a very healthy disrespect of authority and disrespect for the status quo. But at the same time, a very healthy respect for, you know, mathematics and for you know, quantitative processes and first order principles. And, you know, where I think that kind of, you know, has tended to serve me very well, where there's, you know, a lot of skepticism and a lot of, you know, a lot of willingness to say, hey, maybe maybe everyone's wrong, maybe you know, we can do this a better way, maybe there's a totally different way of thinking about something, but at the same time being tethered by, you know, the basic rules of the road, the rules of, you know, like I said, of mathematics and quantitative analysis, so you can't, you know, veer too far off. And I think there are a lot of people in our industry in finance tend to fall into one of two buckets, right, either tend to be, you know, very quantitative, or you tend to be more of a social person, and, you know, end up more on the sales side of things. And I think, on the quantitative side, and on the portfolio management side, I don't know that there's a tremendous amount of creativity these days, and especially as we, you know, as we come out of an era where for so long, the consensus view the herd mentality, you know, just by market cap weighted indexes, there's a Fed put, there's no risk, just keep putting money in and people are, I think, thinking less than less critically about how they invest. And the more that happens, and the bigger the consensus view gets relative to the contrarians. To me the more opportunity there is for people who are contrarian to do things a little bit differently, a little bit differently, not, you know, not certainly not polar bear or anything like that. But I do think that I've, you know, tended to look at the world through a little bit of a unique lens in some instances, and I think that would be if I had to pick that would be my unique trait that I bring to the market.

Andrew Stotz 03:45
Interesting about the status quo, you know, I have a lecture I do in my valuation masterclass, called 14 fallacies, you know, in equity valuation, and in you know, I, but there's one fallacy above all that I basically present many examples of, to my students, and that is the bandwagon fallacy or the bandwagon effect, where everybody is on the bandwagon. And that becomes the status quo, and going against the bandwagon or hanging off and seeing what's going on outside the bandwagon is just not rewarded at all. And I think the bandwagon effect is, you know, the idea that it's interesting if you go back into your old days in Europe 200 years ago or more, when basically a circus would come to town, and that circus would have a bandwagon, and it would make a lot of noise. And that would be how they would enter the city, and then set up at that location which they've all pre planned. And the kids all follow along and everybody wants to join the bandwagon so that they get to see the circus getting set up, and in a week it's going to launch and everybody's on the bandwagon. And so I like the idea of against the side nice quote or not following the bandwagon all the time, you don't have to be against the bandwagon all the time, also, but just think about what's happening.

Phil Bak 05:10
Yep. Yeah, look, I mean, you know, you do need, you know, I've been saying a lot on Twitter in different places, I've been talking about how narratives drive flows drive performance, right. And he talked about fallacies and valuation, like being right, you know, doesn't necessarily reward you these days. Right. It's not necessarily about you. Right. So being ahead of the flows. Right. But, you know, so I think, um, but but, you know, one of the consequences of that change one of there's a few that are not good, but one of them is investor complacency. And I think there is a lot of investor complacency right now, and, you know, look, things that are working, people are very reluctant to move off of things that are working, and things are working for a long time, you know, same strategies been working for a long time, the strategies that have not been working, the value strategies and strategies that have not been working, have not been working for a long time now, long enough that there's a whole new class of chief investment officers and portfolio managers and people that are actually driving flows now that have never seen them work, and are skeptical of them. There's their cyclicalities in the market, you know, there's, there's cyclicalities, whatever those forces are, that we go from growth, to value from domestic to international, all these different things, they play out over time, and they're gonna play out again. And you know, when they, you know, when they turn, those slowest to adapt and change those most stuck in their ways, those most entrenched in what they've done so far, are the ones that got wiped out. And, you know, that tends to happen every 1010 or so years. And I think we're due for that to happen again. Now.

Andrew Stotz 06:40
I'm just curious about, you know, there's two things that I am interested about in relation to REITs. And the first one is that I, I've looked at adding REITs into one of my asset allocation portfolios, and every time I run the correlations, it's just, it's too correlated with equity. And therefore, you know, because REITs are in equity indices, because many of those REITs are listed. And also, you know, they're they're not, it's not like I'm owning land in those REITs. So it's not like a counter, you know, and that's the first reason. So therefore, I look at REITs as kind of a like a little bit of beta on real estate, but I don't really need it, unless I'm ready to make some of those bets. So my first point, my first question is about, what is the state of REITs? Right now? And how should somebody who's thinking, I need diversification? How should they think about, you know, REITs in the US nowadays?

Phil Bak 07:42
So very interesting questions, a lot of ways a lot of places I can go with that. REITs are highly correlated. equities, but not as much as you would think there are actually in some, in some cases, it's, you know, there are correlations to fixed in some cases, it operates independently. And, and there's a lot of different factors and reasons driving REITs. There is significantly more interest rate sensitivity with REITs than there is with equities, they pay typically higher dividends than than most equities and most equity classes. So you do have a little bit of elements of fixed income and there tends to be historically tends to be very sensitive to insulators, inflation protection, but now we're at a kind of a different paradigm shift where we've had we have inflation, right, but, you know, we have, I think, you might say stagflation. And you might say that a lot of real estate is already overvalued. So you have a lot of kind of different, almost contracting factors are playing some, you know, talking about cyclicality, some of these different factors cycle in and out. And I think the main thing that we're seeing in REITs, is that the sub sector correlations, which are already very low, lower, in fact, than most style box equity correlations, there's, you know, very different economies and drivers of the different sub sectors within REITs. Those are going to be increasingly diverged from each other for a number of reasons. So, you know, when you look at, you know, data centers, right, so there's, you know, if you look at the Jim chinos, short thesis, and you look at some of the business models, it's a lot of questions being asked a lot of competitive threats there. But at the same time, you've got this tremendous growth, especially now in the tailwinds of this AI boom. So you have like a whole, you know, separate economy there, you've got these data centers, you've got hospital REITs, you have all these different kinds of REITs. You have Office REITs, which, you know, people are trying to catch a falling knife, and maybe you will, maybe you won't, I don't know, I wouldn't want to own him. I don't have the courage. But you know, that you could say that they're a little bit risky. I think, when you look at in the US, when you look at the supply, demand, imbalance of housing, you look at the demographic trends, there's a lot of reasons to like, residential, and that's what we like, we like residential, we have a fund that, you know, operates off that thesis, but you know, what, at the end of the day, I think, I, you know, I for most of my career, I always felt like readers read, I never thought deeply about it and What really got me hooked on this project and starting our motto was when I started to look at REITs, for the first time based on somebody else's research and coming into somebody else's, you know, fun, I saw that there was a lot of opportunity, there's a lot of divergence or a lot the REIT sector was getting pulled by a lot of different factors, some more conflicting, some are lined up. And I just thought it was a very interesting space to talk about a space that doesn't have a lot of innovation and free thinkers. And you know, it's a little bit boring. REITs are boring. And I'm like, Man, I think I can make read sexy, I think I can

Andrew Stotz 10:31
man make me sexy again. Yes, exactly. That there is a challenge. One of the things about I was a bank analyst for 10 years here in Thailand, when we were going through the boom period, and then the 97 crisis, and then having to recapitalize balance sheets, non performing loans, at the height of that crisis were 55% of total loans. I don't think that there was a country that went through something worse, maybe Indonesia, possibly, but around the world, Latin America debt crisis, and other things, never reached that level of non performing loans. One of the things that's interesting about the US banks is that because of the Fannie Mae and Freddie Mac, you have the ability banks have the ability to sell their mortgages into the secondary market. So if we look at the balance sheet of the banks, and we look at their lending related to real estate, first their mortgages, they can get off their books quickly, if they wanted to, because there's such a liquid secondary market for mortgages, which are residential, single family mortgages. And when we're talking about REITs, and when we're talking about real estate, well, there's other types of loans. There's commercial loans, and, you know, loans for commercial buildings, or maybe there's, you know, rentals or something like that. How does someone look at the different general categories of REITs? These days? In the US? I know, there's a huge swath of different ones, but what would you say, are the general categories if someone says, I want to get into REITs? And I'm going to just go for the biggest ones? And I'm going to try to kind of diversify across REITs? Where would they what would it what would it be cell towers? Or what would that be?

Phil Bak 12:15
So there's structural categories, and then they're like, asset class categories. Right. So structurally, you've got public and private REITs. And that's our I mentioned, the one fund, we have a whole nother fund that's, you know, really built on the thesis that there are some issues with the private REITs. And we think we could fix them using the public REITs. But you know, those are issues, that's a whole wormhole that would take us hours to get through about, you know, essentially, their issues around valuation, liquidity, transparency, pricing, I mean, all, you know, all the usual stuff. So it's just the same story over and over just definitely different names of the product types. But um, you know, the other areas are, you know, there are eight different sub sectors, there's, you know, residential, there's office, which is, you know, kind of shaky, you've got cell towers, you've got hospital, REITs, you've got you mentioned earlier, you're not investing in land, or as you are now, I think, one or two land, farmland REITs. So, so there's all sorts of different categories, and you can access, you know, different strategies, different geographies, different property types, you can, you know, different classes, you can get all sorts of different exposures through these public REITs. In order to be read, they have to pass through 90% of their income as dividends. So they typically are, you know, dividend payers, you know, it's a, it's been historically a very stable asset class, I don't want to be victim to what I was talking about with investor complacency. But, you know, especially not in this market. But I do want to get back to your point about the banks, in the commercial real estate market, there is a tremendous amount of commercial real estate mortgages that are gonna have to be refinanced at higher rates. And that is very much a concern on the commercial real estate side.

Andrew Stotz 13:47
And what happens in that type of case, because we know in the case where interest rates rise a lot as they have, that, eventually, every time the Fed rides us up a roller coaster of super high rates, they take us down very quickly afterwards. And you've got the Fed buying, you know, that the giant sucking sound that we used to say about jobs going I think, to Mexico was the old saying, but the giant sucking sound is the Fed, buying sucking out of the system, all the mortgage backed securities that he could get and injecting liquidity. But when I look at commercial loans, commercial real estate, it doesn't seem like it's that easy for the banks to get these off their balance sheets compared to let's say, the secondary market that there is in mortgages. So what do you think's going to happen in that space? If we could say, let's just assume that it's going to be a rough ride for commercial real estate for the next seven or three to five years?

Phil Bak 14:50
There's no liquidity at all and the commercial real I mean, the biggest buyers of commercial real estate had been these private read funds from Blackstone Starwood KKR. And now they're all set worse, they've had to keep their funds that investors can't get as a whole, it's a major problem. There's an assumption, there's some broad assumption in commercial real estate market, that, well, you know, rates are going to be going back down and very soon, you know, either through, you know, the Fed having achieved its goals or through a recession. And, um, I don't think, you know, it's obviously not a certainty, it's might not even be a probability more of a possibility. And I don't think that people are truly accepting of, you know, the reality of where we are in the cycle. And it's not just, it's not just real estate. I mean, you look at zombie companies, you look at, you know, corporates that have to refinance themselves in order to stay afloat because they can't even make their, you know, their revenues aren't enough to pay off their debt service. You look at the US government itself, and their debt service payments, right. I mean, there are some major, major issues, if those rates don't, or can't come down. You know, I gotta commend a very critical of the Fed, you know, really my whole career, but they are actually sticking to their guns and trying to do something about inflation, I personally think that it should be even higher, I think there's no excuse for rates to ever be lower than CPI. Right? I mean, that's, to me, that's a regressive tax, but, you know, they are still sticking to their guns, at least for now. So, you know, it's, it's, it's a, there's, I think, a lot of risk that is being, you know, kind of underestimated by the market right now, and the next few months, or I think they're gonna be very, the market has been very calm over the last couple of months. And maybe they'll stay calm. But there's a lot more risk than as being priced in by, let's say, the VIX.

Andrew Stotz 16:38
And one last question on this whole topic, just because you're in the US, outside of the US, so I don't really have a good feel on it. But if we were to look at the idea of recession, where we clearly go into a recession, what do you think is the probability that let's say, by the end of this year, it becomes clear that we're, we're in a recession?

Phil Bak 17:05
It's just so hard to say, because the employment numbers have been so good. And so sticky, and it just defies not only defies logic, it defies my lived reality, when just from the people I know. And in my circle, it seems like, that's not so much the case. But, you know, the data is the data. And, you know, until there's some sort of break in the employment numbers, you have to say that that recession is being staved off, but I mean, you know, like, I'm not, I don't have a crystal ball. I can't, you know, I can't say it seems to me that we're long overdue for, you know, for recession, it seems to me that it's, you know, it's coming based on all these factors and others that we haven't discussed, but, you know, I don't know. Who knows, I mean, I, you know, there's just no way, there's no way there's no guarantees, there's no certainly everything, everyone in this industry, anyone who's in finance, gives them probabilities, everything is probabilities, right? And investment strategies, we're trying to tilt the odds in our favor, we can't guarantee anything or tilt the odds, right? Um, you know, to me, the odds are likely of a recession, you guys are likely have a lot of things. But you know, certainly no guarantee and, you know, people who've been calling for recessions have been wrong, and more often than not, ever since the global financial crisis. So, you know, don't underestimate the power of the Fed to come in and overreact and spend money that they don't have, and, you know, whatever else they can to try to, you know, try to stave off the inevitable. So, you know, the market can stay irrational a whole lot longer than your I can stay solvent. So

Andrew Stotz 18:33
it's interesting, because I've been presenting to my clients and I have a chart, I think I'll share that chart. And it's because I faced the same question about unemployment is so low, it's like, this is such a strong economy. You listen to someone like Peter Schiff as an example. And he'll say, Well, yeah, but you got to break those numbers down. And it's not what it looks like. But here's a chart that I'll share, which is my look at recession. So for the listeners out there, it's a chart that shows the unemployment rate going up and down over time, ranging between almost 16%, during COVID time, all the way down to let's say, 3.7%, in 1965, you know, when I was born, let's say at that time, and what's interesting is that, every time that it comes down to a pretty low low, we see that there's a recession, so I've in there, and this helped me to kind of explain to my clients, one of the one of the arguments for a recession in the US is that that peak employment is actually telling us that, you know, that that the market is just about that the economy is just about to go into recession. Now, you know, one one chart doesn't tell the whole story, but it's definitely something that you know, gets me thinking about what the heck's happening. And it's difficult, I think, for everybody to try to figure this out. So I appreciate, you know, sharing some of your expertise in the, in the read space, and then some of your, you know, experience of what you're seeing there. I think we're all trying to figure it out nowadays. That's right. That's right. Well, now it's time to share your worst investment ever. And since no one goes into their worst investment, thinking it will be tell us a bit about the circumstances leading up to and then tell us your story.

Phil Bak 20:33
Circumstances I had was joking about the hair got a full head of hair when I was a kid is actually probably my first investment. It was my first investment experience. Which was good, because, you know, I learned a lot of hard lessons. I'm young, and they're really, you know, they stuck with me. I mean, I learned painfully I learned the hard way, probably lost about 40 bucks, maybe 50 bucks on this trade, which and now so, you know, just to kind of spoil it, I'm going back to when I was about 1213 years old. And that was, you know, full summer of babysitting, and mowing lawns, and all my money, all the money ahead. And at the time, we're just coming off as a bubble of baseball cards. And my older brother had all these baseball cards, and you know, done very well. And they're all worth you know, we have something called the Beckett baseball card monthly, which I guess is like the Bloomberg terminal of the day, it was a printed thing. And you'd flip through, and you'd look at your cards and these things would only go in one direction, or I'll go straight up. And you know, I'm 14 years old, I had no concept of a tulip bubble, right or anything like that. Like to me this is Oh, wow, like you invest in baseball cards, they just screw up. And, you know, like I said, I would you know, babysit or mow lawns or whatever, scrounge together a few dollars, go to the store, buy a pack of baseball cards. And then you know, we started going and my brother and I started going to these baseball cards shows and need to have people there. And they'd have these tables and animal these cards. And I saved up and I bought this Roberto Clemente card, which is like a blue chip. I mean, he was long passed away, like there's no way for him to develop. It wasn't a rookie, but it was still it was like a very valid, it was a blue chip card, that's a card that's going to hold this value, right and have that. And as of next year, and there's a young guy coming up Greg Jeffries, who's going to be the next big thing, right? Big prospect. And I bought the hype. And with baseball cards, the thing is, you want to have the rookie card, the first year of a new player is the most valuable, this guy was just coming up. And the amount of things looking back that like, you know, the amount of things that I know now, right with a whole, you know, career in finance, and you know, the you know, performance chasing the hype, the sample size, the scarcity and diversification, concentration, the intrinsic value all these things. I didn't know anything. So I got excited, right? Oh, got this, you know, this new superstar coming up. And obviously, he's going to be superstar, because, you know, I saw it on the TV show or whatever he's on Sports Illustrated. So I sold my Roberto Clemente card, I sold all my cards, and I decided I'm going to invest, I'm going to pull all my money together, I'm going to buy just this pile into this one stock, right, I'm gonna buy this one guy. And I got myself a bounty of like, maybe 2530 of these cards of these Greg Jeffries, rookie cards. And it was like, to me, it was like the greatest like, this is a short thing. This guy is the next big superstar, the Mets these cards are clearly going to be worth 40 $50 apiece, and just a couple of years the way Darryl Strawberry and I couldn't these other guys were. And, you know, obviously, you know, at the end of the story, it just never never came to be the guy had a career he had, I think he had a good season or two. But you know, there were two things that the player itself never really panned out, but also the entire baseball card bubble also, you know, collapse. And you know, to be a part of that. And to see that and to watch that and watch like, you know, you get those baseball cards, you look it up and like what do you mean by Greg Jeffries isn't our 12 cents? How can that be? That's impossible, because that's like, the book value you can get that you can get like maybe a third of that. But there were a lot of things that happen with those baseball cards that now it's like, it's so obvious, like when these things started to become very valuable. More and more companies came in produce more and more cards or printing, you know, a ton of cards or all these different versions. You know, that is the you know, the scarcity and, you know, they they, they they blew the golden goose right. All they had to do is control themselves and keep it scarce. The volatility of a rookie baseball player, something I'd never considered right. Of course, a player like Roberto Clemente that had a whole fame career and is now passed away. He can't tarnish that he can't have a bad season or ruin it right? That's, that's locked in. That's booked right this book value. But a rookie baseball player, you really just don't know some of them work out some of them don't get we you know, I said before we deal in probabilities, right? The probability of a rookie player panning out even the best prospect you know, whatever it is, maybe it's 50% a little more little less, but um, but there's certainly no guarantee and it was no guarantee and it wasn't edge to noise wasn't diversified I was concentrated. So I fell victim to every single one of those, every single one of those rules that you would tell someone not to fall victim to. And I still somewhere in my, in my, in my closet of no parents or missile somewhere I have a stack of Greg Jeffries rookie cards that are, you know, literally worthless, I doubt I can get $1 for the whole bunch. But the lessons were very good. It's made me very skeptical as an investor. I'm slow to hop on new bandwagons, which, in some cases, maybe, you know, the lack of the mania as of last few years with crypto and NFT is maybe you know, might cost me some money. But I think over the long term, it'll serve me well, you know, but certainly has made me a more cautious investor and a more, you know, an investor more cognizant of, you know, Trinsic value risk management and you know, the basics.

Andrew Stotz 25:59
It's great, you learned so many different lessons from that. And you're the first person to tell the story of, you know, baseball card losses. But for the listeners and the viewers out there, Roberto Clemente was, you know, such a impressive figure, I believe, Puerto Rican by birds, he played for the Pittsburgh Pirates at the time in he, I remember when I was living in Connecticut, I was a young kid. And so we listened to baseball games on the radio and stuff like that. And my father was from his family's from Pittsburgh. So I had this connection with Pittsburgh. And then I started following Roberto Clemente. He was kind of the first athlete I followed as a young young kid. And basically, I mean, we're talking about like, seven or eight years old, at that time that I got into it. And I remember that. I remember when he died, you know, he died in a plane crash. And he was going on a mission, I believe, to Nicaragua, at the time, it was 1970 1972, something like that. And it was just a really first time that I really felt so sad about somebody that was really, you know, such a shining light. So when the listeners hear Roberto Clemente, they may not understand that that was, you know, that was blue chip premium and phenomenal guy. And so, yeah, so how would you summarize the lessons that you learned? What would you say is the key thing,

Phil Bak 27:37
so not only was he a great guy, and beloved, and all that, but it was also, you know, he played before this whole proliferation of baseball cards. So there was, there was scared, like, how not everyone had, you know, it wasn't like, it became in the late 80s, early 90s, when everyone was investing in baseball cards. So having Roberto Clemente card was, it's like having a, you know, a comb a call option that's like, you know, 20% in the money, right, you know, it's there, look, the market moves down a lot, but you have your, in the money, you have you, right, you've got a book gain here. And then to sell that to buy, like, you know, eight or nine, or however many I was able to get of this, Greg Jeffries is like, you know, taking all your taking that option selling it and putting into your cousin startup because he just got valued in a Series A round by a VC and 50 million bucks. And you're just like, you know, hoping for this insane growth trajectory that, you know, just doesn't always come. So, I think, you know, you know, the lessons learned that, you know, I think it has made me a very, a more prudent and almost, in some, in some cases, more cautious investor. Now, by nature, I am a bit of a risk taker, a calculated risk taker, but I'm a bit of a risk taker, I'm an entrepreneur. And I think, you know, when, when I see an opportunity, when I think the odds are in your favor, I'm not afraid to take those risks and do it. And I've done that even within my own career. But there's always a little part of me that's like, Hey, let me make sure I have, you know, let me make sure that we've worked out a plan here where we're building some, you know, we're building some intrinsic value, we're building something that's, that's real, we're building something that is, you know, can't be, you know, what we're putting in a moat, we're putting, you know, different things. And my last company, we, we had a couple ETFs we also built an ETF sub advisory business where we did outsource trading and capital markets to, you know, to have, you know, not just the high fliers of our own funds, but also some stable income coming in and I think we have some similar plans with with my new company, and a lot of that is because, you know, I saw look, this Greg Jeffries guy has a bad year right and all of a sudden my investment goes down to zero because it's something that I didn't foresee which I should have foreseen but didn't foresee coming. You know, expect the unexpected, be prepared, have a backup plan, be diversified, diversified in a number of different ways diversified by revenue stream diversified by, you know, people and relationships and I mean, in every which way that you can, I think, you know, those are lessons that that you know, have served me and hopefully will serve me very well that I can point to that as my first investing experience as where I learned that lesson.

Andrew Stotz 30:08
And I'm going to tell a story of kind of what I learned from this by relating it to a story of something I did. Many years ago, I lived in the desert area out in, you know, New Mexico area, and I live near a lot of rattlesnakes that they had there, in a particular area, if you walked out, you know, into the, the that area, you're going to definitely encounter a lot of rattlesnakes. And I knew to you know, where these rubber boots that I wore that were up to my frickin hips. So if I was to get, you know, attacked, I would, you know, they couldn't get me and all that. But a friend of mine asked me to babysit their baby who was only like six months old. So I took the baby out to the rattlesnake area thought this would be pretty cool. And I put the baby down and had the baby walk through the rattlesnake area. And the sad part of the story is that the baby didn't even know that the Rattlesnakes were dangerous. So the baby was grabbing at these rattlesnakes, it didn't recognize that the rattle in their tail was you know, a sign of danger and to get away. And unfortunately, the Rattlesnakes all beat the baby in my head to tell my friend that the baby died. And, you know, it was terrible was part of the reason why I had to leave the US. But no, I'm just making up that story. But the point of this story is, when you're a baby in the woods, when you're a baby, and you don't know anything, you are exposing yourself to risks that you have no idea what they are. And I think this is a great story. And as I think about it, for you know, for the listeners and the viewers out there, you know, you got to understand that there's lots of risks around the corner that you don't know about until you get some experience. So be very careful. Be very mindful, try to learn as much as you can, but don't put all your money down. So that's that's what I would take away anything you would add to that amazing story, I just told,

Phil Bak 32:02
that is a great story. Because until you have a concept of the Rattlesnakes being dangerous, you don't have a concept. And there are a lot of investors today that have no concept of stocks being dangerous stocks go up, you buy them, you wait, they go up, they go down, waited longer, eventually they go up. And that's been their lived experience. So, you know, I wouldn't trust necessarily an asset manager that hasn't lived through a bear market, right? Or I'd be more skeptical, at least. You know, and a bear market can mean a lot of things. It can mean stocks, it could also mean these kinds of lessons, you know, for me, it was Greg Jeffries, maybe somebody, you know, bought a condo at the wrong time, bought a house the wrong time, they, you know, left their job and went to a startup that didn't go the right way. I mean, people, you know, this is what your podcast is, people learn this lesson a million different ways. And I think as long as you, you know, learn it, recognize it and can grow from it, you know, that is in effect, you know, understanding that the Rattlesnakes are dangerous, and that'll make us all smarter investors.

Andrew Stotz 32:57
So let's now let them bring this down to actionable advice. This is the hardest question because I'm asking you for one action. So the question is, you know, you've learned a lot from that experience, you've learned a lot from your experience in life. Let's now imagine a young person that doesn't really know exactly what they're doing. But you know, they have some eagerness to get involved. What's one action that you'd recommend that they would take to avoid suffering the same fate?

Phil Bak 33:25
Everyone says past performance is no guarantee of future results and everyone performance cases, and I see it over and over and over again. The worst time to invest in anything is after a big run, right? Because there's always there's an element of mean reversion. There cyclicalities never chase just don't chase ever Chase. Be patient. You've missed it. You missed it. There's more. There's always there's another train coming right? Isn't it like a manga, there's another there's always another opportunity to come in, there's another trade calming, another train another trade? Don't chase, just just don't chase don't, you know, get rid of the FOMO get rid of the, you know, whatever, anxiety, whatever, you know, these things are? Detach yourself. Just wait.

Andrew Stotz 34:09
Got it. So what's the resource that you'd recommend for our listeners?

Phil Bak 34:14
I'm a resource. I think podcasts like this, I think there's so much great analysis and insight available to curious people now. You can listen to podcasts, you can read books, you can read blogs. substack has so much great work on substack. Now, um, you know, I'd say the whole, the total amount that I've learned, you know, studying for a CFA or Kayo, or, you know, certainly as an undergrad, you take all that and if I can lock myself in a room for three weeks, just listening to investment podcasts, and maybe, you know, going deep on a couple of topics, you know, just through publicly available information, blogs and SSRN if you really want to dive in or you know, there is some There's more information available to us now than we've ever had. And I would say take advantage. And that's, you know, learn from untraditional channels. But you'll learn more and you'll learn faster.

Andrew Stotz 35:09
Great, great advice. All right. Last question, what's your number one goal for the next 12 months?

Phil Bak 35:15
Well, I've got a young business that we're trying to get off the ground here. So we've got a merger, we're merging with an AI development company and onboarding some AI models with REITs. We've got two new funds that we're trying to get to critical mass. So we've got a lot of work cut out for us. If I got to pick one goal, I would say, I would say to finish the series, a round of capital for the company. And to make sure that we're, you know, we can execute our plan over the next three years.

Andrew Stotz 35:45
Exciting. Capitalism is the lifeblood of where you know, the entrepreneur is the lifeblood of innovation in. So congratulations on that, and I really look forward to hearing your success over the next 12 months. Well, listeners, there you have it, another story of loss to keep you winning. Remember, I'm on a mission to help 1 million people reduce risk in their lives. As we conclude, Phil, I want to thank you again for joining our mission. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Phil Bak 36:27
That's it. Stay curious. And thanks for having me on. This is a ton of fun. I appreciate it.

Andrew Stotz 36:33
Well, we appreciate it too. And that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast hose Andrew Stotz saying. I'll see you on the upside.