Ep718: Christopher Panagiotu – Go With Your Gut, but Verify

Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you meaning winning. In our community. We know that to win in investing, you must take risk but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risks in their lives to join me go to my worst investment ever.com fellow risk takers, this is your worst podcast host Andrew Stotz, from a Stotz Academy, and I'm here with featured guest, Christopher Panagiotu, to Christopher, are you ready to join the mission?

Christopher Panagiotu 00:39
I have never been more ready for anything in my entire life than

Andrew Stotz 00:45
Well, let me introduce you to the audience. Chris hosts the capitalize your finances podcast, and is the original capital lizer. One who is absolutely obsessed with profoundly understanding what there is to know about their passion, Chris, take a moment and tell us about the unique value you are bringing to this wonderful world.

Christopher Panagiotu 01:07
Yes, well, Andrew, first off, thank you for inviting me on the show. And in second regarding what I bring to the table that's a little unique. So we were talking before the show, to give your listeners the bullet points of Chris rea pontio to the cap in capitalize. I started out very early in the world of investing, started investing when I was 10. Started advising pseudo professionally. At 14 After I took a stock course in seventh grade started advising professionally at Union Bank of Switzerland at 18. Got through college and three years went to Morgan Stanley, after that joined a family office before I started capitalize your finances, the planning practice. And so at the tender age of 32, I've accumulated two decades, two years of unbiased award winning financial wisdom. And I am ready to take the financial industry rip the head off of it and give people what they need to know on how to truly capitalize and become obsessively ruthless and committed to pursuing financial greatness.

Andrew Stotz 02:25
And what is wrong with the financial industry that you saw that kind of motivated you to take a different path?

Christopher Panagiotu 02:34
You got four hours. There's a lot there. So one of the things that I saw at the big firms and I'm not going to knock, you know, anyone here specifically, there may be a couple of financial gurus that I'll throw under the bus. But as you know, as far as businesses and all that on a serious note I I just I don't go there. One thing I will say though, is our industry is obsessed with selling based on emotional unintelligence. Regarding finance. Now a lot of people go What the heck does that mean? I'll give you a great example of when I was really good at this at UBS. So someone comes in, and they don't have a clue on investing or planning as they shouldn't, right. That's why they're coming in. Unfortunately, most people in our industry don't have a clue either. And so they go okay, how do you feel about investing? Like, I don't know. So guess what, you're up, you're a moderate, right? You're not aggressive, you're not conservative. People go, what does that mean? And now you take them down this rabbit hole of emotion and then somehow you emotionally match them with a portfolio of investments that will quench their behavioral thirst. And then they don't understand when, you know, if you've got a plain vanila portfolio or a middle of the road market just takes off and they don't take off as much and they go What the hell Chris? Not now but hypothetically, and I go, Well, you had a moderate portfolio, right? If you wanted that type of return, you got to get a little more aggressive with it. And they are just ready to pull the trigger. Let's go okay. And then the market takes a dump and they go What the hell Chris? Like Well, if you didn't want that you had to be a little bit more conservative. And it's this ongoing cycle now. I didn't understand that. The backing of that if you will when I was at UBS and Morgan Stanley, I just saw it during oh eight okay. And I could go down a rabbit hole of Monte Carlos and why those don't really work any of that stuff. But it wasn't until Gosh 2017. I came across the dowel bar study, which for your listeners that are not aware dowel bar study is A study that tracks behavioral finance. So it tracks different types of investment returns and benchmarks. But it also tracks how the average investor has done according to traditional advice. And I believe JP Morgan was the sponsor of that year. So for 1993, to 2012, this is in my book, the average investor lost to inflation by half a percent, according to traditional financial advice. And so one of the things that I remember was, number one, oh, my gosh, my gut instinct is now backed by, you know, academic results. And then secondarily, I'm not going to ask how someone feels not that I don't care. I just know, statistically, it is the second leading killer to net worth accumulation, number one being divorced, I can't help you there. So I just scrapped that. And there was just a ton of things like that, that hit me, there was another one that hit me. Where, let's go with the Monte Carlo simulator. People plug in all of these random data points, well, again, in Oh, wait, that went out the window. And so even though I didn't have the knowledge I have, now I'm sitting here going, Wait a second, you had a 95% chance of success in March. And in six months, now you have a 30% chance of success, and you're probably going to have to go back to work. And statistically, you're not going to be able to come back from that loss. And so early on in my career, I was exposed to a number of things of what not to do. And that's what Charlie Munger always preaches. Tell me, where I would die. So I don't go there. And I accumulated all of these not to dues, and it was partially guttural, it was partially just, you know, understanding that, okay. If everyone else is failing, I'm not gonna go there. And then I backed it with my research, you fast forward today, that a lot of that was the foundation of what capitalize on your finances has become. So if we just talk about that one

Andrew Stotz 07:11
issue, you know, I, I have a real problem with these types of surveys that are given by banks nowadays about the behavioral behavioral biases and stuff like that. And, and I would say that they, those things, orig originated as ways to help clients. And now they are ways to protect the banks. And the advisors, because you can say, look, you see you sign up for that. Right. So it's, it's all about legal liability. Yes. So if I was an individual, and I went to a bank, and they presented that to me, I would refuse to sign it. Yeah. Or if I couldn't do business with them, without signing it, I would say, just tell me what's the highest risk, that's the one I want, everything else you're going to do is going to restrict me from all the other things, and you're going to construct some portfolio that is going to expose me to the biggest risk that you could possibly expose me to, that you'll never be blamed for. And that is shortfall risk, that 30 years from now, when I'm going to retire, you had muted peg me as a, you know, a low risk guy. So you put me into bonds, my money didn't grow. And now I don't have enough money. And I have to and you will never be blamed for that. Who couldn't Who could have known right? I mean, it's never gonna go back to the advisor 30 years from now, with that shortfall risk. And so for the listeners out there, it is a topic that I think you have to really think carefully, carefully about. So Oh, yeah,

Christopher Panagiotu 08:55
well, well, I even think of that, and I didn't mean to cut you off. But so if someone came in, and they're, you know, my age, and they have low risk, not to, you know, blow your brains out with theory, but that's arguably the riskiest thing you could do. Because you're gonna have to save a whole heck of a lot more versus isn't the beauty of compounding, the more that snowball starts to go, really, the less you have to put in because the Snowball is taking care of it for you. I think our industry has a totally misguided and misunderstood idea of what risk is, like you said, it's based on covering their ass and not being liable. But you know what, sometimes you just got to speak up and do what's right.

Andrew Stotz 09:42
And so just to reference, you know, you talked about the dowel bar study, and they have been doing their study for many, many years and I just went to their site, and I see that it's an expensive study nowadays it's almost $1,000 Yes, but we you know, many of us have seen In the results of the past studies, and the key thing about the dowel bar study was that it was one of the many, one of the few actually studies that really helped explain, here's the market return, let's say it's 10% Over the last 20 years. Yeah. And here's what the average investor captures of that return. And it's not 9.5. And it's not nine. And it's not eight. And it's not seven, and it's not six, you're talking about the average investor is capturing a tiny proportion of that 10% upside. And this is a reason why people like John Bogle in the, in the, in the past, talked about the idea of if you just bought an index fund and stayed in it and contributed to it, you'd capture most of that, but for many different reasons related to the financial industry, you end up not capturing that for fees, transactions, bad advice, bad timing on your own part where you're buying high, and you're selling low. So that's also you know, an important study and important information for people to understand. So great, great point there.

Christopher Panagiotu 11:12
Thank you Well, in one point, even to about DALBAR. And it's interesting, the more I go on in my career, the more I understand that I'm gaining knowledge to necessarily, or not necessarily call myself a master, but I'm turning the corner at my craft, but I also feel like I'm becoming more and more of a student. So, you know, even the Dow bar study that same one, I'm just going to use that off the top of my, my, my dome. I remember reading that and I go, okay, you know, the s&p 500 earned eight and a half percent net of not including dividends. So probably 10%, what you said, Okay, inflation historically, during that time was two and a half percent right around average. And the one thing that was interesting, even on bonds was, I think, from 93 to 2012, the average bond investor would have earned I think it was like six or 6.3, something like that. And I remember looking at that going, that's okay, that's right. But that's not right, because you're taking it out of historical context. And my whole point is, is unfortunately, the world of money. It is complex. And is is much as I try obsessively to commit it down to a watered down simplistic formula, in way of understanding whether it's in my book or my podcast, or, like course coming out, or even to my clients, it's always evolving in the second you take your eye off of that, you're gonna get screwed. Because think about it. Anyone that reads that study that takes it for face value, they'll go, Oh, I'm going to earn 6.3% Over the next 20 years and a bond. Are you kidding me? No way, you know.

Andrew Stotz 13:07
So, for the listeners and the viewers out there, I'm gonna have links to your podcasts. I'm also have links to your book, capitalize your finances, the How to financial framework that takes you from compounding ly clueless to monetarily magnificent. So I appreciate all that you've done there. And of course, as you mentioned, you're going to have your course coming out, which is exciting. But now it's time to share your worst investment ever instance, and 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.

Christopher Panagiotu 13:45
Yes. So I was thinking about this last night before we came on. And technically, there's three that I have a tie for the first one I'm going to throw out is Ford. Now I'm not a hey, I'm a patriot, right, like love my country. Just so happens that the stock was lackluster, and I can tell you why it was my worst investment at the time. Number one, I bought it purely because Alan Mulally, who was the CEO of Boeing, basically, you know, saved them in big gave them the amazing reputation that I had before it went to help. He left came to Ford, celebrity CEO, and to his credit, he did turn it around, and I hung on for too long. And then they hired from within or promoted from within after he left. And there was just so much about it. But the thing that really was the main takeaway is Never invest in a company because of a celebrity CEO, founder and CFO, etc. Also, that was my taste of cyclical business. And I'm not saying businesses don't have cycles. But let's face it, how often do you buy a car? I learned that very quickly, you know. And in the car industry, there's seven years of bowl and three years of there, and looking back on it, I bought at the top of the seventh, my friend, and that wasn't smart, you know, and I was suckered into, excuse me a high dividend. Well, then I remember thinking, Oh, well, they were paying a high dividend to lower investors, they couldn't afford to pay that dividend. So that was number one. My second one is GameStop. Now I was a gamer growing up, so in the 2000s. Gamestop was awesome. I gotta tell you really quickly, so my best childhood memories lining up outside Gamestop

Andrew Stotz 16:13
I can right away. There are some people that don't know what Gamestop is. They may have heard it in the news and stuff. Okay. Okay. When you say lining up outside Gamestop What do you mean?

Christopher Panagiotu 16:23
Okay, so first off, GameStop was the go to video game retailer where all they sold was video games. So for nerdy little young uns like myself growing up, and in most cases, even adults, because most adults are gamers, or most gamers are adults. Excuse me. That was like the go to spot. Okay. And I remember, when Nintendo came out with the new Mario Kart or Super Smash Brothers, I'm not kidding you, Andrew, there was a line, probably a quarter mile outside of this game stop. And we would wait till midnight. And it was the coolest thing. There were consoles all set up. There were tournaments. It was almost like a block party. But like, nerds are the kindest people in the world. And they're super accepting and friendly. So it was just fun. And then it would open up at midnight, we'd go and buy the game and go home and play like not sleep. So you have a common mission had a common mission, right? So in the 2000s. Before that, but 2000s For sure. Gamestop was it? And one thing that obviously put a wrinkle in that was when Xbox and PlayStation Nintendo started selling on their platforms. Okay, no different than when blockbuster died. When Netflix came in. It's the same thing. But with video game specific. Well, the thing that Gamestop had was, people still loved the experience, right? It's all about the camaraderie literally coming together. But let's face it, humans are lazy. And capitalism reveals that so if you can make it easy, you're going to kill those that make it more difficult. And I just I hung on for dear life. Now I got out way before like the meme stock craze, like that was years before. But Gamestop hooked me with the same thing that Ford did. Their dividend was huge. And I should have read the income statement. They couldn't afford it. Now, as far as investments, those were the two like black and white stocks. Yep. One that was awful. And this isn't investment related. I know, you know, this was probably a little bit abstract, but I think it's valuable for your listeners. So you know, without getting into the weeds of it. You know, I have no relation with my father anymore. And he had a side business. And I remember out of spite thinking I'm going to start another business just to compete and steal that business so and you know, that lasted about it my assistant could quote me better on this because she was with me through the thick of it, probably six or seven months. And I remember I had this epiphany I woke up and I thought to myself, if I keep doing this, I am no different. The man that I despise. I remember I called my teammate, my assistant buddy. And we got to the office early and I just looked her in the eye and I apologize. I go ahead. I know I can do better. And I'm telling you this story because you know the stocks are one thing but you're gonna get kicked in the teeth, your listeners. I don't know what's going to happen in your lives, but you're going to have a moment where someone that you trust you love you care about they're going to Make sure that you lose any bit of trust that you had in them. And you have a choice at that point, you can match that in dance with the devil. Or you can take it on the chin, take a deep breath, and focus on what is most valuable, which is your family, which is your friends, your clients, be a steward of their trust, and be a steward of the business that you were put on this earth to pursue. Don't try to just steal business out of spite, that was my worst mistake in the world of investing.

Andrew Stotz 20:37
So let's, let's look, I'm gonna say, Okay, there's four, there's GameStop. And then there's spite dad. Out of those three things, you know, investments that you've done? How would you summarize the lessons that you've learned?

Christopher Panagiotu 20:53
How would I summarize the lessons that I've learned? Lesson number one, when in doubt, read more. Lesson number two, go with your gut, but verify. Lesson number three, as early as possible, humble yourself and know that you made a mistake and move on. Yeah, those are my big three.

Andrew Stotz 21:19
That's great. I, maybe there's a few things I would share. I think the first thing is to remember that trees don't grow to the sky. And when we get excited about a company or stock or something like that, you know, we have to look at the whole picture. And there's just so many factors. I mean, it's just what makes capitalism so invigorating, and so challenging is that it's constantly shifting, and in that in no stock very few stocks that you can hold forever. And therefore you've got there are times that you've got to get out. And I think that's something that many people don't think about, they think about the time they get in and how it feels to hold that stock. But there are times that you've got to get out. And so that's the first thing I use stop losses for that, that that brings in the discipline to do that. But you know, for everybody, you got to think about there are times to exit. And then the other point that I would say is that I really grateful because my mom and dad, for whatever reasons, I can't explain it. They never broke my trust. And when my dad was in his latest years, and I was home visiting my mom and dad, and my dad and I were in the car, I said, What's your proudest achievement in your life, he said, I built a trusting family. And I now realize how hard that is. how hard that is, because we're all driven, you know, he could have at any time gone and done selfish things that would have hurt my mom that would have hurt our family that would have hurt me. And then of course, life happens, and you know, difficulties happen, you know. But one of the things that I've learned from my experience with my mom and dad, but also from my experience from my business partner, because my business partner in my coffee business and my business partner in my finance business to different people, but I've been with one of them for 40 Some years practically. And then the other 125 years, I can say that neither of them, they never broke my trust. And I now realize the value of trust. And if you're not getting that trust from the relationships that you're in business or personal, go find it because without it is a very difficult life. And the second part to this, I would say is that when you find a situation where you're not getting the trust that you need, you've got to just walk away and go get it somewhere else. And sometimes it means we got to walk away from friends. We've known for a long time from family members from whatever but you know, at some point if and then walk away, and then you will value the trusting relationships that you build, and then bring that trust into the relationships that you build and the businesses that you build. And then you will have stopped the cycle of you know, that type of pain that happens in a family or business or relationships. Anything you would add to that.

Christopher Panagiotu 24:44
I think it's an interesting conundrum. The idea of success, so I become really good friends with a company or the guy As a company called Book thinkers, and Nick Hutchison is the founder. And he's become very quickly one of my best friends. And when they came up and interviewed me and did some video recordings, took them out to dinner gave him the, the true capitalised treatment, if you will. And at dinner, it was interesting, because we were talking about our, our, my trials, tribulations and all in all, I want to be crystal clear, I've been I've had a wonderful life, I had an amazing childhood. But on the flip side, you could be treated right for 30 years by someone. And all it takes is one decision. And you're done. And Nick had kind of a similar conversation that we had, right now, or circumstance that you've had Andrew and the fact that you go man, like, you know, one of my biggest struggles is, I haven't had a struggle like that, like, my, my parents are great, I have a great family, right? Everyone loves each other, we're all blah, blah, blah, and I go, Well, dad in and of itself is a struggle, right? Because you're compounding that everything is sunshine and rainbows and the second something bad happens, you're gonna feel that a lot more than someone like me, you know, I've had the shit kicked out of me more than enough, right? So for me, it's just another day in the life when it happens. And, you know, like, I was explained to my counselor, you become increasingly increasingly less tolerant of BS. And, and I also told him, I go, when you have kids, you're gonna understand that very quickly. But, you know, on the success side of things, I can tell you professionally, my life started to really take off after everything happened negatively my family. And so, you know, I didn't imagine in my wildest dreams, I would have what I haven't 32. And I can, I can feel the snowball just taking off. But in a lot of ways, I wouldn't wish that for the world. And so I told Nick, and I would tell your listeners be really careful when you say, Man, I want to be successful. Because, you know, in a lot of ways, it's an amazing gift, especially financially, right? We all understand that. But you, you need to be aware of the curses that come along with that, and no one talks about that.

Andrew Stotz 27:24
Except on my worst investment ever. That's where we talk about the things. Yes, that's true. The key word for this podcast is authenticity. Yes. So based upon what you learned from this, these stories, and what you continue to learn what would be one action you'd recommend our listeners take to avoid suffering the same fate?

Christopher Panagiotu 27:49
Well, the first one that comes to my mind, which is super cliche, surround yourself with amazing people. To take that a step further. I'm really fortunate to have guy spear coming on my show in September, I've become good buddies with Goutam vade and William Green. And, you know, in that group, indirectly Mohnish pabrai, who's the one that I'm still working on most of your list? I'll meet you something. He said something in a seminar that hit me very hard, and it comes across as ruthless but it's just very practical. He always asks himself after he meets someone initially, who

Andrew Stotz 28:32
is this you're talking to? Mohnish pabrai. Okay, got it.

Christopher Panagiotu 28:35
Yep. Motors pap. Right. Okay. And he always asks himself, and all these people or friends, if, if, if he ever wants to see this person again? And if not, then he just, you know, he just doesn't. And I took it a step further. And I, I've looked at a lot of people that I have in my life. And I asked myself, okay, let's assume that I don't see this person for a year. And after a year, nothing in my life has changed, other than that person's gone, okay. And if nothing has changed, in my life is the exact same. Without that person, they're in a year. That kind of proves to me. They don't need to be here, period. Right? So why bother? And we live in a world today, which is really soft in the fact that people will go, wow, that's really offensive. Well, guess what those people that are saying that you probably don't want them in your life to begin with, because the ones that understand where you're coming from, those are the ones that you're going to want to stick around. So not only surround yourself with brilliant people and people that don't want to say are better than you because that sounds self deprecating, but level up, level up with the people in your life. Now, that doesn't mean that if you're doing better than all of your friends financially or in some aspect of the or of the of life, you just cut all those people out. But I have a mental checklist of, because I'm sure your listeners have a mental checklist of investments of how to invest, right? Take that into everyday life with people. And if you get down to question number 48, and it doesn't work, you're out. Yep.

Andrew Stotz 30:34
Great advice. Great advice. I know, in my case, I the way I call that I protect my mind. Like I, every body and every billboard is trying to get in my mind, you know, and that's, and I've got to protect that space and that energy in that time that I have. And so I'm ruthless in that space. So great, great advice. What's a resource of yours or any others that you'd recommend for our listeners?

Christopher Panagiotu 31:04
Yes. So for those of you looking to follow Yours truly, there's a couple ways that you can gain access to me. If you are looking for free content every Monday, head on over to Spotify. Type in capitalize your finances, and you will hear my lovely interviews with celebrities from all walks of life where they tell you how to capitalize on your finances if you choose to pursue that career. I also give you up to date, top of the line research that yours truly provides. If you are looking for my content in the palm of your hand, head on over to amazon.com type in capitalize your finances. It's the book, you can have hardback paperback Kindle, we're coming out with audio later this month. If you want to follow me on social media, head on over to Instagram, LinkedIn, or Twitter, you can type in my name Christopher Ponyo to or cap and capitalize in. Lastly, stay tuned because December 1, we are coming out with capitalize your finances. First ever masterclass where I'm giving you all of the modules, tools and tricks, I'm even going to show you what I do for clients every single day on how you can truly capitalize your finances to the fullest of your abilities.

Andrew Stotz 32:25
Holy moly, we're going to have links to all that in the show notes. So for anybody's interested, just click on that and get it. It's a lot of great stuff. So I appreciate that last question. What is your number one goal for the next 12 months.

Christopher Panagiotu 32:44
Number one goal for the next 12 months, personally is to be the best dad and husband I can be professionally not only come out with this online course, but set the stage so that I can basically be the Benjamin Graham equivalent on the planning side for generations to come.

Andrew Stotz 33:07
Exciting 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, Chris, I want to thank you again for joining our mission and on behalf of a sponsor guiding me 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?

Christopher Panagiotu 33:34
Oh gosh, thank you so much for having me on and for your listeners tuning in Thank you for listening to me rant and as always keep capitalizing

Andrew Stotz 33:44
Amen. 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 host Andrew Stotz saying. I'll see you on the upside.