YouSaid · the spoken record

Charley Ellis

lines on the record: 102
first: 2018-07-30
most recent: 2018-07-30
sittings or episodes: 1
sources: podcast

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“We live a lot longer. And where does that go? Does that mean they're working longer? No, no. All that time goes into retirement. So retirement years have been expanded, expanding, expanding. And the balance between work years and retirement years has changed profoundly. And of course, the last part is in retirement. Don't forget it's 65, 66, 67 little argument about the exact number, but something over 65% of your lifetime health expenses are spent in your last six months. So what happened then? Well, people, that's where half the bankrupt bankruptcies come from.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Last for another couple years after that, anyway. So that's where Germany went, and that's why England went with 65. And that's why railroads went from 65, because they studied the German railroads before passing the act in the States. And then as for Social Security came from, and what's happened since 1883?”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rails, shoveling coal, all kinds of heavy work. They're saying to the older guys, you know, the guys are in their late 50s, 60s, you're too old for this kind of work. You take the easy job. You'll be in charge of the switches. So the switches are being manned by guys in their early 60s, and it's a beautiful summer's day, and no train's coming for the next couple of hours. They kind of, why not take a little nap? And they're just taking a nap when they forgot to wake up, and the accident happened. So, geez, for scriptures, we've got to stop this. Well, how can we stop this? You guarantee them to pay them for life. So why don't you pay them not to work? Not to work. That's interesting. We'll do that. But I don't want to spend a lot of money on it. So find the minimax where it costs not too much to solve most of the problem. And the answer was 65. Most people don't live to 65 in those days in Germany, but those who do are really doddering. So 65 will pay them not to work.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's interesting. You get him to come off the forest because they can work lifetime employment. That's terrific. What do you call that? That's a guarantee. This is a commitment. It's the honor of Germany. Okay, let's go. Well, what goes on? Well, after going for a couple of years, there are accidents on the railroads. Good lord, what happened to that accident? Well, it was two trains ran into each other and a couple of people were killed and there was big newspaper hull below. Reichstag is really upset about it. They're thinking about passing legislation and your political momentum is being broken up pretty badly. Varon, you really got to do something about this. Well, let's send a study group and find out what the heck is going on, which is another accident. Find out what's going on with these accidents. Well, we found out what the answer is. The work parties, laying tiles, lifting heavy ties.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Unbelievable benefit to commercial interest, family interest, all kinds of different reasons. What else did he have? Well, obvious technology was railroads. We're going to bring coal and iron ore from the Ruhr and other areas where the steel mills are, and we're going to build steel mills and have tremendous industry. And then we're going to do railroads who are going to be able to bring people from the cities out to the countryside for weekends, vacations are going to be normal. And we'll bring from the countryside fresh fruit, fresh vegetables, all kinds of wonderful things that people in the cities could eat. It's going to make everything terrific. It's great, but where are you going to get the workers to work on the railroad? I'm going to offer them lifetime employment.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“So he's trying to prove that aggregating was a terrific thing and he wanted to get technology on his side. So he had two different devices to prove it. One was the telegraph. The telegraph was combined with the postal service so you could send letters to be picked up anywhere in any major city, be picked up in the morning, be delivered that afternoon. Pretty damn good service. And the telegraph, you could have instantaneous communication anywhere in Germany.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where it's 65 come from, it came from Social Security 1935. Yeah, but where did it come from before that? It came from the railroad retirement act in 1923. Where did it come from before that? It came from Churchill and Chamberlain jointly put forward in the United Kingdom that they would have retirement at 70. And then somebody said, you can't do it, Winston, because 70 would put us at a disadvantage compared to the Germans. The Germans have got retirement at 65. Okay, we'll revise it. We'll put forward 65 sub-tirement. That was before 1920. So where did the Germans get 65? That's easy. In the early 1880s, Baron von Bismarck was trying to prove that combining all the different principalities in Germany together into a German nation led by Prussia, his home country, would be a great thing.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“The answer is Jim, sorry, but nobody else understands that to be. But if I'm on my own, I can promise you this. I'm angry. I'm focused and I'm going to do something about it. And if you think we've had divisive politics in the past, imagine what it would be if you had millions of people and their relatives all saying it isn't fair, it isn't right. These guys got screwed. And I think we're going to have a terrible societal problem, political problem, if we don't recognize that we've got a deep misunderstanding on retirement. And, you know, you go back, do you mind if I take a few minutes just to tick off some of the key factors?”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“My wife and I are going to go in Florida and meet up with those young people and play some golf and some tennis, have some fun. We're going to have great years. We've earned it. It's been a long, long working run, but we've earned it. It's going to work out just fine. And anybody with any knowledge about investing knows right away. $165,000. If you take money out, take money out, take money out from 63 or 4 until 86, 8, 9, 90 in that zone, you're not going to have anywhere near enough per year cobbled together with Social Security to make anything like a decent connection. So what are you going to say? You're going to say to yourself, God damn it, I worked hard all my life. I played by the game rules as everybody laid them out. And I was supposed to be able to retire at a decent age and enjoy retirement. That's part of the deal.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“The same thing if you look at individuals, we've got half of the population does not have a retirement plan, private sector. They've got Social Security, but no retirement plan. Those that do 401k is increasingly dominant, taking over from defined benefit system. The average person approaching age sixty three and a half, which is operationally retirement age in this country, is making a terrible mistake in two different ways. One is that they look at their account and they say, Ted, this is absolutely wonderful. I got more money in my name than I ever dreamed I would have. I've got one hundred and sixty five thousand smackers in my account.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a completely different question. It is, but it's an important one. Crucial. If you look at what are the biggest problems we as a nation have in the investments world, it's easy to summarize pensions. Retirement security. You can see it easily in the state and city funds that are seriously underfunded even if they're assuming a seven, seven and a half percent rate of return which they're not going to get because they've got 25% in 2.5%, 3% bonds, they're just not going to get it.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Talking about this at a moment in time where we've had an incredibly strong run in both equity and bond markets for a long time. Do you get concerned at all that even if indexing can beat the active management community, that investing in the indexes Won't get retirement plans to their objectives, won't get the pension plans that are underfunded. That's a completely different question. It is, but it's an important one. Crucial.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a part of why it's boring is helpful, because you don't get excited and get off to the sidelines. So you do have the positive years come for you. It's also true that the worst days come for you, but over time you will do substantially better just by being there.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of being stimulated, provoked, or scared into doing something that might not be in your best interest. And the less you do The more you benefit is a reality about investing because usually what you do is you make mistakes. So if you make fewer mistakes, you're better off a little bit like driving cars. You want to be a really good driver. Don't get into accidents and your friends and neighbors will all tell you, you're a really good driver. So a really great opportunity of indexing is it's boring. And because it's boring, you don't get interested in doing something about it. And since there's nothing to do about it, you stay in kind of inadvertently for the long term. And wonderful things happen to you if you stay in for the long term. We've all seen charts, and I love them because they all say, gosh, that's interesting. Over the last fifty years, if you've missed 2% of the best trading days, you miss the whole fifty years.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“And most of the mistakes that most of us have made and most of us will make are mistakes where we see Mr Market out there that marvelous gigalo paying all kinds of tricks trying to get our attention so we'll do something. He doesn't give a darn what we do. He just wants us to do something and he wants us to do it when we're not paying too much attention. So Mr. Morgan's out there scaring us sometimes and delighting us sometimes. And we make the same mistake we make otherwise because we're real people, because we're naturally emotional, because we have simplifying ways that we do things. If you haven't read Daniel Condeman's wonderful book, Thinking Fast, Thinking Slow, Slow Down, Think Fast, Read that Book, because it's a catalog of the ways in which as human beings were not perfectly rational. And once you get used to the fact that son of a gun, none of us are perfectly rational, then you can behave the way you want to, which is reduce the change.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, That wonderful You know every rock in your super. Wham, there's a huge crash and a whole bunch everybody on the boat gets jammed around and he says And there's one now Let me give you the big positive pitch on indexing. Number one is that long term, and that's key because short-term is what attracts our attention. Long term, you will have at least top quartile investment returns. Very good chance you'll have top decile given how the markets have tightened up. That'd be wonderful Other things in addition to top decile? Yes. Other things that really matter. What would that be? Well, lower taxes if you're talking about personal account. That'd be nice. What else? Actually, lower interest, lower compelling interest, lower chances that you're going to say, oh my God, or, hey, gee, that's terrific”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“We all do that all the time. The performance chasing dynamic and factor investing is kind of an interesting debate. I think it's Cliffassness Rob or not that go back and forth on whether you should be able to time factors. And the data hasn't supported it in the same way it has with asset classes. And so if you, the notion is right, right, that when a factor performs, they'll get sold well, people will come in at the wrong time. It's just classic performance chasing. But history actually suggests that it's hard to time the factors”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Specialized in factor investing are going to find they can't make as good a profit from doing it as they used to because of the crowd, but they'll still probably do a pretty good job for themselves and for their investors. Those who are in it because it's a good commercial opportunity, intermediaries, were in it because they think, hey, this is a new way to beat the market are going to create a self-disappointing experience. And it's a shame. We're all human beings and we all do that all the time.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“But if you think about it for a minute, when will sales organizations ramp up their selling effort the most? And when will nice people who haven't thought about it as carefully as they might be most tempted to say, let's go with it? Of course. It's after a very good period of rising prices. So if value has been working very, very well, the demand for interest in buying into and the supply, i.e. interest in selling people on, value factor, investment will rise to a crescendo at the top, and then people get disappointed when we realize, oh, that didn't work out. I'm really not doing all that well at all now that I look at my numbers. I ought to get out of that and get in something will work, but I'm sure there is a merit there somewhere. I believe that the guys who have for years”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's selling well too. If let's go back to question on smart beta, if you are Really knowledgeable in understanding the factors and it's factor investing that you're really talking about some low cost and momentum. These things do have real merit over the long, long, long term.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, first of all, it's the best naming that's gone on. It's the second best naming, the very best naming was when two Scots agree that they were going to shift the name of death insurance over to life insurance, and it took off. And smart beta. It's brilliant. You may have noticed you can now buy a bottle of smart water.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because prices are dominated by short to intermediate term thinking. Over the long term, I think they'll do better. And I've got the stamina, the nerve, the cool to be able to go through turbulence, ups and downs, but I know in the long run that's going to work out. Or you can say some of that, but not too much of that, so you might overweight the emerging markets by 10, 20, 30 percent of your portfolio or overweight small cap stocks by 10, 20, 30 percent of your portfolio. But the main thing is fees are huge. And if you're talking about taxable funds, then taxes are really important and costs are there and real. And sidestepping those turns out to be the secret to long-term success given where we are today. And we've got an unbelievably skilled dominated market where everybody knows all this stuff. All the time, immediately.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Depends how clever you think you are and what your temperament were risk tolerances. Easiest thing in the world is to buy a total market index. So you're now diversified across all economies, all markets worldwide, and virtually every major company is there. And that's one way of doing it. Second is Satan. I want to stay within the United States. Fine. You can do the total U.S. market or you can do the S&P 500 or whatever generic broad base you want. Actually, I've got a strong opinion. I've got enough time so that I can make a long-term policy decision. I believe that small cap companies, long, long-term, are a better place to be invested. Or I believe long, long term emerging markets are more attractive than people think they are.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“What does that mean? To me it means very simple. If you would like to be sure that you are a top quartile manager chooser, all you have to do is choose index funds, and the chances are you'll be the top half of the top quartile. And sure to be in the top quartile long run. You do have to hang on, but long run. That doesn't sound bad”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“And everybody's got a Bloomberg terminal, and everybody's got internet, and everybody's got all that information. Is there any data that would suggest, because I read the newspapers, it looks pretty damn good. Four out of our funds were in the top 10% or 20%. Yeah, how many funds do they actually have? 76. Oh, so it's a small fraction during the top. And is that equal to random? No, Charlie, it's not equal to random. It's a little bit less than what you get with random. So take Spiva is now putting out the data. Take the funds that were in existence ten years ago and bring all of them forward, including the ones that were merged out or terminated. What fraction of them could not keep up with the index that they chose as their benchmark? The answer is 84% can't keep up eighty four percent. That's an enormous number or fraction.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the nut as it all is every time you want to buy or sell, you have to buy from guys who know everything that you know. You have to sell two people to know everything that you know, and if you think the market's going to average a return of seven or eight percent, which may be a little bit on the high side, you think, well, let's see, it's 1% of operating costs, not every day, every trade, but over a year, maybe half 1%, maybe 1%. And fees, half of 1% to 1% to 1.5%. Yeah, that's right. Add that up. That's somewhere around 2% has to be recovered just to keep up with the market. So 2% of 8% is 25%. You have to beat the competition by 25%. And they know everything you know as soon as you know it. And you can only buy from them and you can only sell to them. How good a chance do you have of having this all work out? And the answer is not very good. Then you say, well, that's the explanation. And I understand that.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, actually more than a thousand times, but that's right. Unbelievable. So you've got volume change and proportion change.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, trading back in the early 60s might be three million shares a day on the New York Stock Exchange. And today it's I think it probably somewhere between four and five billion?”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“The other thing is you hang out with the nicest, most interesting people in the world. They are just a terrifically interesting, capable group of people playing the largest competitive game anybody ever found. So if you get your energy up by competing at golf or tennis, that's nothing compared to what can be done when you get up with a really interesting game, which is multidimensional and complicated and only the best can win, but they all get to win. And how many times do you hear somebody who used to be in the investment business and got tossed out? It's very, very small. Very small. So there are a lot of really nice characteristics that everybody that goes to any business school studies investment management at least a couple courses. And then they offer you how you go about doing things. And then lots of people offering jobs. I know recently there's been some diminution, but not all that big a deal when you look at it. And it's a terrific employment. So what else is going on?”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Maybe it's once every 10 years. Some unbelievably attractive opportunity, not really right for clients because it's too small, too specialized, but some really attractive opportunity comes up and says, I would like you to invest in me. And it doesn't always work out, but sometimes it does. And when it does, it can be beautiful. So, you know, the perks and benefits around the edges that are quite nice as well.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“You mean it's global? Yeah, of course it's global. It's all over the place. People want in on the good thing. You know, you stand back and say, why would that be? Well, first of all, the investment world is probably the highest paid line of work that's wide open to everybody there's ever been. Certainly the highest paid line of work today for large numbers of people. And you don't get just the salary and the bonus. First of all, you don't have to retire at 65 or 70. You can keep going until 80, 85, 90, 95. And the guys said, look, at $101, I'm going to stop working on Saturdays. A lot of people, so you stretch out longer. And the second thing is anybody in the investment business knows once in a while.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“And anytime you want to talk to anyone, just let us know. Glad to provide it. So unbelievable, flourishing amount of information of all kinds, all of which is organized and distributed just as quickly as possible, i.e. instantaneously to everybody. And then you start going through, and you say, Well, I hear about the CFA program. How's that working out? Well, it's off to a pretty good start. They've got 135,000 people have passed the exams and another 250,000 people in the queue. Cheaper, great. Where do those people come from? Well, still the biggest crowd is the U.S., the second biggest crowd is China, third biggest crowd is India.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Has worldwide some in London, some in Hong Kong, some in Singapore, some in Tokyo, some in Los Angeles, four hundred, five hundred, even six hundred people trying to come up with insights, information, data that might be useful to clients, anything that might be useful. Demographers, economists, political strategists, portfolio strategists, and every major industry teams working on that industry, every major company will have 10, 12, 15 analysts who are really good covering that company. It's unbelievable what's now been available, 600 or 500 per major firm. And of course, then if you go to the specialist firms, there are all kinds of people, and then their intermediaries say, we're not a firm, we're just an intermediary, we've got access to all kinds of experts in any subject you might like have. We've got 2,000 experts.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“The second thing is the number of people involved in active investment management, best I can tell, has gone from less than five thousand to more than one million over fifty sixty years. A major securities firm might have had ten or a dozen analysts back in 1962 or three. What were they doing? They were looking for small cap stocks of interesting companies that might be interesting investments for the partners of the firm. Did they send anything out to their clients? No. Not anything. In fact, Goldman Sachs didn't start sending things out until 64 or 5, and that was just one of the salesmen thought it might be an interesting idea to put four sides of sheet of paper. Little information on four different possible investments. He was doing it himself. Today, any self respecting securities firm”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Didn't have a computer to do some analysis. You could work through the SEC library done at the New York Stock Exchange where nobody went, but if you went, you could get filings that allowed you to do some background digging. You could get a competitive advantage that was real. That's gone. First of all, the SEC now requires any publicly owned company that gives any useful information to any investor must simultaneously make a diligent effort to be sure everybody gets that same information. So no more private conversations with management.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there's a couple of other things you might want to have first. Number one. Look at the information changes. Back in the 60s, which wasn't all that long ago, or 70s or 80s, if you want to have a private meeting with senior management, all you had to do is show that you'd done your homework, that you were asking intelligent, probing questions, and that you had been coming back on a regular basis to this company were a serious investor. If you were, they'd be very glad to have you meet with two, three, four, five. How many eight? How many people would you like to meet with? Because they'd like to be understood so that the pricing would be fair and good. So, okay, that was terrific. You could get a comparative advantage. Secondly, you could be invited to a dinner where the senior executives would talk about what their plans are for the future of the company. You could get a comparative advantage. Third, you could use your computer capabilities. If you had one or a slide rule,”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because everybody knows everything that everybody else knows. You may manage it a little differently, may make some mistakes a little differently, you may do some smart things a little differently, but it's very hard to do significantly better than the other guys when they've got everything that you've got. And that's just the beginning of the problem. But it is an amazing reality. And everybody sort of focused on their own personal experience. They know they're getting better. They know they got better tools. They know they got better information. They know they are whiz bang compared to where they were five years ago or 10 years ago. Just easy to forget that everybody else is terrific too.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“More and more people get more and more equal to each other, and the skills that they might have diminish in their percentage or relative importance because they've got these fabulous tools and this unbelievable supply. And it's that that makes them all increasingly equal, even though they're getting better and better. They're getting less and less different. As to get less and less different, it's hard to beat the other guy. So if I'm playing bridge and I get really better at bridge by quite a lot, take lessons for five years and I go out there and I find out everybody else has been taking lessons too. Is it? Oh my gosh, I thought I would be way ahead and better? I can't be. And then the last is It's like playing bridge with all the cards face up on the table.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“So can everybody else. And if you happen to have all of us are, a mixture of skills and good luck. In the old days, good luck wasn't all that important to skills really made a big, big difference. But as more and more people get the same kind of computing power, the same kind of information, the same speed of access.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“You have noticed that you're getting better and better and better over the years. Your skills keep getting better. You've got better tools to work with, computers like you wouldn't have dreamed of five years ago. They're terrific. I've got more power in my cell phone in my pocket than in IBM three hundred sixty computer would have had. Holy crow, that's amazing. It's just the beginning of the story You have gained and gained and gained, you have research services like you never had before. Want to have it right now? You've got it through the internet. It's there all the time. Everybody gets it. So you're looking at yourself and you're saying, Ted, this is really terrific. I'm better than I used to be. I've got more sources of information I ever had. I get it very, very quickly, and I can act anytime I want to. There's only one irony.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“100% reversal plus plus plus instead of 90% of trading is done by individuals it's now 9-9 that is 99% of trading is done by computers in the cash market and derivatives markets added together derivatives markets a little bit bigger in the cash market but 99% of trading and that of course in my mind is the final bell ringer so I want to explain some of the other things that go into it before you get to that but 99% here's the final slammer So there you are, professional investor.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cleveland Trust, for example, would have half a dozen analysts who were willing to spend time covering utilities or industrials or financials, and nine hundred thirty to four hundred forty five day job, and they were reporting to a group of guys in their sixties who had come up through the chain of command. They were the investment committee, and they met once or twice a month, and they would approve additions or deletions from the approved list, and then the administrative officers working off that list would buy and sell. You got on the list because you were blue chip. You were going to be long-term hold because you wanted to avoid taxes on capital gains. Good dividend because you've got personal trust that have got capital beneficiaries and income beneficiaries. You want to pay the income beneficiaries, well, they're the receivers and then have some money left over, maybe more that would go to the next generation.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“They bought on the basis of what they had read in the local newspaper Business Week or whatever place? What had they heard? They might be pretty active, maybe 10% of people were pretty active, sort of day traders. How do you do that? You call a broker, pay forty cents a share commission, and buy some good stocks. And if you want to do a little bit better, from time to time trade stocks and try to do a little bit better than that. Or you might be it's early days for that sort of thing, but you might be investing in mutual funds. You find a mutual fund that had really good investment results and you'd buy in and hope that that good investment result would keep going.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things we'll talk about later is this question people have about how much indexing can constitute a market. Save it for later. Back then how did Price discovery work if ninety percent of the people were trading because of reasons exogenous to the market?”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“And they didn't know very much, but that didn't matter. They're buying a few blue chip stocks that they'd read about in magazines and stuff like that. Were they hard to beat? No way. They were easy to beat. And the secret to successful active investing is to have what's called, it's a little bit nasty term, but called willing losers or serial losers or repetitive losers or habitual losers. But there are fairly large numbers of people who just don't happen to have accurate measurements to see how well they're doing, who, in their thinking, god, that looks like an interesting stock. I'm going to buy some. That stock's going up. I think I'll buy some more. That kind of thinking without really good research and without a lot of comparison shopping makes them candidly easy targets to pick off and beat.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“ninety percent of trading was done by individuals. And who are they? They were nice people who bought or sold once every year or two, usually in odd lots because that's how much money they had, and about half the time it was AT&T. And they bought because they'd been given a raiser of bonus or an inheritance, and they sold because they were sending kids off to college or buying a home or some other sensible purpose. And it had nothing to do with what's going on inside the market.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“10% of trading at most was done by institutions, and who were the institutions? First, statewide branching was allowed, but interstate branching was not allowed for banks, so every mid-sized and larger city had two or three trust departments. They were most of it. The second group would be the major insurance companies in Hartford. And then there was a little bit of mutual fund activity up in Boston and a little bit in New York, and there might be some out in the West Coast, but nobody was paying much attention.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it was the beginning, the very beginning of a technology transformation. It's been simply fabulous. And what I've been able to do is to witness that transformation. Candidly, there isn't any doubt in my mind that that transformation has already taken place so forcefully and for really good, understandable reasons. It's not going to reverse. And there is a sensible answer. There is a game or a process that can be played. Jerry Goodman called it the money game when he wrote that wonderful book, it's Adam Smith. The money game was seeing if you could outdo the investment capabilities of the other people. And that game used to be Katie liked to steal candy from children.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“In those days, you get paid the entry level at the Chase Manhattan Bank, which was the family bank. Same as domestic servants. Everybody got paid six thousand dollars for the first two years. That was me. So I had a fabulous opportunity to be right at the very beginning, give you an illustration. Rockefeller family through Lawrence had done some venture capital investing. One of them was for the brilliantly talented electrical engineer named Jack Scantlin, who had invented a desktop device that if you punched in on the keypad, the stock exchange symbol of any stock would be It would print out on heat sensitive tape what was the last price, high for the day, low for the day, trading volume. And it was unbelievable up until that time you had to pick up the phone and call a broker and say, what was the last price of IBM or General Motors?”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source
“At the end of that time, he said, Would you like to join us? And I said, Yes. He said, When would you like to come to work? And I said, well, I'd like to take the summer off because my wife and I kind of thought we'd go west because my brother's getting married. And so if it didn't make any difference to you after Labor Day. He said, oh, that's great. We don't do anything in the summer anyway. Why don't you come in on? Tuesday after Labor Day. Fine. We shook hands and he left. We had been interviewing in my apartment, so I went over to see my wife and she said, how'd it go? I said, it really went well. I got offered a job and I took it. That's terrific. What are you going to be doing? Investment management. Well, that sounds interesting. What are you going to get paid? Oops, I forgot to ask.”
2018-07-30 · Capital Allocators · Charley Ellis - Indexing and Its Alternatives (EP.62) · IDENTIFIED FROM THE TRANSCRIPT · source