YouSaid · the spoken record

Jamie Catherwood

lines on the record: 67
first: 2023-02-03
most recent: 2023-02-03
sittings or episodes: 1
sources: podcast

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“Yeah, so if anyone listening enjoyed this conversation, hopefully all of you, then you can find my website, which has all things financial history at investoramnesia.com because we never learn from history. And you can sign up for my newsletter there, which goes out every Sunday morning to 14,500 subscribers. And I also have some online financial history courses available on my site where you can learn financial history from people like Jim Chanos and Neil Ferguson and Mark Andreessen. If you want to learn more about Canvas, you can go to Canvas.osam.com.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“6,000 times across our Canvas accounts and generated $100 million in net losses, which led to on average 170 basis points in tax alpha for our Canvas accounts. So if the index was 7% on average, the Canvas after tax return was 8.7% for those Canvas taxable accounts. Can have a huge impact on investor returns from a tax side, but there's also a bunch of other interesting stuff that we can do with that kind of power of customization at scale.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“The SP 500 was up 15% in a year. In the ETF, all you can do is sell that share of the ETF, which would be at a gain, so that would trigger a taxable event. But if you own the S&P 500 as a custom index, just part of your exposure in your account, then even in a year where the overall index is up, they're still on average like 36% of companies, at least in the Russell 1,000 on a given year of 36% of companies in the Russell 1,000 are at a loss regardless of whether the market is up or not. And so if you have a custom index, you can sell those stocks at a loss to offset your bill, your tax bill on the 64% of stocks in the index that went up. And so like in the first half of 2022, we're still getting our data for second half of the year from January 1st to June 30th, 2022, we harvested losses.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Even like taxes. So, in terms of boosting investor returns, the ability to, because just I guess stepping back for a second, custom indexing for anyone that doesn't know is building your portfolio using single stocks instead of an underlying commingled fund. So just like an advisor would create a model using ETFs and mutual funds, they can create using Canvas our custom indexing platform at O'Shaughnessy Asset Management to build a model with those same exposures, but using individual stocks. And so why that's important is because it allows you to, one, customize basically anything because you own in the individual stocks instead of just an S&P 500 ETF. But by owning the individual stocks, you can also do a lot of tax loss harvesting that you could not do in a commingled fund because, you know, say the market”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Have. It's interesting how it becomes, oh, wow, you have Canvas, like you do custom indexing to, oh, you don't have Canvas or you don't do custom indexing. And so while we're obviously not there now, we think that that's where things are trending towards because in every other facet of life, we want personalization and something tailor-made versus an off-the-shelf cookie cutter product. And so our view is why would financial markets be any different? And the examples people tend to use are just related to stuff like, you know, S&P 500 without Exxon or other stocks like that that they don't like. But that really kind of undersells and understates the level of customization and impact you can have at scale when you're personalizing each client's individual account for things.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Anytime we get an inbound from someone that's interested in Canvas as an individual investor, we will always try and pair them up with one of our Canvas partner firms. So if anybody is interested, certainly don't hesitate to reach out if you're willing to work with an advisor. But yeah, in terms of competitive advantage, we think that this one, Canvas and custom indexing in general is one of the best competitive advantages an advisor can have because especially right now because With technology there's always that kind of flipping point where having a new technology or software, what have you at the beginning is a competitive advantage because you're offering something to the end client, in this case you're investor that other companies can't offer but then as everyone kind of recognizes the power of the new technology and becomes table stakes to”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“To see Canvas be so successful today because it's really an iteration of what Jim tried to launch in the 90s, but the technology and timing of the market was just not there. I think, but he had a company called Netfolio, which was all about building personalized funds for the individual investor using technology, but didn't really lead to anything just because timing late 90s, but then now like 20 years later, same idea is now implemented in Canvas. So it's kind of cool to see that full circle happen.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so Jim obviously, someone who's had a profound impact on my career and kind of personally and professional development. So he will be sorely missed at the firm. I joke with him that he's been in the industry for decades. And after like three years of me being at his firm, he retired. But yeah, in all seriousness, Jim, over his very successful career built an incredible team at OSAM. And so his retirement and departure is just sad on a personal note, but also exciting. Everyone's very excited for his new venture, literally, O'Shaughnessy Ventures. But so we have a great team in place. The day-to-day isn't changing at all. And it's really exciting time at OSAM with our Canvas platform and custom indexing and everything. For me, even though this is more of that recent history, I think it's really cool.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“That just gets automated so you can spend more time on the analysis of that information and hopefully generate more actionable and insightful investment decisions because you're able to spend more time doing what you should be doing as an investor, as an investment analyst, which is analyzing. So I think that'll be interesting. I feel like we're just kind of entering that stage of the cycle now where there's a lot of companies dedicated to helping investors do more analyzing than kind of just gathering data or gathering it faster”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“To market the first one that comes to mind is like Delupa. A lot of the tools I think today are ones less around for investors. I think are less around getting better information necessarily that other investors can't access. And it's more around how do we automate the data gathering and data kind of synthesizing processes that you do and take a lot of time, but are nothing really special. They can be automated so that you as the investor and analyst can spend more time actually analyzing these companies and getting an edge that way. So Tulup is just the example in my mind, like their thing is that they just automatically pull numbers from 10Ks and stuff 10Ks as they're”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Of the last five years of railroad stock prices. And now that you have that recorded history of the market, you can actually study trends because you have the data and you don't have to spend 80% of your time as an investor just trying to get information and get it faster. You can actually just spend more time on doing analysis. And so today in the age of information, by and large, obviously, you know, high frequency traders and alternative data sets that hedge funds use, et cetera, ignoring that because it's a smaller percentage. By and large, all investors are getting the same information at the same time. I think you're going to find out the S&P 500 price faster than I am unless your Wi-Fi is a little bit faster, but nothing that's going to give you a competitive advantage. And so today, I think a lot of the tools that are coming”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Exchange got you an advantage, but the ticker through telegraph cables just used technology to distribute that information. And so the ticker helped investors spend more time doing actual analysis of prices in the market and looking at trends than simply trying to get access to that information. Once the ticker comes along, that's when you start to see a lot of more sophisticated kind of investment strategies and approaches because not only did the ticker in real time give everyone access to information, but someone in the 19th century called the ticker a recorded history of the market, which I think is a really cool idea. And that's technically kind of what it is because it's not even just what's this price right now in the exchange, but once you get that price, you now have it. And so just from having the ticker, you suddenly are able to, you know, do an analysis.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Numbers and letters. And so if someone in Philadelphia in that first tower knows the price of this stock is $48.50 before anybody else, they can communicate that info using these optical telegraphs from Philadelphia to New York in like 30 minutes. So again, just another way outside of pigeons to get that speed faster. But after the ticker comes along in 1867, suddenly everybody hooked up to a ticker receives price information from the New York Stock Exchange at the same time. So before the ticker, just being near the New York Stock Exchange physically provided you with a huge advantage because you would know price information faster than anybody not living in New York because they would have pad shovers, what they called them, these people who literally just ran to and from the exchange back to the brokerage office, back to the exchange, et cetera, et cetera. And so just being physically near the”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“System type things. And then finally, it gets reset. But what really reset or kind of brought through markets to that analysis phase in 19th and early 20th century markets was the ticker. Because before that, again, without technology providing everyone the same information at the same time, you had to drill holes in walls or, you know, use pigeons or something else. Some people were using these optical telegraphs where they're like these chain on hilltops, you know, stretching from like Philadelphia to New York, where if people in Philadelphia learned a price, they would set on a telegraph that looks like a windmill. Like it's a visual tower, basically just like a windmill has the rotating arms that spin around these optical telegraphs had long like wooden arms that could be put in certain shapes, which would communicate different.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“The snooty, like open board trading inside from the armchairs, they obviously are moving a lot of money and prices based on their trading because they're the kind of large capitalists. Because the curb traders weren't paying for the seats, they obviously weren't privy to that information and that trading like in real time. And so a group of curb traders drilled a hole in the side of the building so that they could spy in on the open board trading sessions and like learn information that way. And so going back to that kind of cycle, obviously that access to information in itself was a competitive advantage for them. But soon over time, that kind of dual class structure dissipates. It breaks away and more investors figure out how to get access to that information from trading sessions inside. And so that's no longer an edge. So then you move to the speed component where we had the pigeon.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. I'm trying to remember what the two were called, but I think it was the open board was like the very old money, wealthy elite. They literally traded in tailcoats and top hats. And they would sit in like armchairs that were dead. Like there was their personal armchairs. Like they had assigned seats. And you had to pay a lot of money to get a seat on that open board. And they traded, I think, like five hours a day and took like a break for lunch. Yeah, it's very, very aristocratic and bougie. Alternatively, for the people that couldn't buy those seats because, you know, there are tens of thousands of dollars, they traded on the curb exchange, which was literally just the curb outside the traditional stock exchange, where it was in the street, open cry, you know, there's no top hats or armchairs out there. And these curb traders, though, because the”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Of these curb traders that in this period of history, which was like the mid 1800s and throughout the rest of the century, there was like a two-tiered system on the New York Stock Exchange where what they called, I think”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“So today, you're not going to get an edge by finding out what a company's revenue for Q3 was from their 10K because everybody's going to get that information that's released at the same time. And most people, by and large, I would say 98% of investors have access to the internet readily available. And so that's not going to be your source of advantage. But just being able to kind of use that information for better insights than your competition is where you can get kind of a source of alpha. And so over history, what you see is that once that cycle kind of completes one iteration, usually there's some either new data set that becomes available or new technology that allows access to new information or you can get the information faster, kind of like resets that cycle. And so in this paper I wrote, I used an example.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“At that point, everybody's by and large getting the same information and they're getting it at the same time. And so at that point, I'll performing the competition and kind of getting your competitive advantage is sourced through just superior analysis of the widely available infrastructure.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Pigeons back home to Boston to his colleagues there who would unravel the pieces of paper attached to the pigeons, find out what the news from Europe had been, and then distribute it to their subscribers so that they would know the news from Europe far, I mean, relatively long before anybody else would know. And so while that seems like, you know, how much could you really get from that when it came to things like discovering the outcome of like a big battle or like the death of a leader or something, that small window of time, just like a few hours can make a huge, huge difference. So that, again, is a perfect example of the kind of speed phase where you're just trying to receive information faster. After technology kind of gets democratized so that everybody's getting the same information at the same speed, the third stage of this kind of competitive edge cycle is the analysis phase where”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Has the same info. So then the competitive advantage becomes much more about speed. So it's not getting access to the same information as everyone else, but it's developing methods, which we will come back to, whether it be technology or carrier pigeon, just to get you that information faster than anybody else so you can trade off it before anybody else knows. But carrier pigeons get arbitraged away. And so what Trey is referring to there is in the 1800s, there was a guy in Boston who was offering a news service for investors where essentially he had, he would station himself in Halifax, which was like the northernmost point for ships coming in from, I think, Liverpool. And he would use carrier pigeons to go out and meet the boat, basically discover the news, and then send the carrier.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“That's always a good one. So, yeah, essentially, so I wrote this article about how kind of throughout history, the sources of competitive advantages have kind of followed this cyclical pattern where there's three stages, access, speed, and analysis. And as you referred to in your question, the first stage is access. So at this point, you can get an edge over the competition just by getting access to market information that's not widely available. So if you have some unique data set or there's just general market information that's not democratized and not everybody can just find it on their phone, you haven't access to that information in itself as a competitive kind of edge over the competition. But then over time, as more and more investors do get access to that same information, obviously you lose your competitive advantage because everybody”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“For the US to follow. And in fact, early on, the panics in the US were kind of really modeled upon Walter, what's his face, Walter Badgett's kind of rules for acting as lender of last resort based off of the British experience, specifically in panics like the panic of 1825 and how the Bank of England acted in that episode influenced the way that we structured and thought about our own central banks. So it was definitely, I don't know on the later that'd be interesting to see of like major countries when they founded theirs. I don't know if we were really late to the game or somewhere in the middle, but there's definitely much earlier examples. But it's also just a function of Europe being a lot older than the US.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Fledged central bank, but most economic historians consider the Amsterdam Damchel Bank, the Bank of Amsterdam, to be the kind of first central bank or pre-central bank it might not have done one or two things like a kind of standard central bank does today. But at the time, it was doing many things that a central bank would do today. Similarly, which also that makes sense because the first stock exchange opened in Amsterdam in 1609 actually too the same year. So that was a big year for finance. And in 1694, the Bank of England opened, which was actually happening at a time when I think we talked about it last time, that was during the London Treasure Hunting Tech Bubble boom that the Bank of England was founded. So there was definitely precedent.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, definitely. So, first, I realized I didn't fully answer your last question. So the parallel to SBF with FTX is that earlier in the summer of 2015. Crypto companies going bust. He was stepping in to provide liquidity and save these companies. I think Celsius was one of them. And so the comparisons were kind of clear where he was supposed to be the revered kind of like banking god and exchange god of finance today. And he was like the good guy and he was coming in to provide liquidity and safety essentially for struggling companies in a downturn just like JP Morgan did. it worked out a little differently for JP Morgan and SPF in terms of a central bank and the Fed, the US was actually, I don't know in the grand scheme of things where the US kind of nets out in founding a federal or like a central bank, but there are definitely earlier examples. So in 1609, this wasn't necessarily a full, fully.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“1907 panic because it just really highlighted JP Morgan dies. What are we going to do? It led to the creation of the Federal Reserve in 1913. So yeah, panic in 1917 is kind of like the last pre-fed real panic.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Of last resort and providing capital and doing deals with companies and individuals that needed help because there wasn't really another place for them to turn. So basically what ended up happening was the government realized we can't continue to rely on a single person, you know, to bail us out of future crises. That panic also highlighted downsides of relying on gold as the base of kind of your monetary system because something like an earthquake and a lot of British fire insurance firms leading to a lot of gold needing to be moved causing financial markets to tighten and become more fragile. It just really highlighted how kind of susceptible the gold standard was to these types of shocks. And so that and the need for a federal reserve or some type of central bank were really two of the lasting kind of impacts from the”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Specifically in New York, because this was happening at a time of year where financial markets were already kind of fragile because of just seasonal funding and capital needs around kind of more agricultural stuff. And so even though it seems like an unrelated event, this earthquake had knock-on effects because it really kind of tightened up markets. And then alongside that, you have the Knickerbocker trust company and all these other sketchy trust companies that were highly levered and taking a lot of risk on speculative stocks. And so markets were already kind of fragile because of the San Francisco earthquake issue. And then alongside that, you had a failed corner of the copper market. And then the collapse of Knickerbocker Trust Company and all these other trust companies. And at the time, we didn't have a federal reserve. And so JP Morgan, the person, ended up basically acting like the Federal Reserve and as a”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“But this is important because, again, as over 50% of the fire insurance companies in San Francisco were British, when this event happened, suddenly British fire insurance firms had a lot of money that they were on the hook for to pay out. And so what happened was Britain ended up sending the equivalent of 13% of their nation's gold supply to San Francisco on ships because these firms were just they needed to pay out so much money. And after Britain sends out 13% of their gold supply, they hike up their rates afterwards and really contract their kind of market because they're trying to bring gold back over to London after depleting its reserves so much. And so this had knock-on effects for global markets.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Fires, but then because the city's water mains have been taken out, there was no water to put out the fire. And so for four straight days, the whole city just burned in something like 20,000 blocks were like destroyed in between 30 and like 70%, which I know is a huge gap of San Francisco population went into homelessness because of that fire. I mean, even if it's just 30, that's still a lot of people. And at the time, there was no earthquake insurance. And so people that had had their house destroyed by the earthquake, but it didn't catch on fire. They had no real way to get insurance because it was just from the earthquake. But if they did have fire insurance, what a lot of people started doing was literally just setting their house on fire because there was no earthquake insurance. So they knew like if we're going to get anything out of this, it's by lighting our house on fire and then saying like the earthquake caused our house to catch on fire.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“So, it's really interesting always in hindsight, these comparisons for people that turn out to be not so great. Because I think he is also called the next Warren Buffett. But yeah, so 1907 panic was really interesting one. A large reason why it started was actually from a year earlier in April 1906 with the San Francisco earthquake. Quick history, it's kind of a quirk at that period over 50% of fire insurance companies in San Francisco were British, which becomes very important because I think it's like April 6, 1906, the San Francisco earthquake happens. And what a lot of people, I think, don't know is that it wasn't actually the earthquake that did the most damage. It was the fires because essentially the earthquake took out the city's water mains. And so earthquake happens, it hits a bunch of pipes and whatever causes.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“The regulation was put in place, you know, someone that might have floated a sketchy company before the 29 crash now knows that they will be”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Your number doesn't something like that where it's not distorted. They specifically call out the turning on crash and how they account for it so it's not skewing the numbers. There's still that kind of stark surprisingly. So to me, what those numbers kind of point to is that the just amount of terrible companies that were IPOing before regulation was put in place, if the average return is negative 50%. And again, it shows because there were no rules around like prospectuses and anything like that before all of the post-29 regulation was put in place, there was really no, there was nothing discouraging you from launching your sketchy shady company, much like, you know, when the ICO boom was going on, there was not much stopping, you know, even celebrities, some of which are getting in trouble now for their involvement in pushing ICOs. But there's just nothing really stopping someone from floating these questionable companies. Whereas after”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so it's a great question because that's obviously the first thing you kind of think is like, oh, well, I mean, are these terrible returns just because of the 1929 crash? And I'd have to go back and look at the appendix of the paper that I got this from, but they do construct their analysis in a way that accounts for the 1929 crash.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Of the stats that really stood out to me was around IPOs on stock exchanges before and after the Securities Act. So before the Security Act of 1933 was put into place, the average five-year return of IPOs on stock exchanges that were not New York stock exchange. So basically all normal non New York stock exchanges The average five-year return for IPOs was negative 52%. So pretty terrible. And that was the average before the 33 act. And then afterwards, the average five-year return for IPOs on non-New York stock exchanges changed to a positive 5.7% after the Securities Act. So average five-year return for IPOs. Before Securities Act was negative 52%, and then after the Securities Act, the average five-year return for IPOs on these exchanges was positive 5.7%.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Bring in that kind of sketchiness to everyone. It kind of brings down the whole system, not brings it down, but affects the whole system. And so again, I think to cut that link more regulation will be needed because what basically happened after the 209 crash is that the real kind of focus was making it a better pool to invest in by discouraging or catching more of the frauds and sketchy companies that would have gone public before government regulation. And so it's just ensuring that the individual investor kind of has the best chance because at least there will be a higher level of company on average in the market because of these greater regulations. So to kind of highlight how much of an impact this regulation had in the kind of quality of companies trading at the time.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Sales. And so today, I think the Bitcoin people that almost want to ignore the kind of shady stuff that goes on in crypto more broadly because they feel that Bitcoin is not sketchy like that. They think it's kind of separate. But the problem is that what goes on in these more sketchy ecosystems of crypto do affect Bitcoin because Bitcoin is the main asset that companies are using. Like when the whole Luna coin blew up and all that, like the price of Bitcoin was affected. And so just like activities and these more speculative bucket shops ended up influencing negatively the price of bit of the stock on the stock exchange, these kind of side episodes in the crypto world that are not actually directly about Bitcoin are still moving Bitcoin in more mainstream crypto prices because it's just”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“In the bucket shop, again, if it became too large and everybody all at once is betting on positive price movement for XYZ railroad, then the bucket shop has to go make a huge sell order on XYZ railroad in the real market, which brings down that price. And so the real market is actually being moved by the kind of sketchy speculative activity in these bucket shops. And so for crypto, I think there's a real analogy there where the Bitcoin kind of maximalist, even though they think just like people, you know, the top hat people in the stock exchanges in the 19s, early 1900s who thought, you know, these bucket shops are nothing other than gambling dens where degenerates go to hang out. They had a very morally superior view of themselves. They thought, you know, this is just this little speculative den, but it doesn't really affect our markets until then it did because of all these walks.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Lower price than the stock was trading at on the actual stock exchange to then bring down the price so that when the ticker tape brought through the price and information for XYZ railroad, it would show, oh, the stock price actually fell a lot and is falling. And so the customers did not correctly bet on the price of the stock. And so they lost. And so the bucket shop manipulates the market essentially to get out of paying out all these winnings to its customers by driving down the price. But what was interesting about that is that this basically need for bucket shop owners to try and avoid it paying out money to their customers. That mechanism proved to be the link between the fictitious trades in a bucket shop because again, you're not ever owning the underlying stock. You're just spending on the price. It took that fictitious trading and actually provided a link to the real stock exchange because customers, how they bet”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“It was a zero sum game where because Say XYZ railroad is what everybody wants to trade in 1894 one day. And so everybody in a bucket shop is trading XYZ, railroad stock, and they're all betting on it to go up. If the stock does go up and the bucket shop is wrong, or not even the bucket shop is wrong, but it's that all its customers were right, then the bucket shop loses money because they have to pay out the winnings. And so there's like this opposing relationship between the bucket shop owner and the speculator in there because basically every dollar that the speculator wins, the bucket shop loses. And so because obviously no bucket shop wanted to lose a ton of money. So when the speculators in a bucket shop were all betting on the price of a stock to go up and they're all doing at the same time and the bucket shop would know they're on the hook if it got paid out, what they would do is they would go place a massive sell order at a low”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I think the lesson that I took from that wash sale idea. So for crypto, I feel like the true Bitcoin kind of like maximalists are very bullish on Bitcoin, but they would agree with a lot of other crypto skeptics, not Bitcoin skeptics, that like a lot of crypto outside of Bitcoin is sketchy. That's what I've been told by Bitcoin Maximalists. And so when I wrote this, A lot of what I'm talking about is from an article I wrote for a Bitcoin magazine. And the point I was making with this wash sale kind of anecdote is, so for the wash sales, the difference between a bucket shop and a traditional stock exchange was that on the stock exchange, you know, I place a trade through you, Trey, you get a commission for making the trade, whatever, but you're still working with me on the same team essentially. You're just getting the commission from doing business or placing my business. Whereas in a bucket shop,”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“That in order for the long term success of crypto and digital assets as an asset class, for that to be successful, I think there has to be some sort of regulation so that people not currently in the community will feel more, will feel safer about making a first investment if they feel like the asset class in space as a whole is less kind of sketchy and dangerous like it is today for a completely new investor. There's just, it's hard to tell as someone just entering the space whether you're buying like a shitcoin scam or an actual quality investment. And so we'll see what happens. We'll see. I think FTX could be that kind of tipping point where regulators really figure out like they need to put some type of framework in place to avoid something like this happening again.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Crypto community by and large is obviously against kind of government intervention regulation because it's kind of antithetical to crypto itself. It's all about decentralization. But having said that, I think that there is a need for at least some level of regulation just to have some safeguards in place because right now it's kind of at that point of 100 years ago where there's democratization because that's, I mean, crypto is like ultimate democratization, but not enough regulation. And so you have just, I mean, if you look at the last year, no shortage of high profile bankruptcies, frauds, et cetera, where a lot of people are left holding a lot of losses and there's no real regulation in place to protect them. And so while crypto and government regulation kind of go against each other, I think”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Where the average investor that had been in the bucket shop moves over to the traditional stock exchange. And so theoretically, markets have been kind of democratized because a larger number of people can access them. But before the 1929 crash, there was not a concurrent level of regulation alongside that democratization. So that led to a lot of people being wiped out in 29, not even just wiped out by the crash because market crashes are just a part of investing, but that they were not kind of steered away from just outright frauds that people were knowingly peddling because they knew that there was this sea of kind of innocent retail investor crowd coming in the 20s. And so today where I think we are with crypto and this whole FDX thing is that because I don't want to speak in generalities, but for this purpose it's just simpler.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Participation in a market bubble and crash because, again, bucket shops being closed down, that was really the first bubble that they could broadly participate in because they were finally allowed to come onto the traditional stock exchanges after they lowered their minimums. And so it was after the 29 crash where the average kind of person that had been participating in the market had not been discouraged from taking on too much leverage, they got destroyed in the aftermath. And so having such a high retail participation rate in that crash and them being so affected afterwards led to all these acts and establishment of the SEC, et cetera. And it was that kind of regulation that really helped kind of institutionalize the asset class from a regulatory standpoint because again, before there was really nothing in place to protect the average investor. And so it went from democratization”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“And so because the exchanges still at that point had not realized that, hey, this crowd is actually a new business. There are a whole new group of leads, essentially, and customer base. If we just lower our minimums, which is what they ended up doing. And so suddenly you had this sea of like retail investors and speculators coming into the actual market because they could no longer trade at bucket shops, which had been shut down. You had a wave of retail investors and speculators coming into the market at a time when the market is heavily influenced by these speculators and robber barons. And there was no real protection in place to help them. And so one of the reasons the 1929 crash was so bad was it had up to that point, it was like the record level of retail part.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Where the reason bucket shops have been so popular, I mean, those were just kind of degenerative speculating dens that used to call them gambling dens because you weren't actually buying or selling the underlying stock. You were just betting on the direction of the price. And so bucket shops were created. One, just because people love to speculate, but two, at that time, the like minimum order sizes on the traditional stock exchanges were way too large for the average retail trader to participate in. And so they were kind of barred out generally just people that weren't wealthy were kind of barred out from the stock exchange because of the prohibitively high minimums. So the bucket shops, even”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Democratization without regulation. And so what you had with the equity markets in the 19th century and 20th century was you had the period in the 1800s, you know, the gilded age where it's the robber barons like Jay Gould, Jim Fisk, et cetera, all basically just manipulating the market, not obviously everything, but that was the era of robber barons who got their name from doing sketchy things in the stock market and just kind of business generally. And so you had rug pulls, you had insider trading, you had pools like moving stock prices for their benefit while leaving kind of retail investors holding the bag. And it wasn't until the kind of, what do you call it, bucket shop explosion and then shutting down in the 19, I think it was 1915 that the last kind of bucket shop or the federal ban on bucket shops was put in place.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“The stock price plunged and she made a bunch of money from shorting it. But when everyone discovered the missing money and then saw that she's wearing nicer clothing and really like upgrading her jewelry and everything and she has been spending a lot, people just assumed, oh, she took the money. But it really was no, she just knew that the money was missing because of her access to the documents. And so at that time, that was perfectly legal. Like no one questioned her motives or made her give back the money once it was found out. But today you just, I mean, can you imagine someone using their position to look at the documents short their own company's stock and then be just totally allowed to keep all those profits? And so at a higher level though, a point in that piece was that really the crypto market today to me is in a stage of like democratization, even though that's the most annoying buzzword today.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT
“Was made, and even that was like a court case ruling and didn't really lead to widespread kind of legislation or regulation. But it was the first time that any kind of ruling was made. And so basically anytime before 1909 and really 1929, there were not really any rules around insider trading. One of my favorite stories was of a stenographer at a company, I think it was like a mining company. And she knew because of her position that there was $10,000 missing from the companies like Treasury. And she knew that it was going to become public. And so she shorted the stock. And from shorting the stock, because she made a ton of money once the news came to light that, oh, like, there's $10,000 missing. Like someone's taking money from the corporate coffers.”
2023-02-03 · We Study Billionaires · TIP520: Investing Through Post-bubble Markets w/ Jamie Catherwood · IDENTIFIED FROM THE TRANSCRIPT