China Isn't the Enemy – It's an Investing Opportunity
Summary
Investment Strategy: Kevin Duffy discusses his approach to investing through the Coffee Can Portfolio, which integrates various influences like John Templeton and Peter Lynch, focusing on long-term secular trends.
Market Insights: Duffy emphasizes the importance of understanding historical trends and economic cycles, suggesting that current trends in centralization and fiat currencies may end negatively.
China as an Opportunity: Contrary to popular belief, Duffy views China as a contrarian investment opportunity, highlighting the country's innovation and potential for growth despite geopolitical tensions.
Technology Sector: The discussion touches on the potential overvaluation in the AI and data center sectors, with specific reference to companies like Nvidia, and the risks posed by emerging competition from China.
Economic Philosophy: Duffy advocates for Austrian economics, emphasizing the need for smaller government and privatization to address economic challenges and improve living standards.
Global Investment Perspective: He encourages looking beyond the U.S. for investment opportunities, citing Asia, particularly China, as regions with significant growth potential and entrepreneurial spirit.
Contrarian Viewpoint: Duffy's contrarian stance includes challenging mainstream narratives about China and advocating for a more nuanced understanding of global economic dynamics.
Key Takeaway: Investors should remain optimistic, seek opportunities in anti-bubbles, and focus on long-term trends and entrepreneurial ventures that solve real-world problems.
Transcript
[Music] [Applause] [Music] Hello and welcome to the Stansbury Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and the Ferris Report, both published by Stanberry Research. >> And I'm Cory McLaclin, editor of the Stanberry Daily Digest. Today we talk with Kevin Duffy, editor of the Coffee Can Portfolio. Kevin's an old friend. We have spoken with him a few times over the years, but it's been a little bit too long, so we need to check back in. Let's do that right now. Let's talk with Kevin Duffy. Let's do it right now. Kevin, welcome back to the show. It's always good to see you. >> Good to see you and uh to meet you, Corey, and thanks for having me back on. >> It's been a little while. It's been about two and a half years. been since about March 23 since we last spoke. >> Yeah, I think uh goes back to the banking crisis with SIVB, Silicon Valley Bank. >> Yep. >> I think that was the last time >> it was um no crisis this time, but >> no, >> who knows? >> And crisis averted last time. >> That's right. Um but who knows? You never know what's going to break. >> It's just an ongoing crisis. Yes, >> we can always be hopeful, can't we? Um, so let's uh let's remind our our listeners um who you are and what you do. >> Okay. Well, I uh I actually do two things. I run a a small hedge fund and um under bearing asset management and I also uh started writing a newsletter called the coffee can portfolio. Um I started that about five and a half years ago. Yeah, the coffee can portfolio is a fantastic idea. Um I um I think I've I must have used the story of of the coffee can. I think it was was that Robert Kirby maybe um >> 20 times in the past 25 years. You know, I just sort of trott it out every few years because, you know, I figure another another, you know, generation of subscribers needs to hear it. Um, but that's that's really that coffee can story about buying stocks and throwing it in an old coffee can. That's not exactly what you do, is it? In the coffee can portfolio. >> No. No. Uh, yeah. It's a little bit misleading. And I actually got that idea uh our friend um Chris Mayor um he wrote a book called Hundred Baggers. And the coffee can portfolio is a chapter in the book. And that's what that was the inspiration for the idea. But in truth, my my process is really a mishmash of a whole bunch of different influences. And I think we're as investors, we're probably all like that. We've all been influenced by different people. You know, with me it was uh first it was John Templeton uh the great global investor and contrarian. Uh then it was Peter Lynch uh you know um going to the local grocery store or the retailer and coming up with ideas and is this something that could be rolled out over over the the nation or over uh internationally. Um and then I discovered Austrian economics and uh and this was uh back in the late 1980s at the time of the the Japan bubble. And so I had the contrarian piece and um also I discovered a guy by the name of Mark Fabber who was doing some interviews in uh uh in Barrens and I thought well this guy is a really contra you know he's a contrarian he's a he's a nonconformist and he's going against the grain he's bearish on Japan and so I had that piece and then I discovered you know at the same time 1989 right at the top of this crazy bubble you know and I was it was very you know early in my career the at top of this bubble I discover Austrian economics and so I I read Murray Rothbart's America's great depression and I thought wow this is really interesting because you know boom artificial boom fueled by by credit expansion leads to a bust and then what happens you get a crisis and you get a response and the response makes the whole thing worse uh and they drag it out and so he explained how you know first it was Hoover uh with really the pre-new deal and then it was uh FDR who came in and and also it was you know with the massive government programs and what they did was they prolonged the the uh the depression they made things worse well the you know the Fed also initially intervened in in that okay unlike the depression of 1920 1921 which Jim Grant wrote about which was basically a kind of a lazair approach Um, and and they it's not that the uh the engineers didn't want to get involved, but they they did get it, but they never got around to it and the thing was over before they they knew it. So anyway, back to your back to your original question. So, you know, that was another influence and and I've had, you know, many influences along the way, I think. So, the coffee camp portfolio is a little bit of everything. Um, I think that part of it uh was really me kind of I wanted to uh force myself to think out 10 years and maybe longer. Think about some of these long secular trends that are pretty much baked in the cake and then just um going along for the ride. >> Long secular trend. Baked in the cake. How do you mean? >> Okay. So you know some of I think some of the trends it's like a movie you know looking at at history it's like this movie that's unfolding and I think we if we understand history um we get a sense for how this movie maybe it doesn't end but where it's going. >> We don't necessarily know all of the uh plot twists along the way. Those are maybe a little bit more difficult to figure out. But in terms of where things are going, you know, like for example, um fiat currencies, you know, where does this end? Um you know, I think history and I think economics, especially Austrian economics, you know, teaches us that it's going to end badly. It's going to, you know, that these these will fail. Um, I think you can look at, you know, another really broad trend, and I know this is going to sound probably a little controversial, but there was in, you know, the the colonies really were a long trend in decentralization. they were um the colonists, you know, starting with Plymouth Rock basically um were escaping the um you know the the oppressive kind of centralizing forces of the old world. And so they had this long run of decentralization, okay, where they were pretty much left alone and and freedom flourished. And and then the revolution came along. They realized that they had a problem and they needed to get rid of the British. Um the problem was that the revolution you know war is the health of the state and so it kind of fired up these uh these impulses towards not just towards freedom. So on the one hand yes it was about freedom and getting rid of a a ty a tyrannical uh you know uh ruler but on the other hand they replaced the old ruler with a new one. And um and really that that cemented the a change in trend from decentralization to centralization. And really you could go back and and there were there were um this is a great there's a great book. I brought some props today. This is a great book called um America's Counterrevolution by Sheldon Richmond and I highly recommend it. Um, you know, and this is so, uh, to me it this reminds me a little bit of, uh, the the movie, um, Planet of the Apes, the original one with Charlton H. Have I'm sure you've seen that, Dan. Have you seen it, Corey? >> I I I think I've seen parts of it. I don't know if I've seen the whole thing, but yeah. >> Okay. So, so there in the movie there's this thing there's the the forbidden zone and it's really about you know really the history of how of how this this you know this civilization evolved where apes are on top and the humans are on the bottom and that so I I think of that movie and the forbidden zone as a history it's almost like you need to red pill and go back and and revise history. So there's there's this this great um there's a tremendous amount of propaganda and spinning of American history and I think it's important to go back and really challenge that. So um so basically the constitution started this trend in centralization and what we're seeing and then and then the civil war of course secession would have would have ended that um the secession of the south would have been a check on on that trend and that that was arrested by the civil war and um and Abraham Lincoln who was of course known as the great emancipator but really he was the great centralizer you He gave us um fiat currency. He gave us legal tender laws, the greenbacks. Um you know, he suspended the laws of habius corpus. He, you know, he really just squashed secession. You know, all these things were really led us on the path to the uh the centralized state. And so what we're seeing today, I think, is just this trend, this long trend playing out. And you know I think of I think of counterveailing forces. So what we have here is this very negative trend towards centralization towards top down centralized power but we also have a lot of counterveailing forces that um that have kept living standards rising in this country all this time. So you have you know first of course you had the industrial revolution and you have you know now the information revolution. Um I think I think uh financialization and capital allocation Warren Buffett and Charlie Munger um you know that was huge. Um but also over the last 30 years the um the rise of China, the the product productivity miracle of China. Um and that we have we have this incredible distribution system uh you know retailers like uh like Walmart and entrepreneurs like Sam Walton. Um and going out in the world and finding you know the best products at the lowest prices. Um this has been a boon to the consumer. And of course, what's good for the consumer is is good for for business. Um, if the consumer uh is able if his paycheck is able to go further, he's got more money to spend. That's creates more opportunities. So, um, you know, I think I see this as, you know, a number of trends that are pretty much baked in the cake. And the the positive trends, you know, I'm an optimist long term. The positive trends tend to tend to roll along, but the negative trends uh tend to go through this this pattern of a long rising trend culminated by a blowoff, a a euphoric episode, a bubble and then a crash crash and then a reversal of the trend. And I just think that that's what we're experiencing right right now. >> Oh, so we're we're in euphoria. We're at the We're at the um I guess Templeton might call it the the what is it? The optimism, the point of greatest optimism or something. Um and certainly like I don't know guys like you and I I'm going to lump you in with me are probably looking at the stock market very differently than a lot of other people are right now. Uh you know, I see I see the euphoria. To me it looks like euphoria but when it's happening most people they don't see it that way do they? They just say oh no that you know AI is real and it's going to change everything or the.com you know internet is real and it's going to change everything. And so the trend is right but the investments are all you know they get the trend basically right. You know, the.com boom got the got the importance of the internet correct, but it didn't stop them from making disastrous capital allocation decisions and disastrously bad, you know, capital spending on all kinds of stuff that that yes, the usage of the internet soared, but um the price people paid for it like plummeted. So, there were no returns to be had. And to me, it looks like that's where we are with AI and especially the data centers right now. It's just, you know, >> yeah, I I I agree. And, you know, there's the the saying that the uh uh the pioneers take the arrows in the back and the settlers get rich. >> And um you know, this is exactly what happened during the dot days. And every bubble, every bubble has a false belief. So the the.com bubble, the false belief was not that the future was the internet. The false belief was first mover advantage. It was that the pets.coms and and these you know these startups were going to put um the old guys out of business. Okay. So the old economy and and this is this is another symptom of of bubbles is that you see uh an anti-bubble is the mirror image of the bubble. Okay. And so, um, all the excitement was in these young guys who were going to put the old guys out of business. And, um, and there was some truth to that. Uh, certainly Amazon ended up doing very well and putting companies like Borders out of business and and you know, there was a tremendous amount of disruption that took place. But, you know, for that to for for the settlers to get rich, first there had to be a shakeout, which which took place. And the uh the old economy stocks did very well and they uh you know they adapted to a certain extent they adapted to uh to to this disruption. Some of them did some of them didn't. Um so you know fast forward the tape to today and you know is AI is it going to be as uh as meaningful uh as uh as the internet? I I don't know the answer to that. I I suspect that it's going to be significant. Um but there's a big question in terms of who the winners and losers are. And right now investors are absolutely convinced that uh Nvidia is going to be the long-term winner and that you know they will they will basically retain their um their competitive dominance. Um and um and that they'll you know the profit margins um are I think uh there's something like 65% operating margins uh over 80% of the gross profit is is dropping to the bottom line along with Taiwan Semiconductor you know so these these companies are very profitable and uh you know I think there are there are threats that are are starting are not being realized and I think we have to probably bring bring China into this uh discussion as well. And I think that you know China is sort of the anti-bubble to the American uh US imperialism bubble. You or US exceptionalism bubble. I'm sorry. That's probably a better better description for it. And so I think that um and you know this goes back to to Trump's first term really trying to attack the Chinese and they responded to this by uh it really jumpstarted indigenous in innovation in China. Um and so you know now you can look at what happened with um Nvidia. Um, Nvidia was selling the H20 chip, you know, to to get around the sanctions. That was uh and and then the uh the Trump administration said you can't, you know, you can't sell those. And now they're back on as long as as as long as Nvidia is paying 15% of revenue to to the government, which they can absorb, but a company like AMD, of course, cannot absorb because they don't have the margins that that Nvidia does. So, um, so in, you know, Nvidia, um, where was I, where was I going with with with all this? Um, they, um, they now want to, uh, sell chips back to to to to China. Well, the Chinese are saying, "We're not interested. You know, we basically can't trust you." So, so you have, you know, that's a threat to their business model. Also, uh, the Chinese um are, you know, they're innovating and they're Huawei. Huawei, there were sanctions against Huawei during the Trump administration and now W and they try to kill the company. They didn't kill the company and now um there have been reports that uh they're they've got chips that are that are competitive with Nvidia. Now, I don't you don't have to believe that, but and I think I'm um you know, they they don't have the ability to produce these chips probably in the in the quantities that that Nvidia has, but these are competitive threats that are on the horizon that I think investors are overlooking when they're giving Nvidia a market uh valuation of $4.5 trillion. >> Yeah. >> Yeah. That's interesting. This sounds like sort of a symptom of uh the centralization theme that that that you're you're talking about, you know, unintended uh symptom of it. But um what I'm interested in asking you, you sent us your latest issue. We don't have to give away the whole thing, but one of the areas you're bullish on, I think, right now is is is China, right? >> Yeah. I'm I'm you know, and so Okay. China. What what got me first interested in China was the um the private tutoring industry that uh Xiinping was apparently going to just wipe out. And so um as a contrarian, I looked at this and I thought, all right, you know, let's let's get our let's dip a toe in the water and and let's learn something here. And um and so that's what I did. And so I recommended New Oriental uh education and training and the stock was down I think over 90% from the high and they had uh cash in the bank uh more than enough to cover what we're paying for the stock. Um no debt and a business that was drying up. Um now what's happened is they've been able to adapt. I think uh Xiinping has backed off somewhat that the Chinese obviously value education. That was part of my original thesis. But what what I've learned from this, now this was back in 2021. Um, what I've learned from this is is how um adaptive the system is and how these narratives that we hear here about how it's, you know, incredibly authoritative and um, you know, it's just destined to for the dust bin of history and, you know, all that. Um, that there's a little bit of nuance there. There's more to it than that. And um so I just dug in more and more and you know I start looking at company after company and what you see are a lot of you know really uh exciting qualities um and and you know you also have to look at China um in terms of their stock market. So 2007 was a huge bubble in China and the retail investor was all in. Okay. Well, today the retail investor is gone. They're completely gone from the market. All right. So, you can also look at the foreign investor. Well, the foreign investor has bought into these narratives that um that you cannot invest in in China. Uh it's authoritative. It's the the enemy. It's uninvestable. It's it's uh there's no rule of law. Um you know, all that stuff, right, is is is all tossed in there. So that's kept foreign investors out. All right. And so it kind of begs the question, well, who's left to buy and what you have the the the comp the companies are buying? They're buying their own shares. And you know what I see? One of the things I like to see is entrepreneurs, founder founder companies. You're seeing that um and uh these these uh founders with lots of skin in the game. And we're seeing that you know it and the other the other part about this is uh the valuations of course the valuations you know if I'm looking at an apples to apples in terms of the kind of growth that I can get the compounding and everything um you know I think the prices are like 50 it's a 50% off sale compared to what you can get here in the United States. Um, >> nice. It sounds like a bargain. And you know the what the thing about so this this I think is kind of interesting about China and I I'll bring it back to sort of the big picture and how I kind of got into this business and I sort of you know I cut sort of cut my teeth on the Japan bubble and um you know I was I was one of the contrarians back then along with Mark Fabber and there weren't too many of us. Um but you know I one of the things I learned from that is is to question the narrative. So the narrative back then was that Japan um was it was inevitable history was on the side of Japan and that all empires die. It was just the American empire's turn to die and and hand over the reigns to the Japanese. Um so the America's decline theor so so confidence was very low in the United States it was very high in in Japan uh the retail investor got very excited in Japan you had all these things going on but it was the narrative all right and then and and it was also the people that were driving the narrative and what the people thought. So, you know, what you would see on the nightly business report would be um MIT economists like Lester Theorough who were were telling us that look um the Japanese have a superior system of capitalism, you know, kamicazi capitalism or whatever you want to call it, Japan Inc. and and it was this cooperation between business and government and that you know this was so an improvement over the more lazy fair model of the United States. Well, as an Austrian I looked at that and I thought well this is kind of it's kind of nonsense. But what they were doing the people that were behind the pushing this narrative they wanted more government. They wanted they were Keynesians. They were interventionists. they wanted more government to step in and save the day. Well, thankfully, um, it didn't really happen here in the United States for for whatever reason. And, um, and so the narrative, what I learned from that was that the crowd was kind of all in on this narrative. And the narrative wasn't just a little bit off. The narrative was 180 degrees off. Okay. Um that's what you get at the end of major manas. Um they become they are they're major inflection points. And so you know the bubble was Japan, the anti-bubble was the United States, right? And the anti-bubble was really not just the United States but a belief in US technology. And that's a bet that I made in a big way. I mean we were loaded up. I remember Dell Computer was one of the stocks that that I I remember I I recommended. They went public in in 1988 and in early 2020 the stock was trading at four and 58 and they had uh I think uh they they had uh you know whole bunch of cash, no debt. Um had some some problems in terms of overpaying for DRAM. Michael Dell was young and and kind of untested and but we were buying this at book value. We bought Dell at book value back then. I don't know how much went up after that but you know that just stock in the 90s actually >> it was it >> well I didn't hold it the whole time. I I wish I did but um >> so let's you know let's fast forward the tape to today. Today it's the narrative and I think you know the the narrative is that again uh China's the bad guy. Uh China's the enemy. Um you know we need to protect ourselves from from the big bad wolf and and uh you know we can't trade with them. We've got you know like it's very um this very antagonistic view of China. >> All all Chinese students are spies. That was >> Yeah. Yeah. All Chinese companies are working for the government. You know, it's like on and on and on and and so, you know, I've been kind of like my my first my radar my first thing is to to think, okay, I I've seen this I've seen this movie before. um question the narrative and start factchecking, you know, start going into well, who's behind the wigger forced labor narrative. Uh and well, and then you, you know, you just go into the hyperlinks and you see, well, well, where are they, where's this stuff coming from? It's coming from the defense department. Okay. So, there's an agenda here and there's um I think, you know, the military-industrial complex is basically at the root of a lot. I think it's a combination of of a couple of things. Probably the the military-industrial complex does see China as an existential threat because if China is uh successful um and we can trade with China then there are no enemies there are no external enemies and they can't really justify their own existence. So I think to the mil to the military-industrial complex, China is an ex existential threat. Certainly not an existential threat to the American consumer. The American consumer has benefited mightily from from China. Um but you also have I think there's another force a very powerful force that is driving the anti-China hysteria and that's the um the you know the MAGA Republicans. Um there is a sense in this country that uh something is wrong with this picture which is that um living standards young people are really struggling in this country unlike anything I've ever seen before. Um it used to be that you know the next generation would be better off than the previous generation and we just all took this for granted as Americans. Well, I think that two thou 2000 uh 911 kind of changed all that. It it really set us on a c a course towards more centralization, the surveillance state, the Patriot Act, uh the the wars in the forever wars in the Middle East that cost $6 trillion. Um you know, lives lost, destroyed. um you know running the printing press, gold doing backflips, uh the Fed's balance sheet expanding, you know, whatever how many times it's expanded since then. You know, we've gotten big, we've gotten crisis, three crises really, uh 911, we got uh the GFC in 2008, and we got the COVID crisis. And every one of those brought uh a much greater government response. So we've been accelerating in this this trend towards centralization. Okay. As we have been doing that um those forces have been overwhelming the positive forces that I mentioned before and as a result of that living standards are having a hard time keeping up. Now government intervention helps the incumbent. So you know older people the baby boomers that own their homes are somewhat insulated. You know big business is somewhat insulated. But if you're a startup, if you're a small business or uh especially if you're a young person starting your career or trying to start families, um it's very very difficult. So I think that there's a certain unease uh that has has crept in to um to to Americans and it's expressing itself in this populist movement that is that Trump has basically tapped into. Um you could say brilliantly tapped into or maybe he just stumbled into it. I don't really know but it doesn't matter. Um so this force now is trying to diagnose the problem. It's right it's correct. It's correct that we have a problem. All right. But the problem is big government and the solution is to get rid of it. Okay. Start, you know, just wholesale get rid of it. Um and um and look at what's happening right now. They've completely misdiagnosed the problem. There's none of the solutions on the table or very few of the solutions involve rolling back the state. Okay, we've got the big beautiful bill which is going to add $3.4 trillion in debt over the next 10 years and that's a conservative estimate. Uh estim you know some of the some other estimates go I think as high as 5 trillion. Okay, they are um you know really Trump is bullying uh Powell to come in and and kind of rescue uh the government by lowering interest rates because they know that that interest outlays are trillion dollars a year now and and consuming uh a big part of the budget. Okay. And so um they've misdiagnosed the problem. They think they're trying to scapegoat. They're looking for other scapegoats. They're scapegoating uh immigrants. They're scapegoating uh the Chinese. The Chinese, if I'm correct, the Chinese have been one of the positive forces. Okay? Trade is mutually beneficial. If trade is mutually beneficial, you want people to be productive. You want young people to be productive in this country. You want the Chinese, you want you want the Russians, you don't want them building tanks, you want them pumping oil. Okay, you want everybody to be as productive as possible and you want to be able to trade with them. So, I think they have misdiagnosed the problem and this is something that I think is uh you know, we're just on this path. Like I said, the movies unfolding. Um you know, Donald Trump, it's not Donald Trump that's doing all this. Donald Trump just happens to be in the right place at the right time. You know, he's the guy who's steering the ship right now. But if it wasn't him, I think it would be somebody else. >> Yeah. I I maintain that anybody who can get elected to the presidency is is you know you you can't elect a good good man to the presidency. They're just they're always going to be someone who's interested in power wielding it practically for its own sake. Um and you know they get something out of it eventually. But but I I I agree that uh you know does it doesn't really it's sort of like the opposite of what Peter Lynch used to say. You want a business that's so good it doesn't matter who's running it. Well, this one is so bad it doesn't matter who's running it. The government is so bad it doesn't matter who appears to be running it. Um, and and it's and it's just too big. I also agree with you that size, like anybody any poor unfortunate souls who follow me on Twitter um and are exposed to my ranting and raving know that one of the things I rant and rave about the most is the sheer size. That is the problem. That is the singular greatest problem with government is its sheer size creates an enormous incentive to anybody who who can get in there and get their piece of it, right? It it's your it's like amassing a a big pot of gold or a big big amount of capital and inviting everyone to come and try to get some. And it's and the the incentives are poor because you aren't rewarded for, you know, innovation or productivity or, you know, serving a a need that maybe, you know, people didn't even know they had and creating something new and good. Um, or nor do you benefit by by promoting trade or free immigration. The only thing about free immigration, Kevin, is I agree with you, you know, it's a it's a scapegoated uh thing, but it's it's probably impossible to have it if you have a massive welfare state, right? Because you'll just >> Oh, yeah. No, I I agree. I'm don't don't get me wrong. I'm not I'm not advocating free, okay? >> Yeah. We could Yeah. >> Yeah. >> But uh >> Yeah. I'm just saying I'm bring I'm just bringing that up as an example of the scapegoating. You know, I think that the the you know, you and I, I think, agree with this, Dan, agree on this, that there's really not a lot of difference between the left and the right. And I always >> and and you know, and and the thing, so you have kind of this charade that's that's taking place, this illusion that there's actually uh a difference of opinion. Um, and there are differences. There's no question there are differences. But um >> but I think that that the the uh both of them uh kind of subscribe to this uh this zero sum world where one group is exploiting another group. And so to the left, the ex the oppressor group is is the billionaires and the you know people running businesses. Um and um and and you know the working class is is being uh is the victim. Um on the right the the working class is the victim and the foreigners that are exploiting them. Okay. So there's really you know in in principle there's not a whole lot of of difference. Um, I, you know, I think the right is is more um nostalgic. They want to bring back a a romantic past that maybe never existed. And the left is more willing to just blow everything up and and and just jump right into uh a utopian future because they basically have nothing to lose. The right the right people uh have more to lose. They have more more skin in the game. But I think it's a a sort of a romantic backward look maybe. So those would be some of the differences, >> right? And >> I'm just sitting here I'm sitting here listening and I'm like yes yes yes checking off. Yes. You know agreeing with everything that you're saying. I mean as far as like I haven't heard somebody talk about you know going well some people but not like lately in a financial sense going back to 911 uh financial crisis and uh COVID especially for like a younger generation of people. And I I'm just I I I see I see it the whole if I if I didn't discover Austrian economics myself, I don't know what I would where I would be, you know, right now personally. Um and so from that perspective, like what is the what what's the solution here? What what is the you said just eliminate big government like what is the what can we practically do to like just make this a little bit better? Well, I I always my advice is always number one, grab the oxygen mask. Okay. And then, you know, try to educate yourself, try to be uh try to influence other people. You know, first thing would be um you you know, you mentioned Austrian economics. Um there's economics in one lesson by Henry Hlett. It's you know, it's a must readad if you if you read this book. My aunt read this book. she loved it and she gave it to all of her grandchildren. Um it's a you know it's pretty easy read. Um and um you know once you understand the basic principles um you know basically man acts man acts purpose uh purposefully um with reason maybe not always rationally but you know there's a reason behind behind actions. if you uh you know self ownership these sorts of things you know they're the basic the basic building blocks um economics this is something that you know maybe we're getting a little too far aside but um economics is not the it's not the physical it's a social sciences it's not the physical sciences so the rules are different okay I think a big part of the problem that we have today is that the uh the econom the so-called economists not the real economists but the ones that claim they are um are trying to are trying to apply the rules of of the physical sciences which is induction which is to try to run a controlled experiment it's very empirical so the Chicago school is now there's a there's some agreement between the Chicago and the Austri school but the Chicago school is is um is basically an empirical approach. Um but you the problem is you cannot run a controlled experiment with human beings. Um human beings interact, human beings learn from the from past experience. So you can't just duplicate, you know. So so it means that things like back testing isn't necessarily going to work. You need a a not an inductive process, but you need a deductive process. You need you need a basic chain of of of logic. It can't be disproven by empirical evidence. So, you know, for examp the the the flaws in the logic. Um, so, you know, I think the the like I said, the first thing is grab the oxygen mask. And that's probably where we need to go next is you know how do we do that? But the second thing is yeah get you know get a copy of economics in one lesson and um and you know learn learn about what you know what needs to be done is is you know basically it's privatizing things getting the government like what is what is the government you could look at every single thing that the government does um welfare for example well does the government you could look at the moral morality of that. Is it right to take money from one person and give to another? Okay. Well, you know, so so these are things that the government that nobody should be doing. Okay. Theft should not be legal. It should Okay. And it certainly shouldn't be allowed for the government. Well, then you have certain services that are being provided. uh roads, education, schools, um you know, all these things that the government is doing. Um privatize those. All right? Sell off public lands. Do you know so I think the the the path in terms of like all these things are fixable. They're all fixable if we get the economic piece right. that people that people are educated in economics. I think if if um 10% of the the country read economics and lesson, we'd probably be well on our way to to fixing those problems. >> But, you know, as investors, >> I think that's really where we we need to kind of protect ourselves from from from this. And just >> so maybe that's where we want to go >> next. Like how do we do that? >> Yeah. I I don't know if if you know everybody reading economics in one lesson would have that effect. >> Lots and lots of people have read Atlas shrugged and nothing. So I mean we're >> um >> Well, it wouldn't hurt. Yeah, it won't hurt. >> But let me let me add one thing, Dan. I I think you know it's a combination of two things. One is um we we have to we have to learn, we have to study, but the other thing is that bad ideas have to fail. Okay. I mean, my experience and not just with other people, but even myself is that um if I'm on the wrong path, the only thing that's going to get me to change is I have to I have to fail miserably. And I've done that in my career and I was a failed short seller and I'm very I I made changes five and a half years ago. I was forced to change and I think that most people are the same way. So we need we need these um you know these experiments to fail basically and I think if they do not if I mean when they do then that's probably our best chance that that things will change and young people young people are you know they're distrustful of these institutions that's that's a good start that's a good start so um no I'm I am an optimist long term I mean it's just a matter of this is all going to play out uh the nature of bubbles is that they do eventually burst and when they do you get a a a massive change in in trend and that's that's in the future. agree, you know, the the ideas fail. They, you know, probably take longer than a 63y old wants them to, but to fail, but and and you know, then longer to to fix or whatever, but u Yes, I agree. In fact, you know, you mentioned the the start of the United States and how we learned to, you know, love liberty. Um, and but it wasn't for lack of trying everything else, right? like this this country. It was in the in the in the 17th century, you know, almost practically right up to the time of the revolution, they tried absolutely everything else. I mean, they hung people for being the wrong religion and, you know, you weren't allowed to uh, you know, you could be tortured. Your your punishment for not swearing allegiance to the, you know, Massachusetts Bay Company or whoever the hell it was, you know, would be to be dragged behind a cart through all the towns in the territory or whatever. and and uh you know you being a Catholic would have been illegal say in Virginia and you know you're right next to Maryland which was Catholic the Catholic proprietary there so they tried everything else they did absolutely everything else and if you re you can get this story in Murray Rothbart's book Conceived in Liberty um just the the first of the five volumes will blow you away with how awful and evil these people treated one another and tortured ed one another and and you know killed one another and they and they went after the Indians too and used them in every evil way you could. Um and and yet Rothbart at the end of these chapters and sections he said you know they tried it and it failed. They tried to manipulate everything but the free market will out and it and it you know it failed and they you know they sort of gradually like liberty was I I I say age thrust a certain amount of wisdom upon me. Well, time will thrust an appreciation for the the the cardinal virtue of political liberty upon you. You know, the the the that's the cardinal virtue. It's not democracy. We can hear a lot about democracy nowadays. It's completely mis misplaced. The cardinal political virtue is individual liberty. eventually you know the nature just forces that revelation upon you in all kinds of ways >> you know I think there's another force here that you know another very positive force that um that is going to bring an end to this okay and that's what's happening in the rest of the world and particularly in in Asia I'm I'm not going to include Europe because they've got their their problems as well But um you know the more I've gotten into China um the more excited I am you know when you look at so here's an example of how I think man does learn all right go back to Smoot Holly the reaction to Smoot Holly of the rest of the world was um to retaliate okay and trade went down over 60% and you know kind of sewed this helped sew the seeds for Hitler and World War II and that sort of thing. Um, and you know, I was looking at this originally when it when Trump was was, you know, bringing out the big guns with the trade war and I'm thinking, "Oh my god, you know, here we go, 1930 again. The rest of the world is going to respond this way and uh, what a disaster." And the opposite has happened. I mean, I I'm like I like to be pleasantly surprised. And this is an example of where um I I didn't see this, you know, this wasn't on my bingo card that the rest of the world would basically say, you know what, this guy's nuts, okay? Just because he does something stupid to his own people, we don't need to do the same thing. In fact, because he's doing this, we're going to need to band together. Okay? So, and who's leading the the charge, the free trade charge? It's China. There's no question in my mind it is China. Um, and so, you know, all these countries are now basically forming this block, this alter. So, the United States is is while it's isolating it itself, the rest of the world is kind of coming together into this big big block. I I see that as incredibly incredibly exciting. Um, and and I think also, you know, what's what's going on in China, Asia, you know, the to me the the future is Asia. Um, you know, if I were young, I would be learning, uh, you know, Mandarin and I would I would I'd be spending time in in China. Um, so there's, you know, there's always opportunities. >> You sound like Jim Rogers. >> You can't allow yourself. >> You sound like Jim Rogers. If you're young, go to go to Asia, learn Mandarin. >> Yeah. Yeah. >> I'm sorry. I >> Yeah. Have your kids over there. Get them Get them to learn learn Mandarin. >> Is that the oxygen you're talking about? The rest of the world. That's where we go to seek oxygen. >> Yeah. That's the oxygen mask. Exactly. Okay. >> So, yeah. Um, you know, there's always, and I think this is what's exciting right now, you know, um, Silicon Valley has always been, um, dominant. There's never been another, well, you know, we now have, what's going on in China with technology is incredible. Um, we've never seen anything like this. Um, we've never seen a country, you know, now it's the the second largest economy and they're on their way to being the largest economy. Um, we've never seen a country been able to basically stand up to American imperialism and China is doing that. Um, I see that as incredibly healthy for the world. Um, so that that, you know, this is what gets me when I get up in the morning. This is what gets me excited. it it allows me to kind of deal with unfortunately the negatives that are are playing out in in my country and our country. But um and you know there are ways to protect yourself in the US and there are of course companies that are American companies that are doing very well overseas. So it's not like there aren't any opportunities here in the United States and and I think even the United States there's still there's still a lot of really positive things that are going on. you know there's still entrepreneurial uh there's entrepreneurial energy you know there um you know pretty good capital allocation that's taking taking place I think that the Chinese are start sort of learning from that but there's always there's always something uh there's always some opportunity somewhere >> yeah reminds me of Peter Kundil there's always something to do always you know you got to be a it was one it was one of his his great Please, that's the name of his biography, too. Um, there's always something to do. It was one of his ideas that, you know, you really should be a global investor because if you are, then there is always something to do. If your home country is uh is a bad bargain, you know, is not a bargain. The opposite of a bargain, a bubble, um, there's an anti-bubble. Um, which is a phrase I like very much too. um somewhere else or in some other asset besides you know US stocks and bonds and that's that alone is is to me the reason to become much more interested in other countries you know there's always something to do if you if you are you'll always find something even if it's just a single company in a single country that you never considered before there's always something to do >> you know and It's never been easier, too. It's never been easier to be a global investor. Um, >> Yep. >> I mean, the the balance sheets in in China, they have, you know, these are companies that are that are uh, you know, they've got uh ADRs. They've got to comply with um, you know, the American uh, accounting standards. And I mean, it's just as easy to read a balance sheet from Alibaba than it is uh to look at one from Alphabet. >> Yeah, that's that's pretty amazing. I um I remember years ago I bought a book that's still on the shelf back there somewhere called Asian Financial Statements. And I thought, well, financial statements are financial statements, you know, and you know, it was really, it's a very sort of real in-your-face kind of a book um about how things were, you know, you couldn't trust them basically and here's how you figure it all out. Um maybe maybe it's maybe it's not that bad anymore, huh? >> Well, and you know, look, there's there's all kinds of ways to invest in China. you know, there's the the A shares. Um, I haven't really gotten into that. That's that's kind of higher next level. Um, but, you know, you've got companies that are that are, you know, these are global companies that are are having to um comply with standards. Look, the US government has wanted to kick the Chinese companies out and they I mean any excuse, believe me, if if they weren't complying with accounting standards, they would be gone. Okay? So, um you know, and I this is, you know, this has been the last 25 years, all this has been going on in in China. You know, it's becoming a very much a westernized country in in many respects. and they're the fast learners, you know, they they've learned they're learning capital allocation, you know. I think what's amazing is how the the Japanese it's taken them forever to learn capital allocation and the Chinese, you know, so the China is very different than than Japan. >> China is very it's it's super competitive. um you know constantly driving prices down and you know I think what the next thing that we're going to see so while a lot of in American investors are avoiding China um and um what we're going to see is that that uh Chinese companies they're going to start to you know they they they've been um exporters okay and they've done very well exporting but we're going to start to see you know more multinational um you know global consumer brands coming out of China. I think that probably the first obvious one is is BYD um which is now the you know the largest producer of electric vehicles in the world and an incred and Warren Buffett and Charlie Munger invested in that company in 2008 um you know a remarkable success story um founder led lots of skin in the game I haven't even recommended it yet so um I pro I'm sure I will at some point but you know I think that's the the next thing the the the next um act in this play is we're going to start to see the uh the Chinese push. It's going to look um you're going to have multinational companies and brands built up around the world. >> All right. Um this is a good good place to ask our final question. Um which is the same for every guest no matter what the topic. The question is for our listeners benefit. If you could leave them with a single takeaway, just a single thought today, what would you like it to be? >> I've actually thought about this and I, you know, I listen to your your show quite a bit. So, um, this time I actually decided to prepare something. >> I think it's the first time. >> Never allow yourself to become over >> that anyone ever had. >> Why not? Let's break some ground here. >> That's what I'm talking about. >> Never never allow yourself to become overly pessimistic. Um, the dominant long-term trend is the hockey stick of human prosperity. Look for problems. Look for solutions to problems. Bet on entrepreneurs who are passionate about serving consumers. Look for the silver lining in the cloud. There's always opportunity somewhere. The upside of bubbles is that is that they create anti-bubbles. Uh, defend capitalism, promote free trade, and never underestimate human resiliency. >> Well said. That is excellent. Thank you for that. And thanks for being here, Kevin. It's always a pleasure to talk with you. >> Enjoyed it. It was good. Good meeting you, Corey. >> Yeah, you too. Thanks for being here. >> All right. >> And thanks for thanks for reading my thanks for reading my stuff. >> Yeah, we we're going to keep doing that. And next time we're not going to wait two and a half years to have you back on. Well, it's nice to check in with Kevin after two and a half years. um and find out that he is still a sound Austrian thinker and and an optimistic guy, which is refreshing, I have to say. Oh, yeah. Totally. I'm I was sitting there during it. I'm like, we need to talk to more Austrians here uh over time. Every time every time it just it it confirms all of my biases and I feel very good about it. But and uh I happen to think it's it's all correct. So So that's nice. But >> um >> it's >> yeah it's I I like the way just he if you want to check out his his newsletter you should. I mean it's I like the way he goes about it. He's got these macro themes, you know, that he's >> um that he kind of has developed or t or identified as just, you know, important or like that are emerging over time as over long periods of time as he says and then um kind of matches up the stock picks to those themes, you know, and and how they could play out. And I think you got a taste of that here with the the you know centralization theme and China being an opportunity ironically to to be against that. Um um and so um yeah I'm happy we had him on. It was cool talk. >> Yeah. >> And he brought book recommendations which is always nice. >> Always welcome. Yeah. Um I you you mentioned a good point which is um which is China. He I think if I am not mistaken is like the only person who he's not only said that it's um not uninvestable, he says it's a contrarian opportunity. So he's the he's 180 degrees from you know I I can't remember anybody else um expressing any idea about China except that it's uninvestable which is always what you hear right that's always what you hear when when with the good contrarian opportunities everybody else says it's uninvestable one guy like Kevin says bye you know >> yeah for sure it's funny because when um he uh a couple or I don't know a month or two ago when uh I we interviewed Brett Eversol or I did it was the week you were out and uh we were talking about cheap hated in an uptrend and after that episode I got a message from Kevin on Twitter about like hey what about China and like well there we go. So, yes, to to that point. Um, yeah, I mean, and I mean, brought up a lot of interesting points that I hadn't heard before and I'm sure other people a lot of maybe other people won't agree with, but um, >> yeah, >> you know, that's the point, right? So, >> it is um it is that's how that's how contrarian a real contrarian is. He'll say things like, well, you know, immigrants are are scapegoed. And I'm sure a lot of people are going to go, "What? We have too many illegal immigrants, etc., etc., etc." and and and it doesn't they can sort of both be true, right? You you can you can have a problem with having let too many criminals in your country and and it can also be true that you're unfairly scapegoating the entire immigrant population. That both of those things can be true, >> right? >> Uh yeah. So, so for for that alone, for his deep contrarianism and his consistency, um his intellectual consistency, uh it's a it's always great to have him around. So, that was really that was a that was a to me it was a great fun interview and a great fun episode. I hope you enjoyed it as much as we really truly did. Opinions expressed on this program are solely those of the contributor, and do not necessarily reflect the opinions of Stanbury Research, its parent company, or affiliates.
China Isn't the Enemy – It's an Investing Opportunity
Summary
Transcript
[Music] [Applause] [Music] Hello and welcome to the Stansbury Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and the Ferris Report, both published by Stanberry Research. >> And I'm Cory McLaclin, editor of the Stanberry Daily Digest. Today we talk with Kevin Duffy, editor of the Coffee Can Portfolio. Kevin's an old friend. We have spoken with him a few times over the years, but it's been a little bit too long, so we need to check back in. Let's do that right now. Let's talk with Kevin Duffy. Let's do it right now. Kevin, welcome back to the show. It's always good to see you. >> Good to see you and uh to meet you, Corey, and thanks for having me back on. >> It's been a little while. It's been about two and a half years. been since about March 23 since we last spoke. >> Yeah, I think uh goes back to the banking crisis with SIVB, Silicon Valley Bank. >> Yep. >> I think that was the last time >> it was um no crisis this time, but >> no, >> who knows? >> And crisis averted last time. >> That's right. Um but who knows? You never know what's going to break. >> It's just an ongoing crisis. Yes, >> we can always be hopeful, can't we? Um, so let's uh let's remind our our listeners um who you are and what you do. >> Okay. Well, I uh I actually do two things. I run a a small hedge fund and um under bearing asset management and I also uh started writing a newsletter called the coffee can portfolio. Um I started that about five and a half years ago. Yeah, the coffee can portfolio is a fantastic idea. Um I um I think I've I must have used the story of of the coffee can. I think it was was that Robert Kirby maybe um >> 20 times in the past 25 years. You know, I just sort of trott it out every few years because, you know, I figure another another, you know, generation of subscribers needs to hear it. Um, but that's that's really that coffee can story about buying stocks and throwing it in an old coffee can. That's not exactly what you do, is it? In the coffee can portfolio. >> No. No. Uh, yeah. It's a little bit misleading. And I actually got that idea uh our friend um Chris Mayor um he wrote a book called Hundred Baggers. And the coffee can portfolio is a chapter in the book. And that's what that was the inspiration for the idea. But in truth, my my process is really a mishmash of a whole bunch of different influences. And I think we're as investors, we're probably all like that. We've all been influenced by different people. You know, with me it was uh first it was John Templeton uh the great global investor and contrarian. Uh then it was Peter Lynch uh you know um going to the local grocery store or the retailer and coming up with ideas and is this something that could be rolled out over over the the nation or over uh internationally. Um and then I discovered Austrian economics and uh and this was uh back in the late 1980s at the time of the the Japan bubble. And so I had the contrarian piece and um also I discovered a guy by the name of Mark Fabber who was doing some interviews in uh uh in Barrens and I thought well this guy is a really contra you know he's a contrarian he's a he's a nonconformist and he's going against the grain he's bearish on Japan and so I had that piece and then I discovered you know at the same time 1989 right at the top of this crazy bubble you know and I was it was very you know early in my career the at top of this bubble I discover Austrian economics and so I I read Murray Rothbart's America's great depression and I thought wow this is really interesting because you know boom artificial boom fueled by by credit expansion leads to a bust and then what happens you get a crisis and you get a response and the response makes the whole thing worse uh and they drag it out and so he explained how you know first it was Hoover uh with really the pre-new deal and then it was uh FDR who came in and and also it was you know with the massive government programs and what they did was they prolonged the the uh the depression they made things worse well the you know the Fed also initially intervened in in that okay unlike the depression of 1920 1921 which Jim Grant wrote about which was basically a kind of a lazair approach Um, and and they it's not that the uh the engineers didn't want to get involved, but they they did get it, but they never got around to it and the thing was over before they they knew it. So anyway, back to your back to your original question. So, you know, that was another influence and and I've had, you know, many influences along the way, I think. So, the coffee camp portfolio is a little bit of everything. Um, I think that part of it uh was really me kind of I wanted to uh force myself to think out 10 years and maybe longer. Think about some of these long secular trends that are pretty much baked in the cake and then just um going along for the ride. >> Long secular trend. Baked in the cake. How do you mean? >> Okay. So you know some of I think some of the trends it's like a movie you know looking at at history it's like this movie that's unfolding and I think we if we understand history um we get a sense for how this movie maybe it doesn't end but where it's going. >> We don't necessarily know all of the uh plot twists along the way. Those are maybe a little bit more difficult to figure out. But in terms of where things are going, you know, like for example, um fiat currencies, you know, where does this end? Um you know, I think history and I think economics, especially Austrian economics, you know, teaches us that it's going to end badly. It's going to, you know, that these these will fail. Um, I think you can look at, you know, another really broad trend, and I know this is going to sound probably a little controversial, but there was in, you know, the the colonies really were a long trend in decentralization. they were um the colonists, you know, starting with Plymouth Rock basically um were escaping the um you know the the oppressive kind of centralizing forces of the old world. And so they had this long run of decentralization, okay, where they were pretty much left alone and and freedom flourished. And and then the revolution came along. They realized that they had a problem and they needed to get rid of the British. Um the problem was that the revolution you know war is the health of the state and so it kind of fired up these uh these impulses towards not just towards freedom. So on the one hand yes it was about freedom and getting rid of a a ty a tyrannical uh you know uh ruler but on the other hand they replaced the old ruler with a new one. And um and really that that cemented the a change in trend from decentralization to centralization. And really you could go back and and there were there were um this is a great there's a great book. I brought some props today. This is a great book called um America's Counterrevolution by Sheldon Richmond and I highly recommend it. Um, you know, and this is so, uh, to me it this reminds me a little bit of, uh, the the movie, um, Planet of the Apes, the original one with Charlton H. Have I'm sure you've seen that, Dan. Have you seen it, Corey? >> I I I think I've seen parts of it. I don't know if I've seen the whole thing, but yeah. >> Okay. So, so there in the movie there's this thing there's the the forbidden zone and it's really about you know really the history of how of how this this you know this civilization evolved where apes are on top and the humans are on the bottom and that so I I think of that movie and the forbidden zone as a history it's almost like you need to red pill and go back and and revise history. So there's there's this this great um there's a tremendous amount of propaganda and spinning of American history and I think it's important to go back and really challenge that. So um so basically the constitution started this trend in centralization and what we're seeing and then and then the civil war of course secession would have would have ended that um the secession of the south would have been a check on on that trend and that that was arrested by the civil war and um and Abraham Lincoln who was of course known as the great emancipator but really he was the great centralizer you He gave us um fiat currency. He gave us legal tender laws, the greenbacks. Um you know, he suspended the laws of habius corpus. He, you know, he really just squashed secession. You know, all these things were really led us on the path to the uh the centralized state. And so what we're seeing today, I think, is just this trend, this long trend playing out. And you know I think of I think of counterveailing forces. So what we have here is this very negative trend towards centralization towards top down centralized power but we also have a lot of counterveailing forces that um that have kept living standards rising in this country all this time. So you have you know first of course you had the industrial revolution and you have you know now the information revolution. Um I think I think uh financialization and capital allocation Warren Buffett and Charlie Munger um you know that was huge. Um but also over the last 30 years the um the rise of China, the the product productivity miracle of China. Um and that we have we have this incredible distribution system uh you know retailers like uh like Walmart and entrepreneurs like Sam Walton. Um and going out in the world and finding you know the best products at the lowest prices. Um this has been a boon to the consumer. And of course, what's good for the consumer is is good for for business. Um, if the consumer uh is able if his paycheck is able to go further, he's got more money to spend. That's creates more opportunities. So, um, you know, I think I see this as, you know, a number of trends that are pretty much baked in the cake. And the the positive trends, you know, I'm an optimist long term. The positive trends tend to tend to roll along, but the negative trends uh tend to go through this this pattern of a long rising trend culminated by a blowoff, a a euphoric episode, a bubble and then a crash crash and then a reversal of the trend. And I just think that that's what we're experiencing right right now. >> Oh, so we're we're in euphoria. We're at the We're at the um I guess Templeton might call it the the what is it? The optimism, the point of greatest optimism or something. Um and certainly like I don't know guys like you and I I'm going to lump you in with me are probably looking at the stock market very differently than a lot of other people are right now. Uh you know, I see I see the euphoria. To me it looks like euphoria but when it's happening most people they don't see it that way do they? They just say oh no that you know AI is real and it's going to change everything or the.com you know internet is real and it's going to change everything. And so the trend is right but the investments are all you know they get the trend basically right. You know, the.com boom got the got the importance of the internet correct, but it didn't stop them from making disastrous capital allocation decisions and disastrously bad, you know, capital spending on all kinds of stuff that that yes, the usage of the internet soared, but um the price people paid for it like plummeted. So, there were no returns to be had. And to me, it looks like that's where we are with AI and especially the data centers right now. It's just, you know, >> yeah, I I I agree. And, you know, there's the the saying that the uh uh the pioneers take the arrows in the back and the settlers get rich. >> And um you know, this is exactly what happened during the dot days. And every bubble, every bubble has a false belief. So the the.com bubble, the false belief was not that the future was the internet. The false belief was first mover advantage. It was that the pets.coms and and these you know these startups were going to put um the old guys out of business. Okay. So the old economy and and this is this is another symptom of of bubbles is that you see uh an anti-bubble is the mirror image of the bubble. Okay. And so, um, all the excitement was in these young guys who were going to put the old guys out of business. And, um, and there was some truth to that. Uh, certainly Amazon ended up doing very well and putting companies like Borders out of business and and you know, there was a tremendous amount of disruption that took place. But, you know, for that to for for the settlers to get rich, first there had to be a shakeout, which which took place. And the uh the old economy stocks did very well and they uh you know they adapted to a certain extent they adapted to uh to to this disruption. Some of them did some of them didn't. Um so you know fast forward the tape to today and you know is AI is it going to be as uh as meaningful uh as uh as the internet? I I don't know the answer to that. I I suspect that it's going to be significant. Um but there's a big question in terms of who the winners and losers are. And right now investors are absolutely convinced that uh Nvidia is going to be the long-term winner and that you know they will they will basically retain their um their competitive dominance. Um and um and that they'll you know the profit margins um are I think uh there's something like 65% operating margins uh over 80% of the gross profit is is dropping to the bottom line along with Taiwan Semiconductor you know so these these companies are very profitable and uh you know I think there are there are threats that are are starting are not being realized and I think we have to probably bring bring China into this uh discussion as well. And I think that you know China is sort of the anti-bubble to the American uh US imperialism bubble. You or US exceptionalism bubble. I'm sorry. That's probably a better better description for it. And so I think that um and you know this goes back to to Trump's first term really trying to attack the Chinese and they responded to this by uh it really jumpstarted indigenous in innovation in China. Um and so you know now you can look at what happened with um Nvidia. Um, Nvidia was selling the H20 chip, you know, to to get around the sanctions. That was uh and and then the uh the Trump administration said you can't, you know, you can't sell those. And now they're back on as long as as as long as Nvidia is paying 15% of revenue to to the government, which they can absorb, but a company like AMD, of course, cannot absorb because they don't have the margins that that Nvidia does. So, um, so in, you know, Nvidia, um, where was I, where was I going with with with all this? Um, they, um, they now want to, uh, sell chips back to to to to China. Well, the Chinese are saying, "We're not interested. You know, we basically can't trust you." So, so you have, you know, that's a threat to their business model. Also, uh, the Chinese um are, you know, they're innovating and they're Huawei. Huawei, there were sanctions against Huawei during the Trump administration and now W and they try to kill the company. They didn't kill the company and now um there have been reports that uh they're they've got chips that are that are competitive with Nvidia. Now, I don't you don't have to believe that, but and I think I'm um you know, they they don't have the ability to produce these chips probably in the in the quantities that that Nvidia has, but these are competitive threats that are on the horizon that I think investors are overlooking when they're giving Nvidia a market uh valuation of $4.5 trillion. >> Yeah. >> Yeah. That's interesting. This sounds like sort of a symptom of uh the centralization theme that that that you're you're talking about, you know, unintended uh symptom of it. But um what I'm interested in asking you, you sent us your latest issue. We don't have to give away the whole thing, but one of the areas you're bullish on, I think, right now is is is China, right? >> Yeah. I'm I'm you know, and so Okay. China. What what got me first interested in China was the um the private tutoring industry that uh Xiinping was apparently going to just wipe out. And so um as a contrarian, I looked at this and I thought, all right, you know, let's let's get our let's dip a toe in the water and and let's learn something here. And um and so that's what I did. And so I recommended New Oriental uh education and training and the stock was down I think over 90% from the high and they had uh cash in the bank uh more than enough to cover what we're paying for the stock. Um no debt and a business that was drying up. Um now what's happened is they've been able to adapt. I think uh Xiinping has backed off somewhat that the Chinese obviously value education. That was part of my original thesis. But what what I've learned from this, now this was back in 2021. Um, what I've learned from this is is how um adaptive the system is and how these narratives that we hear here about how it's, you know, incredibly authoritative and um, you know, it's just destined to for the dust bin of history and, you know, all that. Um, that there's a little bit of nuance there. There's more to it than that. And um so I just dug in more and more and you know I start looking at company after company and what you see are a lot of you know really uh exciting qualities um and and you know you also have to look at China um in terms of their stock market. So 2007 was a huge bubble in China and the retail investor was all in. Okay. Well, today the retail investor is gone. They're completely gone from the market. All right. So, you can also look at the foreign investor. Well, the foreign investor has bought into these narratives that um that you cannot invest in in China. Uh it's authoritative. It's the the enemy. It's uninvestable. It's it's uh there's no rule of law. Um you know, all that stuff, right, is is is all tossed in there. So that's kept foreign investors out. All right. And so it kind of begs the question, well, who's left to buy and what you have the the the comp the companies are buying? They're buying their own shares. And you know what I see? One of the things I like to see is entrepreneurs, founder founder companies. You're seeing that um and uh these these uh founders with lots of skin in the game. And we're seeing that you know it and the other the other part about this is uh the valuations of course the valuations you know if I'm looking at an apples to apples in terms of the kind of growth that I can get the compounding and everything um you know I think the prices are like 50 it's a 50% off sale compared to what you can get here in the United States. Um, >> nice. It sounds like a bargain. And you know the what the thing about so this this I think is kind of interesting about China and I I'll bring it back to sort of the big picture and how I kind of got into this business and I sort of you know I cut sort of cut my teeth on the Japan bubble and um you know I was I was one of the contrarians back then along with Mark Fabber and there weren't too many of us. Um but you know I one of the things I learned from that is is to question the narrative. So the narrative back then was that Japan um was it was inevitable history was on the side of Japan and that all empires die. It was just the American empire's turn to die and and hand over the reigns to the Japanese. Um so the America's decline theor so so confidence was very low in the United States it was very high in in Japan uh the retail investor got very excited in Japan you had all these things going on but it was the narrative all right and then and and it was also the people that were driving the narrative and what the people thought. So, you know, what you would see on the nightly business report would be um MIT economists like Lester Theorough who were were telling us that look um the Japanese have a superior system of capitalism, you know, kamicazi capitalism or whatever you want to call it, Japan Inc. and and it was this cooperation between business and government and that you know this was so an improvement over the more lazy fair model of the United States. Well, as an Austrian I looked at that and I thought well this is kind of it's kind of nonsense. But what they were doing the people that were behind the pushing this narrative they wanted more government. They wanted they were Keynesians. They were interventionists. they wanted more government to step in and save the day. Well, thankfully, um, it didn't really happen here in the United States for for whatever reason. And, um, and so the narrative, what I learned from that was that the crowd was kind of all in on this narrative. And the narrative wasn't just a little bit off. The narrative was 180 degrees off. Okay. Um that's what you get at the end of major manas. Um they become they are they're major inflection points. And so you know the bubble was Japan, the anti-bubble was the United States, right? And the anti-bubble was really not just the United States but a belief in US technology. And that's a bet that I made in a big way. I mean we were loaded up. I remember Dell Computer was one of the stocks that that I I remember I I recommended. They went public in in 1988 and in early 2020 the stock was trading at four and 58 and they had uh I think uh they they had uh you know whole bunch of cash, no debt. Um had some some problems in terms of overpaying for DRAM. Michael Dell was young and and kind of untested and but we were buying this at book value. We bought Dell at book value back then. I don't know how much went up after that but you know that just stock in the 90s actually >> it was it >> well I didn't hold it the whole time. I I wish I did but um >> so let's you know let's fast forward the tape to today. Today it's the narrative and I think you know the the narrative is that again uh China's the bad guy. Uh China's the enemy. Um you know we need to protect ourselves from from the big bad wolf and and uh you know we can't trade with them. We've got you know like it's very um this very antagonistic view of China. >> All all Chinese students are spies. That was >> Yeah. Yeah. All Chinese companies are working for the government. You know, it's like on and on and on and and so, you know, I've been kind of like my my first my radar my first thing is to to think, okay, I I've seen this I've seen this movie before. um question the narrative and start factchecking, you know, start going into well, who's behind the wigger forced labor narrative. Uh and well, and then you, you know, you just go into the hyperlinks and you see, well, well, where are they, where's this stuff coming from? It's coming from the defense department. Okay. So, there's an agenda here and there's um I think, you know, the military-industrial complex is basically at the root of a lot. I think it's a combination of of a couple of things. Probably the the military-industrial complex does see China as an existential threat because if China is uh successful um and we can trade with China then there are no enemies there are no external enemies and they can't really justify their own existence. So I think to the mil to the military-industrial complex, China is an ex existential threat. Certainly not an existential threat to the American consumer. The American consumer has benefited mightily from from China. Um but you also have I think there's another force a very powerful force that is driving the anti-China hysteria and that's the um the you know the MAGA Republicans. Um there is a sense in this country that uh something is wrong with this picture which is that um living standards young people are really struggling in this country unlike anything I've ever seen before. Um it used to be that you know the next generation would be better off than the previous generation and we just all took this for granted as Americans. Well, I think that two thou 2000 uh 911 kind of changed all that. It it really set us on a c a course towards more centralization, the surveillance state, the Patriot Act, uh the the wars in the forever wars in the Middle East that cost $6 trillion. Um you know, lives lost, destroyed. um you know running the printing press, gold doing backflips, uh the Fed's balance sheet expanding, you know, whatever how many times it's expanded since then. You know, we've gotten big, we've gotten crisis, three crises really, uh 911, we got uh the GFC in 2008, and we got the COVID crisis. And every one of those brought uh a much greater government response. So we've been accelerating in this this trend towards centralization. Okay. As we have been doing that um those forces have been overwhelming the positive forces that I mentioned before and as a result of that living standards are having a hard time keeping up. Now government intervention helps the incumbent. So you know older people the baby boomers that own their homes are somewhat insulated. You know big business is somewhat insulated. But if you're a startup, if you're a small business or uh especially if you're a young person starting your career or trying to start families, um it's very very difficult. So I think that there's a certain unease uh that has has crept in to um to to Americans and it's expressing itself in this populist movement that is that Trump has basically tapped into. Um you could say brilliantly tapped into or maybe he just stumbled into it. I don't really know but it doesn't matter. Um so this force now is trying to diagnose the problem. It's right it's correct. It's correct that we have a problem. All right. But the problem is big government and the solution is to get rid of it. Okay. Start, you know, just wholesale get rid of it. Um and um and look at what's happening right now. They've completely misdiagnosed the problem. There's none of the solutions on the table or very few of the solutions involve rolling back the state. Okay, we've got the big beautiful bill which is going to add $3.4 trillion in debt over the next 10 years and that's a conservative estimate. Uh estim you know some of the some other estimates go I think as high as 5 trillion. Okay, they are um you know really Trump is bullying uh Powell to come in and and kind of rescue uh the government by lowering interest rates because they know that that interest outlays are trillion dollars a year now and and consuming uh a big part of the budget. Okay. And so um they've misdiagnosed the problem. They think they're trying to scapegoat. They're looking for other scapegoats. They're scapegoating uh immigrants. They're scapegoating uh the Chinese. The Chinese, if I'm correct, the Chinese have been one of the positive forces. Okay? Trade is mutually beneficial. If trade is mutually beneficial, you want people to be productive. You want young people to be productive in this country. You want the Chinese, you want you want the Russians, you don't want them building tanks, you want them pumping oil. Okay, you want everybody to be as productive as possible and you want to be able to trade with them. So, I think they have misdiagnosed the problem and this is something that I think is uh you know, we're just on this path. Like I said, the movies unfolding. Um you know, Donald Trump, it's not Donald Trump that's doing all this. Donald Trump just happens to be in the right place at the right time. You know, he's the guy who's steering the ship right now. But if it wasn't him, I think it would be somebody else. >> Yeah. I I maintain that anybody who can get elected to the presidency is is you know you you can't elect a good good man to the presidency. They're just they're always going to be someone who's interested in power wielding it practically for its own sake. Um and you know they get something out of it eventually. But but I I I agree that uh you know does it doesn't really it's sort of like the opposite of what Peter Lynch used to say. You want a business that's so good it doesn't matter who's running it. Well, this one is so bad it doesn't matter who's running it. The government is so bad it doesn't matter who appears to be running it. Um, and and it's and it's just too big. I also agree with you that size, like anybody any poor unfortunate souls who follow me on Twitter um and are exposed to my ranting and raving know that one of the things I rant and rave about the most is the sheer size. That is the problem. That is the singular greatest problem with government is its sheer size creates an enormous incentive to anybody who who can get in there and get their piece of it, right? It it's your it's like amassing a a big pot of gold or a big big amount of capital and inviting everyone to come and try to get some. And it's and the the incentives are poor because you aren't rewarded for, you know, innovation or productivity or, you know, serving a a need that maybe, you know, people didn't even know they had and creating something new and good. Um, or nor do you benefit by by promoting trade or free immigration. The only thing about free immigration, Kevin, is I agree with you, you know, it's a it's a scapegoated uh thing, but it's it's probably impossible to have it if you have a massive welfare state, right? Because you'll just >> Oh, yeah. No, I I agree. I'm don't don't get me wrong. I'm not I'm not advocating free, okay? >> Yeah. We could Yeah. >> Yeah. >> But uh >> Yeah. I'm just saying I'm bring I'm just bringing that up as an example of the scapegoating. You know, I think that the the you know, you and I, I think, agree with this, Dan, agree on this, that there's really not a lot of difference between the left and the right. And I always >> and and you know, and and the thing, so you have kind of this charade that's that's taking place, this illusion that there's actually uh a difference of opinion. Um, and there are differences. There's no question there are differences. But um >> but I think that that the the uh both of them uh kind of subscribe to this uh this zero sum world where one group is exploiting another group. And so to the left, the ex the oppressor group is is the billionaires and the you know people running businesses. Um and um and and you know the working class is is being uh is the victim. Um on the right the the working class is the victim and the foreigners that are exploiting them. Okay. So there's really you know in in principle there's not a whole lot of of difference. Um, I, you know, I think the right is is more um nostalgic. They want to bring back a a romantic past that maybe never existed. And the left is more willing to just blow everything up and and and just jump right into uh a utopian future because they basically have nothing to lose. The right the right people uh have more to lose. They have more more skin in the game. But I think it's a a sort of a romantic backward look maybe. So those would be some of the differences, >> right? And >> I'm just sitting here I'm sitting here listening and I'm like yes yes yes checking off. Yes. You know agreeing with everything that you're saying. I mean as far as like I haven't heard somebody talk about you know going well some people but not like lately in a financial sense going back to 911 uh financial crisis and uh COVID especially for like a younger generation of people. And I I'm just I I I see I see it the whole if I if I didn't discover Austrian economics myself, I don't know what I would where I would be, you know, right now personally. Um and so from that perspective, like what is the what what's the solution here? What what is the you said just eliminate big government like what is the what can we practically do to like just make this a little bit better? Well, I I always my advice is always number one, grab the oxygen mask. Okay. And then, you know, try to educate yourself, try to be uh try to influence other people. You know, first thing would be um you you know, you mentioned Austrian economics. Um there's economics in one lesson by Henry Hlett. It's you know, it's a must readad if you if you read this book. My aunt read this book. she loved it and she gave it to all of her grandchildren. Um it's a you know it's pretty easy read. Um and um you know once you understand the basic principles um you know basically man acts man acts purpose uh purposefully um with reason maybe not always rationally but you know there's a reason behind behind actions. if you uh you know self ownership these sorts of things you know they're the basic the basic building blocks um economics this is something that you know maybe we're getting a little too far aside but um economics is not the it's not the physical it's a social sciences it's not the physical sciences so the rules are different okay I think a big part of the problem that we have today is that the uh the econom the so-called economists not the real economists but the ones that claim they are um are trying to are trying to apply the rules of of the physical sciences which is induction which is to try to run a controlled experiment it's very empirical so the Chicago school is now there's a there's some agreement between the Chicago and the Austri school but the Chicago school is is um is basically an empirical approach. Um but you the problem is you cannot run a controlled experiment with human beings. Um human beings interact, human beings learn from the from past experience. So you can't just duplicate, you know. So so it means that things like back testing isn't necessarily going to work. You need a a not an inductive process, but you need a deductive process. You need you need a basic chain of of of logic. It can't be disproven by empirical evidence. So, you know, for examp the the the flaws in the logic. Um, so, you know, I think the the like I said, the first thing is grab the oxygen mask. And that's probably where we need to go next is you know how do we do that? But the second thing is yeah get you know get a copy of economics in one lesson and um and you know learn learn about what you know what needs to be done is is you know basically it's privatizing things getting the government like what is what is the government you could look at every single thing that the government does um welfare for example well does the government you could look at the moral morality of that. Is it right to take money from one person and give to another? Okay. Well, you know, so so these are things that the government that nobody should be doing. Okay. Theft should not be legal. It should Okay. And it certainly shouldn't be allowed for the government. Well, then you have certain services that are being provided. uh roads, education, schools, um you know, all these things that the government is doing. Um privatize those. All right? Sell off public lands. Do you know so I think the the the path in terms of like all these things are fixable. They're all fixable if we get the economic piece right. that people that people are educated in economics. I think if if um 10% of the the country read economics and lesson, we'd probably be well on our way to to fixing those problems. >> But, you know, as investors, >> I think that's really where we we need to kind of protect ourselves from from from this. And just >> so maybe that's where we want to go >> next. Like how do we do that? >> Yeah. I I don't know if if you know everybody reading economics in one lesson would have that effect. >> Lots and lots of people have read Atlas shrugged and nothing. So I mean we're >> um >> Well, it wouldn't hurt. Yeah, it won't hurt. >> But let me let me add one thing, Dan. I I think you know it's a combination of two things. One is um we we have to we have to learn, we have to study, but the other thing is that bad ideas have to fail. Okay. I mean, my experience and not just with other people, but even myself is that um if I'm on the wrong path, the only thing that's going to get me to change is I have to I have to fail miserably. And I've done that in my career and I was a failed short seller and I'm very I I made changes five and a half years ago. I was forced to change and I think that most people are the same way. So we need we need these um you know these experiments to fail basically and I think if they do not if I mean when they do then that's probably our best chance that that things will change and young people young people are you know they're distrustful of these institutions that's that's a good start that's a good start so um no I'm I am an optimist long term I mean it's just a matter of this is all going to play out uh the nature of bubbles is that they do eventually burst and when they do you get a a a massive change in in trend and that's that's in the future. agree, you know, the the ideas fail. They, you know, probably take longer than a 63y old wants them to, but to fail, but and and you know, then longer to to fix or whatever, but u Yes, I agree. In fact, you know, you mentioned the the start of the United States and how we learned to, you know, love liberty. Um, and but it wasn't for lack of trying everything else, right? like this this country. It was in the in the in the 17th century, you know, almost practically right up to the time of the revolution, they tried absolutely everything else. I mean, they hung people for being the wrong religion and, you know, you weren't allowed to uh, you know, you could be tortured. Your your punishment for not swearing allegiance to the, you know, Massachusetts Bay Company or whoever the hell it was, you know, would be to be dragged behind a cart through all the towns in the territory or whatever. and and uh you know you being a Catholic would have been illegal say in Virginia and you know you're right next to Maryland which was Catholic the Catholic proprietary there so they tried everything else they did absolutely everything else and if you re you can get this story in Murray Rothbart's book Conceived in Liberty um just the the first of the five volumes will blow you away with how awful and evil these people treated one another and tortured ed one another and and you know killed one another and they and they went after the Indians too and used them in every evil way you could. Um and and yet Rothbart at the end of these chapters and sections he said you know they tried it and it failed. They tried to manipulate everything but the free market will out and it and it you know it failed and they you know they sort of gradually like liberty was I I I say age thrust a certain amount of wisdom upon me. Well, time will thrust an appreciation for the the the cardinal virtue of political liberty upon you. You know, the the the that's the cardinal virtue. It's not democracy. We can hear a lot about democracy nowadays. It's completely mis misplaced. The cardinal political virtue is individual liberty. eventually you know the nature just forces that revelation upon you in all kinds of ways >> you know I think there's another force here that you know another very positive force that um that is going to bring an end to this okay and that's what's happening in the rest of the world and particularly in in Asia I'm I'm not going to include Europe because they've got their their problems as well But um you know the more I've gotten into China um the more excited I am you know when you look at so here's an example of how I think man does learn all right go back to Smoot Holly the reaction to Smoot Holly of the rest of the world was um to retaliate okay and trade went down over 60% and you know kind of sewed this helped sew the seeds for Hitler and World War II and that sort of thing. Um, and you know, I was looking at this originally when it when Trump was was, you know, bringing out the big guns with the trade war and I'm thinking, "Oh my god, you know, here we go, 1930 again. The rest of the world is going to respond this way and uh, what a disaster." And the opposite has happened. I mean, I I'm like I like to be pleasantly surprised. And this is an example of where um I I didn't see this, you know, this wasn't on my bingo card that the rest of the world would basically say, you know what, this guy's nuts, okay? Just because he does something stupid to his own people, we don't need to do the same thing. In fact, because he's doing this, we're going to need to band together. Okay? So, and who's leading the the charge, the free trade charge? It's China. There's no question in my mind it is China. Um, and so, you know, all these countries are now basically forming this block, this alter. So, the United States is is while it's isolating it itself, the rest of the world is kind of coming together into this big big block. I I see that as incredibly incredibly exciting. Um, and and I think also, you know, what's what's going on in China, Asia, you know, the to me the the future is Asia. Um, you know, if I were young, I would be learning, uh, you know, Mandarin and I would I would I'd be spending time in in China. Um, so there's, you know, there's always opportunities. >> You sound like Jim Rogers. >> You can't allow yourself. >> You sound like Jim Rogers. If you're young, go to go to Asia, learn Mandarin. >> Yeah. Yeah. >> I'm sorry. I >> Yeah. Have your kids over there. Get them Get them to learn learn Mandarin. >> Is that the oxygen you're talking about? The rest of the world. That's where we go to seek oxygen. >> Yeah. That's the oxygen mask. Exactly. Okay. >> So, yeah. Um, you know, there's always, and I think this is what's exciting right now, you know, um, Silicon Valley has always been, um, dominant. There's never been another, well, you know, we now have, what's going on in China with technology is incredible. Um, we've never seen anything like this. Um, we've never seen a country, you know, now it's the the second largest economy and they're on their way to being the largest economy. Um, we've never seen a country been able to basically stand up to American imperialism and China is doing that. Um, I see that as incredibly healthy for the world. Um, so that that, you know, this is what gets me when I get up in the morning. This is what gets me excited. it it allows me to kind of deal with unfortunately the negatives that are are playing out in in my country and our country. But um and you know there are ways to protect yourself in the US and there are of course companies that are American companies that are doing very well overseas. So it's not like there aren't any opportunities here in the United States and and I think even the United States there's still there's still a lot of really positive things that are going on. you know there's still entrepreneurial uh there's entrepreneurial energy you know there um you know pretty good capital allocation that's taking taking place I think that the Chinese are start sort of learning from that but there's always there's always something uh there's always some opportunity somewhere >> yeah reminds me of Peter Kundil there's always something to do always you know you got to be a it was one it was one of his his great Please, that's the name of his biography, too. Um, there's always something to do. It was one of his ideas that, you know, you really should be a global investor because if you are, then there is always something to do. If your home country is uh is a bad bargain, you know, is not a bargain. The opposite of a bargain, a bubble, um, there's an anti-bubble. Um, which is a phrase I like very much too. um somewhere else or in some other asset besides you know US stocks and bonds and that's that alone is is to me the reason to become much more interested in other countries you know there's always something to do if you if you are you'll always find something even if it's just a single company in a single country that you never considered before there's always something to do >> you know and It's never been easier, too. It's never been easier to be a global investor. Um, >> Yep. >> I mean, the the balance sheets in in China, they have, you know, these are companies that are that are uh, you know, they've got uh ADRs. They've got to comply with um, you know, the American uh, accounting standards. And I mean, it's just as easy to read a balance sheet from Alibaba than it is uh to look at one from Alphabet. >> Yeah, that's that's pretty amazing. I um I remember years ago I bought a book that's still on the shelf back there somewhere called Asian Financial Statements. And I thought, well, financial statements are financial statements, you know, and you know, it was really, it's a very sort of real in-your-face kind of a book um about how things were, you know, you couldn't trust them basically and here's how you figure it all out. Um maybe maybe it's maybe it's not that bad anymore, huh? >> Well, and you know, look, there's there's all kinds of ways to invest in China. you know, there's the the A shares. Um, I haven't really gotten into that. That's that's kind of higher next level. Um, but, you know, you've got companies that are that are, you know, these are global companies that are are having to um comply with standards. Look, the US government has wanted to kick the Chinese companies out and they I mean any excuse, believe me, if if they weren't complying with accounting standards, they would be gone. Okay? So, um you know, and I this is, you know, this has been the last 25 years, all this has been going on in in China. You know, it's becoming a very much a westernized country in in many respects. and they're the fast learners, you know, they they've learned they're learning capital allocation, you know. I think what's amazing is how the the Japanese it's taken them forever to learn capital allocation and the Chinese, you know, so the China is very different than than Japan. >> China is very it's it's super competitive. um you know constantly driving prices down and you know I think what the next thing that we're going to see so while a lot of in American investors are avoiding China um and um what we're going to see is that that uh Chinese companies they're going to start to you know they they they've been um exporters okay and they've done very well exporting but we're going to start to see you know more multinational um you know global consumer brands coming out of China. I think that probably the first obvious one is is BYD um which is now the you know the largest producer of electric vehicles in the world and an incred and Warren Buffett and Charlie Munger invested in that company in 2008 um you know a remarkable success story um founder led lots of skin in the game I haven't even recommended it yet so um I pro I'm sure I will at some point but you know I think that's the the next thing the the the next um act in this play is we're going to start to see the uh the Chinese push. It's going to look um you're going to have multinational companies and brands built up around the world. >> All right. Um this is a good good place to ask our final question. Um which is the same for every guest no matter what the topic. The question is for our listeners benefit. If you could leave them with a single takeaway, just a single thought today, what would you like it to be? >> I've actually thought about this and I, you know, I listen to your your show quite a bit. So, um, this time I actually decided to prepare something. >> I think it's the first time. >> Never allow yourself to become over >> that anyone ever had. >> Why not? Let's break some ground here. >> That's what I'm talking about. >> Never never allow yourself to become overly pessimistic. Um, the dominant long-term trend is the hockey stick of human prosperity. Look for problems. Look for solutions to problems. Bet on entrepreneurs who are passionate about serving consumers. Look for the silver lining in the cloud. There's always opportunity somewhere. The upside of bubbles is that is that they create anti-bubbles. Uh, defend capitalism, promote free trade, and never underestimate human resiliency. >> Well said. That is excellent. Thank you for that. And thanks for being here, Kevin. It's always a pleasure to talk with you. >> Enjoyed it. It was good. Good meeting you, Corey. >> Yeah, you too. Thanks for being here. >> All right. >> And thanks for thanks for reading my thanks for reading my stuff. >> Yeah, we we're going to keep doing that. And next time we're not going to wait two and a half years to have you back on. Well, it's nice to check in with Kevin after two and a half years. um and find out that he is still a sound Austrian thinker and and an optimistic guy, which is refreshing, I have to say. Oh, yeah. Totally. I'm I was sitting there during it. I'm like, we need to talk to more Austrians here uh over time. Every time every time it just it it confirms all of my biases and I feel very good about it. But and uh I happen to think it's it's all correct. So So that's nice. But >> um >> it's >> yeah it's I I like the way just he if you want to check out his his newsletter you should. I mean it's I like the way he goes about it. He's got these macro themes, you know, that he's >> um that he kind of has developed or t or identified as just, you know, important or like that are emerging over time as over long periods of time as he says and then um kind of matches up the stock picks to those themes, you know, and and how they could play out. And I think you got a taste of that here with the the you know centralization theme and China being an opportunity ironically to to be against that. Um um and so um yeah I'm happy we had him on. It was cool talk. >> Yeah. >> And he brought book recommendations which is always nice. >> Always welcome. Yeah. Um I you you mentioned a good point which is um which is China. He I think if I am not mistaken is like the only person who he's not only said that it's um not uninvestable, he says it's a contrarian opportunity. So he's the he's 180 degrees from you know I I can't remember anybody else um expressing any idea about China except that it's uninvestable which is always what you hear right that's always what you hear when when with the good contrarian opportunities everybody else says it's uninvestable one guy like Kevin says bye you know >> yeah for sure it's funny because when um he uh a couple or I don't know a month or two ago when uh I we interviewed Brett Eversol or I did it was the week you were out and uh we were talking about cheap hated in an uptrend and after that episode I got a message from Kevin on Twitter about like hey what about China and like well there we go. So, yes, to to that point. Um, yeah, I mean, and I mean, brought up a lot of interesting points that I hadn't heard before and I'm sure other people a lot of maybe other people won't agree with, but um, >> yeah, >> you know, that's the point, right? So, >> it is um it is that's how that's how contrarian a real contrarian is. He'll say things like, well, you know, immigrants are are scapegoed. And I'm sure a lot of people are going to go, "What? We have too many illegal immigrants, etc., etc., etc." and and and it doesn't they can sort of both be true, right? You you can you can have a problem with having let too many criminals in your country and and it can also be true that you're unfairly scapegoating the entire immigrant population. That both of those things can be true, >> right? >> Uh yeah. So, so for for that alone, for his deep contrarianism and his consistency, um his intellectual consistency, uh it's a it's always great to have him around. So, that was really that was a that was a to me it was a great fun interview and a great fun episode. I hope you enjoyed it as much as we really truly did. 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