Geopolitical Risk: The guest highlights persistent geopolitical uncertainty as a defining factor for 2026, affecting markets and investor positioning.
Energy Markets: Focus on energy supply dynamics, citing Venezuela and Russia as catalysts and emphasizing how policy and tensions could sway pricing.
Supply Chains: Continued strain and tariffs are flagged as key variables impacting costs, corporate margins, and sector leadership into 2026.
Commodities: Discussion notes dollar softness and tariff effects driving gold/silver highs and a copper upswing, with mine constraints amplifying moves.
AI: AI-driven productivity gains and algorithmic trading are examined as transformative forces, though with uncertain long-term market impact.
Market Outlook: Elevated volatility is expected to persist, framed as a source of opportunity for disciplined investors.
Companies Mentioned: Oracle (ORCL), Blue Owl (OWL), and Warner Bros. Discovery (WBD) are referenced as examples amid market noise rather than specific pitches.
Investment Approach: Emphasis on risk management, edge-based methods, and avoiding headline/politics-driven decision-making to navigate the year ahead.
Transcript
This episode is brought to you by Interactive Brokers. And where can quantum computing take your portfolio? Investment themes from Interactive Brokers helps you find out. Start with a trend like quantum computing or clean energy and instantly see where companies are most connected based on revenue, strategic focus, and product relevance. You can explore competitors, global exposure, and business relationships across more than 500 themes. Built with AI powered insights from reflexivity, investment themes turns complexity into clarity and helps you move from trend to trade with speed. Available now across IBKR desktop, mobile, and traders workstation. The best informed investors choose interactive brokers member SIPC. Check it out at ibkr.com/themes. >> The disciplined [music] investor is all about you, your money, and the markets. Sit back and get ready for [music] this edition of the disciplined investor podcast. This episode [music] of the disciplined investor is sponsored by Horowits & Company. If you're looking for a portfolio manager, look no [music] further. Horowits & Company. From seed through harvest, cultivating [music] financial success. Being disciplined pays off. Markets finishing in a good place and ready for 2026. Fun times ahead with a January warning. And let's get inspired by market wizards with our guest, the renowned Jack Swagger. All this and much more on episode number 953 of the Disciplined Investor podcast. [music] [music] And here we are coming into the end of the year and this is officially the last episode this year. Don't get crazy. This year of the Disciplined Investor podcast and it's been quite just quite a year looking back. We had just an astounding array of guests, just amazing people, so many stories that they told, so many lessons that we learned that we continue hearing about some of the the things that are that needed to be done in order to be successful at this very difficult task of investing. Many of you have, I know, taken to heart the things that our guests have talked about, learned from some of the things that we've uh discussed. And remember, not every guest is going to give us an absolute nugget of information that is like, "Wow, I'm going to go out and buy that or do this." What we're designed to do here is build upon layer upon layer and build a little bit more, another layer, so that we can become truly disciplined. That's the whole point. That's the whole point of what we're doing here in our our our journey to become financially set. And that's a big that's a big thing to ask. That's a hard thing to do because a lot of people once we get to that place I remember listen I remember back when I was first starting working back uh it was a number of years ago u but I remember I said you know what when when I'm successful the first thing I'm going to do is I'm going to get myself a new car and I am going to get that BMW 3 series man look at that thing when I get that that is going to be when I can finally put that stake in the ground raise the flag and say, "I am a success." Seriously. And I would pass the dealership all the time. And when it got to the point that I was able to afford that car, you know what happened? I was like, "Ah, I don't want it. I have more things I want to do." Uh, but yet I wasn't as successful as I wanted to be. Even though I could get the BMW, and I said to myself years ago, you know, when I get to that point, I am going to declare that I'm I'm a success. Well, what happened is that I kept on moving the goalpost and once I learned something, a lesson that was simple but yet profound. I was forever chasing my tail. And that lesson was very simple. It was this is that if you set your goal out to be a certain place and you get to that point and you achieve it, take stock in it. Take a deep breath, absorb it, bathe in it, relish in it, and then if there's another goal, we'll get to that one. But if in fact your goal that you set is to reach the horizon by running five miles a day, the reality is that horizon is constantly moving and you'll never get there. and you'll constantly be disappointed, frustrated, and eventually give up because you just can't do it. So, when you set goals for yourself, make sure they're measurable. Make sure that there's something that's achievable. And when it comes to investing, when it comes to financial security, when it comes to being set in life, that's something that we have to have a number on. I need to have x amount of dollars so I could get this amount of interest that could support my lifestyle at this level. Those are quantifiable and we need to make sure that we get to that point. If we surpass it, we can do so. But don't set a goal that's so difficult that you can never get there. And also never set an open-ended goal that will just frustrate the hell out of you. little bit of word of wisdom for the beginning of uh the end of this year, the beginning of next year. By the way, the other thing that I want to mention to you is the one thing that we don't do when it comes to investing is make these resolutions. I have found that resolutions are a way of just appeasing our own psyche for a short term and allowing ourselves to wander from those particular I don't they're not even goals. They're just sayings that I am going to lose 20 pounds blah blah blah blah blah. Yeah. What happens is you end up gaining 10 pounds getting into it saying well I can eat now because I'm going to start that diet on Monday. I'm going to start saving that Monday money on January 1. I'm going to increase my 401k plan and I never do it. There's a difference between a resolution and a commitment. There's a huge differential. Make sure that you're not making open-ended and uh just vacant promises to yourself. If you're going to make a commitment, write it down. And better yet, you want to really make sure that you stick to something, share it with somebody that can make you accountable. When it comes to finances, share it with your spouse. Share it with your good friend. share it with your financial adviser who should be working with that on you if that is what they're doing from a financial planning standpoint. Maybe your investment advisor, you can talk it through as well. But whoever you're dealing with and somebody that can hold your feet to the fire and make you accountable, share what that particular goal is, that that commitment. The resolution, fine. You want to go on a diet next week, you're going to only drink one drink a week, you're going to cut down on cigarettes or whatever. Those are resolutions. My favorite time of the year is January, February. I drive by the various gyms in the neighborhood. The parking lots are full. By March, half full. By June, uh, pretty empty. It's a cycle that is as old as time. But we bought into this idea of of doing these resolutions. Forget them. Throw them out. Let's do commitments. Now, what are we doing here at Horowitz and Company towards the end of the year, thinking about the new year? Well, we're busy reconciling reconciling accounts and making sure everything is aligned with what we expect in 2026 because listen, it's been a it's been a great year 2025 and we're building on momentum from 2024. And the question is, is that going to last? And that that's a big issue. How are we going to navigate the next year with all of the headwinds that we have currently that really are not much different than what we had previously? maybe a little bit different, maybe a little bit lighter, maybe a little bit more uh acceptable some of the things that are going on. But I got to tell you from a firm view here, we I I think we successfully navigated the short-term risks with at the same time, I should say, staying very focused on the broader trends that define not only 2025, but really 2024 as well. There was just I mean there was numerous global events that could have just totally distracted us that probably had you a little bit concerned as well throughout the year. We had persistent inflation concerns uh sh uh I would say shifting uh or disassociation with reality when it comes to central bank policies. We had global tensions, energy price volatility. Well, currencies, what about that? Big currency fluctuations. The yen dollar, all that. Wow. And that created a challenging backdrop. There's no question about that. And add to that the uncertainty about global growth, the the the trade disruptions that we saw. Don't forget about April, what happened then, and ongoing debates about, well, is interest rates going to go up? It's going to stay the same. We're going to move down five times. Go two times. We're going to move it up. It's very clear now right at this exact moment at this juncture of life that discipline is what it's all about. That was the most important feature of 2025. Now looking ahead to 2026 and what I see many of these themes are likely to persist. We are looking at a few new dynamics that are emerging, potential for divergence in global monetary policy, which could present opportunities and risk at the same time, especially if the Federal Reserve maintains a cautious stance. You know, this whole idea that well, you know, we may raise, we may not raise, where other ones are like all out in you know what, we're dropping we're dropping rates and and better. not our our our central bank our Fed is not saying they're going to raise rates but there's also talking about well you know we saw GDP at 4% and that's really good and uh you know maybe we'll you know maintain our our stance at this I mean a lot of things going on but here's the thing let's be honest it's highly unlikely as the Trump administration is pushing for a dovish Fed chair just last week they talked about it that you know uh Wow, you know, GDP is good and markets sell off a little bit because of that, which they didn't really. Uh, and you know, President Trump is saying, you know, if markets, you know, are going up, well, rates to still go down. And I want them and anybody that I appoint will do so. So, there is a lot riding on what's going on with the Fed. But more I think more importantly what really is going to define 2026 and this is where we need to be smart is geopolitical uncertainty. And I think the focus really needs to come down to the energy markets and supply chains. You see what's going on in Venezuela, right? We see what's going on in China, right? Well, right there is the poster child for both of those items. In Venezuela, we have an issue. Again, they're not a big supplier of oil, but we have uh tankers being escorted away basically, and we're saying, "Well, no, you're not going to use those." We have Russia energy there. We have the potential for the consist consistent uh concern about about supply chains. We keep this tar tariff screw tightened, what's going to happen? And the US dollar is going to be a big part of that discussion. Right now, we could say that the dollar has been relatively weak. That's why you see gold and silver at all time highs. Copper is in a big upswing. First time ever uh got to the point where it got last week above $12,000 12,000 a ton. A and and what's interesting about that is that comes from a combination of tariffs, comes from a combination of supply constraints and problems with basically mines that are stripped bare, the major ones. Now meanwhile the other thing we have to look at is the continuation and acceleration of the AIdriven productivity gains. That's that's a big issue. The evolution that we're seeing the transition toward and in some cases away from green energy may start to reshape sector leadership from what we saw over the last couple years. I would venture to say that volatility is expected to stay elevated, but as we keep talking about as disciplined investors, that often translates to opportunity. Yes. No question. Like what we saw with this whole Oracle debacle, with the Blue Owl deal, with the fact that they're getting and they're not getting and they're going to build and they're not going to build and they got the money and they don't. Now they're going to be involved in in Larry Ellison backing uh the son David Ellison with the Warner Brothers deal and it keeps going on keeps going you know this whole narrative that we see the constant commotion like you know just just step away from the TV step away from the radio step away from the the the uh the Reddit articles. Do yourself a favor. Focus on what's important. step away from the politics. Step away from the politics, you'll be able to see markets a lot clearer than uh if you are laser focused on the daily news and the politics that are out there. Now, one of the things I really like to do, we did this last year as well, one of the last uh uh podcast of the year, we bring on Jack Schwagger. Now, Jack Schwagger is quite a guy. Uh Jack Schwagger has written so many books and and he is you know him from the the market wizards series and interviewing the best of the best in the world and understanding how they did what they do. How is somebody making 25% compounded annual return for the last 20 years or some number like that? We're going to talk about that because Jack has met all of them. He's written about many of them and he's talked to them and learned from them. So, we're going to get to that in a second. Before we do so, I have a question because you know, uh, you have to think about where do you get your information from? And the question about what's happening, what's changed in your portfolio this week? What positions are driving your returns? Ask IBKR. Ask IBKR. This is a breakthrough AI powered tool from Interactive Brokers that lets you interact with your portfolio using plain English. You It's so simple. You ask questions like, "How did I perform this week?" or "What's my biggest sector exposure?" And you get instant personalized answers. Ask IBKR pulls from your actual account. It looks at the data and delivers real-time insights into performance, allocation, risk, and so much more. It's built into the IBKR platform to help you stay informed and in control. Because the best informed investors, well, they choose Interactive Brokers, member SIPC. Stop searching and start asking. Check it out atkr.comask. All right, let's get on with our last guest of 2025 and get into how the greats do it and what we can learn from them. And let's bring on Jack Schwagger. Jack, how are you? >> Hey, I'm doing fine, thanks. >> Great. I mean, listen, it's been a while. You were on I think if I'm not mistaken, you were the last guest of 2024, >> I think. So, yeah. >> Uh, which we planned very well. I I and and I always am intrigued by your insights because you talk to some of the I mean the the traders that are known unknown in the world that have just incredible stories and returns and things like you know people are happy with 7% annualized returns. You talk to people that have 25 years of 20% annualized returns. That's just amazing isn't it? >> Yeah. Yeah. and uh and sometimes more uh and some of the younger guys who haven't been around for 20 years but haven't been around 10 or 15 you know triple digit returns you know for that period so there there are more astounding ones >> it's amazing I mean so after decades of interviewing these you know top traders uh we talked about some of their traits right the consistently the consistent things that separated them from the average if my memor is correct we talked about that they were they had a very consistent riskmanagement plan. >> Yeah, I mean that's almost universally true. >> What other things? It's got to be something else. Is it a the kind of guy that's going to push the limits? Is it a gal who is just like you know what uh while they look at the risk but on the other side they have the risk management and they have that almost like a a trampoline for a highwire act right you know they know they can do this but there's something at least protected what is it that gets them to that point because it can't be just like oh my god they have all this insight they knew that Google was going to be what it's going to be there's more to that >> well it's more than risk management because Um, like I example I use, if all you have is risk management, I challenge you to go to uh Las Vegas and play roulette and use use your best risk management. See how far you get. Uh, it ain't going to work because in that particular example, the casino has the edge. You don't have the edge. So risk management is critical and necessary, but it isn't sufficient. You basically have to have some sort of methodology that has an edge. Um you have to be the you have to be the casino. Uh otherwise risk management won't save you, >> right? Because if you just have risk management, you stopped out of every trade. >> Yeah. I mean, yeah, you could, you know, if you don't have a if you don't have an edge, you're basically, let's say, if you threw darts, which is equivalent to not having an edge, um when to buy and sell, well, you'd lose because of transaction cost over time. you still, even if it was 50/50, even if you used a a pure 50/50 type of uh method, uh you would still lose because transaction costs would would would would go against you. Also, it goes beyond that really. um like one of the uh traders I interviewed, this goes back to the uh second market wizard's book, so we're going back here to uh like early 90s, but he he kind of said that um and this is Bill Ehart. Uh he said that uh humans are so poorly attuned uh to trading that they will do worse than random. Essentially, he's saying that our human emotions, it's not it's not that you you will just do like a flip of the coin. He says it's worse than that. Um, so like the proverbial monkey throwing darts at the Wall Street Journal page of quotes, [clears throat] he says the monkeyy's going to do better. It's not the monkey will do as well. The monkey will do better because it's uninhibited by emotions. So his his claim is that we as humans are so poorly attuned to making correct decisions because of our emotions uh that we will do worse than random. So, so that plus transaction cost means if you don't have a methodology done, you're you're doomed to lose, >> you know. But is I I remember back in the 80s or maybe it was the 90s, there was something about the darts. There was like a an annual darts, wasn't there, in the Wall Street Journal or something? >> They might have done that. I, you know, >> I think it was the Dart portfolio. Somebody would get a Wall Street Journal. They'd open it up and they throw darts. And I remember back then, I'm like, let me do that. What the hell? I'll just invest like that because the darts always seemingly won. But I'm sure that wasn't an exact science to the whole process. >> No, I mean the point there is that uh managers don't do better in the market and that and that actually is true. I mean that's been shown over and over. When I say managers, I mean just a universe of of uh say mutual funds. uh there've been multiple multiple studies and I'm not aware of a single study that has come to a different conclusion but they all come out with uh on that the uh like 85% or whatever the exact percent is but it's way beyond 50% but let's call it 85% of managers do worse than the S&P and that's not a surprise because if you taking all the funds all the managers they are they are the market and they all have transaction cost and the S&P doesn't. So >> that's, you know, the thing that's interesting is even if you just take out management fees and just put in uh uh transaction cost, is it is that saying that the S&P 500, which is a managed fund by the way, right? Things are in and things are out. >> Well, yeah, by definition of what the S&P index is, but it it has uh well, there's no fees, right? except you know like if you're invested you know via an ETF or there might be some or fund uh or something like Vanguard or whatever there might be some small fee but that's pretty small and uh the changes in the S&P index are infrequent and certainly don't have a meaningful impact on the cost of running it. So, uh, it's a c it's a frictionless, um, portfolio and, um, you know, I guess that's that's where everything else in in in in Wall Street has a cost attached. There are fees attached, >> fees plus transaction costs. >> So, you let's get back to the the the the person you were talking about, Ehart, I think his name was, uh, from a moment ago. And one thing that sticks out to me in the reading I have on whatever the book that you wrote um because there again as you read it's always a similar there's always at the end like h similar theme you know I mean greatness achieved by something again edge uh risk management but also something that was different about that person but yet at the same time there was something was different that's the theme right something was different that difference was always different >> yeah they their approach >> right what's different is their approach Surprisingly, they were all doing different things, you know. So, that's uh that's what's different. >> But one of the things I think that is important here, tell me what you think about the role of self-awareness in in this, right, that the idea that the the role of self-awareness in um that comes into trading success. I think it's I think there's something to be said about understanding your limitations, what you can do, what you can't do, and going past your limitations is always uh redlining your own psyche to a point when it comes to trading where you're over leveraging or underleveraging, right? But but if you do know, isn't there something about that with all of these? Isn't there a commonality with all of these traders that they are very self-aware? >> Yeah, it's a very common theme. Uh a lot of them are very very uh attuned to their own psychology and their own mindset, their own mood. very frequently come up with traders who will say they keep a journal and one of the things they keep in the journal is their emotions on that day or on that trade or uh one trader in the last book I know market wizards uh sort of mentioned he had a uh he made it like an excel sheet and he had various various traits like uh you know is he angry is he is he fearful is he whatever and he and and u he would check on each day which traits which moods were were applicable and he would see if there were patterns and and how his trading was related to those patterns. >> But what's interesting is that he actually is aware of his how he's feeling. That that's kind of >> not so easy. That's not so easy. I go along each day I'm thinking, you know, ask me am I happy? Am I sad? >> I don't know. It's Tuesday. You know, whatever. You know what I'm saying? It's like it's what it is. But but it is interesting. That's the whole point being really tuned in to your own abil that that's something that is something that we could work on. Every individual can work on that. Maybe not master it but can work on it. Yeah. I mean and uh also a matter of getting themselves in the right mindset. So another trader from the last book uh talking about the process before he's anticipating a big day. Uh Liz was a guy who would was trading uh certain events and sort of knew ahead of time when he potentially would be having a day where it could be potentially a big day for him and just the preparation and getting himself calm and getting totally focused. I mean to the point where you know complete tunnel vision that is only all he sees is just a screen and he's pre-planned everything he'll do under any like if there's a Fed announcement he's kind of decided what he'll do for any word that that's said and stuff like that. So um a lot of preparation and sort of getting himself into that zone >> and those are the things that have been translated into trading automation when you can have now a even before quote unquote AI you could have an algo or you can have at least some machine reading through the transcript of a Fed or a let's say a live uh a live read through of a conference call from a from a company, right? Or or some other transcript of sorts and get go through there much faster than human can. >> Yeah, you I mean that's absolutely true. So, um there used to be a time where where traders who were very attuned and very ready uh could um could just beat everybody uh and get the be the first online or very first were among the first to get orders off in these situations. Of course now and for some time now uh algorithms when it's just basically like particularly headline type uh items or keywords they will they will uh act in in fractions of a second I mean so it's impossible for any human to compete and so those type of trades where speed is the essence um you know humans have been eliminated from that. Interesting like in the the book we're currently working on um there is a trader who uh you know so this topic has come up and uh so he he had to stop doing some of the stuff he was doing because of the algos but still is able to to come out ahead because when there's like u SEC filings or whatever with things of complexity u some of these things are are uh the algos aren't there yet to do fine-tuned interpretation or like he gives examples of uh let's say uh there's a merger ob deal announced but the the jurisdiction is in in Maryland instead of Delaware um he'll he'll know that that makes a big difference uh because of the laws make it um less that that in Maryland the acquire the company that's being that would be acquired has much more power to reject it than let's say in Delaware or something like you know situation like that. >> So he's he's aware of those nuances the algos wouldn't. So he can still find situations where he can trade on things like SEC filings because they're they require a certain degree some of the things in there require enough nuance of interpretation that it's not been sort of computerized away. >> Well that brings up two points right? Number one is how long is it going to take till that goes away? But the second thing, right, that that's only a matter of time, let's be honest. Um, >> yeah. So, >> but but the second thing is and then I want to answer both, right? It's a matter of time. And the second thing is that goes right to the efficient market theory. Um, and efficient markets that have been one of I I would think I'm going to extend on this for a second. I would think that one of the things that many of the traders have uh and and many traders can make money on is the inefficiency. That's what you're talking about here, right? This guy knows about these things and it's not an efficient situation because not everybody knows about that Maryland versus, you know, Delaware or whatever it is. Um, and there's other things, for example, with maybe tax rules and line items, and there's a market efficiency issue where maybe an ARB is out of whack for a for a buyout or for for a convertible bond or potentially for um a a a bond rating that may change because of something. So, the market efficiency thing, which over the years due to transparency laws, etc., has been getting better and better, right? The efficient market has been getting better and better. And I would think that does that does that limit the amount of wizards in the future? >> You would think so, but I'm I'm finding traders who are better who are as good or better than any traders I've ever interviewed. Um, and crazy stories. I mean, in the book I'm working on now. Uh I've got two of the traders who started with small accounts and by small I mean like uh 50,000 or under and um and have run it up to and this is not going to sound believable I know but I've run it up to a half a billion dollars. >> Wow. >> So that's two traders that have done that. So you don't >> without any Wait without any outside money. They're saying taking that money, trading it to that level. >> I'm talking about that 50,000 being compounded to the point where they they've gone gone to 50 50 uh to 500 million. >> Wow. Wow. That's that's unbelievable. Over what period of time? >> Uh let's see. I >> It doesn't matter what period of time, by the way. It's pretty amazing. >> Roughly 20 years or less. That's that that's that's that's impressive. >> Yeah. I mean, that's I mean, it's crazy, right? I mean, >> right. >> That's like a better return than if you had uh Bitcoin. I mean, that's the same kind of stuff we're talking about. >> Crazy. Crazy. Yeah. Crazy. >> And they're still going. >> And Yeah. Still they're still going. Yeah. >> I' I'd assume that they're >> even though their hit rate may be good, they move the markets more if they're doing something compared to when they were investing 75,000. >> Oh, yeah. So that's you bring up another point. So yeah, so they can't long ago they they had to stop doing what they were doing originally because you know they may have they um they started out well they they were they different completely different traders. Uh but one guy started out with small cap and uh you know now now given the size he's trading um you know it's small cap isn't worth his trouble anymore, >> right? the size he would have to trade small cap is so small that it's just not worth his time. >> So you mentioned your new book. I I believe you have a co-author >> on this book. Uh can you tell us who that is and and why? >> Sure. Sure. uh this fellow by the name of George Coyle who has a long history and experience in financial markets and um the way I actually um he's responsible for this book coming to life because I had no plans to write another book but about a year ago year and a half ago I a mutual acquaintance of ours uh emailed me and he said hey you know this this guy I know has written some articles on traders and be interested and getting, you know, your feedback. Would you mind if he sent you the articles? And I said, "Sure." So he was the connection and uh and uh so he so George sent me a couple of the articles and um you know, I thought they were pretty good and uh said, "Yeah, I'll talk to you." So I spoke to him and I said, "Hey, you know, you've got some good articles here and you've you were right on on the what you're thinking about it and uh you know, you should think of maybe compiling these into a book or something." and I gave him some tips about writing and all of that and um you know I I said you know I didn't want to be involved. I wasn't planning to do another book and um sort of asking me if I could and one problem he had is that he was quoting a lot from my books and he didn't feel it was fair to be quoting so much first of all right >> you know for my books without having me and I said well yeah but I I wouldn't feel right I had to be doing something more >> and then I thought about it and I you know I read his art you know a couple of his articles he said you know what George I can uh I can actually write my own commentary on your article and add it as an addendum and if you want to do that you know it can be your book and I'll add my addendum and you know we'll have some sort of split and I could do that and you know so so I approached my editor and we sent him a couple of chapters where George had written a chapter and George was using uh basically other sources so he was doing a lot of research and you know a lot of quotes from different places and paraphrasing and so forth and putting it together into one narrative. So my editor kind of look and looked at it and he said, "Hey, you know, I love your summary, but you know, the other thing we just he just wasn't interested in the book unless there was an actual unless it was a firsthand interview. He didn't like the fact that it was all being sourced secondhand." So, um, anyway, that kind of one thing led to another and I said, "Okay, you know, um, you know, all right, so maybe we'll go we'll we'll work together on it." And so we ended up, so we ended up working together. And the book we're writing is really very much like the previous market wizard books. So sometimes George, the interviews, by the way, tend to be in transcript form are kind of long. So, you know, you might have a 100 pages of of transcript. You've got to boil it or plus and you want to boil it down to 20 pages or whatever it is, right? 20 30 at most. Um and um so uh we we we divided him up, you know, I did some from scratch, he did some from scratch and then his his uh version I would then rewrite so to my satisfaction and he would have you know I'd send it back uh and he could uh comment on my changes and stuff and basically that's the way we did it. So we divided the workload and we did the interviews together and uh you know the book is turning out just fine. >> Now so this brings me to a question that you and I are not getting any younger by the day and uh and and I'll I'll go so far as as as saying uh I'll call it the market wizards franchise. I'll call it that. I don't think it's an untrue thing. Uh who's going to continue on? Is George going to continue on? Because I think it's >> I never thought Yeah, I never thought about it before and you're right. I'm not I'm certainly getting on and you know I'm I'm still pretty I'm I'm luckily still pretty much there with it you know I mean I my mental faculties are pretty much there and I don't think my writing is any has has degraded at all and so that type of stuff I'm still you know kind of totally capable. I'm not as focused as I used to be for sure and I certainly can't do anything like the workload I used to do but um you know I'm still kind of there and it's just a question if I want to do it another book. >> Yeah. I'm not suggesting you're not Jack. [laughter] >> Yeah. No, no, I understand. >> That's not what I'm saying. I'm just saying that >> but at 77 Yeah. I'm not >> the world needs to continue having these and I think this kind of thing. Um may I propose that to you that you consider that? I don't have any plan for you. I'm just saying consider that. >> Yeah. I would give George my blessing uh you know based on my experience of working on this book you know at given the point where uh I no longer want to do anything and he and he wants to um there you go. We just made we just made we just made a a we just we just helped everybody out there with the understanding that it will continue on. Everybody feels good. Um now um going back to um the the ideas that we we've been talking about the the newest book the late or the two the book that's coming any without giving away too much but is anything like oh brand new in there because with this new book the last book you did was what year? last book was >> it's yeah 2020 >> 2020 >> yeah 2020 >> so let's let's call that before AI by the way >> I mean that well yeah I guess it was before AI was as prominent as it is now there was there was well it's kind of the what you call AI can is also a >> machine learning smart smart algos but is >> alos were certainly there yeah >> is this starting to pop through a little bit though the >> um so Yeah, I mean um not not explicitly in terms of uh in actual examples. I mean the algos are kind of more obvious and but AI itself that uh what AI is doing in fact one thing of AI is even the people who who to create it don't know don't know exactly what's going on a lot of times you know it's I mean that's that's part of what AI is right >> making it it's deciding its own uh rules and patterns and stuff like that so that's still too early on for I think traders to comment on knowing specifically how AI is affecting the markets. Uh but also have been affecting it for some time and that's come up >> right. Let's switch gears a little bit. Um and let me give you some I'll call it rapid fire questions. >> Yeah, sure. >> I have I have a few of them that I kind of was pondering. Um and you know, you can go as long as you want, but I thought maybe you can, you know, some of these will be quick. Okay. Um let's start in the back. Let's start with with with way back when and your your your story, right? What wor This is maybe a little bit longer this one. Uh what first drew you into this industry and more importantly what keeps you here? >> Yeah. By the industry you mean financial? >> Financial. Yep. >> Yeah. Pretty much accidental. I mean accidental beyond the fact that I was an economics major. Uh but so coming out of a graduate degree in economics, uh I was just looking for an analytical job and it so happened the first decent job offer I had well it wasn't so decent actually it was a very paying [laughter] job uh but it was decent in terms of being interesting uh was as a uh com uh commodity market analyst and so that was the position I took. I knew nothing about commodities. I knew very little about markets in general. Uh so I came into it as a pretty much as a total novice and certainly not somebody who as a teenager had thoughts of gee I'm I want to get into Wall Street and stuff like that as do a lot of the traders I interview. I was never in that uh group. I just literally fell into it because the first job that appealed to me that I was offered coming out of graduate school happened to be an analyst position in commodities. >> Okay. And what keeps you here? >> What keeps me here? Well, uh I've gone through a lot of different phases, but the markets are always interesting. Uh there's never Yeah, they're always changing. Um it always requires creativity. So, uh it's it's one of those jobs. It's one of those careers and and spheres of operation where it doesn't get boring ever. >> Yeah. Never. Especially now. >> Yeah. Well, anytime. I mean, I've been through a lot of things. I don't know if now is any more fascinating than uh than the 70s, let's say, which was, >> you know, uh which is people think we had inflation recently. They weren't around in the 70s. >> I know there was a lot going on in the 70s. As a matter of fact, know you've seen a lot of market cycles, right? So, what's one lesson that stayed true through all of them? >> Well, okay. particularly for young reader particularly for your younger listeners out there. I mean this is um um you know the idea of investing you know buy and hold and all that kind of does have merit you know for the long run. Uh the trouble is it's kind of hard to live through but it's also trouble is that the timing of when when people go to it is completely off. So I I did a book I don't know 12 years ago whatever called market sense of nonsense and one of the chapters in there I basically did an analysis I got data going back to literally well as long as far back as it existed on the stock indexes uh I think uh it went back to like 1860s or something like that. What I basically did is I uh calculated um you know what was your forward if you invested in the stock market you know today uh what is what what what is your average turnover the next five years 10 years 15 years 20 years and I did that looking at each year what was the prior five year prior 10 year prior 15 prior 20 and what you found was were not surprising to me but what you found was that by far your best results was when you came in and the last 10 years looked like crap. You know, everybody, you know, they were was maybe the last 10 years were net net negative and and everybody was negative in the market. So if so if you get if you look back at the last 5 year you know if the last 5 year 10 year 15 year those periods are near the lower historical range of percent return then that is a really good time to be a long-term investor >> is the opposite true >> reverse also yeah that that that's what I'm asking >> if you come in if you come in after the last you know 101 15 years have been great the next 1015 years usually aren't >> that's the old reverse reverion to the mean concept, right? That's the whole point that you're you're you're you're truing out. >> Yeah, it is. It is. And reversion to mean is a cliche, but it's a cliche because it's true, >> right? So, what's your take on the current investment environment? And are we in a new era of or just another phase? >> Yeah. Oh, well, you know, uh we're not in, you know, this time is I don't I can't think of an instance where this time really was different. There's always a reason why this there's always some Wall Street explanation of why this time is different. Um but but this time is never different. It never ends up being that way. I I mean so now maybe the argument is because of AI this time will be different. Uh I mean it could be the first time where that argument is true. But I heard it in all different situations, right? So um I I basically you're just going on what I just said and this is not a pro prognostication but based on what I just said because indeed the last 10 years have been quite good and I guess the last 15 as well and the last five uh so because I think you'll find that we're sort of the recent periods have been on the towards the higher end of returns that the next 5 10 15. Uh I would not expect them to be particularly good in that sense until you know unless of course we get a draw down unless we get a a 2008 or a 2000 2001 thrown out there again. And at that point the situation changes again. Yeah. It doesn't mean it doesn't mean that the stock market won't be a good long-term investment for the next 15 years. What I'm saying is it'll be a good long-term investment once you get enough of a draw down so the past five ten years don't look great, >> right? What's the um what's the one financial myth you wish people would stop believing >> aside from this time is different. [laughter] You know that >> um well you know one one is and this is not one that I wish people would stop believing but I think it's a myth. uh the official and you mentioned it before the official market hypothesis um you cannot you cannot interview the people I've interviewed and and by the way you know check their records you know verify their records because anybody can say anything and certainly on the internet you have a lot of people claiming they've done a lot of things which they haven't done but we verify >> well I'm gonna go from a lot to everyone but go ahead >> yeah [laughter] well not everyone but but a lot okay so Um the point here is that that um I've seen just too many people whose records I verified do things that are impossible that would be statistically like one just take two other traders I you know in this book uh one of them has not had a down month at least in 11 years but be even before then but the last 11 years he was on his own so we could look at his you know returns Not a down month. >> What's that? >> Not a down month. >> Not a single down month, right? Not a single down month. [clears throat] Another trader. Uh, >> and he's not just investing in like money markets. >> No, [laughter] he's not. No, he's not doing anything obvious. He's actually uh he's kind of doing a lot of merger op stuff and stuff stuff where people have lots of, you know, have down months, but you know, he just hasn't. Uh he's very short term though. He's extremely short term. Um, another trader is also very short-term. Um, his record now he's been trading for like 25 years, but his record since he was a prop trader for other firms before, but since he formed his own firm, his record goes back only about I know 14 15 years. Um, like is he had he had like five or six down months, but they were all tiny. And you know the odds of having just five or six tiny down months uh and [snorts] actually his worst down month in that whole 15 16 years was less than his average monthly return. >> Wow. Wow. >> So put that and that is you can't have that happen in an efficient market. Those type of results uh would be impossible. >> So that that's going against the whole indexing. Well not going against but there is another side to the story is the point. You're not saying that buy and hold S&P 500 bad thing. You're not saying that. You're saying there's other things. >> Well, I'm the thing here is, you know, this is kind of odd here. Um, so what I've what I've written and I think I wrote this in the last book, uh, was that the efficient of Markup offices, no doubt in my mind that it's wrong. No questions asked, no may. However, here's the irony. Most people would be better off acting as if it were right. >> Yes. No, I get that. I get that. >> Because because most people don't have an edge and they actually will be better going into a lowcost index fund than trying to do it on their own. Yeah. >> And there are statistics and studies that prove this. >> Yeah. No, I guess >> so. Um, so most people would be better off acting as if the efficient market hypothesis was correct. But it is wrong. >> What? Which means for for some people who have the talent and have done enough work and figure it out they can indeed be you know beat the market >> right. So there are many people who are impacted significantly from the books you've written whether it goes back to the early days of um getting started in technical analysis or some of the more recents. uh what book, what mentor, what experience has had the most impact on your philosophies? >> Yeah. Well, sort of I've interviewed so many people. I guess a lot of them have um but the biggest influence has been on the risk management side. So take one example and we probably I probably have mentioned this to you before but one of the traders from the actually the very first market was his book was Bruce Coer uh who then went on to found this firm Caxton and Bruce has been one of the more successful traders out there ever and u he had one line in that first interview which um which has had a big impact and That line is uh know where you will get out before you get in. Uh which is very good advice because first of all it captures about 95% of risk management in one sentence which is a feat in itself. And the thing about making a decision of knowing where you'll get out before you get in is in psychologically insightful in an implicit way. Because what changes when you go from not in the market to in the market? What changes is you lose your objectivity. Cuz if you're not in a position, you could be >> Oh, you're a genius. You're a genius. >> You could be the superman of [laughter] objectivity because you've got no money on a lot. >> Right. Once you're in a position, you now every news story that comes out, if it's for the position, uh, I'm right. And if it's adverse to the position, well, yeah, but that's already discounted or yeah, that's going to just be a temporary effect. You know, you you'll make excuses, but before you get in, you can think clearly. So, if so, my advice and I advise all people to do this before you put a position on, decide, hey, what price am I going to be wrong? Where where should it not go if I'm right on this trade? And what you do is when you enter, let's say, let's say you want to buy a stock that's at 50 and you figure, well, it should go from here. It might pull back a couple of bucks, but it should go back to 45. If it goes back down to 45, I've just blown this trade. Okay, buy the stock, put in a stop, good, cancel it at 45, and then you don't have to worry about it. And you've also defined what your worst loss on the trade is. You know, it's funny because there's there's a lot of times I have trades on for clients or positions on, I should say, positions on for clients in our in our trading portfolio and um you know, it's like it's going against us here. We knew kind of where we wanted to be on this and um you know, I'm not willing to take it down this much more than X dollars. And it's so relieving to actually have a trading stop on versus having to think through it. And also somehow it's very cleansing to put it on and knowing where you're going to be and it hitting and you're fine with it versus me chasing a position price to get out uh and freaking out about oh my god it's going lower than I wanted to go. Let me let me let me hit it now. And then you're like am I hitting at the right time? What am I doing? What if it pops? Am I going to be pissed off if I just got uh emotional about it? It's going to pop right back up. >> Exactly. I agree. >> Yeah. And then there's the proverbial, well, it's already down here. I'll just give it another three bucks. >> Yeah. And and I'll buy some more. >> Well, that's that's even worse, you know. [laughter] >> All right. So, let's finish up. Um, looking ahead, is there a particular trend? Let's leave AI out of this. That's going to define the next decade of investing. >> Um, I don't know if there's a trend really. Um, it's sort of hard to define what AI is going to do to the markets. Uh, I'm not sure myself on that one. Um, you know, that's, you know, >> well, I mean, let let's let's let me let me help you with this for a second. Let's dovetail this into the things that are going on right now when it seems like government is getting in. You know, for a long time, uh, state-owned enterprises in China were like, "Oh my god, what a horrible thing. We have Chinese government owning parts of the and or Japan buying into the major markets or the Norwegian sovereign wealth fund buying all terrible. Oh my god, this and now we do it. It's like, oh, what a great idea. >> Uh, I don't know if people agree it's a great idea. >> I don't think it's a great idea personally, but that's but is this something where we're going to have basically governments take take over? >> I doubt it. I mean it's true of this administration but I don't anticip like a lot of things in this administration I don't expect it to continue beyond this administration >> right maybe that's why a lot of things are just looked past of what goes on who knows kind of crazy times but um all right anything else that you want to talk about when's the book coming out what's happening what's >> well the book the book will come out next summer I think uh but not finished writing it yet I think it'll come out around June July something like that. >> Oh, and it's going to be called It's going to be called um Marco Wizard's The Next Generation. And >> it's like a Star Trek It's like a Star Trek. >> Yeah. You know, George mentioned that. I'm not a Star Trek fan. Like Star Trek, but you know, I'm not a I'm not a Star Treky. Uh George was aware of it and uh he said that and uh I said, "Gee, I didn't even I wasn't even aware of that, you know." But [laughter] uh uh so no it's uh I thought it was appropriate because the cohort of traders are younger than any cohort I've ever interviewed. Now given that I'm looking for traders who at least 10 15 years experience there's a limit to how young they could be but um you know uh uh most of the traders are 30s are 30s which is pretty young for a group of traders that I've interviewed. By the way, are these traders, these younger traders different than let's say your first set of Well, clearly different than first. Let's not talk about that. The last they are there's a lot more crypto involved. >> The some crypto, but crypto I didn't interview any traders who are crypto traders per se. They they if they trade crypto is just like any other market. They might have traded it, but it's not a big thing for you know that's come up. Um there the one big difference I've noticed is uh so many of these traders have a very short-term orientation or at least had very short-term orientations in their early years until maybe they got too much money to be that short term. But u that's >> or it's possible that their upbringing which allowed them to focus on studying for school, watching TV, listening to music uh and all at the same time. Well, that and playing video games >> all at the same time. >> So, this is the first book where playing video games has come up on several interviews. I don't think it's up ever in any of in >> So, this time it's come up several times. >> That's cool. I like it. >> Yeah. Yeah. >> That's good stuff. My favorite video game when I was a kid, uh, well, I listen, uh, when I was a kid, we had Space Invaders, one of the first ones that came out, Galaga. Um, we had Asteroids, Missile Command, um, Donkey Kong, uh, all the all the Mario, all the favorites. That was all, but those were all quarter machines back in the day. >> Yeah. >> And we used to go down everywhere. I was in I was in high school. That's when that happened was high school. Was >> I could still remember Pong. >> Yeah. Pong was great. Was I love Pong. >> Very first one. Two paddles. Two paddles and one ball. >> Right. Exactly. Good stuff. >> Three items on three items on the screen. >> Right. [laughter] >> Yeah. And that's all we could focus on at the time by the way. >> Well, that's all the program could focus on. >> That's true. Also, Jack Schwagger, always a pleasure. Thank you so much for joining us today on the discipline investor. >> Yeah. Thanks, Andrew. >> Thanks. >> Appreciate it. Take care. >> Well, there goes there you have it. There is the last bit of tidbit of smidgen of knowledge from the Disciplined Investor podcast from 2025. Looking forward to seeing you next year. We have some great guests, some best of, some things happening. You're going to really enjoy it, I'm sure. Learn from it, utilize it, profit from it. Thanks [music] for joining me this year. Happy New Year. I'll see you soon. Bye-bye. [music] This podcast is intended [music] forformational purposes only and does not constitute personalized investment advice. Investing [music] involves risk, including the possible loss of principle and past performance is not indicative of future results. The views and opinions expressed are those of the host and any [music] guests and may not necessarily reflect those of Horowits and Company, Inc., an investment adviser registered with the US Securities and Exchange Commission. Registration with the SEC does not imply a certain level of training or skill. Advisory services are only offered to a client or prospective clients where Horowits a company is properly registered or is excluded from registration requirements. 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TDI Podcast: Wizardly Discipline (#953)
Summary
Transcript
This episode is brought to you by Interactive Brokers. And where can quantum computing take your portfolio? Investment themes from Interactive Brokers helps you find out. Start with a trend like quantum computing or clean energy and instantly see where companies are most connected based on revenue, strategic focus, and product relevance. You can explore competitors, global exposure, and business relationships across more than 500 themes. Built with AI powered insights from reflexivity, investment themes turns complexity into clarity and helps you move from trend to trade with speed. Available now across IBKR desktop, mobile, and traders workstation. The best informed investors choose interactive brokers member SIPC. Check it out at ibkr.com/themes. >> The disciplined [music] investor is all about you, your money, and the markets. Sit back and get ready for [music] this edition of the disciplined investor podcast. This episode [music] of the disciplined investor is sponsored by Horowits & Company. If you're looking for a portfolio manager, look no [music] further. Horowits & Company. From seed through harvest, cultivating [music] financial success. Being disciplined pays off. Markets finishing in a good place and ready for 2026. Fun times ahead with a January warning. And let's get inspired by market wizards with our guest, the renowned Jack Swagger. All this and much more on episode number 953 of the Disciplined Investor podcast. [music] [music] And here we are coming into the end of the year and this is officially the last episode this year. Don't get crazy. This year of the Disciplined Investor podcast and it's been quite just quite a year looking back. We had just an astounding array of guests, just amazing people, so many stories that they told, so many lessons that we learned that we continue hearing about some of the the things that are that needed to be done in order to be successful at this very difficult task of investing. Many of you have, I know, taken to heart the things that our guests have talked about, learned from some of the things that we've uh discussed. And remember, not every guest is going to give us an absolute nugget of information that is like, "Wow, I'm going to go out and buy that or do this." What we're designed to do here is build upon layer upon layer and build a little bit more, another layer, so that we can become truly disciplined. That's the whole point. That's the whole point of what we're doing here in our our our journey to become financially set. And that's a big that's a big thing to ask. That's a hard thing to do because a lot of people once we get to that place I remember listen I remember back when I was first starting working back uh it was a number of years ago u but I remember I said you know what when when I'm successful the first thing I'm going to do is I'm going to get myself a new car and I am going to get that BMW 3 series man look at that thing when I get that that is going to be when I can finally put that stake in the ground raise the flag and say, "I am a success." Seriously. And I would pass the dealership all the time. And when it got to the point that I was able to afford that car, you know what happened? I was like, "Ah, I don't want it. I have more things I want to do." Uh, but yet I wasn't as successful as I wanted to be. Even though I could get the BMW, and I said to myself years ago, you know, when I get to that point, I am going to declare that I'm I'm a success. Well, what happened is that I kept on moving the goalpost and once I learned something, a lesson that was simple but yet profound. I was forever chasing my tail. And that lesson was very simple. It was this is that if you set your goal out to be a certain place and you get to that point and you achieve it, take stock in it. Take a deep breath, absorb it, bathe in it, relish in it, and then if there's another goal, we'll get to that one. But if in fact your goal that you set is to reach the horizon by running five miles a day, the reality is that horizon is constantly moving and you'll never get there. and you'll constantly be disappointed, frustrated, and eventually give up because you just can't do it. So, when you set goals for yourself, make sure they're measurable. Make sure that there's something that's achievable. And when it comes to investing, when it comes to financial security, when it comes to being set in life, that's something that we have to have a number on. I need to have x amount of dollars so I could get this amount of interest that could support my lifestyle at this level. Those are quantifiable and we need to make sure that we get to that point. If we surpass it, we can do so. But don't set a goal that's so difficult that you can never get there. And also never set an open-ended goal that will just frustrate the hell out of you. little bit of word of wisdom for the beginning of uh the end of this year, the beginning of next year. By the way, the other thing that I want to mention to you is the one thing that we don't do when it comes to investing is make these resolutions. I have found that resolutions are a way of just appeasing our own psyche for a short term and allowing ourselves to wander from those particular I don't they're not even goals. They're just sayings that I am going to lose 20 pounds blah blah blah blah blah. Yeah. What happens is you end up gaining 10 pounds getting into it saying well I can eat now because I'm going to start that diet on Monday. I'm going to start saving that Monday money on January 1. I'm going to increase my 401k plan and I never do it. There's a difference between a resolution and a commitment. There's a huge differential. Make sure that you're not making open-ended and uh just vacant promises to yourself. If you're going to make a commitment, write it down. And better yet, you want to really make sure that you stick to something, share it with somebody that can make you accountable. When it comes to finances, share it with your spouse. Share it with your good friend. share it with your financial adviser who should be working with that on you if that is what they're doing from a financial planning standpoint. Maybe your investment advisor, you can talk it through as well. But whoever you're dealing with and somebody that can hold your feet to the fire and make you accountable, share what that particular goal is, that that commitment. The resolution, fine. You want to go on a diet next week, you're going to only drink one drink a week, you're going to cut down on cigarettes or whatever. Those are resolutions. My favorite time of the year is January, February. I drive by the various gyms in the neighborhood. The parking lots are full. By March, half full. By June, uh, pretty empty. It's a cycle that is as old as time. But we bought into this idea of of doing these resolutions. Forget them. Throw them out. Let's do commitments. Now, what are we doing here at Horowitz and Company towards the end of the year, thinking about the new year? Well, we're busy reconciling reconciling accounts and making sure everything is aligned with what we expect in 2026 because listen, it's been a it's been a great year 2025 and we're building on momentum from 2024. And the question is, is that going to last? And that that's a big issue. How are we going to navigate the next year with all of the headwinds that we have currently that really are not much different than what we had previously? maybe a little bit different, maybe a little bit lighter, maybe a little bit more uh acceptable some of the things that are going on. But I got to tell you from a firm view here, we I I think we successfully navigated the short-term risks with at the same time, I should say, staying very focused on the broader trends that define not only 2025, but really 2024 as well. There was just I mean there was numerous global events that could have just totally distracted us that probably had you a little bit concerned as well throughout the year. We had persistent inflation concerns uh sh uh I would say shifting uh or disassociation with reality when it comes to central bank policies. We had global tensions, energy price volatility. Well, currencies, what about that? Big currency fluctuations. The yen dollar, all that. Wow. And that created a challenging backdrop. There's no question about that. And add to that the uncertainty about global growth, the the the trade disruptions that we saw. Don't forget about April, what happened then, and ongoing debates about, well, is interest rates going to go up? It's going to stay the same. We're going to move down five times. Go two times. We're going to move it up. It's very clear now right at this exact moment at this juncture of life that discipline is what it's all about. That was the most important feature of 2025. Now looking ahead to 2026 and what I see many of these themes are likely to persist. We are looking at a few new dynamics that are emerging, potential for divergence in global monetary policy, which could present opportunities and risk at the same time, especially if the Federal Reserve maintains a cautious stance. You know, this whole idea that well, you know, we may raise, we may not raise, where other ones are like all out in you know what, we're dropping we're dropping rates and and better. not our our our central bank our Fed is not saying they're going to raise rates but there's also talking about well you know we saw GDP at 4% and that's really good and uh you know maybe we'll you know maintain our our stance at this I mean a lot of things going on but here's the thing let's be honest it's highly unlikely as the Trump administration is pushing for a dovish Fed chair just last week they talked about it that you know uh Wow, you know, GDP is good and markets sell off a little bit because of that, which they didn't really. Uh, and you know, President Trump is saying, you know, if markets, you know, are going up, well, rates to still go down. And I want them and anybody that I appoint will do so. So, there is a lot riding on what's going on with the Fed. But more I think more importantly what really is going to define 2026 and this is where we need to be smart is geopolitical uncertainty. And I think the focus really needs to come down to the energy markets and supply chains. You see what's going on in Venezuela, right? We see what's going on in China, right? Well, right there is the poster child for both of those items. In Venezuela, we have an issue. Again, they're not a big supplier of oil, but we have uh tankers being escorted away basically, and we're saying, "Well, no, you're not going to use those." We have Russia energy there. We have the potential for the consist consistent uh concern about about supply chains. We keep this tar tariff screw tightened, what's going to happen? And the US dollar is going to be a big part of that discussion. Right now, we could say that the dollar has been relatively weak. That's why you see gold and silver at all time highs. Copper is in a big upswing. First time ever uh got to the point where it got last week above $12,000 12,000 a ton. A and and what's interesting about that is that comes from a combination of tariffs, comes from a combination of supply constraints and problems with basically mines that are stripped bare, the major ones. Now meanwhile the other thing we have to look at is the continuation and acceleration of the AIdriven productivity gains. That's that's a big issue. The evolution that we're seeing the transition toward and in some cases away from green energy may start to reshape sector leadership from what we saw over the last couple years. I would venture to say that volatility is expected to stay elevated, but as we keep talking about as disciplined investors, that often translates to opportunity. Yes. No question. Like what we saw with this whole Oracle debacle, with the Blue Owl deal, with the fact that they're getting and they're not getting and they're going to build and they're not going to build and they got the money and they don't. Now they're going to be involved in in Larry Ellison backing uh the son David Ellison with the Warner Brothers deal and it keeps going on keeps going you know this whole narrative that we see the constant commotion like you know just just step away from the TV step away from the radio step away from the the the uh the Reddit articles. Do yourself a favor. Focus on what's important. step away from the politics. Step away from the politics, you'll be able to see markets a lot clearer than uh if you are laser focused on the daily news and the politics that are out there. Now, one of the things I really like to do, we did this last year as well, one of the last uh uh podcast of the year, we bring on Jack Schwagger. Now, Jack Schwagger is quite a guy. Uh Jack Schwagger has written so many books and and he is you know him from the the market wizards series and interviewing the best of the best in the world and understanding how they did what they do. How is somebody making 25% compounded annual return for the last 20 years or some number like that? We're going to talk about that because Jack has met all of them. He's written about many of them and he's talked to them and learned from them. So, we're going to get to that in a second. Before we do so, I have a question because you know, uh, you have to think about where do you get your information from? And the question about what's happening, what's changed in your portfolio this week? What positions are driving your returns? Ask IBKR. Ask IBKR. This is a breakthrough AI powered tool from Interactive Brokers that lets you interact with your portfolio using plain English. You It's so simple. You ask questions like, "How did I perform this week?" or "What's my biggest sector exposure?" And you get instant personalized answers. Ask IBKR pulls from your actual account. It looks at the data and delivers real-time insights into performance, allocation, risk, and so much more. It's built into the IBKR platform to help you stay informed and in control. Because the best informed investors, well, they choose Interactive Brokers, member SIPC. Stop searching and start asking. Check it out atkr.comask. All right, let's get on with our last guest of 2025 and get into how the greats do it and what we can learn from them. And let's bring on Jack Schwagger. Jack, how are you? >> Hey, I'm doing fine, thanks. >> Great. I mean, listen, it's been a while. You were on I think if I'm not mistaken, you were the last guest of 2024, >> I think. So, yeah. >> Uh, which we planned very well. I I and and I always am intrigued by your insights because you talk to some of the I mean the the traders that are known unknown in the world that have just incredible stories and returns and things like you know people are happy with 7% annualized returns. You talk to people that have 25 years of 20% annualized returns. That's just amazing isn't it? >> Yeah. Yeah. and uh and sometimes more uh and some of the younger guys who haven't been around for 20 years but haven't been around 10 or 15 you know triple digit returns you know for that period so there there are more astounding ones >> it's amazing I mean so after decades of interviewing these you know top traders uh we talked about some of their traits right the consistently the consistent things that separated them from the average if my memor is correct we talked about that they were they had a very consistent riskmanagement plan. >> Yeah, I mean that's almost universally true. >> What other things? It's got to be something else. Is it a the kind of guy that's going to push the limits? Is it a gal who is just like you know what uh while they look at the risk but on the other side they have the risk management and they have that almost like a a trampoline for a highwire act right you know they know they can do this but there's something at least protected what is it that gets them to that point because it can't be just like oh my god they have all this insight they knew that Google was going to be what it's going to be there's more to that >> well it's more than risk management because Um, like I example I use, if all you have is risk management, I challenge you to go to uh Las Vegas and play roulette and use use your best risk management. See how far you get. Uh, it ain't going to work because in that particular example, the casino has the edge. You don't have the edge. So risk management is critical and necessary, but it isn't sufficient. You basically have to have some sort of methodology that has an edge. Um you have to be the you have to be the casino. Uh otherwise risk management won't save you, >> right? Because if you just have risk management, you stopped out of every trade. >> Yeah. I mean, yeah, you could, you know, if you don't have a if you don't have an edge, you're basically, let's say, if you threw darts, which is equivalent to not having an edge, um when to buy and sell, well, you'd lose because of transaction cost over time. you still, even if it was 50/50, even if you used a a pure 50/50 type of uh method, uh you would still lose because transaction costs would would would would go against you. Also, it goes beyond that really. um like one of the uh traders I interviewed, this goes back to the uh second market wizard's book, so we're going back here to uh like early 90s, but he he kind of said that um and this is Bill Ehart. Uh he said that uh humans are so poorly attuned uh to trading that they will do worse than random. Essentially, he's saying that our human emotions, it's not it's not that you you will just do like a flip of the coin. He says it's worse than that. Um, so like the proverbial monkey throwing darts at the Wall Street Journal page of quotes, [clears throat] he says the monkeyy's going to do better. It's not the monkey will do as well. The monkey will do better because it's uninhibited by emotions. So his his claim is that we as humans are so poorly attuned to making correct decisions because of our emotions uh that we will do worse than random. So, so that plus transaction cost means if you don't have a methodology done, you're you're doomed to lose, >> you know. But is I I remember back in the 80s or maybe it was the 90s, there was something about the darts. There was like a an annual darts, wasn't there, in the Wall Street Journal or something? >> They might have done that. I, you know, >> I think it was the Dart portfolio. Somebody would get a Wall Street Journal. They'd open it up and they throw darts. And I remember back then, I'm like, let me do that. What the hell? I'll just invest like that because the darts always seemingly won. But I'm sure that wasn't an exact science to the whole process. >> No, I mean the point there is that uh managers don't do better in the market and that and that actually is true. I mean that's been shown over and over. When I say managers, I mean just a universe of of uh say mutual funds. uh there've been multiple multiple studies and I'm not aware of a single study that has come to a different conclusion but they all come out with uh on that the uh like 85% or whatever the exact percent is but it's way beyond 50% but let's call it 85% of managers do worse than the S&P and that's not a surprise because if you taking all the funds all the managers they are they are the market and they all have transaction cost and the S&P doesn't. So >> that's, you know, the thing that's interesting is even if you just take out management fees and just put in uh uh transaction cost, is it is that saying that the S&P 500, which is a managed fund by the way, right? Things are in and things are out. >> Well, yeah, by definition of what the S&P index is, but it it has uh well, there's no fees, right? except you know like if you're invested you know via an ETF or there might be some or fund uh or something like Vanguard or whatever there might be some small fee but that's pretty small and uh the changes in the S&P index are infrequent and certainly don't have a meaningful impact on the cost of running it. So, uh, it's a c it's a frictionless, um, portfolio and, um, you know, I guess that's that's where everything else in in in in Wall Street has a cost attached. There are fees attached, >> fees plus transaction costs. >> So, you let's get back to the the the the person you were talking about, Ehart, I think his name was, uh, from a moment ago. And one thing that sticks out to me in the reading I have on whatever the book that you wrote um because there again as you read it's always a similar there's always at the end like h similar theme you know I mean greatness achieved by something again edge uh risk management but also something that was different about that person but yet at the same time there was something was different that's the theme right something was different that difference was always different >> yeah they their approach >> right what's different is their approach Surprisingly, they were all doing different things, you know. So, that's uh that's what's different. >> But one of the things I think that is important here, tell me what you think about the role of self-awareness in in this, right, that the idea that the the role of self-awareness in um that comes into trading success. I think it's I think there's something to be said about understanding your limitations, what you can do, what you can't do, and going past your limitations is always uh redlining your own psyche to a point when it comes to trading where you're over leveraging or underleveraging, right? But but if you do know, isn't there something about that with all of these? Isn't there a commonality with all of these traders that they are very self-aware? >> Yeah, it's a very common theme. Uh a lot of them are very very uh attuned to their own psychology and their own mindset, their own mood. very frequently come up with traders who will say they keep a journal and one of the things they keep in the journal is their emotions on that day or on that trade or uh one trader in the last book I know market wizards uh sort of mentioned he had a uh he made it like an excel sheet and he had various various traits like uh you know is he angry is he is he fearful is he whatever and he and and u he would check on each day which traits which moods were were applicable and he would see if there were patterns and and how his trading was related to those patterns. >> But what's interesting is that he actually is aware of his how he's feeling. That that's kind of >> not so easy. That's not so easy. I go along each day I'm thinking, you know, ask me am I happy? Am I sad? >> I don't know. It's Tuesday. You know, whatever. You know what I'm saying? It's like it's what it is. But but it is interesting. That's the whole point being really tuned in to your own abil that that's something that is something that we could work on. Every individual can work on that. Maybe not master it but can work on it. Yeah. I mean and uh also a matter of getting themselves in the right mindset. So another trader from the last book uh talking about the process before he's anticipating a big day. Uh Liz was a guy who would was trading uh certain events and sort of knew ahead of time when he potentially would be having a day where it could be potentially a big day for him and just the preparation and getting himself calm and getting totally focused. I mean to the point where you know complete tunnel vision that is only all he sees is just a screen and he's pre-planned everything he'll do under any like if there's a Fed announcement he's kind of decided what he'll do for any word that that's said and stuff like that. So um a lot of preparation and sort of getting himself into that zone >> and those are the things that have been translated into trading automation when you can have now a even before quote unquote AI you could have an algo or you can have at least some machine reading through the transcript of a Fed or a let's say a live uh a live read through of a conference call from a from a company, right? Or or some other transcript of sorts and get go through there much faster than human can. >> Yeah, you I mean that's absolutely true. So, um there used to be a time where where traders who were very attuned and very ready uh could um could just beat everybody uh and get the be the first online or very first were among the first to get orders off in these situations. Of course now and for some time now uh algorithms when it's just basically like particularly headline type uh items or keywords they will they will uh act in in fractions of a second I mean so it's impossible for any human to compete and so those type of trades where speed is the essence um you know humans have been eliminated from that. Interesting like in the the book we're currently working on um there is a trader who uh you know so this topic has come up and uh so he he had to stop doing some of the stuff he was doing because of the algos but still is able to to come out ahead because when there's like u SEC filings or whatever with things of complexity u some of these things are are uh the algos aren't there yet to do fine-tuned interpretation or like he gives examples of uh let's say uh there's a merger ob deal announced but the the jurisdiction is in in Maryland instead of Delaware um he'll he'll know that that makes a big difference uh because of the laws make it um less that that in Maryland the acquire the company that's being that would be acquired has much more power to reject it than let's say in Delaware or something like you know situation like that. >> So he's he's aware of those nuances the algos wouldn't. So he can still find situations where he can trade on things like SEC filings because they're they require a certain degree some of the things in there require enough nuance of interpretation that it's not been sort of computerized away. >> Well that brings up two points right? Number one is how long is it going to take till that goes away? But the second thing, right, that that's only a matter of time, let's be honest. Um, >> yeah. So, >> but but the second thing is and then I want to answer both, right? It's a matter of time. And the second thing is that goes right to the efficient market theory. Um, and efficient markets that have been one of I I would think I'm going to extend on this for a second. I would think that one of the things that many of the traders have uh and and many traders can make money on is the inefficiency. That's what you're talking about here, right? This guy knows about these things and it's not an efficient situation because not everybody knows about that Maryland versus, you know, Delaware or whatever it is. Um, and there's other things, for example, with maybe tax rules and line items, and there's a market efficiency issue where maybe an ARB is out of whack for a for a buyout or for for a convertible bond or potentially for um a a a bond rating that may change because of something. So, the market efficiency thing, which over the years due to transparency laws, etc., has been getting better and better, right? The efficient market has been getting better and better. And I would think that does that does that limit the amount of wizards in the future? >> You would think so, but I'm I'm finding traders who are better who are as good or better than any traders I've ever interviewed. Um, and crazy stories. I mean, in the book I'm working on now. Uh I've got two of the traders who started with small accounts and by small I mean like uh 50,000 or under and um and have run it up to and this is not going to sound believable I know but I've run it up to a half a billion dollars. >> Wow. >> So that's two traders that have done that. So you don't >> without any Wait without any outside money. They're saying taking that money, trading it to that level. >> I'm talking about that 50,000 being compounded to the point where they they've gone gone to 50 50 uh to 500 million. >> Wow. Wow. That's that's unbelievable. Over what period of time? >> Uh let's see. I >> It doesn't matter what period of time, by the way. It's pretty amazing. >> Roughly 20 years or less. That's that that's that's that's impressive. >> Yeah. I mean, that's I mean, it's crazy, right? I mean, >> right. >> That's like a better return than if you had uh Bitcoin. I mean, that's the same kind of stuff we're talking about. >> Crazy. Crazy. Yeah. Crazy. >> And they're still going. >> And Yeah. Still they're still going. Yeah. >> I' I'd assume that they're >> even though their hit rate may be good, they move the markets more if they're doing something compared to when they were investing 75,000. >> Oh, yeah. So that's you bring up another point. So yeah, so they can't long ago they they had to stop doing what they were doing originally because you know they may have they um they started out well they they were they different completely different traders. Uh but one guy started out with small cap and uh you know now now given the size he's trading um you know it's small cap isn't worth his trouble anymore, >> right? the size he would have to trade small cap is so small that it's just not worth his time. >> So you mentioned your new book. I I believe you have a co-author >> on this book. Uh can you tell us who that is and and why? >> Sure. Sure. uh this fellow by the name of George Coyle who has a long history and experience in financial markets and um the way I actually um he's responsible for this book coming to life because I had no plans to write another book but about a year ago year and a half ago I a mutual acquaintance of ours uh emailed me and he said hey you know this this guy I know has written some articles on traders and be interested and getting, you know, your feedback. Would you mind if he sent you the articles? And I said, "Sure." So he was the connection and uh and uh so he so George sent me a couple of the articles and um you know, I thought they were pretty good and uh said, "Yeah, I'll talk to you." So I spoke to him and I said, "Hey, you know, you've got some good articles here and you've you were right on on the what you're thinking about it and uh you know, you should think of maybe compiling these into a book or something." and I gave him some tips about writing and all of that and um you know I I said you know I didn't want to be involved. I wasn't planning to do another book and um sort of asking me if I could and one problem he had is that he was quoting a lot from my books and he didn't feel it was fair to be quoting so much first of all right >> you know for my books without having me and I said well yeah but I I wouldn't feel right I had to be doing something more >> and then I thought about it and I you know I read his art you know a couple of his articles he said you know what George I can uh I can actually write my own commentary on your article and add it as an addendum and if you want to do that you know it can be your book and I'll add my addendum and you know we'll have some sort of split and I could do that and you know so so I approached my editor and we sent him a couple of chapters where George had written a chapter and George was using uh basically other sources so he was doing a lot of research and you know a lot of quotes from different places and paraphrasing and so forth and putting it together into one narrative. So my editor kind of look and looked at it and he said, "Hey, you know, I love your summary, but you know, the other thing we just he just wasn't interested in the book unless there was an actual unless it was a firsthand interview. He didn't like the fact that it was all being sourced secondhand." So, um, anyway, that kind of one thing led to another and I said, "Okay, you know, um, you know, all right, so maybe we'll go we'll we'll work together on it." And so we ended up, so we ended up working together. And the book we're writing is really very much like the previous market wizard books. So sometimes George, the interviews, by the way, tend to be in transcript form are kind of long. So, you know, you might have a 100 pages of of transcript. You've got to boil it or plus and you want to boil it down to 20 pages or whatever it is, right? 20 30 at most. Um and um so uh we we we divided him up, you know, I did some from scratch, he did some from scratch and then his his uh version I would then rewrite so to my satisfaction and he would have you know I'd send it back uh and he could uh comment on my changes and stuff and basically that's the way we did it. So we divided the workload and we did the interviews together and uh you know the book is turning out just fine. >> Now so this brings me to a question that you and I are not getting any younger by the day and uh and and I'll I'll go so far as as as saying uh I'll call it the market wizards franchise. I'll call it that. I don't think it's an untrue thing. Uh who's going to continue on? Is George going to continue on? Because I think it's >> I never thought Yeah, I never thought about it before and you're right. I'm not I'm certainly getting on and you know I'm I'm still pretty I'm I'm luckily still pretty much there with it you know I mean I my mental faculties are pretty much there and I don't think my writing is any has has degraded at all and so that type of stuff I'm still you know kind of totally capable. I'm not as focused as I used to be for sure and I certainly can't do anything like the workload I used to do but um you know I'm still kind of there and it's just a question if I want to do it another book. >> Yeah. I'm not suggesting you're not Jack. [laughter] >> Yeah. No, no, I understand. >> That's not what I'm saying. I'm just saying that >> but at 77 Yeah. I'm not >> the world needs to continue having these and I think this kind of thing. Um may I propose that to you that you consider that? I don't have any plan for you. I'm just saying consider that. >> Yeah. I would give George my blessing uh you know based on my experience of working on this book you know at given the point where uh I no longer want to do anything and he and he wants to um there you go. We just made we just made we just made a a we just we just helped everybody out there with the understanding that it will continue on. Everybody feels good. Um now um going back to um the the ideas that we we've been talking about the the newest book the late or the two the book that's coming any without giving away too much but is anything like oh brand new in there because with this new book the last book you did was what year? last book was >> it's yeah 2020 >> 2020 >> yeah 2020 >> so let's let's call that before AI by the way >> I mean that well yeah I guess it was before AI was as prominent as it is now there was there was well it's kind of the what you call AI can is also a >> machine learning smart smart algos but is >> alos were certainly there yeah >> is this starting to pop through a little bit though the >> um so Yeah, I mean um not not explicitly in terms of uh in actual examples. I mean the algos are kind of more obvious and but AI itself that uh what AI is doing in fact one thing of AI is even the people who who to create it don't know don't know exactly what's going on a lot of times you know it's I mean that's that's part of what AI is right >> making it it's deciding its own uh rules and patterns and stuff like that so that's still too early on for I think traders to comment on knowing specifically how AI is affecting the markets. Uh but also have been affecting it for some time and that's come up >> right. Let's switch gears a little bit. Um and let me give you some I'll call it rapid fire questions. >> Yeah, sure. >> I have I have a few of them that I kind of was pondering. Um and you know, you can go as long as you want, but I thought maybe you can, you know, some of these will be quick. Okay. Um let's start in the back. Let's start with with with way back when and your your your story, right? What wor This is maybe a little bit longer this one. Uh what first drew you into this industry and more importantly what keeps you here? >> Yeah. By the industry you mean financial? >> Financial. Yep. >> Yeah. Pretty much accidental. I mean accidental beyond the fact that I was an economics major. Uh but so coming out of a graduate degree in economics, uh I was just looking for an analytical job and it so happened the first decent job offer I had well it wasn't so decent actually it was a very paying [laughter] job uh but it was decent in terms of being interesting uh was as a uh com uh commodity market analyst and so that was the position I took. I knew nothing about commodities. I knew very little about markets in general. Uh so I came into it as a pretty much as a total novice and certainly not somebody who as a teenager had thoughts of gee I'm I want to get into Wall Street and stuff like that as do a lot of the traders I interview. I was never in that uh group. I just literally fell into it because the first job that appealed to me that I was offered coming out of graduate school happened to be an analyst position in commodities. >> Okay. And what keeps you here? >> What keeps me here? Well, uh I've gone through a lot of different phases, but the markets are always interesting. Uh there's never Yeah, they're always changing. Um it always requires creativity. So, uh it's it's one of those jobs. It's one of those careers and and spheres of operation where it doesn't get boring ever. >> Yeah. Never. Especially now. >> Yeah. Well, anytime. I mean, I've been through a lot of things. I don't know if now is any more fascinating than uh than the 70s, let's say, which was, >> you know, uh which is people think we had inflation recently. They weren't around in the 70s. >> I know there was a lot going on in the 70s. As a matter of fact, know you've seen a lot of market cycles, right? So, what's one lesson that stayed true through all of them? >> Well, okay. particularly for young reader particularly for your younger listeners out there. I mean this is um um you know the idea of investing you know buy and hold and all that kind of does have merit you know for the long run. Uh the trouble is it's kind of hard to live through but it's also trouble is that the timing of when when people go to it is completely off. So I I did a book I don't know 12 years ago whatever called market sense of nonsense and one of the chapters in there I basically did an analysis I got data going back to literally well as long as far back as it existed on the stock indexes uh I think uh it went back to like 1860s or something like that. What I basically did is I uh calculated um you know what was your forward if you invested in the stock market you know today uh what is what what what is your average turnover the next five years 10 years 15 years 20 years and I did that looking at each year what was the prior five year prior 10 year prior 15 prior 20 and what you found was were not surprising to me but what you found was that by far your best results was when you came in and the last 10 years looked like crap. You know, everybody, you know, they were was maybe the last 10 years were net net negative and and everybody was negative in the market. So if so if you get if you look back at the last 5 year you know if the last 5 year 10 year 15 year those periods are near the lower historical range of percent return then that is a really good time to be a long-term investor >> is the opposite true >> reverse also yeah that that that's what I'm asking >> if you come in if you come in after the last you know 101 15 years have been great the next 1015 years usually aren't >> that's the old reverse reverion to the mean concept, right? That's the whole point that you're you're you're you're truing out. >> Yeah, it is. It is. And reversion to mean is a cliche, but it's a cliche because it's true, >> right? So, what's your take on the current investment environment? And are we in a new era of or just another phase? >> Yeah. Oh, well, you know, uh we're not in, you know, this time is I don't I can't think of an instance where this time really was different. There's always a reason why this there's always some Wall Street explanation of why this time is different. Um but but this time is never different. It never ends up being that way. I I mean so now maybe the argument is because of AI this time will be different. Uh I mean it could be the first time where that argument is true. But I heard it in all different situations, right? So um I I basically you're just going on what I just said and this is not a pro prognostication but based on what I just said because indeed the last 10 years have been quite good and I guess the last 15 as well and the last five uh so because I think you'll find that we're sort of the recent periods have been on the towards the higher end of returns that the next 5 10 15. Uh I would not expect them to be particularly good in that sense until you know unless of course we get a draw down unless we get a a 2008 or a 2000 2001 thrown out there again. And at that point the situation changes again. Yeah. It doesn't mean it doesn't mean that the stock market won't be a good long-term investment for the next 15 years. What I'm saying is it'll be a good long-term investment once you get enough of a draw down so the past five ten years don't look great, >> right? What's the um what's the one financial myth you wish people would stop believing >> aside from this time is different. [laughter] You know that >> um well you know one one is and this is not one that I wish people would stop believing but I think it's a myth. uh the official and you mentioned it before the official market hypothesis um you cannot you cannot interview the people I've interviewed and and by the way you know check their records you know verify their records because anybody can say anything and certainly on the internet you have a lot of people claiming they've done a lot of things which they haven't done but we verify >> well I'm gonna go from a lot to everyone but go ahead >> yeah [laughter] well not everyone but but a lot okay so Um the point here is that that um I've seen just too many people whose records I verified do things that are impossible that would be statistically like one just take two other traders I you know in this book uh one of them has not had a down month at least in 11 years but be even before then but the last 11 years he was on his own so we could look at his you know returns Not a down month. >> What's that? >> Not a down month. >> Not a single down month, right? Not a single down month. [clears throat] Another trader. Uh, >> and he's not just investing in like money markets. >> No, [laughter] he's not. No, he's not doing anything obvious. He's actually uh he's kind of doing a lot of merger op stuff and stuff stuff where people have lots of, you know, have down months, but you know, he just hasn't. Uh he's very short term though. He's extremely short term. Um, another trader is also very short-term. Um, his record now he's been trading for like 25 years, but his record since he was a prop trader for other firms before, but since he formed his own firm, his record goes back only about I know 14 15 years. Um, like is he had he had like five or six down months, but they were all tiny. And you know the odds of having just five or six tiny down months uh and [snorts] actually his worst down month in that whole 15 16 years was less than his average monthly return. >> Wow. Wow. >> So put that and that is you can't have that happen in an efficient market. Those type of results uh would be impossible. >> So that that's going against the whole indexing. Well not going against but there is another side to the story is the point. You're not saying that buy and hold S&P 500 bad thing. You're not saying that. You're saying there's other things. >> Well, I'm the thing here is, you know, this is kind of odd here. Um, so what I've what I've written and I think I wrote this in the last book, uh, was that the efficient of Markup offices, no doubt in my mind that it's wrong. No questions asked, no may. However, here's the irony. Most people would be better off acting as if it were right. >> Yes. No, I get that. I get that. >> Because because most people don't have an edge and they actually will be better going into a lowcost index fund than trying to do it on their own. Yeah. >> And there are statistics and studies that prove this. >> Yeah. No, I guess >> so. Um, so most people would be better off acting as if the efficient market hypothesis was correct. But it is wrong. >> What? Which means for for some people who have the talent and have done enough work and figure it out they can indeed be you know beat the market >> right. So there are many people who are impacted significantly from the books you've written whether it goes back to the early days of um getting started in technical analysis or some of the more recents. uh what book, what mentor, what experience has had the most impact on your philosophies? >> Yeah. Well, sort of I've interviewed so many people. I guess a lot of them have um but the biggest influence has been on the risk management side. So take one example and we probably I probably have mentioned this to you before but one of the traders from the actually the very first market was his book was Bruce Coer uh who then went on to found this firm Caxton and Bruce has been one of the more successful traders out there ever and u he had one line in that first interview which um which has had a big impact and That line is uh know where you will get out before you get in. Uh which is very good advice because first of all it captures about 95% of risk management in one sentence which is a feat in itself. And the thing about making a decision of knowing where you'll get out before you get in is in psychologically insightful in an implicit way. Because what changes when you go from not in the market to in the market? What changes is you lose your objectivity. Cuz if you're not in a position, you could be >> Oh, you're a genius. You're a genius. >> You could be the superman of [laughter] objectivity because you've got no money on a lot. >> Right. Once you're in a position, you now every news story that comes out, if it's for the position, uh, I'm right. And if it's adverse to the position, well, yeah, but that's already discounted or yeah, that's going to just be a temporary effect. You know, you you'll make excuses, but before you get in, you can think clearly. So, if so, my advice and I advise all people to do this before you put a position on, decide, hey, what price am I going to be wrong? Where where should it not go if I'm right on this trade? And what you do is when you enter, let's say, let's say you want to buy a stock that's at 50 and you figure, well, it should go from here. It might pull back a couple of bucks, but it should go back to 45. If it goes back down to 45, I've just blown this trade. Okay, buy the stock, put in a stop, good, cancel it at 45, and then you don't have to worry about it. And you've also defined what your worst loss on the trade is. You know, it's funny because there's there's a lot of times I have trades on for clients or positions on, I should say, positions on for clients in our in our trading portfolio and um you know, it's like it's going against us here. We knew kind of where we wanted to be on this and um you know, I'm not willing to take it down this much more than X dollars. And it's so relieving to actually have a trading stop on versus having to think through it. And also somehow it's very cleansing to put it on and knowing where you're going to be and it hitting and you're fine with it versus me chasing a position price to get out uh and freaking out about oh my god it's going lower than I wanted to go. Let me let me let me hit it now. And then you're like am I hitting at the right time? What am I doing? What if it pops? Am I going to be pissed off if I just got uh emotional about it? It's going to pop right back up. >> Exactly. I agree. >> Yeah. And then there's the proverbial, well, it's already down here. I'll just give it another three bucks. >> Yeah. And and I'll buy some more. >> Well, that's that's even worse, you know. [laughter] >> All right. So, let's finish up. Um, looking ahead, is there a particular trend? Let's leave AI out of this. That's going to define the next decade of investing. >> Um, I don't know if there's a trend really. Um, it's sort of hard to define what AI is going to do to the markets. Uh, I'm not sure myself on that one. Um, you know, that's, you know, >> well, I mean, let let's let's let me let me help you with this for a second. Let's dovetail this into the things that are going on right now when it seems like government is getting in. You know, for a long time, uh, state-owned enterprises in China were like, "Oh my god, what a horrible thing. We have Chinese government owning parts of the and or Japan buying into the major markets or the Norwegian sovereign wealth fund buying all terrible. Oh my god, this and now we do it. It's like, oh, what a great idea. >> Uh, I don't know if people agree it's a great idea. >> I don't think it's a great idea personally, but that's but is this something where we're going to have basically governments take take over? >> I doubt it. I mean it's true of this administration but I don't anticip like a lot of things in this administration I don't expect it to continue beyond this administration >> right maybe that's why a lot of things are just looked past of what goes on who knows kind of crazy times but um all right anything else that you want to talk about when's the book coming out what's happening what's >> well the book the book will come out next summer I think uh but not finished writing it yet I think it'll come out around June July something like that. >> Oh, and it's going to be called It's going to be called um Marco Wizard's The Next Generation. And >> it's like a Star Trek It's like a Star Trek. >> Yeah. You know, George mentioned that. I'm not a Star Trek fan. Like Star Trek, but you know, I'm not a I'm not a Star Treky. Uh George was aware of it and uh he said that and uh I said, "Gee, I didn't even I wasn't even aware of that, you know." But [laughter] uh uh so no it's uh I thought it was appropriate because the cohort of traders are younger than any cohort I've ever interviewed. Now given that I'm looking for traders who at least 10 15 years experience there's a limit to how young they could be but um you know uh uh most of the traders are 30s are 30s which is pretty young for a group of traders that I've interviewed. By the way, are these traders, these younger traders different than let's say your first set of Well, clearly different than first. Let's not talk about that. The last they are there's a lot more crypto involved. >> The some crypto, but crypto I didn't interview any traders who are crypto traders per se. They they if they trade crypto is just like any other market. They might have traded it, but it's not a big thing for you know that's come up. Um there the one big difference I've noticed is uh so many of these traders have a very short-term orientation or at least had very short-term orientations in their early years until maybe they got too much money to be that short term. But u that's >> or it's possible that their upbringing which allowed them to focus on studying for school, watching TV, listening to music uh and all at the same time. Well, that and playing video games >> all at the same time. >> So, this is the first book where playing video games has come up on several interviews. I don't think it's up ever in any of in >> So, this time it's come up several times. >> That's cool. I like it. >> Yeah. Yeah. >> That's good stuff. My favorite video game when I was a kid, uh, well, I listen, uh, when I was a kid, we had Space Invaders, one of the first ones that came out, Galaga. Um, we had Asteroids, Missile Command, um, Donkey Kong, uh, all the all the Mario, all the favorites. That was all, but those were all quarter machines back in the day. >> Yeah. >> And we used to go down everywhere. I was in I was in high school. That's when that happened was high school. Was >> I could still remember Pong. >> Yeah. Pong was great. Was I love Pong. >> Very first one. Two paddles. Two paddles and one ball. >> Right. Exactly. Good stuff. >> Three items on three items on the screen. >> Right. [laughter] >> Yeah. And that's all we could focus on at the time by the way. >> Well, that's all the program could focus on. >> That's true. Also, Jack Schwagger, always a pleasure. Thank you so much for joining us today on the discipline investor. >> Yeah. Thanks, Andrew. >> Thanks. >> Appreciate it. Take care. >> Well, there goes there you have it. There is the last bit of tidbit of smidgen of knowledge from the Disciplined Investor podcast from 2025. Looking forward to seeing you next year. We have some great guests, some best of, some things happening. 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