It’s not comfortable on the beach, is it?
And after the day we’re going here,
How many of you would not exchange for him?
The issue is that this is how I imagined my clients
when I started working in the stock market.
They called me on the phone and I executed their purchase-sale orders.
Sure, I did not see them.
With the passage of time, I began to realize that they were losing money.
A lot of money.
They even went bankrupt.
And that worried me, not only for them,
but because if the bank where he worked
He ran out of customers, I would stay in the street.
So I prepared a report with the data
of the clients’ last years,
and I discovered something amazing,
or at least, little known.
And it is that 80% of the private brokers
they go bankrupt after two years,
and only 2% survive.
Worried, I went to see my boss who, very nice and kind, told me:
“Marcos, (laughs) but what a heck you’re made of.
We are not in this business to make money for our customers.
This is like a farm and we are farmers.
Here we come to extract milk from cows
until there is no drop left.
And when they’re squeezed, it’s already more cows. “
That left me in “shock”.
Because I never imagined that I had gone to work
in an industry that to be profitable leaves its customers to die by system.
A few years later I entered the business of the investment fund industry.
To save on a fund, usually one saves money
and instead of going to find a good financial advisor,
that costs money,
he goes to his bank of all life to recommend a good fund.
What a coincidence, of the 25,000 funds registered in Spain,
if today I go to the bank, they will recommend me the same as all of you.
And we left the bank happy, with our money in the background.
But at the bottom of the ocean, as we are going to see.
Because this fund has crumbs.
And to see it, let’s imagine that the fund industry is like …
the party of the paella of our town, where there are three contests.
First, to the best ingredients.
Second, the best paella ever.
And third, the best paella deconstructed.
The first contest is to see who exceeds a minimum of quality
at the time of producing the best oil, the best rice, the best vegetables …
We will call that minimum quality “benchmark”.
How many funds do you think they approve?
Well 96% suspend.
This is due to many reasons,
but one of them are the commissions that collect the funds.
Between 1% and 2% a year that may seem small,
but if you expected to save for retirement EUR 100,
You are going to be left alone with EUR 50.
And you start to imagine
Who stays on the road with half missing?
The second contest for the best traditional paella,
It hides a secret that the industry does not like you to know.
And it is not so important what funds we choose to invest,
but the proportion that they will have in the investment paella.
In fact, up to 94% of the profitability of your investment portfolio,
It depends on the proportion of the ingredients,
not the particular funds you bought.
This is so important that the industry spends huge amounts of money
to investigate what is the perfect ratio.
That formula that gives us the proportion of the best paella.
This search has always reminded me of one of Gulliver’s trips.
At the University of Lagado, when Gulliver visited her,
the best scientists in the country worked,
and they had been squeezing cucumbers for years to try to get sun rays from them.
Of course, without success.
The same thing happens to industry.
Those sophisticated mathematical models, some with Nobel Prizes behind,
They need to work to tell them what the future will be like.
And, unfortunately, the best analysts are no better than a coin,
when it comes to predicting the future.
So it does not surprise us that, in this second category of the paella contest,
nine out of ten suspend.
The third category is to deconstruct the ingredients,
dehydrate them, inflate them, turn them into foam,
Mix them in different ways
to give them a salable form also known as a hedge fund.
A little what is done with this that seems food
but we do not know very well what it is.
An example:
In 1998, one of these funds that had gained 20% a year for several years,
He lost all his money and even more.
So much so, that the US Federal Reserve he had to rescue him
so that the global financial system would not break.
This is very dangerous to play with the ingredients.
But in general, how do these types of funds do it?
Warren Buffet, one of the richest people in the world,
he bet with a friend USD 1 million that in 10 years he would earn more money
investing in a stock index
than in a portfolio with the best hedge funds.
How’s the bet going?
Nearing completion, the basket of hedge funds
is giving a 22% cumulative return,
and the stock index is giving almost four times the profitability.
The issue is that, if all the money that has been invested in hedge funds
it would have been invested only in treasury bills,
customers would now have double the money in their pocket.
So we have funds that do not get approved.
But of course, between 25,000 funds and 14,000 hedge funds,
there is always someone who does it very well.
If we order your profitability like in the soccer league,
and we choose those who are in positions of “Champions”,
we could think that if we invest in one of the best,
next year will also remain in the “Champions” position.
Well, no.
Only 5% repeat the following year and in five years, none.
In other words, investing in the best funds of last year makes so much sense
how to buy the lottery number that came out last Christmas.
We have increasingly thinner and fatter cows every time.
This is almost a recochineo because it seems that the more they suspend, the more they earn.
How much?
In the last two decades, the industry has pocketed EUR 39 billion,
while customers have lost EUR 118 billion.
If at least this were illegal, we could report it. (Laugh)
But no, it’s not illegal. Needless.
It is not necessary because they do not deceive us, we deceive ourselves.
We go to the bank, they sell us a paella with pineapple and chorizo, and we left happy.
We’ll have to start thinking that maybe he’s not very smart
Do what everyone does. We are going to reveal ourselves.
And how are we going to reveal ourselves?
We are going to “hack” the fundamentals of the industry.
And for that I propose that you adopt the botijo.
The botijo is a very simple technology. It works for thousands of years.
We put water and with a little patience, a natural phenomenon not forced, it cools it down.
The evaporation of water.
It is also made with basic and unadulterated materials and is at our service.
We have to answer two questions: In what to invest and in what proportion.
Let’s imagine, to invest,
that we have to feed on what a garden produces all year round.
That means we have to have fruits and vegetables that bloom and ripen
during the four seasons of the year. That way we will always have something to eat.
The same thing happens with investments.
The economy goes through cycles of growth and recession.
And if we have enough ingredients to capitalize the cycle,
There will always be some asset that is giving us profitability.
And then, the question is: What proportion?
How can we do better than Nobel Prizes and thousands of physicists
and mathematicians working on complex equations?
Well, we have a great advantage, and that is that the botijo is humble.
And if we start from that humility, we will win.
The botijo does not try to predict anything, and neither do we.
If we can not know which financial asset is going to give more money next year,
We are going to invest, in equal parts, in all the ingredients. It’s that simple
And I’ll show you three examples that you can do at home,
for yourselves
You can research on the Internet
without the need for any greater complexity.
The first is The Portfolio of Dylan Grice, it is 50% in bonds, 50% in stock market.
It remains constant.
Another proposal is four ingredients. In addition to bonds and stock market, gold and liquidity.
This proposal is from the White House candidate, Harry Browne.
The third, by Professor Craig Israelsen, is 12 ingredients, in equal parts.
What results do we have? The results we have are, first,
that we can go to the beach to fish or lie down in my client’s hammock.
The second is that we are going to obtain a profitability similar to that of the stock market,
but with half the risk; this means that if we start saving
at 20 years EUR 5 a day, we are going to retire millionaires.
In summary, the industry is going to push us towards expensive and sophisticated products.
He will sell us the arrogance of his managers. And try to focus on the short term.
However, the efficiency in the investment is in the cheap products,
in the simplicity of the strategies, in the humility when managing
and in the patience to capitalize the strategy.
Now I just have to tell you that it depends on you
if you want to become a cow or adopt a botijo.
Thank you.
(Applause)
”
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