Stig Brodersen 7:25
Malcolm Gladwell tells us a few stories about what he would call “thin slicing.” Basically, how with little knowledge can go a long way. He’s saying that one of the most extreme versions of thin slicing you can observe on a daily basis is whenever you are evaluating the teaching qualities of professors.

Basically, what they did in this test was that they had the students look at three sets of videos. The first one was just 15 seconds long. Then they have the students evaluate the performance of this professor and how good he was at teaching.

The interesting thing was that there was no audio here at all. It was just this guy who they had never seen before and just looked at him for 15 seconds. Now, when they compare that to the other group who actually had that teacher, they were exactly the same ratings.

So, okay, if people can do this in 15 seconds, just normal college students, well, can we do that for 10 seconds? They tried it for 10 seconds and it was exactly the same result.

Then they even did it in two seconds. In just two seconds, they could evaluate the teaching performance again without audio, just really with a blink of an eye. That’s so powerful. It’s not just as we saw in the first example, where it’s an expert who has been studying Greek statues for three decades, it’s random college students who have the same capabilities of valuing whether or not a teacher is good at teaching.

Preston Pysh 8:53
One of the stories in the book that I liked the most about thin slicing was the story of doctors who were being sued for malpractice. It was interesting the way that he said this. He said that if they could peer in on a phone conversation between a doctor and a customer or a patient for just a couple minutes, they had such a high probability. I forget what the percent was, but it was a very high probability of accurately predicting whether that person would be a doctor that has a higher probability of malpractice lawsuits or not.

What’s so fascinating about this is for a person looking at this from the outside in, they would say, “Well, how many surgeries does the person do a year and what type of surgeries do they do? Have they had poor performance in the past with some of their surgeries?” That’s where most people would go.

However, they found that they were actually able to predict malpractice with doctors at a significantly higher rate by listening to a phone call for just five minutes between the doctor.

Gladwell talks about the reason people want to sue a doctor is not just because they perform something wrong with the surgery, but because people had an issue with the doctor. They felt like the doctor was condescending to them or that the doctor didn’t treat the right. That’s the person who has a malpractice.

What was interesting was he talks about how some doctors have a ton of surgeries that don’t go well, but they’re never sued. The reason why, according to Malcolm Gladwell, is because the doctor is nice and actually likes and takes care of their patients. Meanwhile, doctors who are mean and the ones that kind of treat their patients like they’re inferior, or beneath the doctor, are the ones who get sued.

They then were able to listen to just a short conversation between the patient and the doctor on the phone. If the doctor was talking down to the patient, or talking to them, like they’re lower being than him, the probability of that doctor being sued for malpractice was significantly higher.

This is a great example of thin slicing of a critical element that leads to malpractice suits, which, believe it or not, was higher than the doctor’s poor performance.

I’m sure there are a lot of situations where this scenario is not true, but from a macro perspective, it’s actually a much better predictor. I found that just fascinating. That’s what he’s really getting at.

He talks about this idea of looking at what it is you’re trying to understand from an angle or from the side. He says, “This is a great example of being able to not look head on to why this person is being sued because the surgery was performed wrong, but actually looking at a more critical element from a side vantage point, which is how does the doctor treat the patient? How does the doctor make the patient feel?”

He found that that was a more important characteristic to identify such malpractice.

Another example that Gladwell goes into, this was really a neat story as well.. This is a story about a gentleman named John Gottman, he works at the University of Washington. He’s a psychologist there. He has become an expert on understanding whether a couple is going to continue to stay married or not.

The way that he has conducted this research, this is quite fascinating, is he set up a room with two seats that face each other and then there’s a table in between. Then there are sensors on the seats and cameras behind the people.

Basically, you had a camera, giving a direct face shot of the one person and then another face shot of the other person, as the two people would be interacting, the couple would be interacting on the chairs. He’s got sensors to see how they’re moving. He has the sensors to see how their facial reactions are. He’s obviously recording the sound. And so, he’s using all these sensory inputs.

Then he’s trying to capture a couple having a conversation, preferably an argument for about an hour. What he has found that is by watching and looking at his sensor inputs for one hour with a couple arguing, he can predict with 95% accuracy if they’ll get a divorce within 15 years.

When you think about this, the fact that he’s watching an hour conversation, and he can predict something like that with such accuracy, for me it is a little scary. When you hear the story that he talks about in the book, it’s really quite fascinating. The level of detail that he goes into to detect the way people are interacting and the way that their face changes whenever they’re having a conversation…

One of the conversations that he talks about in the book is that he brought in this couple and he said, “What don’t you guys agree on?” They said, “Well, we don’t agree on the dog.”

The man doesn’t like the dog, the wife loves the dog. So he says, “Okay, no problem, just talk about the dog. I’m going to capture the information that you guys are talking about.”

After they’re done, he’s showing this tape to Malcolm Gladwell, and he’s showing him where the concerns are down to like every little moment in that conversation and down to you see what happened here during these three seconds, how his face reacted to the way that she said this. That right there, where he’s raising his eyebrow, is very bad.

What he does is he takes each one of those, let’s just say he breaks it down into buckets of one second. He’s flavoring whether that one second is a positive reaction or a negative reaction. Then what he’s doing is he’s summing up each one of those one second buckets. He’s looking at that for the entire duration of the 15 minute or one hour conversation. Then it’s basically providing a score based off of those one second buckets that he collected.

Stig Brodersen 15:00
Just to give you an idea of the details that he used, he had 27 different emotions on a chart that he used. He had a number for each one of them. It was not only facial expressions, even though there were quite a few good ones like rolling with your eyes, for instance. If anyone is in doubt, that’s not a good thing to do to your wife.

He used 27 different emotions. The face is actually the body language that is easiest to manipulate. People actually do that to each other because we are told to at least look happy, or at least pretend that you are whatever that is. So they also had cameras below the table.

One of the most honest parts of your body, that’s actually your feet, because your feet tells you what you’re thinking. Your feet tell you your mental state. That was also a different and important tell.

At the end of a one hour call, he had as many as 900 numbers on each person in terms of going through whether or not there would be a high risk of them getting a divorce.

Just to continue on Preston’s point on what you should really pay attention to. He had something called the four *inaudible*. There was a most important one, that was contempt. Speaking from a higher level, because it’s so close to discuss basically the same as told rejection.

I actually found that very interesting compared to suing your doctor for malpractice because it was exactly the same thing as being condescending, speaking from a higher level. That’s really what gets you into trouble. It’s the same with marriage.

One way you can easily look at something like intent is if a person rolls their eyes, that would be one of the easiest signs.

The next one would be stonewalling. Apparently, more men tend to do that than women. Stonewalling is really what we’re getting at before, like not giving in and just saying, “I’m right”, being completely inflexible.

Then we have criticism, apparently more women do that than men. Then being defensive, really having all these responses saying, “I agree, but…”

Whenever you’re trying to give in, and then still say “but” at the end, and then come with another defense, this typically means that you shouldn’t have an agreement at all.

For me, this was really an eye opener. I guess, for anyone being married, or any kind of relationship with a significant other is really interesting to think back on different discussions you had.

It’s not only arguments, even though he said that arguments would be a good starting point for analyzing how you communicate together, it’s really the pattern of how you communicate, regardless if it’s a very difficult argument, or if it’s really your everyday discussion.

So 95% accuracy of divorce after just one hour. I mean, for me, it’s unbelievable. He said, “After 15 minutes, it was 90%. Just after three minutes, you will give a pretty accurate picture.”

I don’t know. Preston, will you say, “Yeah, I would really like to try this or I don’t know if I want to know this?”

Preston Pysh 18:10
Now I read that as one of those things I really want him to tell me what he thinks, with that kind of accuracy. Now, I found it really fascinating though.

One point that you said there that was also really important is whenever one of the individuals in the argument would just say something to deface the other person like, “Well, screw you.” That is a relationship that is going to have a problem like in the future, hands down.

I don’t know if anyone out there listening has that kind of stuff going on. But that’s what we read. In fact, I would highly encourage people to buy this book, just to read this section. I think it was really fascinating to hear some of the points that he talked about. This is right at the very beginning of the book, I think this is in the first chapter. It was pretty interesting stuff.

The next story that I found really interesting in the book was the story about a surgeon. His name was Brendan Reilly. He was trying to discover a better way to diagnose heart attacks in a hospital. For anybody who works in the medical field, and I’m very illiterate when it comes to anything medical related so I apologize for those listening, if I mess any of this up.

When you think about a person who’s coming to the hospital that has a chest pain and has a concern of a heart attack, this is a really risky position for the hospital because if they bring the person in and they run a bunch of tests, and the person in fact did not have a heart attack, it’s very costly to the hospital to go through that process. It takes up a lot of time and effort. It may distract from other patients that might need care.

There’s a lot of pieces here that if they don’t make the right diagnosis, it’s very bad for the hospital for obvious reasons.

On the other hand, If the hospital sends the person home, and they in fact do have a heart attack, or they have the symptoms, or a heart attack that’s about to occur, that’s really bad for the hospital as well. So they’re kind of in this situation where they have to be very accurate with their diagnosis.

For Brendan Reilly, this was a real passion for him to try to understand what is the checklist that could develop that really kind of asks the right questions and gets really high accuracy in a short amount of time, but doesn’t overburden things.

At the end of all this, Brendan came up with a three question checklist. Out of all the things that you could think about trying to understand it like how old is the person? What’s their history for heart risk? All these different things that could come out, none of those things were included in this checklist.

In fact, this is his checklist. Number one is the pain felt by the patient unstable? Number two is their fluid in the patient’s lungs? Number three is the patient’s systolic blood pressure below 100?

Those were the three questions and that was it. He says, “Let’s do this.” For each person that comes in, they’re going to do the checklist of three that Brendan Reilly came up with. Then the other doctors are going to do whatever method they were doing before. Then they’re going to compare the results after I think it was one month that they tested both of the systems.

What they found after a month was that Brendan Riley’s three question checklist was 70% more accurate compared to the method that other doctors used. It was safer because it didn’t involve any precursor surgery or anything like that, which, for me, is just mind blowing that something so simple could have those types of results.

Kind of as a sidetrack, this reminds me of this professor in politics. He has seven questions. I think it’s a seven or eight question checklist that he asked himself before each election of who’s going to win the election. It’s seven questions. That’s it.

His accuracy for the last 25 or 30 years, he’s only missed, I think, one election. In that entire period of time, he has been wrong one time. That’s crazy because when you look at the probabilities of what all the pollsters and things they would have been saying.

Maybe there’s something to this and it’s quite fascinating. This goes back to what Malcolm Gladwell was saying that we discussed earlier, which was looking at the critical element of what’s happening, kind of from a side angle and a split second judgment based off of these really simple questions. Stig, I’m curious how you kind of read through this example.

Stig Brodersen 22:47
I think there are so many built-in problems to this story. It’s really not my way of saying that the healthcare system in the US it’s broken or anything like that.

Just for instance, to begin with, when you talk about malpractice, as it turns out, only 10% of the people who came to Cook County Hospital had a heart attack or had a true heart disease. But of course, you don’t want to send someone home. If there was something wrong, you don’t want to be sued or anything like that. So you just admit a lot of people and which basically means that if you meet everyone, no one will get the right treatment.

I think what really stood out for me was how more tests didn’t help at all. Problem one, more people died. Problem two, it is more expensive. Problem three, the doctor felt more comfortable having more information. That also meant that they had a really hard time changing their mind because now they have all these tests and they feel certain in their decision to do Plan A instead of Plan B, that it was a huge advantage to the patients if they were not diagnosed correctly, which again, would lead to problems one and two.

It really also goes back to being human, I guess, in the sense that if you’re a doctor, think about how you spend so much money and so much time studying and gaining experience. I don’t know if you feel like you have mastered your craft, but if I were a doctor, and I spend so much time and money coming to that place, why would I feel comfortable using three simple questions that I guess more or less everyone on the street can do? Why would I not trust my own decision, follow my own guidelines and make my subjective doctor decision?

Otherwise, I would just feel like I’m a robot in a system one way or the other following this simple decision tree.

This is not my way of *inaudible* or any bad experiences with doctors. I think it’s also more an ego thing and more just being a human being like why would you use a system like that.

I cannot help to relate this slightly to stock investing, in the sense that simple being better. I’m thinking you’re using something as simple as these three questions. It cannot relate to medicine for me and like something very, very similar. Everyone can basically do it, if they understand what’s behind it.

Compared to an individual investor, a doctor coming up with a habitual assessment, reading through all this data and watching all the documentaries, whatnot, about this company. You feel this is the best pick ever because you have so much knowledge. But that stands to reason that simple is typically better.

If you have a formula that is proven and it works, why would you go through all the hoops of the other thing? You are just painting yourself into a corner.

It may be lame that I’m talking about heart attack and transition into a discussion about stock investing, but it’s more how do we make a decision? How do we avoid the human bias in the decision that we’re making and taking out the personal pride?

Preston Pysh 26:18
Yeah, and this is exactly how I thought of it whenever I was going through this, too, was, when I come back to investing, how can I develop a checklist or something that makes things easier, but is also all encompassing, that other things are nested underneath of those really profound questions or those points that I’m trying to understand?

So when I look at this as an outsider that has zero medical knowledge whatsoever, and I see that they’re just three questions, it seems really too simple to just ask those three questions.

However, I guarantee you, there are so many nested thoughts and ideas that are underneath each of those three questions, that it’s way beyond what it looks like on the surface.

When I think of a great checklist for investing, I think that that’s also something that a person needs to think about in the way that they’re developing their approach.

Stig Brodersen 27:10
Preston, if you ask someone like Toby, he would say that he just needs one question and what’s the lowest multiple on this exact formula, then I’ll just buy them. I won’t do any visual assessment, because whenever we test that, people can’t do that. It’s just too hard. So it’s just easy just to trust that one multiple. That’s it.

II think that really makes you humble, regardless if you’re a great investor or a great doctor. It might be simpler than you think sometimes.

Preston Pysh 27:38
I think you go to Warren Buffett, and people say how long does it take you to figure out what the value of a company is? Then he says, I can figure out what I think the intrinsic value is in a minute… I forget what the exact quote is, but it’s like a couple minutes, right? It’s not very long at all. He’s doing something very similar.

Stig Brodersen 27:57
It’s definitely not to put doctors or investors on display because as a patient, wouldn’t you rather have your doctors take you through six tests? That would probably give you a sense of security and safety, just like you would like your money manager to scan the market now second for second so you are sure that you would get the very best stock for you, even though that might not be really what you need. I just saw so many similarities between those two.

Preston Pysh 28:29
I think it’s Einstein with the quote, “Make things as simple as possible, but not any simpler.”

For this example, it works, but for other times, people might be trying to simplify things too much. They’re missing just a ton of important details that need to be incorporated, but it was an interesting story. It was an interesting point that was laid out in the book. It definitely makes you challenge some of the way that you view things and maybe over complicating things.

Up to this point, in our discussion, at least, Gladwell is basically talking about all the pros of how a person can look at something in a very short amount of time, from this outsider’s kind of angle, not looking at it head on, and being able to make a determination on something that’s very accurate. It gives them very good insight.

Stig Brodersen 29:19
The second part of the book is just the opposite. How do we come up with these snap decisions that sometimes work against us?

One of my favorite stories, not just in this book, but in general, that’s the story about the new Coke. To me, it’s just such a fascinating story of how so many people are wrong.

If you’re listening to this, and you’re thinking, how is that related to “Blink” and making snap decisions, it’s because the way that this was tested, whether or not people like Pepsi or Coke was that they were doing blind testing and they were doing like a few sips of Coke.

Back when they tried this, this was in the early 80s, they realized that 57% of you preferred Pepsi, compared to Coca Cola in a blind test. Clearly this frustrated Coca Cola a great deal.

They were trying to come up with a new formula for a new Coke to make it taste better. What they realized was that they needed to make it sweeter. They decided to make Coca Cola sweeter on a test basis. This was a very, very thorough test. They actually asked more than 100,000 people to go into a lab. They might be stopping people in malls or whatnot, and then take them into a room and do a blind test. They will ask if they like Pepsi, or the new improved Coca Cola.

Finally, in September of 1984, they came up with this final version of what they call new Coke. Across the board, more than 100,000 people were asked, and 7% more now prefer new Coke compared to Pepsi.

The CEO even called it the surest move Coca Cola ever had done in history. We know it’s going to fail.

People who remember this or guess in my situation, people have been told this story, it talks about how people just went crazy. Not in a good way. Everyone was just so displeased.

People more or less feel betrayed that the Coca Cola company was taking away their favorite drink. Now people are starting to look back and say, “How could they just be so wrong? How could people prefer the new Coke, the taste of new Coke, but not actually when they started to manufacture this and start to market it?”

There were quite a few reasons for this. One of the most important ones was the sip test problem, which is a problem both for soft drinks and also for the music business.

This is the thing, whenever you get just a sip of Pepsi, it’s better because it’s sweeter than Coca Cola, but you don’t drink one sip of Pepsi or you don’t drink one sip of Coca Cola. You drink an entire bottle. That’s the first part.

The second part is you need to account for the environment, right? So it’s not like whatever you were drinking, it’s not like you’re sitting in a lab. That’s not how you enjoy a drink. You’re doing that with your friends. You’re doing that in front of the TV. It’s a different experience.

It feels different when you drink a bottle of Coca Cola in your own home. So whenever you ask people for polls, you need to put them in the right situation.

A lot of music has done really well in sip test labs, but that’s not necessarily the musicians who do well. You need to put people into the concert to give them the experience of the music and to give them the experience of the Coke, if you might add, before you can really do a poll on what works and what does not work. I’m curious to hear your take on this, Preston.

Preston Pysh 33:15
I think where it fits into what Malcolm Gladwell was talking about was when the two seconds is a bad decision point for a person. In this case, Coke didn’t even believe that when Pepsi started airing these commercials that in a blind taste test, everyone prefers Pepsi. Coke then went out and started testing it themselves.

They found out that everyone prefers Pepsi over Coke in a blind taste test. And so they’re like, “We’ve got a problem on our hands.” That’s why they went after this whole new Coca Cola drink.

What Gladwell is really getting at is that two seconds was not representative of what the truth was, which is you have to drink the whole can before you make a determination whether you like it or not, and when you drink the whole can that too sweet necessarily isn’t a good thing. I found it to be a really interesting example that he used in the book. It’s something that I think everyone can relate to.

I know there’s a lot of people out there that say, “I can taste the difference.” I think for some people they can, but it was an interesting story. I liked it.

Alright, so that’s kind of our summary for “Blink.” There’s a lot of other stories in this book. If you’d liked some of the stories that we were talking about the whole books just littered with stories like this, I think this is well worth your time to read. I found it really to be fascinating.

The one thing that I can say is… I don’t even think this is a negative, I just think it’s really hard to maybe change the way you make your snap judgments. I think Gladwell even makes this argument in the book that maybe this isn’t something that we do have control over. Maybe this is just something that your subconscious spits out whether you like it or not. Sometimes it’s useful and sometimes it’s not.

I would argue that that’s kind of his point in the book, but I think that some of his discussions are really interesting to hear. I think that that’s the real value. Then just to be kind of aware of the fact that sometimes it’s really useful and sometimes it’s not.

Alright, so this is the point in the show where we’re going to ask a question from the audience. This question comes from Brian.

Sender 35:13
Hi, huge fan of the show. I have a question for you about commodities.

Preston, I recently reached out to you on Twitter for a recommendation on books about commodities. You pointed me in the direction of Jim Rogers. I’ll be honest, I didn’t really know that much about Jim Rogers when I picked up his book, “Hot Commodities,” I absolutely loved it. I’m going to continue to follow Jim very closely, especially over the next couple of years.

In applying the knowledge from that book, one key point in “Hot Commodities” is that a lot of the commodity indexes out there tend to be extremely concentrated in oil, energy and precious metals.

What Jim points out in the book is there’s a lot of other great commodities out there and being more diversified is a good thing to do. Hence, these are RICI indexes. So in trying to go out into the marketplace right now, as a retail investor with five figures, small portfolio ETFs are really my best option.

I’ve been looking at RJA, for example, but there’s one problem I’m running into and that is, it’s an ETN. And so, I wanted to first get your thoughts on the safety of ETNs and do you use them? How do you approach the risk of delisting and things like that?

Secondly, what recommendations do you have for getting into broad commodities for a retail investor like myself? I love your show, keep doing what you’re doing. Thank you so much.

Preston Pysh 36:33
All right, Brian, fantastic question. I’m going to let Stig go first.

Stig Brodersen 36:37
I really like your question about ETNs, because I think it’s something they really haven’t covered. We primarily talk about ETFs here on the podcast. Those two are very similar in the sense that they’re both designed to try an underlying asset and typically very popular because you have a lower expense ratio than active *inaudible* funds.

Now, the main difference between the two is really under the hood. When you invest in an ETF, you are investing into a fund that holds the assets it tracks, and then it trades that.

With an ETN, it’s more like a bond. Basically you are buying an unsecured debt note that’s issued by an institution. So just like a bond, an ETN can be held to maturity, and they can be bought and sold. But you are depending on the institution.

So if the underwriter of this, it would typically be a bank, if they were to go bankrupt, or if they get a credit downgrade, it will affect the price and value of your ETN, which is very different from what it is with an ETF.

I think one of the advantages if you do decide to invest in ETFs, would be that for tax reasons. Sometimes it’s better to hold the fund until it’s completely sold out, which is often years later. You will trigger long term capital gains tax. It can be a gain with some other funds, with the short term capital gains tax.

However, again, that might also be a part of the strategy of that fund that you rebalance often. That will be a counter argument.

Also, another advantage is that it doesn’t have any tracking error because you’re basically buying this basket of whatever this would be commodities, and then it sold off at the very end.

In terms of giving a suggestion or providing a recommendation of what to invest in, I think it’s very difficult because I guess I would say if you’re not familiar or comfortable evaluating a bond and evaluating credit, I definitely wouldn’t go for an ETN.

If you feel comfortable doing that and you like the underlying asset, I think it would be good. If that’s not you, I would probably go for an ETF or another vehicle. That, I guess, to most people is easier to analyze.

Preston Pysh 38:51
Brian, I completely agree with what Stig just said about ETNs. I don’t own ETNs. I’ve kind of tried to stay away from them just basically for the same reasons that Stig just mentioned.

When you think about commodities, at least what I learned from Jim Rogers book is it really comes down to supply and demand. In fact, we just had an interview with Bill Miller just last week. That was one of the things I asked Bill is whenever he looks at whether he’s going to buy a specific commodity or not, what’s the main thing he’s looking at?

He said it’s supply and demand. It’s all supply and demand when you’re dealing with commodities. So it really comes down to finding a low cost ETF for the sector that you’re specifically going after that you think that there’s a supply and demand imbalance.

I also feel that commodities are a great place to be if you feel like the dollar is going to be devaluing as far as a macro trend, which is one of my main arguments for why I think commodities in general, generally speaking, are going to do well in the coming year.

Whenever you look at the different commodities out there, I think the big buckets are energy, agriculture, industrial metals, livestock and precious metals. I think those are your big buckets.

If you’re finding a call to pro shares, or an i-shares ETF in there, those are probably going to give you the lowest cost, the lowest fees to be in one of those. But again, make sure you go back and you’re looking at the supply and demand globally is how I typically like to look at this: What’s the global supply and demand and what’s things looking like, if that’s going to continue to persist that imbalance?

If there’s an oversupply and under demand, and you’re seeing that trend continue, then you can position yourself accordingly for that.

I’m a huge fan of the book that you just mentioned by Jim. I think that that’s the best commodities book I’ve ever read out there just kind of talking about the best way to invest in commodities.

Stig Brodersen 40:43
I think commodities is an interesting play in terms of a hedge. I mean, if you just look at the returns, just by commodities itself, it is typically not super appealing compared to some of the other asset classes, but it has a negative correlation to long term bonds, close to .2 and native correlation, two stocks with close to 2.27.

For that reason alone, it might be something you’re interested in, if you think that those markets are overpriced. Really, if not, you might take the reverse position, but that’s one of the reasons why a lot of really good investors are holding it in the portfolio.

There might be good reasons why you won’t just say, “Oh, okay, I just don’t want to be as exposed.” You might have a capital gains tax you’ll have to pay if you decide to own that stock. So that might be a way to manage your risk.

I guess that would be my take on it, that it wouldn’t be like a long term thing to hold for me, but it would be something that under the right market conditions might be an interesting and appealing investment.

Preston Pysh 41:44
I think another important part with commodities is really kind of looking at moving averages and looking at what the trend is for commodities. Stanley Druckenmiller often says that commodities move in about three to five year periods of time. If you start getting on a bull trend, an early bull trend with a commodity, historically, those have moved in about three years. It’ll continue to move in whatever that direction is.

When you go back, and you look at the last time the commodities market had a big bull run, that was the start of 2007, when interest rates were climbing, and kind of, in my opinion, a very similar dynamic to where we are today.

Whenever you saw commodities really kind of melt down, you saw that kind of play out in 2014 through 2017, you saw commodities just get crushed. I think that you’re kind of at the bottom. I think when you look at the price action of commodities, this is also where it’s different than stocks where a stock has a lot more variables to it, where you’re trying to figure out whether the competitive advantage of each underlying asset is going to continue to be there, whether the business is moving in the right direction, whether developing new products, and the R&D is being properly allocated.

You’re looking at all these things to determine whether the trend of a company is going to continue to outperform the market. That’s really difficult stuff, but going maybe to the simplicity of commodities is if you look at commodities, you’ve been punished for the last three or five years. You’re probably at a point…

I know this sounds really simple, but you’re probably at a point where they’re probably getting ready to do really well and probably perform pretty well because there’s only so much price action that can happen for the price of oil or the price of cattle or whatever it might be.

I think we’re at one of those points in time. I’d say the sector that I’m most excited about in 2018 is commodities hands down.

Brian, thank you so much for your awesome question. Just to say thank you for the question, we want to give you a free course to our intrinsic value course on our TIP Academy page on our website.

This is a paid course, but we’re going to give it to you completely for free for the awesome question. For anybody else. If you want to get your question played on our show and potentially get a free course just go to asktheinvestors.com and you can record your question there. It only takes less than a minute for you to record your question.

Stig Brodersen 44:03

All right, guys. That was all that Preston and I had for this week’s episode of The Investor’s Podcast. We will see each other again next week.

Outro 44:10
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