Hello everyone today, I'm joined by Daniel Gladi of the Vltava Fund in the Czech Republic. Daniel and I have known each other for quite a while, and I really admire his ability to think both at the micro level and macro level. He did write a book called “Learn How to Invest” but it's in Czech, and I don't speak Czech! So I'm excited that he's writing a second book and hopefully I can glean something from that. So, Daniel, I know you've been hard at work getting your second book out. What is the title? And what what drove you to write it?
The title is “Stock Investments” and it's actually was published in 2014. So what I'm writing now is you know, extended second edition and. My first book “Learn How to Invest” was published about 17 years ago and every year or so, when a publisher calls me, you know, she tries to push me into writing another book, which I always refuse. But she called me with this interesting thing.
She called me about November and she said, the sales of the books tripled since March. And I couldn't figure out why. Apparently the virus and the lockdown had this perverse effect - that people starting focusing on stock markets, you know, not only opening their new accounts with Robinhood, et cetera, but also buying a lot of books by investments.
So that is most probably why. She asked me, do you want to do a reprint or are you going to write another one? You know, as I said, okay, well this time I write a extended second edition. Because I think there's a good topic for that. Because when I wrote the two books, I tried to focus on ideas and principles and recommendations that remain more or less forever because I don't think that the investment changes over time. So that's why the first book is still selling after 17 years. And they can be selling for another 17 years because it's always of good use. But this, this time decided to ride more actual extension because of what happened last year about the pandemic.
The financial markets and especially with money printing and sort of changing thinking across all political spectrum about how to use money, how to finance deficits, et cetera. And this will have very, very large effect on financial markets on the value of currency.
And unfortunately people have to deal with it somewhat. In my writing I'm describing this environment that will be there for a very long time. And trying to explain investors, how they should think about investing. They want to preserve the value of their wealth over time.
That sounds like a very worthy measure. And who will benefit most from reading this?
It is individual investors. Well, everyone that has acquired some sort of wealth and wants to preserve it at least in real terms, over a long period of time, so not two or five weeks or months, but many years, and even generations, which fortunately or unfortunately covers maybe half of the population everywhere.
As soon as you have money you become an investor. Maybe even if you don't want to. Even not doing anything is an investment decision, which affects your world. So you have to face the music and thinking about it and do something. So I'm trying to try to help them by talking about investing.
What are the biggest mistakes you see individual investors make when they select funds?
I think the biggest mistake by far is that they select funds based on recent performance. And I think it's both ideologically terrible way to pick funds. And also statistically it's been proven to bring terrible results.
So I actually recommend to people that they should make their conclusions about selecting or not selecting a particular fund without looking at its performance which is very hard to do. And almost no one does it because once you look at the performance, you’re already. 90% predisposed to the outcome, and I think that's incorrect. Yes it's quite hard. I think because I've always been kind of on your side and now that I'm talking to people about funds, the first thing they look at is performance. And then, so I have to think about that.
We always published our long-term performance on our website. But we stopped doing that recently because we don't want people to become our investors primarily because of the performance they saw. We want them to read our presentation think about our mission and philosophy and pretty much come to the conclusion before looking at the performance.
I think you've been in the market for so long now and have done well for so long that I think maybe it's just a, maybe there's not that many people coming to your website anymore, but people are making decisions from other areas. I'm not sure it works. I have a feeling you'll still get lots of investors interested. What are the main themes of your book?
Well I'm trying to make it quite simple. So I described the environment, the economic environment in which we will be living for many years to come. And the main characteristic is that the loss of value of the main currencies will probably go faster than any other time in history. And then I looked at the main asset classes, that could provide you help, and then listed those preferred asset classes, which, you know, no surprise the stocks come out very high.
I look at the how you should select individual stocks if you want to do that. And I can give you a simple example, for example to illustrate my way of thinking. The winner of the US tennis open last year got prize money of $3 million. The winner of us open in 1985 got $250,000.
So 12 times less. And the value of the money didn't go down 12 times, but there's certainly some more commercialization of sport involved, certainly we can say that. The human factor, the skills, the ability, the performance, kept the real value over time. And I think it's a simplistic example, but I think it actually holds in real life and in business as well.
So I think if you're worried about inflation, you should among other things look for businesses where the contribution of the human factor is very high, relative to other things, because the value of the human factor is not eroded by depreciating currency. So I'm trying to explain that. And then try to point out certain businesses or industries where you can find companies that fit this.
So maybe mining companies or commodity companies might not be a good areas?
They might not, because there's always a human factor in both, but it's smaller. The good example would be perhaps some financial services company like a Moody's or S&P Global where the human factor importance is very high. Or Burford Capital, the litigation finance company where basically all of the value is created by the human factor. So, you know, things like that.
Yeah, I liked that the human factor because even in investing with the selection of funds and it is the human factor because the algos are doing all the work and it's very, very hard to understand what is going on, unless you have a human being explained it to you. So when do you think the book will come out? When will it be published?
Second quarter, second quarter of this year. So it's pretty much written. So when we're going through this editing phase and graphics and stuff like that?
Thank you so much, Daniel, and I'm very jealous that you are off in the mountains. And I'm stuck at home, but that’s okay. I'll forgive you for now.
Thank you. Thank you very much. And thank you for your invitation.
You can find out more about Daniel’s way of thinking on his website: https://www.vltavafund.com/