In general, you know, it's still possible to make money in this market. But we've seen a lot of people crowd into the growth trades, which were kind of sexy, attracted a lot of money, went up really quickly, went down really quickly. How are you managing your risk right now?

BILL SMEAD: Well, we manage our risk the same way always, which, first, use our eight criteria for common stock selection. And people could see that at our website. It's smeadcap.com. But let it be said that about five qualitative oriented characteristics we're looking for, a couple of valuation characteristics. And then we-- long before anybody cared about governance, we like shareholder friendliness, which is another way of saying good governance.

So that's the basis of everything we do. We know they're going to be wild and differentiating circumstances. And one of the keys we think is to stay to your discipline, right? If anything we've learned in the last 12 months, stay to the discipline and use the emotions and psychological extremes of the other people as your advantage.

JARED BLIKRE: Well, that makes a lot of sense. And it's important to filter out the noise. We happen to be in the news business. So I know there is a lot of noise in it. But when you're trading, you've got to focus on other things.

What are you really focusing on right now in terms of any kinds of macro factors? And we can get into the details later like inflation, housing. I know you have a lot of themes. But in general, how are you approaching these different times, even if you're still trying to hold on to your investment style?

BILL SMEAD: Great question. So just looking at sheer demographics, we looked at the prior time when the 30 to 45-year-old age group was dramatically larger than the previous group, the ones that preceded them. And that was the baby boomers taking the place of the silent generation in the '70s and '80s in that 30 to 45-year-old age group.

And that's the demographic chart right there. And we now have 90 million millennials, not too long from now 95 million, that are going to take 65 million Gen Xers place in the 30 to five-year-old age bracket. So that just creates a huge amount of demand for necessities.

And then one of our research firms, Fundstrat, was kind enough to provide us with a list of the 20 industries that would most benefit from the aging of the millennials. And you can see at the top of that list is mortgage interest and finance charges. So long before it was in the news, long before it was popular to think about, we have been over owning the home builders knowing that we have years of building homes to make up the differential between demand for homes that population will drive and the existing homes for sale. So the irony of the pandemic is it's actually catalyzed one of our most important themes, which is the necessity spending of the millennial age group.

JARED BLIKRE: Yeah, they're going to be spending a lot of money. And, finally, nice to see them heading into the housing market after a hiatus about a decade ago for some reason. Scratching my head there. We're going to come back to some of these topics, but I want to play a clip from none other than Warren Buffett because our editor in chief Andy Serwer had a chance to sit down with him one year ago in the middle of the COVID sell off. And here's what he had to say about it.

ANDY SERWER: So it's March 10. And it's the day after the stock market crash. The Dow is down over 2,000 points. Oil cratered to $30 a barrel or so. The 10 year bond went to below 0.5%. What the heck is going on, Warren Buffet?

WARREN BUFETT: I told you many years ago if you stick around long enough, you'll see everything in markets. And it may have taken me to 89 years of age to throw this one into the experience. But, you know, markets, if you have to be open second by second, they react to news in a big time way. I mean, it's not like the market for real estate, or farms, or you know things of that sort.

So you have to have a price, assuming-- of course, we hit the circuit breaker yesterday. But, you know-- so it wasn't October 1987. But it was a sign. It was an invitation anyway. And the combination actually of the coronavirus and what happened with oil over the week. I mean, that's a big one-two punch.

JARED BLIKRE: Oil at $30 per barrel. It hadn't even gone negative yet. All right, stick around Bill because I want to read the results of our first poll. And then we're going to get into the second one. And then we're going to talk again about Archegos.

All right, so, yeah, the original value investor was-- this is the results of our first poll. Warren Buffett, 26% of people said that was the original value investor. Then we have Bill Ackman, 7%, Charlie Munger, 9%. Bill Ackman, arguable whether he's a value investor. But Benjamin Graham, the original, not only the father of value investing-- 58% or majority got that right.

Now, for the second poll, here it is. At 10 times the leverage, how big a drawdown will result in total loss? Is it 5%, 10%, 50%, or 100%? We're definitely going to be talking about leverage here. And Bill, I want to bring you back in and talk about Archegos, Viacom.

You had a couple positions in your fund that you had already been invested in. And then you wake up one day. They're going parabolic. I think that's the word that you were using to describe it.

I know you can't reveal the actual details of how you handled it until you release your next report in a couple of weeks. But in general terms, can you just describe what happens when you wake up and you see a stock in the money? You're happy, but it's up so much you might be a little bit scared.

BILL SMEAD: Right. So we came into this quarter owning Macerich and Discovery. And Macerich was one of the Reddit stocks with a large short position that people came after. And then more recently, Discovery had a large short position. And, obviously not only individual investors through chat rooms came after it.

But we now know that some hedge funds were using heavily leveraged vehicles to participate in their enormous rise. So the answer is when you own what is a meritorious and undervalued common stock, the ideal circumstance for you is for that undervaluation to get worked off over an extensive time period of say two to three, four years. To have a stock way more than double in the first three or four weeks of the year or have a stock go up 3 and 1/2 fold in 2, 2 and 1/2 months is completely unusual for us, right? We're not buying initial public offerings where there's some possibility of that happening.

And then, secondly, it is in companies that we felt three to five years from now could be worth that or more, which creates quite an interesting conundrum, you know. How do you-- how do you handle that? How do you deal with that? And let it be said that you should always be very nervous about when a stock goes parabolic.

And don't think for a minute that the people that have been fortunate enough to have things go parabolic over the last five years and then them continue to be very, very successful investments in the next two or three years after that-- that is one of the most unusual things I've seen in my 41 years in the business. And asking for that to happen regularly is a ticket to lose significant amounts of your capital.

JARED BLIKRE: Yeah, I think it's important to highlight that because a lot of the new traders into the market. And I think it's-- I write about this all the time and say it all the time. I think it's a great thing that they're here. But they're learning some very hard lessons.

A lot of accounts are getting bled dry because they're in options that are expiring worthless. You know, leverage has its own constraints and problems that it brings with trading. But people kind of get attached to the fast buck.

I want to answer some reader questions now. And this is going to be a basic one. I'll let you field this, Bill. What is the Warren Buffett balance between value and growth stocks if there is one? And this is coming from Susan.

BILL SMEAD: Yeah, really good question. So to speak to Buffett and Munger, all investing is value investing. They want to buy the bird in the hand, which is worth two in the bush. They want to buy something for well less than they think it's worth, OK? So the ideal thing in investing is based on the mathematics of common stock investing.

If you buy a stock for $30 and you pay cash, the worst thing that could possibly happen to you is it goes to 0. But the best thing that could possibly happen to you is exponential. So Buffett what Munger really brought to Buffett-- it moved him away from the Ben Graham buy 200 cigar butts at half the price that they're worth and through the market's movements get wealthier doing that to buy a business that is growing over the decades at a time when other people are scared to death or don't understand why it's going to be such a good thing over the next 20 or 30 years. And then enjoy a double whammy, which is the re-evaluation.

The price that people are willing to pay for each dollar of earnings grows as well as the earnings number grows. So that really-- those two are not really mutually exclusive. So I'll give you an example.

Buffett bought Coca-Cola in '89 at about 18 times earnings. Well, I started in the investment business in 1980 as a stockbroker at Drexel Burnham Lambert. And my first stock that I was pitching to people was Coca-Cola, $30 a share. It was at six times earnings paying a 5% dividend. When Buffett bought in eight years later, he paid six times what I was trying to pay for it, but I would be destitute and living in a tent in downtown Phoenix or Downtown Seattle if I kept pitching that stock because no one would buy it.

Virtually, no one wanted it. Common stock ownership in 1981 was 8% of US household assets, off the charts low. No one wanted that company. But what Buffett could see in '89 was that the Berlin Wall was falling.

And a number of countries that used to be closed were going to open their doors. And the Coca-Cola corporation was going to be able to sell their beverages to a huge part of the population that they had never sold it to before. And in emerging markets and less wealthy countries, that clean something to drink was very valuable.

JARED BLIKRE: There's a lot of wisdom there. I'm glad you shared that. And, also, we'll have to do another talk some time on what it was like to be at Drexel Burnham in the 1980s. I'd love to be a fly on the wall there.

I want to play a clip now. This is another Buffett clip. This was at last year's annual shareholder meeting.

So a few months had elapsed in the interim. There's nobody there except for Warren Buffett and some of us. But, nevertheless, here it is.

WARREN BUFETT: We would have bought other airlines too, incidentally, but those were the four big ones. And those ones we could put some money into. And we put whatever it was, 7 or 8 billion into it. And we did not take out anything like 7 or 8 billion.

And that was my mistake. But it was-- it's always a problem if there are things on the lower levels of probabilities that happen sometimes. And it happened to the airlines. And I'm the one who made the decision.

JARED BLIKRE: All right, with 20/20 hindsight, selling the airlines when he did, that was the bottom. And now they've climbed substantially. Southwest Airlines almost at record highs again. How do you deal with these events in the market either when you just get them wrong? Or is that simply sticking to the discipline and actually executing correctly?

BILL SMEAD: Well, we don't have to use 20/20 hindsight. I wrote about what he said that day in a fairly extensive missive that your folks can go back and take a look at it at smeadcap.com. And Charlie and Warren say that successful investing is an unusual combination of patience and aggression. And this is not a criticism of Warren Buffett because he has been the most brilliant investor of my lifetime and has been a resource teacher like none other that we can all be very thankful for and grateful for. But that clip just reminds me that at 90 Warren has lost some of his aggression.

And airline stocks are not the kind of stocks that you want to deal with if you've lost some of your aggression because that business is tough. It's capital intensive. It's labor intensive. There are all kinds of things that they don't control that affect their business all the time.

And, again, the answered question is the airline business will be attractive and has a better moat than it used to, which is what attracted Warren to get back involved in them. But then he got reminded that he should belong to airlines anonymous. And by the way, all of us have investors in industries or sectors that we should probably never get involved in.

JARED BLIKRE: Yeah, I have a--

BILL SMEAD: That has to do with us, not the industry.

JARED BLIKRE: Yeah, I think we were discussing-- I am a member of commodity-- excuse me, WTI crude anonymous. All right, so I want to go over the results of our last poll. At 10 times the leverage, how big a draw down will result in total loss?

The correct answer is 10%, which about half of you got right, pretty impressive. Because if you have $100.00 and 90 of it is loaned and you put up $10 and it loses 10%, you're down to $90 in value in the position. But you're wiped out. And I think that's an important lesson for people to learn.

And now here's our next poll, poll four. All right the Archegos debacle illustrates-- and there's no right answers here, just kind of an opinion poll-- in the end, the system worked, margin calls were met and there was no bailout, or the markets are rigged, Wall Street rewards risk too heavily, or, finally, all of the above. All right, I want to take this time now to demonstrate some of the features of Yahoo Finance Plus.

We rebranded just a few weeks ago. And I'm going to share my screen. You guys can take that poll down. And in the meantime, here we go.

Well, if you guys can see my screen-- hopefully, you can-- we have a dashboard here. This is what happens-- this is what you see when you log in. I happen to have a sample portfolio here. Pretty easy to link this to your brokerage account. You can get everything right here on a dashboard.

We have insights into valuation. This is my random portfolio somewhat. Eight of 13 stocks are overvalued in the midterm. That uses a Peter Lynch model.

Diversification here. 67% of the stocks are exposed to the communications services sector. So might want to weed some of those out, add some kind of diversification measures. And then also risk level, saying it's moderately aggressive with a beta of 0.98. Figuring out your beta risk to the market, pretty important when it comes to managing volatility and market swings.

What I like about these-- and I usually focus on the technical events and the technical investment ideas because that's kind of my wheelhouse. But since we have Bill here, I'm going to focus mainly on the fundamentals. You can see here we have research reports. All of these are from Argus Research.

Here's the fair value metric. You can see the sliding scale, the thermometers, company outlook. This gives you a variety of tools to look into, peer into how the company is managing itself. Fields are innovation, the hiring, sustainability, earnings, dividends-- you can see that in the lower left-- technical events, just went over that. And here are the investment ideas.

This is going to be a mix. All of these right here are fundamental ideas. But we also have these technical chart patterns that it recognizes automatically and plots the patterns on your screen. We'll take an example here.

Here's Paychex. Most of these reports come around the time that they release earnings. And so here they are maintaining their buy and raising their target to 105. They give number of reasons why. So you can do this in a chart.

And you can also view all reports. We'll get to those here. Let's take a look at view all the reports. This is on this particular ticker. You can see all these metrics in the dashboard for this particular stock up at the top.

And here we have the chart that we just loaded. And if we wanted to, we could put technical events. And I'll just kind of load that as-- here we go, long-term bullish. See if we have any events here, midterm. There we go.

And you can see these dots on the screen. These dots represent different events. And in fact, if you wondering why a certain move happened, you can actually pull these down. Under Events, you can check all of these boxes. And it'll tell you why a stock was moving that particular day as long as there's a news event tied to it.

All right, we're going to get back to the regularly scheduled program. And I want to talk Robinhood. And, guys, if you can get that Munger clip up and running in just a second.

I want to talk about GameStop, Bill, and exactly what has been going on with that. Is it affecting market liquidity, how it's affecting your investment style, and just kind of reviewing how we manage risk? So let's hear that clip real quick. This is a short one. Go ahead.

WARREN BUFETT: Robin said Robinhood trades are not free. When you pay for order flow, you're probably charging your customers more and pretending to be free. It's a very dishonorable, low-grade way to talk. And nobody should believe that Robinhood's trades are free.

JARED BLIKRE: Yeah, Munger with some important words there. We just did a seminar, really went into detail on GameStop. But just some of your views. How do you view the GameStop and WallStreetBets and Reddit phenomenon?

BILL SMEAD: Well, it comes under the heading of financial euphoria. And a book that I would recommend to all your watchers and listeners is John Kenneth Galbraith's "A Short History of Financial Euphoria." Financial euphoria episodes are as normal and healthy as all the other aspects of the fluctuation of the common stock market.

So it's not like they're a disease you can't survive, but it's a disease you will need to survive. So I always think about-- I read that people are younger, that are participating in a lot of these things. And I want them to understand that the beauty of the investing game is that you have a much higher likelihood to succeed or get rich slowly than you do get rich quickly.

So getting rich slowly works heavily in favor of people under 35 years old. And the irony is with smaller amounts of money at younger ages, people try to get rich quickly. And that is the opposite of what it should be. In other words, you have time as an ally. Let ally-- let time be your ally.

Buy something you can get rich slowly on of merit that maybe doesn't have as much risk attached to it but is highly likely over 20 or 30 years to make you 10 times your money. And that's the way I would advise people under 35 to make common stock investments.

JARED BLIKRE: Yeah, I like that, get rich slowly-- not quite the hook that "get rich quick" is for some reason, unfortunately, but very good advice there. But I want to get to the results of our last poll. We have-- the Archegos debacle illustrates, in the end, the system work, 18%; markets are rigged, 14%; Wall Street rewards risk too heavily, 30%; all of the above, the majori-- well, not the majority, the plurality, 38%. And pretty interesting there.

And I could make the case that the system worked because you didn't need a systemic bailout. You didn't have to get the Fed in the room with all these guys like they did with long-term capital. I'm wondering, Bill, how have you managed your portfolio over the years when value wasn't necessarily in play?

I'm talking about this low interest rate, this persistently low interest rate environment that we've had. I mean, some of the stocks have worked, some haven't. But it's really been about growth in this environment. So how have you managed it over the last decade or so?

BILL SMEAD: Yeah, well we feel like-- first of all, Buffett and Munger say that the key to investment success is to have weak competition. So recently, our results have been very strong because there's just not very many people that want to pick stocks anymore that have a value bet, right? Everybody wants to go do the woogie-- disrupt this and disrupt that and woogie and tech this and tech that.

All they want's woogie, OK? So when everyone wants woogie, and no one wants to buy a company based on it being worth a lot less than it'll be worth five years from now, it creates great opportunities for us, OK? Then that's-- so then, how do you beat the value people?

Well, most value people are looking for a $0.50 dollar. They buy it for $0.50, it goes up to $0.85 or $0.90, they sell it, and go try to find a new $0.50 dollar. And Charlie Munger says that's really hard because value people have a tendency to cut off their winners too soon.

Remember, I said get rich slowly, buy something you can hold for 30 years, and it goes up 10 times your money, plus dividends. OK, so how we beat the value people is we keep them a lot longer than they do. And how we beat the growth people is we buy good quality merchandise at times of maximum pessimism, right?

So when Amazon goes to the grocery business, we bought Target because they're in the grocery business. And everybody hated them, OK? Or when American Express divorced Costco on their credit card, on the branded credit card, everybody flooded out of American Express, even though millennials, it's the number one credit card for millennials. And we got 90 million millennials.

So that's what differentiates us from the growth people is we want to buy an outstanding company when it gets deep in the doghouse. And by the way, if you're wondering, any of these corrections in the FAANGs in the last 6 to 12 months is not a doghouse. And going from 900 down to 600 on a stock that's gone from $10 to 900 is not a doghouse on Tesla.

JARED BLIKRE: Yeah, I want to switch gears and answer a couple of questions here but also that relate to what you're saying. Here's one from Robbie, and this touches on a subject we haven't really explored just yet-- where to invest when we have rising interest rates and inflation. The key word, inflation-- how are we doing that?

BILL SMEAD: Great question. We have, in the last year and a half, reoriented our portfolio pointed at that subject because 90 million millennials with massive deficit spending and a bunch of stimmy checks in their pocket, they're going to spend. And Jamie Dimon said today at JP Morgan, we're probably going to boom for a couple of years.

And that is highly likely to cause inflation. First of all, the body politic needs the price of oil to go very high to make alternative energy more economically attractive. So if you think $60 is high, get ready for $100 or $150 because the body politic wants to restrict drilling, restrict supply, drive prices higher, and make cleaner alternatives more economic on a relative basis.

So we like the oil stocks. The second thing is, people are moving out of renting in downtown coastal city cores and moving to the suburbs, or 50,000 to 250,000 population cities around the country that are way less expensive are going to grow like weeds. And that means that, for example, suburban malls will prosper. Banks will prosper that make loans to people buying houses and cars that have put their money on deposit there but have never been liability customers before.

And let's see-- lastly, on the inflation front, the best way an individual household can insulate themselves against inflation is to be a home owner rather than a renter. Cap your rent by getting a fixed mortgage and capping your rent. In the 1970s, when inflation went rampant, the two best investments were oil and houses.

JARED BLIKRE: Yeah, we were just showing some housing related charts there. Most of these guys are at record highs. I want to ask you then, because this relates to another question-- this is anonymous. "At what point do you begin to look at an investment and reduce ownership or portfolio percentage?" Because I'm thinking that could happen either way. It goes up too much, goes down too much. How do you address it?

BILL SMEAD: Great, great question. On the downside, three things that could cause us to sell-- some of our qualitative criteria go downhill, like they screw up their balance sheet or the free cash flow dries up or their corporate governance goes to heck in a handbag, you know? Our qualitative characteristics can be violated.

We'll buy a stock originally, it goes down 20%. We reanalyze it, and we decide we were just wrong. [INAUDIBLE]. And then the third thing is when a stock becomes maniacal. In other words, let's say you're a bank and you traded at 9 to 15 times earnings for 40 years, and banks get really popular, and the bank stock goes to 25 times earnings.

We'll sell it just because of, from a historical perspective, that's an outlandish price. For example, there's a number of wonderful companies right now that people are happy to pay 35 times earnings for that aren't young like they used to be and aren't going to grow nearly as fast in the future as they have in the past. And we don't want to pay 35 times earnings for anything, but especially not a slow growing blue chip.

So all of you that are big fans of Costco or Nike or visa or Mastercard or any of these high flying, highly-thought-of growth companies with high multiples, there is no historical evidence that it pays to pay 35 times earnings for a mature business, even a successful mature business, OK? So that's the kind of thing that guides us in selling.

JARED BLIKRE: Well, we're on a roll here. So one more question. Then we're going to take a look at some other stuff here. This comes from-- I believe it's pronounced Meyer or Meyer. In your opinion, what are the most important metrics to determine if a company is undervalued?

BILL SMEAD: Well, certainly, we look at a business as if we owned the entire company. So if you own the entire company, what you're interested in is how much free cash flow that business generates. See, for your audience, if they're not heavily steeped in accounting, think of yourself as a household.

Free cash flow is how much money you've got left over from your pay at the end of the month that you didn't spend. And you get to do whatever you want with it. And businesses are the same way. And the best businesses generate massive amounts of free cash flow.

And what you want to do is you want to buy a relatively secure and growing stream of free cash flow at a reasonable price or a deeply depressed price. And that's what we do, which, by the way, that's part of the reason why this Archegos thing with Discovery has been so difficult.

The business of creating unscripted television costs 10% of scripted television. And therefore, it is incredibly profitable and generates massive free cash flow. And that stock was so undervalued to start the year, and that's what made that circumstance so difficult to deal with because, in fact, we do think that business is worth a lot more money. We think it's worth more than where it's corrected to now after going way up and then going down sharply because they generate massive free cash flow. That'd be the number one thing that I would look at is, what is the free cash flow, and what is the free cash flow likely to do over the following 10 years?

JARED BLIKRE: Well, let's take that, and maybe you can give me a couple of examples of some sectors or stocks that we haven't hit so far. I'm thinking maybe something in health care. We did touch on energy before, but wherever you want to go with this, and just kind of-- I'll pull up some charts, and you can break down your thinking.

BILL SMEAD: Oh, great. So let's use Merck. I think one of my charts that I gave you was Merck's relative value for 20 years. So Merck is the most conservative-- the drug and biotech stocks do the most conservative accounting of any of the companies in the S&P because they expense their most important long-term investment.

See, most businesses depreciate their long-term investments. Merck expenses. So they spend 18% of their revenue on R&D, which is the lifeblood of their future. And where that R&D goes, it goes to the Fred Hutchinson Cancer Research Center. And it goes to the Mayo Clinic. And it goes to Sloan Kettering, and it goes to M.D. Anderson. It goes to the Mayo.

They are the funders of the greatest health care research organizations in the world. And so they use very conservative accounting, but despite that, they generate very high return on equity and very high free cash flow. And right now, you can buy Merck cheaper relative to the stock market that you could hit the bottom in '09.

And at the bottom of '09, people were afraid to buy because people actually weren't filling their prescriptions because they couldn't afford to fill their prescriptions. And the way that the government has dealt with the pandemic by flooding people with liquidity, very few people have skipped filling their prescriptions because of the stimulus money that the US government has provided. So that is a great example of both free cash flow and then an extremely undervalued stock.

JARED BLIKRE: And what about any other stocks or sectors you want to take a look at here? Pretty flexible.

BILL SMEAD: Well, I think I provided you a chart that shows how many homes are built in the United States each year divided by the population. Put that chart up, and I'll comment on that. And that'll be fun for your viewers.

JARED BLIKRE: Yeah, I think that's our third slide there, guys, if you can just put that up. Housing starts as a percent of the population. Housing supply is inadequate. And there we go. So what are we looking at?

BILL SMEAD: And it'd be great if you could expand it a bit. But let me just point out that on a population-adjusted basis, the current level of homebuilding, which is trying to make up for a severe lack of homes for sale, would have been the worst number from 1959 to 2003. And the best number in 1972 and 1978 was at dramatically higher mortgage rates than we have now.

The 1978 peak, which is doubling the number of homes built divided by population from where we are now, happened at an average of 10.4% mortgage rates. So if you know somebody that's telling you that we don't have a lot of homes to build the next 5 to 10 years because mortgage rates will go up, they don't know history.

JARED BLIKRE: Wow, it looks like we were able to blow that up a little bit. I just want to let everybody know we're going to send a slide deck that we-- we're going to share that with everybody by email after the presentation. I want to get to another relevant question here. This is from Jeff. "Isn't part of Buffett's success the ability to negotiate, buy prices below market, below the market price or below market value, due to large volume in private sales?"

We know Buffett is pretty famous for getting really great deals, Goldman Sachs and the global financial crisis. I think he's even making a bunch of money on Occidental Petroleum now, not to mention a fat dividend. Do you go after any of these deals? And if so, how do you spot them?

BILL SMEAD: I would argue the opposite.

JARED BLIKRE: Really?

BILL SMEAD: Let me explain. Buffett has $140 billion in cash. He has to spend $30 billion on an individual company to be impactful in the slightest. And we've just gone through a 10- to 12-year stretch where growth stocks and the index have done spectacularly, therefore making the market capitalizations of companies way higher than that threshold.

So a year ago, one of Buffett's biggest problems was that the best ideas a year ago were tiny. And it put the Smead value fund into the driver's seat, right? We're much smaller. So we can put $50 million into something and be really happy.

So the truth of it is, a year ago, what Buffett should have said was my teacher, Ben Graham, that this would be Nirvana for him a year ago. He could have put some money in 100 different companies that were trading at depressed prices because of the pandemic and done extremely well, and he would have.

And so I would argue, and we adjust how much Berkshire Hathaway we own based on how compelling it is compared to what we're doing, and what we're doing is way more compelling because when money comes out of popular growth stocks, it's like a fire hose. And the companies that it's going into are a teacup. You're pouring water from a fire hose into a teacup. And that's also part of what happened with Reddit and Archegos.

JARED BLIKRE: Yeah, and let me just touch on the growth names again. This is another question-- I believe this is from Shivraj. "Is investing in SPAC and ETFs a better idea in this market?" I mean, SPAC's probably going to be very volatile, like IPOs. ETFs are another matter. I know you invest in individual names. But given that Warren Buffett is a huge advocate of passive investing, is that something that you would advise for other people, maybe who aren't putting all of their money with your firm?

BILL SMEAD: This is the single worst time to be a passive investor since they started passive investments. Let me say that again.

JARED BLIKRE: Yeah.

BILL SMEAD: The essay that I wrote recently, that Warren Buffett should shift his widow back from going into an S&P 500 index fund to Berkshire Hathaway right now, OK, because the index is highly likely to not make money over the next 10 years, whether you look at historical price earnings ratios, whether you look at the normalization of interest rates, whether you look at ridiculously high levels of participation by individual investors compared to household net worth going back for decades.

It all points to the same thing. The markets are not designed to make the majority succeed. Alpha comes from deviation. You have to be a deviant to outperform, , not a nondeviant, OK? So it is fine when stocks are trading average in the index to below average to use the index.

When they're trading way above average from a historical standpoint, you are dooming yourself. You know, the South Sea bubble looked really attractive even to Isaac Newton, one of the most brilliant people that ever walked the face of the Earth. And he lost so much money when the South Seas bubble broke that his employees in his office would get fired if they mentioned the South Seas bubble, OK? And he was one of the wisest [INAUDIBLE] ever walked the face of the Earth.

JARED BLIKRE: I just want to highlight that. I actually had a graphic of his individual-- I'm talking about Isaac Newton's trades in the South Sea company. And you can see him getting in and out of the stock. The trade that killed him is he went all in at the very top. And after it peaked and went down a bit, he was completely wiped out. And we're going to leave it on that note.

Hopefully everybody here fares a bit better-- in fact, much better. So Bill Smead, thank you for coming here. I want to thank all the audience members, and a couple of programming notes. Next webinar here is going to be in four weeks for Yahoo Finance plus. That's going to be Wednesday, May 5. And a replay of this webinar will be on www.perfectloveletters.com.

Also, we're going to email it out to all the attendees along with our slides. And now we've got to talk about Berkshire Hathaway. We are going to be live streaming the annual shareholder meeting on Saturday, May 1. And you're going to want to catch it right here on www.perfectloveletters.com. We also have a number of other lead-up events to it. So thank you again, everybody. We've had a wonderful time with you, Bill. Goodbye.

BILL SMEAD: Bye-bye.