WEBVTT NOTE Question and Answer Session 1 00:00:00.000 --> 00:00:16.000 I've got one piece of evidence to that, that in Chicago there wasn't a single hotel built or office building built until the 1950s. 2 00:00:16.000 --> 00:00:22.000 I'm wondering if you have supporting data or other things to suggest. 3 00:00:22.000 --> 00:00:34.000 The fact that there wasn't a hotel built for more than five years after the war in Chicago gives you some idea about the lasting impact on our real standard of living. 4 00:00:34.000 --> 00:00:48.000 The issue of did the World War II get us out of the Great Depression was really settled, I think, by Bob Higgs, Robert Higgs, in an article in the Journal of Economic History back in 1992. 5 00:00:48.000 --> 00:01:18.000 and he actually opens the article with a quote from Ludwig von Mises and basically what Hayek showed was that the level of consumption by Americans during World War II was actually a little bit lower than the level of consumption during the Great Depression so that Americans in their ability to consume were actually worse off during the Great Depression and so he argues that World War II did not get us out of the Great Depression 6 00:01:18.000 --> 00:01:28.000 and that it was the ending of the war that actually got us out of the 15-year depression. 7 00:01:28.000 --> 00:01:42.000 I actually was very interested in that subject for a number of years and I actually did some sophisticated econometrics on the stock market during that period. 8 00:01:42.000 --> 00:01:58.600 period. And what I found out, and this is the only known case that I know of, is that on the day that Roosevelt's death was reported, the stock market actually took, started a rebound that hadn't experienced for over 15 years really. 9 00:01:58.600 --> 00:02:08.080 And so you could think of Roosevelt's death as giving us out of the Great Depression, not what he did in terms of policies. 10 00:02:08.080 --> 00:02:23.080 How would you respond to the claim that the war economy helps us get the internet and the common energy and things like that, that people claim that good things come out of war economy? 11 00:02:23.080 --> 00:02:35.080 Well, there are a few things that do come out of these massive government programs in terms of leading the Russians to the moon. 12 00:02:35.080 --> 00:02:46.080 We didn't get much out of that at all, but we did get Tang, vitamin C supplement. 13 00:02:46.080 --> 00:02:49.080 But there are a few things related. 14 00:02:49.080 --> 00:02:53.080 Now, atomic energy, of course, would have been developed anyways. 15 00:02:53.080 --> 00:03:00.080 It's really an alternative fuel that doesn't have any, it has very limited superior uses 16 00:03:00.080 --> 00:03:10.840 where you know existing fuel could be used in a better way but also you have 17 00:03:10.840 --> 00:03:15.560 the simple fact that the government is using massive amounts of resources in 18 00:03:15.560 --> 00:03:20.280 these projects so you have to think in terms of what was the 19 00:03:20.280 --> 00:03:26.640 alternative use of those of all those resources sure you might generate a few 20 00:03:26.640 --> 00:03:36.640 seeds of technology or innovation, but the overall impact is very, very limited, I would say. 21 00:03:36.640 --> 00:03:39.640 Yeah, what is seen and not seen, right? 22 00:03:45.640 --> 00:03:49.640 I'm finishing up my initial commitment as an officer, a junior officer now. 23 00:03:49.640 --> 00:04:16.640 A couple things they do, just to give you an idea of the mentality of the senior leadership and the typical junior officer in the military today, to his question, they're constantly spreading propaganda of these sorts of projects, 24 00:04:16.640 --> 00:04:19.640 are what really is the backbone of the American economy. 25 00:04:19.640 --> 00:04:26.640 One general came by to talk to us about retention issues and said that the American military deserves the credit for the great economy 26 00:04:26.640 --> 00:04:30.640 in the past five years because we've kept the world, you know, kept them in line. 27 00:04:30.640 --> 00:04:40.640 And they also, they use, you know, it's just the mentality that these people are too stupid to invest their stuff and technology 28 00:04:40.640 --> 00:05:10.640 The Federal Reserve and technology will work unless we did it for them, and they really buy that, so they really are socialists, they may pass themselves off as cultural conservatives, but they're socialists in their thinking, in their bureaucrats, but the effect morally, because you're talking about the moral effect, especially on younger people, is the thing that's detrimental, because people talk about bringing out courage or that sort of thing, certainly difficult trying situations bring out courage in individual people. 29 00:05:10.640 --> 00:05:16.640 They also tend to be the individual people that will stand up for something when everyone else is going along the party line. 30 00:05:16.640 --> 00:05:19.640 And that is exactly what they kill from the very beginning. 31 00:05:19.640 --> 00:05:25.640 They talk about excellence, but from the very beginning, like for instance at the Air Force Academy, they kill any sense of individual responsibility. 32 00:05:25.640 --> 00:05:27.640 That's right, because you have a meeting. 33 00:05:27.640 --> 00:05:35.640 They kill it outright and say, if you, whatever happens, if you're so-and-so messes up and it's on your head. 34 00:05:35.640 --> 00:05:44.640 So the thing that they inject that makes it even worse is that people tend to stop their moral reasoning at the level that they can justify, 35 00:05:44.640 --> 00:05:49.640 that they find the level of moral justification for their lives, and then anything beyond that they can live however they want. 36 00:05:49.640 --> 00:05:58.640 And what the military does, especially when younger people, as it says, what you're doing is you're serving your country and you're being selfless and therefore you're a good person, 37 00:05:58.640 --> 00:06:25.640 Well, everybody's got to have a party line in that board. You know, there's a good deal of, for lack of a better term, brainwashing to get a unit to serve under such difficult circumstances. 38 00:06:25.640 --> 00:06:31.640 It's not surprising that all armies have done that, you know, except for mercenary armies all the way back in time. 39 00:06:31.640 --> 00:06:37.640 The democracy makes it worse because it gives you this abstraction that you're supposedly supporting. 40 00:06:37.640 --> 00:06:44.640 You're not, you know, taking an oath to help you, you're taking an oath to just document it as a way of life. 41 00:06:44.640 --> 00:06:53.640 One of the things I was thinking of sort of connecting the earlier point and what Jean was talking about in terms of mathematics 42 00:06:53.640 --> 00:07:21.640 and Mathematics was the recent movie The Beautiful Mind that came out where they have all these mathematicians and these modelers and decipherers and stuff, the greatest minds in American society, and what's the whole show about is bringing these most capable minds in society and putting them into these military spy type think tanks. 43 00:07:21.640 --> 00:07:34.640 and of course what was actually going on, even though Nash was given the most prestigious position in one of these institutes, 44 00:07:34.640 --> 00:07:40.640 he gets there and is bored to tears, basically doesn't have anything to do. 45 00:07:40.640 --> 00:07:44.640 He and his staff of leading mathematicians are not really doing very much, 46 00:07:44.640 --> 00:08:08.640 and so much. Of course, ultimately a few of them did make deciphering codes and that sort of thing very successful, but in total you have a massive mental capital investment on the part of the military taking that out of the private sector and bringing it into the public sector and seeing very little productivity come about as a result. 47 00:08:08.640 --> 00:08:26.640 Jim, I've got a question about the financial models we have, and it's quite interesting, but I found it a bit puzzling, like, if you guys have to adjust each time there's some particular change, why do you have those models? 48 00:08:26.640 --> 00:08:33.640 What's the point of it? If things are falling into a particular trend line, then we don't need any models. 49 00:08:33.640 --> 00:08:38.640 I mean, like in the bull market, I remember there was a lady who spoke extremely well and asked her, 50 00:08:38.640 --> 00:08:41.640 what's the principle? She was listening to the backing of the dog. 51 00:08:41.640 --> 00:08:45.640 If the dog would bark twice, she would bark twice. If it barked twice, she would sell it. 52 00:08:45.640 --> 00:08:47.640 She was doing extremely well. 53 00:08:49.640 --> 00:08:53.640 The trend is out for us. It doesn't matter what you do, you're just doing well, right? 54 00:08:53.640 --> 00:09:20.640 What I'd say is that the model can, you have to develop a model robust enough to withstand minor changes in interpretation in the market. 55 00:09:20.640 --> 00:09:32.640 When I say they stop it and change it, you know, often in the day, the model may run all day trading the deal for all the traders and never be stopped. 56 00:09:32.640 --> 00:09:42.640 Working on this, I had said that, you know, the model can, you have to change the model when you get a major change in reinterpretation. 57 00:09:42.640 --> 00:09:49.640 I stopped and thought, well, what's major? Well, major is how much margin does your model give you? 58 00:09:49.640 --> 00:10:02.640 You know, these people are looking for three cents a share and, you know, it's only an interpretation that's going to throw things off by more than that, that makes them stop the model. 59 00:10:02.640 --> 00:10:14.640 What they get out of it is, and they're not looking at a trend, you know, doing Apple and Sun are gone, but, you know, they're going, they're not picking market direction or anything. 60 00:10:14.640 --> 00:10:19.640 They're just looking for stocks coming out of a set parameter. 61 00:10:19.640 --> 00:10:21.640 There's a whole bunch of things they feed into it. 62 00:10:21.640 --> 00:10:24.640 You know, the details of the model are very proprietary. 63 00:10:24.640 --> 00:10:36.640 But what they get to do is they can let the computer trade all day, most days, for them. 64 00:10:36.640 --> 00:10:42.640 And as I said, you know, they've done this for years and churned out this three cents a share 65 00:10:42.640 --> 00:10:47.640 Is this the same model each year? 66 00:11:12.640 --> 00:11:24.640 They stop it, think about it, perhaps input new parameters, they keep evolving it when they find, they keep analyzing the P&L over all the mergers they're doing and keep evolving it. 67 00:11:24.640 --> 00:11:32.640 It sounds to me, especially your explanation about mergers, that a lot of people do that on a fundamental basis. 68 00:11:32.640 --> 00:11:41.640 Without using the computer, they're looking for a bigger chunk, you're looking, you're using a computer to try to get those little chunks. 69 00:11:41.640 --> 00:11:47.640 Without the computerization, the tiny increments we're looking to pick up would be... 70 00:11:47.640 --> 00:11:51.640 We couldn't do it so fast and so frequently during the day. 71 00:11:51.640 --> 00:11:56.640 We couldn't keep picking up those three cents all day long. 72 00:11:56.640 --> 00:12:00.640 It sounds like it's very different from what long-term capital management is. 73 00:12:00.640 --> 00:12:09.640 They seem to be aspiring to find the model that would explain the whole world and make money forever. 74 00:12:09.640 --> 00:12:12.360 Wasn't that your sense of the culture of that place? 75 00:12:12.360 --> 00:12:20.880 Yeah, I'm not that familiar with them, but yeah, and I think they got unhedged too. 76 00:12:20.880 --> 00:12:23.480 I think they wound up seriously unhedged. 77 00:12:23.480 --> 00:12:26.480 One thing we try to do is always be market neutral. 78 00:12:26.480 --> 00:12:31.800 You know, the Enron 102,000 shares was purely a computer bug. 79 00:12:31.800 --> 00:12:34.560 We are never net long or net short. 80 00:12:34.560 --> 00:12:38.560 We're always looking to buy and sell at the same time. 81 00:12:38.560 --> 00:12:41.560 But launch from capital at the beginning was just like this firm. 82 00:12:41.560 --> 00:12:48.560 Okay, we're just harboring the difference between a cash security and a future security in a bond market, a bond market everywhere. 83 00:12:48.560 --> 00:12:54.560 It's very similar, just looking for tiny incremental change and doing it on a lesser basis. 84 00:12:54.560 --> 00:13:01.560 You know, I think one thing that happened was they kept getting capital and they didn't have enough of that to invest in, 85 00:13:01.560 --> 00:13:04.560 so they started going out into riskier and riskier things. 86 00:13:04.560 --> 00:13:13.560 These people keep returning capital to the partners because they only want the amount of capital that they see they can do this arbitrage with. 87 00:13:21.560 --> 00:13:23.560 It's a private firm. 88 00:13:27.560 --> 00:13:32.560 Well, but they have to give me my return on the capital. 89 00:13:32.560 --> 00:13:39.460 Now, it could be that they're giving me that and they didn't really make it and they just like me, but I don't... 90 00:13:39.460 --> 00:13:43.460 People in this kind of work say all kinds of things all day long, out there, so... 91 00:13:43.460 --> 00:13:46.760 Sure, but as I said, the cash is there at the end of the year. 92 00:13:46.760 --> 00:13:51.860 At the end of the day, it's just like the guy who developed a way to beat the roulette table by a penny at the time. 93 00:13:51.860 --> 00:14:00.860 That's not the custom process. There's nothing entrepreneurial about it. I think that's it. 94 00:14:00.860 --> 00:14:11.860 Yes, this question is for you Mark. Apart from all the bad things that you said happened during war, what do you think about this theory about blowbacks or unintended consequences? 95 00:14:14.860 --> 00:14:20.860 Well, war certainly has a lot of unintended consequences. 96 00:14:20.860 --> 00:14:29.620 Consequences, it results in new entangling alliances, it results of course even for the 97 00:14:29.620 --> 00:14:38.860 victor in a war that you're going to be long term involved in the affairs of other countries, 98 00:14:38.860 --> 00:14:39.860 that sort of thing. 99 00:14:39.860 --> 00:14:46.960 I'm not sure exactly what the unintended, the area of unintended consequences you're 100 00:14:46.960 --> 00:14:57.960 What are you referring to, because there's so many domestic, economic, personal liberties, the list is really endless. 101 00:14:57.960 --> 00:15:00.960 Is there a specific area that you were thinking about? 102 00:15:00.960 --> 00:15:06.960 Well, there was one mention, I think that came from the CIA, 103 00:15:06.960 --> 00:15:36.760 And the same thing could be said about Afghanistan itself, where you had a fairly neutral regime, 104 00:15:36.760 --> 00:16:06.760 replaced by the Russians and then we're in there covertly supporting the Mujahideen and the groups like the Bin Laden people we're part of and you know and so they do, it does seem to always get worse over time when you start involving yourself covertly in these regimes and a lot of that stuff has come home to roost and it just seems to get worse 105 00:16:06.760 --> 00:16:18.760 The Iran case has certainly been that way for quite a long time, and of course Afghanistan is really a very unfortunate circumstance. 106 00:16:18.760 --> 00:16:24.760 Short-term gain for a very long-term loss. 107 00:16:24.760 --> 00:16:38.760 Is it true that big financial institutions throughout history have provoked two different groups to cause the war, to make the finances, to make the money, is that the deal? 108 00:16:54.760 --> 00:17:01.760 In that component of the economy go the devils, the group of devils, they're the ones that do benefit from the war. 109 00:17:01.760 --> 00:17:10.760 Of course, you know, you're making munitions, you have to finance the war, you have to finance the debt, and all of that is a big money making process. 110 00:17:10.760 --> 00:17:18.760 And so in every war in the United States and most other places, the Revolutionary War, Spanish-American War, 111 00:17:18.760 --> 00:17:32.760 Certainly the Civil War and the Nordic side, World War I and II, they all resulted in big gains for the people who were helping the government finance the war itself. 112 00:17:32.760 --> 00:17:45.760 And so to the extent that they're in there provoking the war, I'm not really familiar with a lot of that, but they certainly end up benefiting from it as a result. 113 00:17:48.760 --> 00:17:54.760 Jean, I found the Mises quote really fascinating about entrepreneurial profit. 114 00:17:54.760 --> 00:18:04.760 Is he basically saying that the entrepreneurial profit, whether it be through entrepreneurs or investors, goes to the contrarian? 115 00:18:04.760 --> 00:18:12.760 Well, if everyone already knows that the change circumstances are going to increase the demand for wheat, 116 00:18:12.760 --> 00:18:19.320 the demand for wheat will, the price for wheat will already be at the final level 117 00:18:19.320 --> 00:18:25.880 that reflects that change. So he's in several places in Human Action he says 118 00:18:25.880 --> 00:18:30.640 it's people who first understand, you know first, the early, the people who 119 00:18:30.640 --> 00:18:37.120 earliest understand what the impact of some change will be, correctly 120 00:18:37.120 --> 00:18:42.120 understand it, will be the ones who get entrepreneurial profits. 121 00:18:42.760 --> 00:19:01.760 A lesson here for the Austrian economics movement, that if all the mainstream economists basically agree with us, that we ought to just sort of keep a low profile, and if they're all saying the same thing and they totally disagree with us, should we be shouting from the rooftops? 122 00:19:12.760 --> 00:19:17.840 you know I think you try to say the truth whatever you think it is there's 123 00:19:17.840 --> 00:19:22.460 been some back and forth in the journals on has Austrian economics passed the 124 00:19:22.460 --> 00:19:27.960 market test or you know as it failed the market test you know that's that's a 125 00:19:27.960 --> 00:19:33.320 misapplication I to me you know you can't you can't bring market thinking 126 00:19:33.320 --> 00:19:39.680 into this search for intellectual truth the a squared plus b squared equals c 127 00:19:39.680 --> 00:19:43.680 squared, even if most investors don't think so, right? 128 00:20:09.680 --> 00:20:29.680 I haven't. I would say our involvement in... I'm not sure where to start. In modern times, we go backward or start back and go forward. 129 00:20:29.680 --> 00:20:41.680 The Mexican-American War, Spanish-American War, World War I and II, Korea-Vietnam, the current crisis. 130 00:20:41.680 --> 00:20:44.680 The Civil War is a tough one. 131 00:20:44.680 --> 00:20:48.680 You're saying these other wars we should have not entered? 132 00:20:48.680 --> 00:20:53.680 Yes, I would say that they could have been avoided, yes. 133 00:20:53.680 --> 00:20:57.680 Could have been avoided is different, I'm saying we should not have entered. 134 00:20:57.680 --> 00:20:59.680 That's right, but he asked... 135 00:20:59.680 --> 00:21:01.680 How could you avoid the World War II? 136 00:21:01.680 --> 00:21:03.680 How could you avoid the World War II? 137 00:21:03.680 --> 00:21:05.680 Stay out of the World War I. 138 00:21:05.680 --> 00:21:09.680 Stay out of the World War II, that's a good start. 139 00:21:09.680 --> 00:21:15.680 No, but it's a hindsight kind of New York history, though. 140 00:21:15.680 --> 00:21:20.680 Yeah, I mean, just a few minor things. 141 00:21:20.680 --> 00:21:25.680 If somebody had done something right before Pearl Harbor, we could have avoided that. 142 00:21:25.680 --> 00:21:36.680 My point, Marco, what you said is that, you know, I understand that the United States foreign policy has often times been aggressive and arrogant, having people stationed in 140 countries around the world. 143 00:21:36.680 --> 00:21:51.680 I view that a little bit excessive. But on the other hand, once someone attacks you at your home base, and once you realize someone who attacks you is an irrational human being, how are you going to get... you have to do something. 144 00:21:51.680 --> 00:22:08.680 Now, you're telling me what we're doing wrong, but you're not saying what we should have done. Instead, having a national homeland security expanding the government perhaps is a little bit difficult, but what else could you have done under the same circumstance? That's my point. 145 00:22:08.680 --> 00:22:18.680 I mean, Dr. Hoppe says maybe we can get AIG and Prudential to send out mercenaries, but that's totally unrealistic and fairly idiotic, really. 146 00:22:18.680 --> 00:22:27.680 Well, I think that the issues like Pearl Harbor and the trade towers, when I say they could have been avoided, 147 00:22:27.680 --> 00:22:38.680 what I'm thinking of most directly is the fact that in both cases, if one person or one federal agency 148 00:22:38.680 --> 00:22:46.680 or branch of the military out of a couple of dozen in both cases had done a decent job, 149 00:22:46.680 --> 00:23:06.680 How do you provide security for so many airports and so many places when you're dealing with an enemy and can't even pinpoint? 150 00:23:06.680 --> 00:23:31.680 When anything happens, like the World Trade Power Act, that was a criminal action. You allow the criminal justice to take care of it, and then you permit private property owners, the owners don't privatize the airport, but allow the airlines or airlines or any private to take steps to protect their passengers. 151 00:23:31.680 --> 00:23:34.680 If they don't do that, then they're going to lose money and go out of business. 152 00:23:34.680 --> 00:23:37.680 Or if they do too much of it and become too vexatious, 153 00:23:37.680 --> 00:23:42.680 and they take their shoes off and steal your screwdriver to your eyeglass, which they did to me, 154 00:23:42.680 --> 00:23:46.680 then you don't go that way and you have competition. 155 00:23:46.680 --> 00:23:48.680 You know, I don't know, what do you do? 156 00:23:48.680 --> 00:23:52.680 You do a lot of private property owners who are threatened to respond. 157 00:23:52.680 --> 00:23:54.680 And then you're protecting the borders the whole way. 158 00:23:54.680 --> 00:23:58.680 And number one, the Air Force are not proud of the property. 159 00:23:58.680 --> 00:24:24.680 Well, what I was responding to in the question was that if we had a lot of those things as well as just any sort of compliance with what these people were supposed to be doing at the time, and it's only in hindsight that we go back and look at this sort of systemic incompetence, but those things could have very easily been avoided entirely. 160 00:24:24.680 --> 00:24:32.680 Not to say that that would have solved the problem, but there are, as Joseph suggests, other ways of addressing those issues. 161 00:24:32.680 --> 00:24:36.680 Well, the big question is, why do they want to do it to us? That's because of our meddling. 162 00:24:36.680 --> 00:24:40.680 They're taking out their revenge on us because they feel like we're meddling in their affairs. 163 00:24:40.680 --> 00:24:43.680 And that makes you completely justify what you're doing. 164 00:24:43.680 --> 00:24:50.680 Now, we don't feel justified, but most people in this country don't understand how much the United States is meddling in everybody's affairs. 165 00:24:50.680 --> 00:25:19.680 Yes, it's important, you know, and economics is always talking about rationality and, you know, and Americans looking at these other groups who may be attacking us or doing strange things in their own country. We don't see them as being rational from our perspective. 166 00:25:19.680 --> 00:25:26.680 It's a fact that you have to look at issues and events from the people you're actually judging. 167 00:25:26.680 --> 00:25:29.680 It's not that they're not irrational. 168 00:25:29.680 --> 00:25:32.680 That's not an issue. 169 00:25:32.680 --> 00:25:36.680 You can't use something that has happened. 170 00:25:36.680 --> 00:25:39.680 He said that we're looking at history of hindsight. 171 00:25:39.680 --> 00:25:41.680 History is hindsight. 172 00:25:41.680 --> 00:25:43.680 It's hindsight all the way back. 173 00:25:43.680 --> 00:25:46.680 You have to look before and ask what causes it. 174 00:25:46.680 --> 00:26:01.680 A single event cannot be used as a trump card for justifying one program. What happened on the trade tower cannot be justified in an entire neocon program, which includes, if they were serious, they'd pull out of Saudi Arabia for two huge reasons. 175 00:26:01.680 --> 00:26:14.680 A, the two huge reasons they don't, the oil interests that are involved, where Rothbard documented this in his essays for the Rothbard report. 176 00:26:14.680 --> 00:26:25.680 And the second thing that the Saudi Arabian government does, plays a difficult role, besides having us protect our own, is they promote the very grand result of fundamentalism that doesn't. 177 00:26:25.680 --> 00:26:30.680 But no one has ever even mentioned within the circles that possibility. 178 00:26:30.680 --> 00:26:44.680 So the motive of the people in power who we are implicitly giving their assent to is entirely different than actually protecting the life and property of the people of the United States. 179 00:26:44.680 --> 00:26:49.680 That's not their motive, because you can't assign them that motive after the fact. 180 00:26:49.680 --> 00:26:51.680 So we need to do something about that. 181 00:26:51.680 --> 00:26:55.680 They still must be called the cartel. 182 00:26:55.680 --> 00:26:59.680 Any more questions? 183 00:26:59.680 --> 00:27:05.680 I made these questions too big. 184 00:27:05.680 --> 00:27:13.680 It seems like the pages of Pilgrim's Every Day with another con job being explored, 185 00:27:13.680 --> 00:27:19.680 like the Invan situation in Argentina, and these are always sort of the big shock people after the fact. 186 00:27:19.680 --> 00:27:24.680 In the case of Argentina, I think it's listed very high on the index of economics. 187 00:27:24.680 --> 00:27:33.680 Freedom, and Forbes magazine had an article after article about the glorious supremacy system, and I guess Enron got very impressed. 188 00:27:33.680 --> 00:27:42.680 What are the things that you look for to sort of spot frauds that are out there? How do you sort of anticipate these things? What are the telltale signs? 189 00:27:42.680 --> 00:27:46.680 The most telltale sign is it's too good to be true. 190 00:27:46.680 --> 00:27:53.680 And if you lived in Houston and you knew people who worked thread run, and you were actually looking at the company, 191 00:27:53.680 --> 00:28:09.680 One of the things, the company was suppressing any bad news and promoting all of the good news, so it really did appear to everyone that things were too good to be true, which we really looked at. 192 00:28:09.680 --> 00:28:19.680 The CEO had a beach home in Galveston and liked it so much he built two more on either side. 193 00:28:19.680 --> 00:28:27.680 And even though he only goes down there a few weekends out of the year, he has a butler there who's making $140,000 a year. 194 00:28:27.680 --> 00:28:30.680 I mean, you see things like that, you think, but watch out. 195 00:28:30.680 --> 00:28:36.680 I don't think it's the only thing. To answer your question, I think if you look at a company's financial statements, 196 00:28:36.680 --> 00:28:45.680 to the extent that there's some opaqueness in there, or more questions than answers, it's time to close it up and pick up another one. 197 00:28:45.680 --> 00:29:03.680 I think the question is where you can't look, which is often times you can't look to Wall Street research, which doesn't often expose a lot of this kind of economic business class or whatever, because there's a real moral hazard there, and they're not incentivized to expose these kinds of things. 198 00:29:03.680 --> 00:29:33.600 To come back to Tony's earlier point, you know, one thing is that the trading inside this company is all completely open, it's up on the internet inside the company. 199 00:29:33.600 --> 00:29:40.120 as it happens and it's all computer generated and so it's not a possibility 200 00:29:40.120 --> 00:29:53.520 that someone is you know hand finagling these things yeah yeah yeah oh they're 201 00:29:53.520 --> 00:30:09.520 $100 of a capital you can do a whole lot of things nowadays, I believe that's the investment process, I think the investment process requires just a big nose, sub-common sense, and ability to reach the next level. 202 00:30:09.520 --> 00:30:15.020 Yeah, well, you know, there's different kinds of ways to make money in the market. 203 00:30:15.020 --> 00:30:20.520 If your puzzle is what economic role they're playing, they're finding mispricings. 204 00:30:20.520 --> 00:30:22.020 You know, are you familiar with... 205 00:30:22.020 --> 00:30:28.020 The book in Las Vegas, who has developed a system on the roulette table, obviously has some economic role as well. 206 00:30:28.020 --> 00:30:32.020 I don't see a distinction between the two. 207 00:30:32.020 --> 00:30:37.520 Well, are you familiar with reversals and conversions in the option market? 208 00:30:37.520 --> 00:30:38.020 Sure. 209 00:30:38.020 --> 00:31:08.020 Yeah, they find them all the time and when you find a reversal and conversion, you have two securities that are not priced correctly and they're able to discover them all day long and just pick up money but the activity that they do corrects the mispricing because they're buying the underpriced security and selling the overpriced one so the market would not stay roughly rational unless someone was busy looking for the 210 00:31:08.020 --> 00:31:18.020 How did the government force the exchange to go from fractions to pennies? 211 00:31:18.020 --> 00:31:21.020 Did that have any effect on your business? 212 00:31:21.020 --> 00:31:28.020 Yeah, pricing became somewhat more, tighter margins. 213 00:31:28.020 --> 00:31:34.020 That may also have something to do with the drop in return last year. 214 00:31:34.020 --> 00:31:41.020 Yeah, definitely. There were some programs, in fact, we abandoned due to that. 215 00:31:41.020 --> 00:31:48.020 Jean, what's the possibility that this will be declared unfair? 216 00:31:48.020 --> 00:31:59.020 There seems to be some pretty good profits in it, and this is exactly the kind of thing the government like to call unfair or something like that, and you put a name into it. 217 00:31:59.020 --> 00:32:29.020 Geez, you know, I haven't heard about anything developing in that way, and they, you know, they don't seek any publicity, they're private, they just mind their business and churn out, you know, the profit margins sound fantastic, but, you know, as Tony points out, they're trading on a good bit of margin, and it's, you know, a lot of it is the fact that they've been at it for years, they're good at it, a lot of it is, 218 00:32:29.020 --> 00:32:34.020 What is really their wages? Because they know what they're doing so well. 219 00:32:34.020 --> 00:32:40.020 You know, a lot of what looks like return on capital is really wages on their labor. 220 00:32:40.020 --> 00:32:42.020 I don't see anything on the horizon.