This week in the China Shop we are joined by Dr. Hans Boateng, the Investing Tutor. Join us as we talk with Dr. Hans about how he got involved with the markets before jumping into the effects of yields and inflation on the market. We also touch on Cryptos and our guest gives us some useful tips when looking for long term investments. To wrap things up, we challenge our guest to pick the real doctor from a list of posers!
2 Bulls in a China Shop: Recorded on 05/11/21
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SPEAKERS Kyle Hedman, Dan Leeson, Dr. Hans Boateng
KH: You are listening to an entertainment program put together by a company called Financial Ineptitude. Anything said on this show is not an endorsement, or professional advice. Would you really want to tell a court of law you were suing us because you thought taking financial advice from two idiots on a podcast put out by Financial Ineptitude was a good idea? Really? Clown hat smiley face.
Hello and welcome everyone. Come one come all, step into the china shop today, step right in. Opening the doors, got a special interview episode. Very excited about that. With me as always is Kyle, creator of financialineptitude.com. How you doing today, Kyle?
KH: I’m seeing green today. I’m happy. Finally.
DL: Aye, it’s a blessed green mornin’ for you.
KH: Yeah, and only two months late.
DL: Yes. Only a little late.
Well, we are joined today by Dr. Hans, the main investor over at theinvestingtutor.com. How are you doing today, Dr. Hans?
Dr. Hans: Doing very, very well, Dan and Kyle, thank you so much for having me.
KH: Oh, no, thanks for doing our show.
DL: Yes, it’s our pleasure.
KH: It’s nice to have credentialed people on here for a change, rather than what, comedians and pot companies.
DL: I love those pot companies.
KH: I know you do.
DL: So Dr. Hans has finally joined us today. He’s going to share with us a lot of his wisdom and the knowledge he’s gotten, he’s as, a long-term investor. How long have you been investing or playing around with stocks?
Dr. Hans: Yeah, I would say and, and I, I don’t consider it playing around. I take it pretty serious. But it’s been about 12 years.
DL: Oh, well, that’s more than enough time to learn your way around the dark streets of Wall.
Dr. Hans: How about you all?
KH: I think, Dan, how long have you been? We’ve been doing this about the same amount of time, you started really young though.
DL: Yes. I started dabbling when I was really young, about 13 years old.
Dr. Hans: Oh, wow.
DL: I used to check my grandmother gave me for my birthday to buy a direct stock purchase from a utilities company, put it in a dividend reinvestment program, going to be my retirement. But then Enron happened. Yeah, kinda blew up on me.
KH: Yeah, Dan’s always been a gifted picker.
DL: Oh, yes. Yes, definitely.
KH: I’ve been probably more serious about long-term investing probably since right about 2007. So I too also picked a terrible time to start. Because I think it was maybe three or six months before the crash. I was still in the Navy. Using my bonus money from from the military. And yeah, it didn’t do very well right off the bat.
Dr. Hans: Yeah, I’m (inaudible).
DL: All right. Well, I had forgotten, we had planned on starting off with some music to, you know, give you a little feel for what we do here in the china shop.
Dr. Hans: Please.
DL: Yeah, here, you should be able to hear this.
Dr. Hans: Is that you Dan?
DL: Yes, yes. Yeah, I like it. I have a good time with the tunes. It’s a lot of fun.
KH: Yeah, I was thinking we should use that for the intro song, but we kind of skipped that part already. Alright, let’s go ahead and start moving this thing along it’s, Dr. Hans, so so tell us more about your style. You say you’re a long-term investor, and then you’d like to study the trends and the actual mechanisms that make the markets move. Can you tell us a little bit more about what that actually means?
Dr. Hans: Yeah, so I started investing, as I shared, pretty much about 10, 12 years ago. And at that time, I knew little to nothing about investing, right? So to Dan’s point, in the beginning, the very first stock that I purchased was Netflix and…
KH: Ah, I did one of those too.
Dr. Hans: It was about $50 a share. It was right around that time that I think Reed Hastings had announced that they were switching over to an online version of Netflix. And the markets reacted quite negatively, right? They wanted their physical DVDs.
DL: Mm hm.
Dr. Hans: How could you dare tell us you want to put that your movies on the internet? What is the internet? Oh, my gosh, Netflix is going to go out of business for this. And so I believe that that stock fell to about $50 per share. And that was around that time that I purchased two shares. So I purchased the shares, and I saw it increased from $50 to $100 per share, and immediately I sold, you know, that (inaudible) investment and I was like yes, this is it, I’ve made it. I’m an investor, I made money, this is it. It took a while, maybe a couple of months, and I was like, what was the point of that? I mean, I took the $100 gain that I had, I spent it on something that I do remember. Clearly, this is not how wealth is built. Kind of I had to go back and, you know, begin learning from the best. How is investing done the right way? How does an individual build wealth? How do we understand what’s happening, you know, in the economy, with companies, and and that’s been the last 10 years, 10 to 12 years, that journey for me, you know? And along the way in 2016, I realized, so halfway into my journey, I realized that most of the individuals in my community or underrepresented groups, even women, and you know, millennials, we, most of us aren’t taught much about the topic of investing.
Dr. Hans: So I saw that as an opportunity to, you know, come into the space, as, you know, The Investing Tutor, and simplify the subject of investing, and then make it easy to understand. So yeah, that’s when I launched my business in 2016 been running the business for about five years now. You know, working one on one was my initial business model. Now I hold workshops and things of that nature, so I can work in a group. But believe it or not, in 2016, when I when the business kicked off, there wasn’t a single individual that you could reach out to in the US to teach you one on one how to invest.
KH: Oh, really?
Dr. Hans: Yes.
KH: Why do you think that is?
Dr. Hans: Because I went to Google, and I don’t see…
Dr. Hans: Investing tutor. But I get it, in answer to your question. It’s because the financial industry has no incentive to want to teach you how to invest, right? They would prefer you bring your money. How can they make money off of your funds if if if you don’t bring it over to them, right?
KH: Oh, yeah.
Dr. Hans: How can they charge their two percent fee or one percent fee…
KH: Yeah, right.
Dr. Hans: Or three percent fee? And I’m not saying there’s anything wrong with their fee, but the model by which Wall Street is built, specifically the financial advisory business, there’s no incentive for them to want to show you how to invest, right? Because otherwise, they’re not going to have a repeat customer.
Dr. Hans: If you are clueless about investing, you have to leave your money with them.
Dr. Hans: You have no other option, right? How are you going to invest if you don’t know what a stock is, what a brokerage account is? You know, I was shocked that I had friends come to me and say hey, Hans, I keep hearing about a 401k, what is that? And I looked at them, I was like wait, what? I was shocked.
KH: Oh my god, yeah.
Dr. Hans: You know, and right around the same time a friend said, what’s a stock? How can I buy a stock?
KH: Dan? Wait, Dan?
DL: Wait, yeah.
KH: I think we have something for that.
DL: I have something for this. Okay.
KH: That’s a stock, Dr. Hans.
Dr. Hans: I’m loving this.
KH: I’m sorry, didn’t mean to interrupt.
Dr. Hans: No, I’m really loving this. So I, I felt it as an obligation to begin to educate, you know, as I shared, people in my community, anyone who wanted to learn. And surprisingly, when I started back in 2016, believe it or not, social media didn’t have a lot of personal finance, you know, being posted all the time, as much as we have today.
KH: Right, yeah. It’s all over the social media these days
Dr. Hans: It’s all over. Oh, my gosh, and it’s been super incredible to see the change and the shift over over time.
KH: As far as doing the tutoring, did you have any special accreditations or anything that you had to actually go and apply for in order to do that?
Dr. Hans: No, you just have to read the SEC laws.
KH: Uh huh.
Dr. Hans: Which designate what a Financial Advisor, who has to be, you know, registered and everything, has to abide by, right?
Dr. Hans: So if a person, right, for compensation is managing people’s money, and then advising where the funds should go, as to the purchase of specific securities.
Dr. Hans: Right, then, all of a sudden, it gets into the wheelhouse of the SEC. But when an individual like myself is coming in saying, hey, I’m educating, and I’m not educating about specific stocks and securities, but rather I’m teaching an individual, okay, this is a stock, this is how you analyze it. You know, this is how you identify good performing stocks. This is what you look out for. And I do the same with index funds or exchange traded funds. This is an ETF, you know, this is what an expense ratio means, you know, this, that this is how you look at the holdings within an ETF, all of a sudden, it puts me in that classification of an educator or someone right, it’s not providing personalized, you know, financial advice.
KH: Cuz that’s definitely a very tricky. gray area area, you don’t want to get caught in.
Dr. Hans: Definitely not. Yeah, that’s why, before I launched my business, one of the first things that I did was, you know, download and read the entire.
KH: Oh, my God, how long did that take?
Dr. Hans: Oh, man, but you have to do it, right? So I always, you know, if you were to go to my website, you see all of the disclaimers. Plus, when I’m working one on one with individuals, I never, even up- the funny thing is, the SEC designation says for compensation, if you’re like telling people what to do, right? But even if people message me who are not, you know, paying members, so literally free individuals who follow me on social media, if they were to message me and say, hey, Dr. Hans, what do you think about this stock? I won’t share my opinion. I’ll tell them, you know, go analyze it, or I can speak from my perspective, you know.
Dr. Hans: For example, I can say, oh, you know, based on my opinion, this is what I think.
Dr. Hans: So that it’s not, you know, taken, as you know, offering advice.
DL: You’re not proscribing an action.
Dr. Hans: Definitely.
Dr. Hans: Yeah.
KH: Yeah, I think we had, when we had David Moadell on, he was very very cautious about making sure that he put the disclaimers out, I am not licensed, I do- do your own research, before he would tell us anything about the wheel. Yeah. Do you do anything with any of the securities like options or Forex or futures? Are you more stock trading in general?
Dr. Hans: Yeah, so I don’t do any of the options and Forex. For me it’s more, yeah, just stock market and now slowly but surely started to branch into crypto.
DL: Crypto? Ooh.
Dr. Hans: Crypto, yeah.
KH: I’m still scared of crypto. And I think that’s more because I don’t fully understand.
Dr. Hans: Yeah. Yeah. And I completely understand why you’re scared. I’ve been studying the market for the past two, almost three years. And I’m just scratching the surface as to the amount of information out there about…
KH: Oh, I know.
Dr. Hans: Yeah.
KH: We’ve had a couple guests on who specialize in that and I still walk away like like, wait, it’s only worth that because we say it’s worth it. What does it do? What does it do?
Dr. Hans: Well, it’s not necessarily because we say it’s worth that.
KH: Oh, right.
Dr. Hans: So that’s one portion of it, which you know, is if people are willing to exchange real currency for that, it imbues the asset a certain value because you know, we’re exchanging dollars or currency for it, that’s part part of it.
Dr. Hans: But the other is energy. Right? And that’s why we hear in the news…
Dr. Hans: (Inaudible) yeah, because you need energy to maintain mine, and bit-in the Bitcoin network, and that energy costs money. So that’s also a value that’s being placed on to the network.
KH: Yeah, yeah. Okay. Something just clicked in my head there.
Dr. Hans: Yep. So, because, think, and this gent- and I know we’re talking about stocks, not crypto, but…
KH: No, that’s all right.
Dr. Hans: (Inaudible) one share that, you know, the amount of energy that’s used to mine, let’s say, one Bitcoin, right? If you were to ask yourself, how do I capture that amount of energy, and move it anywhere across the globe? Like that exact same amount of energy, or transfer that same amount of energy 100 years into the future without losing any of that energy? The only way you can do that is via Bitcoin.
KH: Yeah, but I can’t stick a Bitcoin in my electric vehicle and have it run.
Dr. Hans: You actually can, and…
KH: Oh, you, what really?
Dr. Hans: Yeah, smart devices can have their own digital wallets, and make payments and everything. So it…
KH: Oh, yeah. Yeah, that’s just paying for it. But the energy that was going into creating the Bitcoin has gone at that point, right? It’s been converted into the product.
Dr. Hans: Absolutely, it’s been converted into the product, and and it is holding that value, right?
Dr. Hans: So for example, if a person wanted to go purchase that amount of energy, they can use that portion of Bitcoin at any time to be able to get an equivalent amount of that energy. Yeah.
KH: So there is an actual asset that’s backing it, then if you think of it in that, that terms. Because that’s always been one of my main holdups.
Dr. Hans: Yes, it definitely is. And also, another value prop that you have to think about is, you know, the network effects, right? There is value in a network. For example, Facebook is a social network. The reason why Facebook, Facebook becomes more valuable as more people use the network, right? The incremental user makes the network more valuable. It’s the exact same for Bitcoin.
Dr. Hans: Right.
Dr. Hans: Every incremental user makes that Bitcoin network more valuable, because then there’s more people that we can transact that global digital currency with. So that is also another layer of the value of Bitcoin. Like I said, it goes, there’s a ton.
KH: Well yeah.
Dr. Hans: It’s fascinating.
KH: Let’s, let’s jump back to stocks real quick. You mentioned the process of trying to analyze and choose good stocks. What are some of the things that you’d look for when you’re, when you’re picking a stock? Or when you’re going through your, like, what do you set your screeners up to to search for?
Dr. Hans: Yeah, before I even go to a screener I ask some very simple basic questions, which I think, you know, any and everyone can ask. The first one is, do I love or even care about this company that I’m I’m looking at investing? Right? It’s very basic, I try to keep it simple. If the answer is no, I’m not buying it. And if the answer is, yes, oh okay, then I can move on to the next question. Do I understand their business? How are they making money? Do I understand it? What is their business? You know.
Dr. Hans: How are they making money? That’s the number two. And number three, will this company continue to grow into the future? Meaning, are they, whatever they are selling, are they going to be selling more of it? Will they have more customers, right? So we can take Disney for example. Well, will there be more Disney Plus subscribers five, 10 years from now? The average person listening to this podcast can tell you, you know, with confidence, yes.
Dr. Hans: So by that very simple answer, an individual can have a strong, you know, estimated guess as to the potential growth of Disney. Without knowing oh, is it going to be 20% 25? That doesn’t really matter. A person can buy that knowing that oh, at least I know my money will grow and continue to grow into the future.
Dr. Hans: So those are the basics that I try and cover before I even sit down to even analyze.
KH: Well, those are some great questions. I Dan and I have talked about that before, that’s kind of one of Buffett’s, like keys that we’ve mentioned multiple times is, is picking companies that that are, you know, the product has a use, and will continue to have a use, like Gillette razors during the dotcom bubble.
DL: Yeah, you understand where the company gets its money.
KH: Right. So does that mean that you stay more away from growth stocks, or stocks that are like an Inception? Something like Virgin Galactic that doesn’t actually make any money yet, but is hopefully on the path?
Dr. Hans: I love those companies, so…
Dr. Hans: I know, you mentioned Buffett, like, you know, I was a student of Buffett. I see myself as, during their early days of my education about this field, I learned as much as I could from the best out there, right. So the Reed (inaudible) the Warren Buffetts the Peter Lynches, you know the Stanley Druckenmiller. I mean, just learned as much. So I, you know, went across and just learned from everyone. And what I did was I just picked out the best from each individual person, and then applied it in a way that really resonated with me. So, you know, I’m not your typical value investor, or, you know, or this particular like momentum trader, or, you know, only a growth or tech investor.
Dr. Hans: I tend to look from a fundamental standpoint, so I don’t necessarily perform a lot of technical analysis, right? I look at companies from a fundamental standpoint, and then try and anticipate or estimate the future value. So a company like Virgin, which is, doesn’t have any revenue. You know, it’s difficult, because they are at the very early stage. So the question that person has to ask is, how confident are you that Virgin Galactic is going to be able to deliver on their goals?
KH: Depends on when you ask me. If you asked me two months ago, I’d have been very confident. The last two weeks, not as much.
Dr. Hans: It’s, yeah, and that’s the only reason why I haven’t necessarily purchased, you know, Virgin Galactic yet. But that doesn’t mean, you know, that company will not be successful. I just need to be quite certain.
Dr. Hans: Right.
Dr. Hans: Before I, you know, if if Space X was a public company.
KH: Oh, I’d have been on that in a heartbeat.
Dr. Hans: No brainer, right?
Dr. Hans: Right.
Dr. Hans: Even if they’re not making any money, that’s just no brainer.
KH: Just the cult of Elon Musk will sustain that stock for decades.
Dr. Hans: Absolutely. Absolutely, so yeah. So I asked those three questions, then I look at, you know, other metrics. I can share a few of them with you.
Dr. Hans: You know, I look at revenue growth over time. I look at Wall Street sentiment, right? So analyst sentiment, and I think it’s super important. I also look at, you know, EPS or earnings per share growth over time.
Dr. Hans: To see okay, hey, how is this company growing profits over time? About 12 other metrics, but the ones that I shared with you I would say are some of the highlights of what I look at. So analyst sentiments, as well as analysts price targets, right?
KH: Um hmm, yep.
Dr. Hans: Revenue growth over time, and then you know, earnings per share EPS, growth.
KH: I like cash flow, too. I like to see cash on hand versus debt.
Dr. Hans: Hmm. Yeah. I mean, cash is king, right?
KH: And then what’s the other one? Return on equity? That’s another one I really like.
Dr. Hans: How are they using? You know…
KH: What’s their efficiency of the revenue that they’re bringing in? How much are they actually clearing or making profit on?
Dr. Hans: Absolutely.
KH: Dan, I think you had a question about the beginner investors.
DL: Yeah, what do you find is, are some of the most common mistakes people make when they’re first starting out in investing?
Dr. Hans: Oh, that’s quite simple. They think that they can spend the next 10 to 15 years paying off all of their student loans, and once they’re done, they’re going to have more money to be able to allocate into the market, and have enough time to reach retirement. Yeah, that’s just hilarious. Yeah, I mean, if you think about it like, right, think about like, oh, I’m going to pay off all my debt so that I have more money, right? So I can invest double the amount that maybe I can invest now, right? I can double it. And in 15, even if I start in 15 years, I’m going to have twice the amount, so I can make it up.
Dr. Hans: Huge mistake, and…
KH: Yeah, compound interest is amazing.
Dr. Hans: It is mind blowing. You know, the day that I discovered that the average person would have to invest four times their money to make up for waiting, I think about 10 years or so, I was shocked, yeah.
Dr. Hans: They need to invest four times their money to make up for waiting about 10 years. So then, you know, it’s it just seems like when you just think about it, oh, yeah, I’ll double my money. So then, meaning, once that is paid off, I can double the amount of money I’m investing. So people think that and and…
KH: That will make up, yeah.
Dr. Hans: I will make up. And the funny thing is, they don’t even know what cycle the market is going to be in. Are we going to be at, you know, a decade downward, or just a flattening of the market, like we experienced from 2002 all the way to like, you know, ’08, ’09, right after that peak, and then bottom. So that year was literally flat, in terms of gain. So individuals don’t understand all of this, and they think they can just pick and choose when they can come into the market, and you know, the market is going to be waiting for them because they have more capital to allocate into the market. And that’s one of the biggest mistakes that I see out there. Beyond that, it is trying to time the market, right? A person has money, they are, they are ready to invest. And to your point, they’re like, oh, I’ll just wait for this stock to dip, as if they, as if they control what the stock market is going to do.
Dr. Hans: Oh, I’ll just wait for it to dip, and then I’ll buy it. Okay, what if it keeps going up?
Dr. Hans: What if you ex- yeah. What if you experienced a 2009 through until 2019 markets where the S&P 500 grew about 500%.
Dr. Hans: (Inaudible) everything aside waiting for a market crash that never arrives?
KH: I think, yeah, the the waiting though, that, I think that, one of my favorite sayings is like the best time to start investing is yesterday. The next best time is today.
Dr. Hans: Absolutely. I wholeheartedly agree.
KH: And I think, Dan, you’ve had some experience with trying to time things.
DL: Oh, yeah, my timing is not good.
KH: Nobody’s is, because it’s a…
DL: But I’ll tell you, you really did speak to my own experience. It wasn’t till I started paying myself or saying, alright, yeah, whatever debts I got, it doesn’t matter. I’m going to prioritize. The first bill, I pay is to my brokerage account. And then all of a sudden, it started growing, even if I’m making bad decisions. I’m not necessarily picking the best stocks?
Dr. Hans: Yeah.
DL: My, my portfolio is growing.
Dr. Hans: Absolutely. And and, yeah, I just ignore the debts, and now now I’m a year in and it’s…
KH: I wouldn’t say you ignore them, hang on.
DL: Well, you know, I still pay them. Like I’m not in trouble here.
DL: They’re not going to come take my car. But I’m not. I’m not as worried. And it’s been it’s been fantastic, as I’ve watched this portfolio literally grow from zero to something substantial.
Dr. Hans: Yeah, one last thing that I’ll add, and this, this will surprise you both, because you’re kind of in the finance field. But the average person thinks that the price of a stock tells them whether a stock is cheap or affordable. So for example, Ford, you know, I don’t even know what Ford stock is right now., but…
KH: It’s probably about 15.
Dr. Hans: Yeah, back then it was up to $9 per share, right? So someone would see a Ford stock for $9. And then to see Amazon back in the day when it was 900 right?
Dr. Hans: Obviously right now, Amazon is like 3,000. But..
Dr. Hans: They would see both stocks, and if they have to purchase a stock, even though they can buy fractional shares, they will say oh, the Ford stock looks cheaper, so I can afford it.
KH: Yeah, market cap is a, market capitalization.
Dr. Hans: I know they don’t, they don’t even, most people well 99 point point 9% of people don’t know what market cap is.
Dr. Hans: So then to them, they’re just looking at price. And price tells, I keep saying it, price tells you nothing.
KH: I keep having trouble with my mom. I gave her a couple stocks that I’ve liked over the years and say, you should check out this one, I think it just got hit with some bad news, it’ll recover. And she’ll look and be like, that’s $130 a share, that’s too expensive. No, it was cheap right now, mom. So yeah, a lot of people make that mistake.
DL: So so how, how do you go about identifying when the market cycle has shifted to a new new cycle? A new…
KH: Well, first can you explain the the cycle in general? Like, you kind of briefly touched on it, but can you…
Dr. Hans: Yeah, trying to keep it very simple, right?
Dr. Hans: With the economy, we have, you know, cycles of expansion where, you know, everything is booming, you know? Oh, my gosh, what they used to back then 1920 was called Roaring 20s, right?
Dr. Hans: You hear in the news we’re about to enter the Roaring 20s. Well, the past like four or five months, doesn’t feel like it in the stock market.
Dr. Hans: Yeah, and then you you have cycles of contraction, right? So to kind of, what’s the word that I’m looking for, to differentiate the two, right? In the booming markets, or the expansionary markets, that’s where you have capital flowing in an economy and the rates, so interest rates attached to the capital, to be able to borrow that capital is really low. So then there is an incentive for people to want to borrow money. And when they borrow money they spend, right?
Dr. Hans: And, and what most people don’t realize is, every dollar that you spend is someone else’s salary. And that person also gets to spend that money, and it’s someone else’s salary. So when there is free flow of money, cash, at low rates, in an economy, it is expansionary, right? It allows an economy to boom.
Dr. Hans: That’s, the opposite happens when rates begin to increase. So if you’re wondering, why have we barely moved if this should be Roaring 20s? Because the market is terrified. When is the Fed going to increase rates? Because when rates go up, you know it, that money that is in circulation becomes super expensive.
Dr. Hans: Right? Because now…
KH: Oh, okay.
Dr. Hans: Yeah. Because now, oh my gosh, what, rates are higher? Are people going to want to borrow more money? Are people going to want to spend? No, it’s too expensive. I don’t want a mortgage for 5 percent interest.
Dr. Hans: What, five percent? It’s not like in 1980 interest rates for homes…
KH: Like 12 or 13?
Dr. Hans: Exactly. Five percent, whoa five? So you know, so the market right now is anticipating, even though the Fed has said we’re not increasing rates still 2023 or 2024?
KH: I was going to say that. Yeah, why are they still freaking out about it every single week? Every week they come on and say that.
Dr. Hans: Yeah, it’s it’s almost like you’re at a party, and the hosts keep telling you. let’s imagine it’s about, you know, midnight, and the host is saying we’re going to party until six in the morning. And people are having such a good time they’re like, what if they decide to end this party at 1:00? How do we know that they are not going to end it at 1:00? While you are dancing, you hear sirens, you know, outside. You’re like, oh my gosh, will will someone come and break this party up? Wait, are you sure you’re going to keep this party going no matter what? And the host keeps saying, I’m keeping this party going. And people are like, are you sure? how are we certain? You know, so right now, the market is is not taking time to just enjoy…
Dr. Hans: The low rates.
Dr. Hans: They are terrified that rates will increase. And that thing that is causing them to be terrified, you know, referencing the s- the sirens that I had shared, like, you know, you know how you are partying and you know, cops are like, hey, why why are you guys making noise, party over. You know that that party is done when a police officer says, you know, everyone go home, it’s done.
DL: Move along, yeah.
Dr. Hans: Well, that police officer, as an analogy, is inflation. And and people are like, what is inflation? Well, inflation is when the cost of goods and services go up, right? And the worst thing, and I don’t want to get too much into economics here for the listeners, so just take my word for it. The worst thing that can happen is for inflation to go up. And then interest rates below, that is that worst thing to happen, because then prices of goods and services are soaring, while there’s more money in circulation, so it makes your money worth less.
KH: Kind of a vicious cycle that feeds…
Dr. Hans: Vicious cycle.
KH: Feeds it?
Dr. Hans: Yep, so people’s money in their savings account, you might have $10,000 in your savings account. But if inflation takes off, that 10,000 could realistically be worth $5,000. So when that happens, when inflation, you know, becomes real, the Federal Reserve has no choice but to increase interest rates.
Dr. Hans: So now, think about it. We’re having a party, you kind of, it seems like we’re hearing si- you know, you know…
KH: Yeah, we’re definitely hearing sirens.
DL: Yeah, yeah.
Dr. Hans: It seems like you’re hearing it, but we haven’t, we haven’t seen anyone at the door yet. And you’re wondering if it’s just your mind making you hear it. But it’s, you know, and the reason there is a fear for inflation, is because of the amount of money that has been printed.
Dr. Hans: Over, in 2020 about 27 percent of all of the US dollars in circulation was printed in one year. About 25 to 27 percent more dollars.
Dr. Hans: Yeah.
KH: Yeah, Dan…
Dr. Hans: Printed.
KH: I think you found a graphic that was kind of…
DL: Oh, yeah, yeah.
KH: Looked at the, yeah.
DL: I shared a graph on on our Discord server that showed the M3.
Dr. Hans: Yep.
DL: And how it spiked in 2020.
Dr. Hans: Yeah.
Dr. Hans: So so I want people to imagine, literally there’s more dollars chasing the same goods and services we have, right? Because keep in mind, we’ve been locked up. So it’s not like.
Dr. Hans: So there’s more money chasing goods and services. So realistically, those, you know, assets, or those things should increase in value, because there’s just more money in circulation, that money has to find a place. That’s why, you know, and it’s funny, can I share something? You know…
Dr. Hans: More people celebrate that their home values are increasing.
Dr. Hans: And it’s funny, because from a financial standpoint, you need to ask yourself, why? Why is your house worth 10 or 15 percent more just in one year? It’s so not by accident, folks.
KH: Don’t burst my bubble.
Dr. Hans: I know it, it could be the sirens outside. And that’s why the market is hesitant. Now, let’s translate that into tech stocks. Okay? Now, technology stocks are companies that have to grow quickly. And the way that they grow quickly is by getting access to more capital, more cash. So for them, they can borrow a ton of money at low rates and be okay, because they are growing at such a fast pace, they can then pay back all of those, you know, loans, right? So tech companies benefit in a low interest rate environment, because it gives them more cash. And imagine that cash is (inaudible) into their business and then what, they are growing exponentially. But what happens when all of a sudden, the money that you’re going to borrow costs a lot more?
Dr. Hans: Now, tech doesn’t seem is attractive, because it becomes risky.
KH: Right. Ah ha.
Dr. Hans: Yeah, the capital costs much more.
KH: So is that why we’re seeing the rotation out of growth and tech?
Dr. Hans: Yes, it’s, it’s partly because of the inflation fears, which you know, translates into interest rate increase fears, and also, we have to understand that 2020 there was literally no money, and that’s an exaggeration, going into value stocks.
Dr. Hans: So we need to have a broadening of the market if we want it to be sustainable, right? We cannot have all capital, like all the capital going into only a handful of, of sectors, right to where we’re seeing a broadening out of the market. Meaning money, some of the money that was placed in in tech is being reallocated to other what’s the term that I’m looking for, to other sectors, right.
KH: Right, like energy, looks like energy and utilities, I think, have been benefiting a lot lately, right?
Dr. Hans: Exactly, exactly.
KH: Safe, dividend paying.
Dr. Hans: Yep. Yep. I was surprised, I was looking at, you know, my portfolio, which is heavy in tech. And the funny thing is, at the beginning of this year, I had a choice to rotate out of tech, or keep it in tech. And I make, I made the decision to keep a large portion of it in tech, because I just assumed that the current administration will do whatever they need to do to, you know, keep the party going.
DL: Yeah, yeah.
Dr. Hans: What I didn’t think about, and which is very hard to anticipate, is whether the people at the party will be concerned about, regardless of what their host is saying, if people are the party are more worried about what could potentially happen, they are not even enjoying the party, that is what I missed.
DL: Right, and they’re running it for you too.
Dr. Hans: I know. So that is a market that that tells you the psychology of of participants in the market is what, at the end of the day rules, not your, you know, your well-studied thesis.
Dr. Hans: How things should play out, because my thesis was spot on. Oh, my gosh.
KH: Biden’s infrastructure.
Dr. Hans: Yes, infrastructure, about to put another two trillion of stimulus checks in people’s hands, you know, they are going to give EV credits to Tesla. Oh, my gosh, we’re good. We’re good. I mean on paper, it looks splendid. How can you judge that the market is going to be scared of increased ra- of inflation and…
Dr. Hans: I mean, the Fed literally said, we are not thinking about, thinking about raising rates.
Dr. Hans: What else do they want to hear, you know?
Dr. Hans: They want to hear it every week, it seems like. Oh, that’s a lame party.
Dr. Hans: Yeah, it’s a lame party. People are not even dancing, they are looking out the window.
Dr. Hans: Yeah. Telling everyone to be quiet.
DL: Sh- I think I hear something. That’s a great analogy.
KH: Yeah, that’s a very awesome explanation, too. I think you just made a lot of things kind of click in my head. Because I was in the same boat you were. I think, Dan, you as well, we were making the bet that Biden’s infrastructure plan going towards EV? EV stocks have been benefiting from this. But yeah, if everybody else is afraid of it and pulling their money out of it, well, that’s not going to do you any good.
DL: Guess that’s why my my Westwater Resources is down so much.
KH: Yeah, mine too.
Dr. Hans: Amazon is pulling in 100 billions of dollars per quarter. What? 100 billion dollars in revenue. That is a boatload of money.
Dr. Hans: And the stock has barely moved.
Dr. Hans: What?
DL: More money than some countries.
KH: I know, right?
Dr. Hans: And you know, the funny thing, meanwhile, Doge is up 24,000%.
KH: I know.
Dr. Hans: Oh god, that’s true.
KH: It’s a joke. It’s a joke.
Dr. Hans: I know. Right? It’s, it’s, I mean, so at some point, I I took a seat and I was like, you know, Hans, you are so articulate with your views of the markets and the prospects, and you know, this cycle and that cycle, and you know this stimulus and all of that, and look Doge is up 24,000%. What did you miss? Market psychology. And it’s it’s interesting. If I had not brushed off Doge as a joke, I had the opportunity in January, I brushed it off, I go oh, it’s a joke, I’m not even going to pay attention to it. So guess what, I missed one important piece of information, which would have changed (inaudible).
KH: Elon Musk?
Dr. Hans: No, no, no, no. It was listed on Robinhood.
Dr. Hans: That is this. that is, that is key. Because with cryptocurrency, demand is what determines its price movement. And if we have an on-ramp for retail, from beginning investors all the way to, you know, more knowledgeable investors, once there is an on-ramp, which we all know Robinhood is the number one retail investing app.
KH: Are they still?
Dr. Hans: Yeah.
KH: Even after three times they’ve screwed investors out of cryptocurrencies and…
Dr. Hans: Last week.
DL: I love you, baby, I didn’t mean it, I didn’t mean it.
Dr. Hans: Last week…
KH: I know.
Dr. Hans: Robinhood, Vlad Tenev, he shared a picture on Twitter. Number one most downloaded app, Robinhood.
Dr. Hans: Yeah.
DL: No such thing as bad press, I guess.
KH: I guess.
Dr. Hans: So that was the thing that I missed. You know, I was brush- oh, it’s a joke, it’s a joke. It’s a joke. And it was on Robinhood. And guess what?
Dr. Hans: Many people don’t sit down to perform fundamental or technical analysis that we that we do. Some people just want to buy something because it costs five cents. Remember our discussion about price?
KH: And value, right.
Dr. Hans: Yeah, five cents, 10 cents. Oh my gosh, Bitcoin is 50,000, this is five cents, I can buy a little.
Dr. Hans: It is the retail perspective. There’s no, I’m just buying this because I want to buy it, and no one can stop me, right?
Dr. Hans: And I’m not talking about myself.
KH: Right, yeah. Right.
Dr. Hans: Even though I wish I had put about $1,000 into Doge, because if I had in January, when I discovered that it was listed on Robinhood, it would be worth roughly about $150,000.
KH: I think I saw something this was, I think before the crash after Elon Musk went on SNL, but they said that if you put all of your stimulus checks into Dogecoin, you’d be a millionaire.
Dr. Hans: Yeah. Crazy.
Dr. Hans: Crazy. Yeah, it’s been fascinating to to watch.
DL: It’s a joke, but nobody’s laughing anymore.
Dr. Hans: Yeah.
KH: Not anymore, no.
Dr. Hans: Or the only people laughing are the ones who invested. Did you hear about that Goldman Sacks manager who quit his job two days ago?
Dr. Hans: Yeah, district manager in London. He quit his job because he’s become a multimillionaire because of Doge.
KH: Oh, really?
Dr. Hans: Yeah.
KH: Good for him.
Dr. Hans: Wow. Well.
KH: Well, Dan, do you have anything else you want to cover? Actually, I kind of want to ask about, have you followed Jumia by any chance?
Dr. Hans: Yeah, not closely but Jumia is one of the investments that I hold.
Dr. Hans: But it’s more of a long-term investment.
KH: Yeah, for me too.
Dr. Hans: So I don’t necessarily follow it like on a day-to-day basis like I do Tesla. So my thoughts about Jumia, when we look at how Amazon has, you know, utilized e-commerce as a way to dominate the retail field in the US, and now they’re expanding to India.
KH: Oh, they are?
Dr. Hans: Yeah.
KH: Oh nice.
Dr. Hans: Oh my gosh. Yeah. During the pandemic…
KH: I missed that piece.
Dr. Hans: During the pandemic, a ton of money, you know, was flowing into India, especially Amazon. So yeah, they are looking at being able to deliver you know, retail goods in India. So, I’m just looking at the blueprint of what Amazon has been able to do, it begs the question what’s the, you know, retail super giant in Africa? And and I just couldn’t find any such player. So when Jumia popped up, you know, at that time, I believe it was worth anywhere between three to five billion or so. I was like hm, Amazon is worth 1.5 trillion dollars.
Dr. Hans: Jumia is looking to serve the entire continent, not only a country?
Dr. Hans: You know? Continent of Africa. And I was like, man, this company should be worth way more than, you know, 5 billion or whatever. You know, even if it’s 10 billion, it should be worth way more than that. By comparison. So then, that was the thesis. Also, they had some incredible backers, right. In terms of prior investors into Jumia. That was also a confirmation. And also it was a service that I knew individuals back home who have utilized it, and they really enjoyed it.
KH: Okay, so…
Dr. Hans: So yeah.
KH: It checks all the boxes.
Dr. Hans: Yeah, it definitely does. So I viewed it as more of a long-term investment, and…
KH: Yeah, because I think they’re still not profitable. Actually, their earnings are today, I think, maybe tomorrow, I think they’re tomorrow. I think they have yet to actually post a profit, but they definitely grown quite a bit, thanks to the pandemic.
Dr. Hans: Yes, significantly. It took off substantially. When I purchased Jumia, it was around $20 per share, I watched it dropped to $3 per share. And then during the pandemic, it took off from $3, all the way up to about 24 or $30. And I was like, God, why didn’t I buy in at 3?
Dr. Hans: But going back to the point, you can never anticipate, predict what the market is going to do, you just can’t.
KH: Well, a lot of its big run up I think was, it got sucked into the short squeeze with GameStop. And all the other ones, because had a really healthy short interest on it when it was I think I ran up almost 60.
Dr. Hans: Gotcha.
DL: It did.
Dr. Hans: Oh, went up to 60?
Dr. Hans: I think it hit 60 at one point.
DL: In February, it got over 60.
Dr. Hans: Wow, that even tells you and confirms that I really view it as a long-term investment.
KH: Yeah, it does.
Dr. Hans: Don’t look at it.
KH: That’s kind of what I was thinking as it was running up there. I’m thinking like, yeah, this is going to be something huge in five years. If it doesn’t get bought out by an Amazon or somebody’s trying to get a foothold because that’s really the only…
Dr. Hans: Exactly.
DL: It’s the only way in.
KH: Dan, do you have anything else, or should we move on to the fun stuff and kind of wrap this up?
DL: I think. I think it’s time to move on to some fun stuff. We’ve gotten some…
KH: All right.
DL: We’ve gotten some great, great stock advice and analogies. You’ve really opened, I know my eyes. I’m pretty sure Kyle’s too.
KH: Oh, yes.
DL: With a lot of this stuff.
KH: We like to prepare something special for each of our guests to kind of have a little bit of fun to close these things up. So since you’re a doctor, I put together a list of well, you’ll get a multiple choice of doctors that are on television, and you have to tell me which doctor is actually a real doctor.
Dr. Hans: Absolutely.
KH: Are you are you big on the watching the medical shows?
Dr. Hans: A few of them.
KH: Okay. All right, you ready?
Dr. Hans: Okay.
KH: Okay, so Dr. Connor Rhodes, Dr. Gregory House, or Dr. Hawkeye Pierce? Which one of these actually holds a doctor title?
Dr. Hans: Gregory House?
KH: No, he does not. That’s Hugh Laurie. He has some fellowships. But actually Alan Alda has gotten multiple honorary doctorates.
DL: Hawkeye Pierce is…
KH: Yep, Hawkeye Pierce.
DL: Is a real doctor.
KH: Kind of. I don’t know, how do you view the honorary doctorates? Do you guys consider those real doctors?
Dr. Hans: I mean, when conferred, you know, on an individual, so to a certain extent, I guess.
DL: Short answer, no.
KH: Yeah, I was always wondering about that. They’re in acting though, so I think he’s at least, you know, earned his his chops on that.
Dr. Hans: It just would be fascinating. And I don’t know, like, I’m just curious if it would be fascinating, let’s say I was I didn’t, you know, pursue a doctorate degree, and I was, you know, conferred. You know, would I expect people to call me doctor? You know?
KH: I know, right? Yeah. do they?
Dr. Hans: There’s a psychological thing associated with that, you know.
KH: Yeah, I don’t think, I think if somebody’s got an honorary doctorate, I would not call them doctor. That’s like calling a chiropractor a doctor, I won’t do it.
DL: I won’t do it either.
KH: Alright, next next batch, Dr. Ken Jeong, Dr. Doogie Howser or Dr. Meredith Gray?
Dr. Hans: uh, Meredith Gray.
KH: See, you would think. But no, Dr. Ken Jeong is actually a real doctor and he’s a real medical doctor as well, he went through, went through medical school. He’s the the the Asian fellow that played the Spanish teacher on Community. He was…
DL: He’s in The Hangover movies.
KH: He’s got his own show that came out called Dr. Ken.
Dr. Hans: Yeah, I haven’t seen it.
KH: Okay. All right. All right, last one then, last one, and we’ll wrap this up. All right, Dr. Pepper, Dr. Seuss, or Dr. Acula?
Dr. Hans: Oh my gosh, this is a good one. Oh my Lord. Could you repeat it?
KH: Dr. Pepper, Dr. Seuss, or Dr. Acula?
Dr. Hans: Dr. Acula?
Dr. Hans: No, that’s actually just Dracula.
DL: Also the one s-…
Dr. Hans: Dr. Seuss.
DL: Dr. Seuss. Yeah, yeah. No, that’s also the one I chose in the pre-call when Kyle was telling me about them, definitely. Dr. Acula.
DL: Yeah, I was like, I was like Dr. A- I was like definitely not Dr. Pepper. And I was like, Dr. Seuss? Hm.
KH: Dr. Seuss, yes. He has an honorary degree, he dropped out of school, and then he took on the moniker to appease his parents. But then he actually ended up getting an honorary after. The Dr. Pepper one was kind of interesting, because everyone thinks it’s based, or it was named as an homage to a Dr. Pepper in the town where Dr. Pepper was actually created, but there’s nothing that really confirms that. So I would have taken Dr. Pepper but.
Dr. Hans: Yeah, but the Dracula was pretty talented. Dracula.
KH: That’s actually a Mitch Hedberg joke, I think. He said he went to get his blood drawn, don’t ever go see Dr. Acula. All right. Dr. Hans, can you tell people where they can find you? Are you on any of the socials, you got your website?
KH: At the Investing Tutor?
Dr. Hans: Yeah, yeah, You all, this has been absolutely phenomenal. Thank you, Kyle. Thank you, Dan.
DL: You’re welcome, thank you.
Dr. Hans: You know, I always enjoy being able to, you know, talk about the economy, whether it’s macro or micro and looking at the future and what’s ahead. For this year, I feel that it’s going to be, you know, this volatility as we continue to figure out what’s ahead, right? I mean, right every other day there is something new, whether it’s, you know, taxing the rich, or finding ways to spend more money, or, you know, whatever it is that will be next. So that uncertainty is going to continue, and especially this year,.
Dr. Hans: And all through the reopening, right. Are we going to be able to reopen successfully? Are we going to reach herd immunity? There’s so many questions in play. So I’m going to continue to kind of watch and monitor. Most importantly, I’m going to continue to broaden my perspective, specifically with crypto currency, not, you know, not the ones, like today I ha-, oh, there’s this Shiba Inu coin, or no, no, no, I don’t I don’t, I can’t. But the projects that are really making a difference, right? Because as we see, the stock market kind of goes sideways or down and we see the crypto market, you know, take off on a rocket to the moon, it begs the question…
Dr. Hans: It begs the question, you know, should we learn or educate ourselves about this asset class, I’m going to continue to do that for individuals who kind of want to follow you know, my journey or, you know, the information that I share, you can find me on Instagram at The Investing tutor. So that’s T-H-E Investing Tutor.
KH: We’ll put a link to that in the episode description.
Dr. Hans: Appreciate it. And my website, I have a free stock, you know, workshop. So if individuals want to check that out, it is www.theinvestingtutor.com. And yeah, this was an absolute delight. I really loved the discussion.
KH: I think we’ve got, left a lot on the table, too. We barely scratched the surface. I think if you’re up for it, we’ll probably try to have you back on maybe in a month or two.
Dr. Hans: Yeah, let’s make that happen. We’ll see what analogy I can come up with on the spot.
KH: I’ll have to so some more doctor research, too.
Dr. Hans: How about you res- and it’s funny, because if you had done the episode on which one of these individuals have played a key role in the US economic system, right? And vernac- because I know probably about 100 times more about the market, and they economy and that, than I do about the healthcare field, because it’s been in my entire focus for the past 12 years. When I was in pharmacy school, I was reading more about the stock market and finance than I was about pharmacy, even in school.
DL: Well, then, one last quick question for me then is, can you name an economist that started out poor and got rich?
Dr. Hans: Started out poor and got rich? Huh?
DL: Yeah, like a rags to riches economist.
Dr. Hans: Hm, let’s see. Well, I don’t know if, you would need to check, but let’s let’s, I’ll go with Paul Krugman.
DL: Paul Krugman. Okay. Okay.
Dr. Hans: Yeah. I need to see his beginnings if he came, started out, you know, poor, but he’s doing pretty well. And he is he’s one person that comes to mind.
KH: Paul Krugman.
DL: As Kyle and I have often discussed, the that doesn’t, it doesn’t seem like there’s a lot of rich economists out there.
Dr. Hans: Yeah. I wouldn’t say he’s super rich, but you know, he’s probably doing well.
DL: He does all right.
KH: He was born in a Russian Jewish family, so, well, it was in 1922, also. So probably, an immigrant, I’m guessing he probably didn’t do too well coming over here.
Dr. Hans: Yeah, and…
KH: Most of the time they left everything behind when they did that.
Dr. Hans: In 1922 you know, a couple of years right before the depression.
DL: Yeah, yeah. Yeah. All right. Good call. Good call Paul Krugman. Well, I thought it was going to stump you there.
KH: You almost did.
Dr. Hans: When it comes to, when it comes to money, finance, economy, man.
DL: That’s your jam.
Dr. Hans: It really is.
KH: All right, Dan, you want to wrap us up?
DL: Yeah. Oh, this has been so fantastic, having Dr. Hans with us here in the shop. We’re so glad you all came and gave it a listen and you’ve made it here to the end. But as always, we gotta shut the door sometime. We know Wall Street’s dangerous after dark. But…
KH: Are we are we, is the party over?
DL: Yeah, the, this party’s over.
DL: You’re going to have to find another one, until next time, but we promise we’ll be back at you soon. And until then, happy trades.
KH: Bye, folks.
Dr. Hans: Bye everyone.
DL: 2 Bulls in a China Shop is an entertainment program, and all thoughts and opinions expressed in the show belong to the hosts and not of any company. They are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide entertainment about stocks in the financial industry of trading. If you make trades based on what you hear in the show, you assume all risks for those trades.
Who is Dr. Hans Boateng?
He earned his Path of Distinction MBA from William and Mary and holds a Doctor of Pharmacy from St. John Fisher College. Born and raised in Ghana, West Africa. He recognizes the lack of investment literacy in immigrant and minority households. When he discovered how rich families built their fortune using the stock market, he decided to become an investor. After reading 400 books, 40,000 financial articles and spending 11 years pursuing mastery, Dr. Hans now teaches his proven strategies. He has impacted the lives of countless professionals and placed many families on the path to Generational Wealth. He is the most trusted investment tutor in the country.
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2 Bulls Discord:
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