October 28, 2025 • 26 mins
In this episode of Lead-Lag Live, I sit down with Seth Cogswell, Managing Partner at Running Oak Capital, to unpack the strange market dynamic where low-quality, high-debt companies are outperforming — and why that may be setting up one of the biggest long-term buying opportunities in years.
From zombie stocks to the passive investing paradox, Seth breaks down why common-sense investing has vanished from today’s markets — and how his “buy low, sell high” discipline at Running Oak is bringing it back.
In this episode:
– Why profitable, high-quality companies are lagging speculative names
– What the “buying a Lexus for the price of a Camry” moment means for investors
– How passive flows have hollowed out the core of the market
– Why most portfolios no longer follow the buy-low, sell-high principle
– The mission behind Seth’s new educational series Not So Passively Aggressive
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:00):
So I took a 99% pay cut to start my own company,
which was built around thestrategy that my father created.
And I did so because I realizedthat what I thought was my dream
job was a little soul sucking attimes.
It was, you know, I was I didwell and and I felt good about,
(00:20):
you know, success, but it waslargely doing playing a
high-stakes video game for amulti-billionaire family.
And I didn't feel like I wasproviding a whole lot of good.
You know, this strategy, my thestrategy that my father created,
running Oaks Efficient GrowthStrategy, first of all, just is
common sense.
SPEAKER_01 (00:48):
I'm your host, Melanie Schaefer.
Welcome to Lead Leg Live.
Now, today we're talking aboutRunning Oaks ETF run, R-U-N-N,
which has been drawingattention.
It's a managed mid-cap lendstrategy with the aim of
long-term growth.
The FUD holds roughly 50 to 70names and maintains a
disciplined rules-based processthat balances growth and
(01:09):
downside risk.
This year run is up modestly inline with expectations for a
strategy to build built tomanage volatility rather than
chase every market move.
My guest today is Seth Cogswell,managing partner at Running Oak.
Seth's been leading thetransformation from separately
managed accounts to scalable ETFstrategy that seeks to deliver
(01:30):
consistent returns withoutexcessive drawdowns.
Seth, welcome.
Thanks for having me, Melanie.
So let's begin with the recentperformance.
When you look back at runsreturns over the past year or
more, what factors have drovethose gains and what do you feel
might be holding you back?
SPEAKER_00 (01:46):
This year has been kind of a tale of two periods as
far as through uh the end ofApril, particularly through
April 8th, we our strategy hadoutperformed every single peer
and every single benchmark yearto date.
And so that was, it performedespecially well when the when
the market struggled.
(02:07):
So there's a bunch of studiesthat are uh research that's been
coming out recently.
BTIG always does a really goodjob.
And I actually received someresearch from BTIG earlier today
that showed that uh a comparisonbetween the Russell 2000, so
small cap stocks versus the S P600, also small cap, uh, is as
(02:28):
extreme as it's ever been inhistory.
So Russell 2000 does not haveany kind of screens really.
It doesn't, it doesn't favorprofitability, whereas the S P
600 does.
So it's it's kind of comparingapples to apples as far as small
caps versus small caps.
The big difference is thatprofitability and the
(02:48):
unprofitable leaning Russell2000 has absolutely destroyed
the profitable leaning S P 600,which is just pretty remarkable.
Um, anytime you hear somethingthat's never been done before,
it's always worth worth noting.
Um, you know, another point thatBTIG has made in the last week
or so is that the Goldman Sachslong short quality index.
(03:12):
So it compares high quality,which it there's different
definitions for that, but let'ssay profitable, um, you know,
reasonable amounts of debt onthe balance sheet.
Just you know, what we wouldconsider to be good, well-run
companies, high quality haslagged low quality to a degree
only seen one time in history,which was late 2020, early 2021,
(03:38):
which it was pre-COVID.
And and if anybody remembersthat, the the market was just
going straight up every singleday.
And when you get that, no onethinks about risk or quality or
profitability or anything likethat.
It's more just a casino.
Uh, and so again, the only timein history uh that we've seen
this other than that that shortperiod.
(04:00):
And then another data point isthe Barclays high volatility
index, since April 8th, itdoubled in six months.
So to think of just a largenumber of stocks doubling is
pretty crazy.
Um, you know, and highvolatility companies, you know,
quality kind of companies thatgo about their day, those are
(04:22):
boring.
Those are not high volatility.
What's high volatility iscompanies that are borderline
bankrupt, zombies, you know, thethe ones, the meme stocks, and
those are what have doubled.
They're up 100% in six months.
And so in that regard, I mean,that that is the exact opposite
of what we would ever invest in.
(04:44):
Uh our strategy, efficientgrowth, leans toward maximizing
earnings growth.
So we we value profitability,making money.
We feel that making investing incompanies that make money is a
good thing.
Um, it also balances debt.
So a lot of the companies thatperformed especially well are
(05:05):
borderline uh you know debt.
They're zombie companies, right?
They they have so much debt andthe interest payments are so
high that they can't evengenerate enough cash to pay
them, and yet they're performingextremely well, whereas those
companies that have less debtare performing, you know,
they're they're just not keepingup because they're not as
exciting.
Uh so again, I kind of love it.
(05:28):
You know, yes, we've lagged inthe last uh few months, but
frankly, the last thing I wantto do is be talking about a
strategy or you know a servicewhere people would be chasing
and maybe the odds aren't intheir favor.
Whereas today, the the oddsappear by a number of uh you
know metrics to be as favorableas maybe ever.
SPEAKER_01 (05:53):
Yeah.
And so a quote uh used that Ilike buying a Lexus uh for the
price of a camera.
Can you talk to me specificallyabout the opportunity that
short-term underperformancemight actually present uh in the
context of your long-termframework, the best of the best
solution?
SPEAKER_00 (06:07):
Yeah, so our strategy again has a uh 12 over
a 12-year audited track recordas a 36 years worth of data,
like a real-time data history,and then a five-decade history.
So it's about as time-tested asit gets.
From 89 to 2012, 2013, theportfolio outperformed the SP by
(06:27):
roughly 3.5% or so before feesand did so with roughly 50% of
the average drawdown.
Uh now, those returns prior tome launching Running Oak aren't
audited, but I actually helped,I ran the portfolio for a chunk
of that.
Uh, my father created thestrategy, ran it for the rest.
And so it's real time, certainlyworth paying attention to.
(06:49):
And, you know, if you can getsomething that has provided that
significant of value for thatlong, right?
So three and a half decades ofoutperformance and less than
half of the downside, and thenyou get it, and you can get it
at a significant discount.
I mean, again, the lowestquality names have have just uh
(07:10):
you know skyrocketed in the lastsix months, right?
They're up a hundred percent.
Um, and then we've lagged that,thankfully.
I if I if we kept up with it,I'd say I tell our clients that
if we keep up with that, weshould be fired because we're
clearly not doing what we saywe're going to do.
Um, and so that that laggingactually, though, creates a
discount, right?
It whether the market continues,fine.
(07:31):
So then we would expect goodcompanies at some point to catch
up to bad companies.
And so that would create a nicelittle tailwind.
Or if the market struggles,which is often what happens when
you see this kind of speculativefervor that we've seen in the
last six months, if that happenswhere the market struggles,
great, that just creates thisbuffer for us to, you know, to
(07:55):
use that word again, bufferclient portfolios.
And so now is to use your quote,which I guess was my quote, um,
it's definitely like buying aLexus, you know, one of the best
performing for the price of aCamry.
Uh, it's it's it's a discountand it seems to be an ideal
time.
SPEAKER_01 (08:14):
Well, another quote you you know that you hear a lot
in investing is sell low, buyhigh.
Can you talk a little bit aboutthat sort of narrative and what
is actually going on right nowuh within the market?
SPEAKER_00 (08:25):
Yeah, so I I've kind of been using the the term very
recently um themes, memes, anddreams, because I I feel like
that describes the typicalclient portfolio better than
anything else at this point.
Uh, you know, not that long ago,if you asked someone how to make
(08:45):
money in in the markets and theywanted to be a little bit of a
jerk, they'd say buy low, sellhigh because it was so obvious.
Yet there's little to n littleto none of most clients'
portfolios are actually buy low,sell high these days.
Uh the part of that is due tothe popularity of index fund
(09:09):
investing.
And one of the things that manydon't realize is you know, index
funds have had a very positiveimpact on the investing universe
as far as bringing fees down.
And it's it's had, you know,it's it's made it more
efficient.
However, it's not uh you know apanacea, right?
(09:30):
It's it's not necessarily aperfect investment.
It has its own characteristics.
And if you really look at howpassive portfolios are built in
their simplest form.
So if we look at it from a stockby stock basis, we'll use Apple
because everybody knows it andit makes sense.
So let's say you know you've gota company and then you've got a
stock.
They're they're connected.
(09:51):
Let's say at some point themarket is efficient and the
value of the stock reflects thevalue of the company.
Uh now, let's say Apple.
Someone bought a MacBook or aniPhone and says, man, this is
the greatest.
Therefore, they turn around andbuy Apple.
Now, nothing changed with Appleas a company because they had
(10:11):
already bought the MacBook orthe iPhone, right?
So nothing changedfundamentally, but that demand
for that stock is going to pushthe price up.
That's what demand does.
It pushes prices up.
Now, because that price ishigher, it it now, Apple now
comprises a larger percentage ofthe index.
So now anybody else that investsin the index buys more Apple
(10:36):
because Apple is now overvalued.
So now let's say, let's take itone step further.
Let's say a momentum manager oror even somebody just chasing uh
performance says, oh, Apple'sflying.
And so they buy Apple becauseit's up.
Now that demand pushes Apple upmore.
Because Apple's price is higher.
Again, nothing's changed withthe company.
(10:56):
Company is just doing its thing.
Because the price of the stockis higher, it's now a bigger
percentage of the S P 500, whichmeans that the next person that
invests invests an even higherpercentage in Apple because it's
more overvalued.
So you're buying more and moreand more, the more and more
overvalued a company getsbecause it's overvalued.
(11:18):
It's the opposite of buying low.
It's buying high and then buyinghigher and buying higher.
Now, on the flip side, if acompany, let's say somebody's
MacBook crashes and they'relike, you know what, I hate
Apple, then they're gonna sellthe stock.
Now, even though they'd alreadybought the, I mean, I guess they
could return the MacBook andmaybe the value of Apple would
drop.
But let's say they haven't donethat yet.
(11:39):
So Apple's still sitting here asa company, but now the stock is
a little bit lower becausesomebody sold.
Now anybody that invests inNindex is going to invest less
in Apple because it'sundervalued.
And now let's say something I'vebeen thinking about a lot is all
these um, you know, these uh uh,you know, these these uh tax
(12:02):
loss harvesting strategies,right?
So now because Apple's down,people are gonna sell it because
they're like, oh, we can realizea loss.
That's going to push Apple downmore because people are selling.
Now, Apple, even though nothingchanged with the company
whatsoever, now that it's moreand more undervalued, SP
investors are investing less andless and less.
(12:22):
So it's the opposite of buy low.
So again, it's buy high, buyless if it's undervalued, and
then there's no selling.
It just goes up and up and upand up and up until maybe at
some point it hits a you know aspot where it's just top heavy
and can't continue, and then itcomes down.
The only time the SP 500 willever sell is if the committee
(12:46):
that runs the SP says, you knowwhat, this no longer, we don't
think this should be part of itanymore, so we're gonna kick it
out.
So again, it's not buy low, sellhigh.
It's buy high, buy higher, buyeven higher, buy more and more
higher, never buy low, or buyless low, and then never sell.
Um, and that has become a verylarge percentage of most
(13:07):
people's portfolios.
Um I'm currently reading theBogle effect, which is the most
recent biography on Jack Bogle.
And one of the comments that'smentioned multiple times is the
hollowing out of core.
So core is kind of the centralor sort of foundational part of
someone's portfolio.
So hearing the hollowing out,that doesn't sound good if your
(13:30):
core is being hollowed out.
Now, they don't necessarilyimply it in that way.
The way that they're using it isthe fact that uh index funds
have basically wiped out allmutual funds or active manager
in that core space, which meansthat it's basically that core
space, the foundation ofportfolios has been replaced
with index funds, which as wejust described, buys higher and
(13:52):
higher and higher and higher,never sells until maybe they
sell at the very, very, very,very bottom.
Um and so the core's beenhollowed out, to quote them.
Um, because the core has beenhollowed out and because of the
dominance of passive investing,many investors have now, on
(14:12):
whether the active side orallocators have now invested
around the periphery, often inthemes.
So you've got thematic investingin ETFs, many of which are
really cool.
Um, although I don't know how Ifeel about the 5x ETFs.
I don't know if those count asthemes or not, but that's those
are pretty nuts.
Regardless, you know, whetherit's robotics, whether it's AI,
(14:35):
um, playing themes can be reallyinteresting.
It can be a really way tocomplement, but most of these
have no valuation component.
There is no buy low, sell highcomponent for the majority of
these thematic ETFs.
So now you now we know the thecore, the majority is buy high,
buy higher, buy higher, buyhigher, never sell.
(14:56):
And then the themes are youknow, investing in pockets or
you know, certain um parts ofthe market that you want more
exposure to, but there's no buylow, sell high there.
And so it's evolved into thisscenario today where the
majority of people's portfolioshave no buy low, sell high
(15:20):
aspect to it.
Keep in mind, again, that's themost common sense, most obvious
way to make money investing.
We've all said, we've all kindof made fun of people by saying
just buy low, sell high.
People don't do it anymore.
And they, and that's not becauseit doesn't make any more sense,
because this still makes just asmuch sense as it ever did.
They've just stopped doing it.
Um, and it and they've stoppeddoing it because we've focused
(15:42):
on fees over common sense andnumbers and valuations and
companies.
Uh, you know, fees dominateeverything, and then we've got
the themes to sort of try tocompensate on that.
To wrap all of that up, runningOak is buy low, sell high.
Uh, we are very focused onvaluations.
(16:03):
We intentionally invest incompanies that, according to our
numbers, are attractivelyvalued.
We want to buy low.
And then what reallydifferentiates us versus the
majority of managers is we havea very disciplined um sell
signal when a company hits acertain point beyond where we
feel is fair value and we feelthat it should go down, we sell.
(16:26):
We don't own companies thatshould go down.
Um, so again, it's buy low, sellhigh.
And it's it's just such anobvious common sense uh way to
invest that everybody knows andno one is doing now.
And we are running oak as areturn to buying low and selling
(16:46):
high.
At least, at least use it forlike a part of your portfolio
because doing the opposite justdoesn't make sense.
And that's precisely howeverybody's portfolio is now
constructed.
It's it's wildly alarming.
SPEAKER_01 (16:59):
Yeah, well, that was a great description and also a
good reminder of back's the youknow main point of the
philosophy of uh investing.
Um I just want to pivot now uhbefore we we start to wrap up,
but you've been building a newvideo series called Not So
Passively Aggressive.
I aimed at education.
How does that tie into yourfunds philosophy?
And and what are you hopingviewers will take away when they
(17:22):
watch it?
SPEAKER_00 (17:23):
So I took a 99% pay cut to start my own company,
which was built around thestrategy that my father created.
And I did so because I realizedthat what I thought was my dream
job was a little soul-sucking attimes.
It was, you know, I was I didwell and and I felt good about
(17:45):
you know success, but it waslargely doing playing a
high-stakes video game for amulti-billionaire family.
And I didn't feel like I wasproviding a whole lot of good.
Uh, you know, this strategy, mythe strategy that my father
created, running a sufficientgrowth strategy, first of all,
just is common sense.
And I feel like the world hasgotten away from common sense.
(18:07):
Um, as I just described, I mean,we've gotten a away from buy
low, sell high, which is such asimple and obvious way to
invest.
And people just aren't thinkingabout it anymore.
And there's good reasons whypeople aren't thinking about it
anymore.
Uh there are, you know, we're inan industry built around money,
(18:28):
and people are gonna do thingsfor to make more money.
And, you know, a lot of this,while I think that uh the more
and more I learn about JohnBogle, I love what he created
and I love the value ofVanguard.
But there are other companiesthat are kind of, you know, uh
competing with Vanguard thathave a little bit of a history
(18:48):
of maybe not looking out for theclient's best interest.
And one of the things that torecognize about passive
investing is that it is not afree gift from the gods.
Um, everything has a give andtake, everything has a cost.
And these companies, whetherit's standard poor's, BlackRock,
Fidelity, these companies aremaking a lot of money.
(19:08):
Uh, they're not just giving youthis free passive portfolio out
of the goodness of their hearts.
They're making a ton of money.
And and they make money based onselling.
Uh, and I feel like there's beena lot of sales efforts that have
misled people to believe thingsthat aren't true.
One of the things that reallyunsettles me is this belief that
(19:31):
people should not think aboutinvesting.
If you really think about theamount of effort and time and
maybe even misery that goes intosaving money to retire, right?
So, like a person might work 40,50 hours a week, um, will hope
50 weeks a year and they get twoweeks of vacation for three to
(19:54):
four decades to try to save acertain amount of money so they
can provide this high quality oflife for their children, to
retire, whatever.
They're working so hard.
And most people are not workingjobs that they love, right?
And they're doing it to squirrelaway this small amount of money.
And then to think that they'veworked so hard to over a long
(20:14):
period of time amass this amountof money, to then not think at
all about what they're doingwith it, to listen to people who
are selling them stuff andtelling them don't think, just
put it with us.
There's no major decision inlife where you'd say, don't
think.
Somehow this is the onlydecision where you're like, ah,
don't think about it.
Now, there's reasons that led tous being here, which is uh, you
(20:38):
know, for a long period of time,when investors chased returns,
when investors did certainthings, yes, it destroyed value.
But that doesn't mean weshouldn't try to learn and try
to better ourselves and try tohave a better grasp of the
decisions that we're making andthe impacts that they're gonna
have on our future, your abilityto retire.
(20:58):
So that's that was a long-windedway to say that the whole point
of not so passively aggressiveis to educate, to try to just um
help people think a little bitmore of the risks that they are
taking.
For instance, again, what Idescribed about passive
investing, it's it's it's greatfor certain things.
(21:21):
It's cheap, awesome.
Like paying less fees if you'reget if you can get the same
thing elsewhere, awesome.
But just know that it is amomentum portfolio.
It does really well whenmomentum is hot.
It's not an all-day, all-weatherportfolio.
There are gonna be periods whereit does really poorly.
And we've just been through thehottest period in history of
(21:44):
momentum, which has led peopleto think, you know what, we
don't have to think about this.
We're just gonna make moneyevery single day.
And that's just not the case.
Um, and that's called not sopassively aggressive to coin a
few friends who I ran up by,they're like, yeah, that fits
you perfectly.
You're very far from passiveaggressive.
So um, you know, uh ideally, ifanyone watching this happens to
(22:08):
see uh a not so passivelyaggressive video and you feel
it's of merit and could helppeople, please like it.
Um pass it along because thegoal is to help as many people
as possible, and I'd appreciateyour help in doing so.
Same with this video.
Hopefully this video helps aswell.
SPEAKER_01 (22:27):
Where can our viewers go to find the video
series that you're uh releasing?
And also where can people go ifthey want to dig deeper into run
and your philosophy or connectwith you?
SPEAKER_00 (22:37):
Um to find not so passively aggressive.
I am very begrudgingly anduncomfortably going to be
posting it everywhere I canbecause again, the goal is to
help as many people as possible.
And if people don't see it, thenI'm not really helping anybody.
Um and I'm not selling anythingon it, so I'm not even helping
myself by doing it.
Uh so it'll be available on youknow Apple, anywhere you can see
(23:01):
a podcast, Apple, Spotify,YouTube.
I've never posted a video onInstagram or TikTok, but I I
might do it.
Uh we'll see.
So please keep an eye out forit.
And then as far as me personallyor Running Oak, um, you can find
our we got a shiny new website,runningoak.com or
runningoaketfs.com.
(23:23):
Um, I'm also begrudgingly doinga lot more on LinkedIn, so hit
me up on there.
Uh, I'd love to talk, love tohelp however I can.
SPEAKER_01 (23:33):
Thank you uh so much for joining me.
Thank you to everybody forwatching.
Be sure to like, share, andsubscribe for more episodes of
Lead Leg Live.
SPEAKER_00 (23:41):
Thank you for having me.
So I took a 99% pay cut to start my own company,
which was built around thestrategy that my father created.
And I did so because I realizedthat what I thought was my dream
job was a little soul sucking attimes.
It was, you know, I was I didwell and and I felt good about,
(00:20):
you know, success, but it waslargely doing playing a
high-stakes video game for amulti-billionaire family.
And I didn't feel like I wasproviding a whole lot of good.
You know, this strategy, my thestrategy that my father created,
running Oaks Efficient GrowthStrategy, first of all, just is
common sense.
SPEAKER_01 (00:48):
I'm your host, Melanie Schaefer.
Welcome to Lead Leg Live.
Now, today we're talking aboutRunning Oaks ETF run, R-U-N-N,
which has been drawingattention.
It's a managed mid-cap lendstrategy with the aim of
long-term growth.
The FUD holds roughly 50 to 70names and maintains a
disciplined rules-based processthat balances growth and
(01:09):
downside risk.
This year run is up modestly inline with expectations for a
strategy to build built tomanage volatility rather than
chase every market move.
My guest today is Seth Cogswell,managing partner at Running Oak.
Seth's been leading thetransformation from separately
managed accounts to scalable ETFstrategy that seeks to deliver
(01:30):
consistent returns withoutexcessive drawdowns.
Seth, welcome.
Thanks for having me, Melanie.
So let's begin with the recentperformance.
When you look back at runsreturns over the past year or
more, what factors have drovethose gains and what do you feel
might be holding you back?
SPEAKER_00 (01:46):
This year has been kind of a tale of two periods as
far as through uh the end ofApril, particularly through
April 8th, we our strategy hadoutperformed every single peer
and every single benchmark yearto date.
And so that was, it performedespecially well when the when
the market struggled.
(02:07):
So there's a bunch of studiesthat are uh research that's been
coming out recently.
BTIG always does a really goodjob.
And I actually received someresearch from BTIG earlier today
that showed that uh a comparisonbetween the Russell 2000, so
small cap stocks versus the S P600, also small cap, uh, is as
(02:28):
extreme as it's ever been inhistory.
So Russell 2000 does not haveany kind of screens really.
It doesn't, it doesn't favorprofitability, whereas the S P
600 does.
So it's it's kind of comparingapples to apples as far as small
caps versus small caps.
The big difference is thatprofitability and the
(02:48):
unprofitable leaning Russell2000 has absolutely destroyed
the profitable leaning S P 600,which is just pretty remarkable.
Um, anytime you hear somethingthat's never been done before,
it's always worth worth noting.
Um, you know, another point thatBTIG has made in the last week
or so is that the Goldman Sachslong short quality index.
(03:12):
So it compares high quality,which it there's different
definitions for that, but let'ssay profitable, um, you know,
reasonable amounts of debt onthe balance sheet.
Just you know, what we wouldconsider to be good, well-run
companies, high quality haslagged low quality to a degree
only seen one time in history,which was late 2020, early 2021,
(03:38):
which it was pre-COVID.
And and if anybody remembersthat, the the market was just
going straight up every singleday.
And when you get that, no onethinks about risk or quality or
profitability or anything likethat.
It's more just a casino.
Uh, and so again, the only timein history uh that we've seen
this other than that that shortperiod.
(04:00):
And then another data point isthe Barclays high volatility
index, since April 8th, itdoubled in six months.
So to think of just a largenumber of stocks doubling is
pretty crazy.
Um, you know, and highvolatility companies, you know,
quality kind of companies thatgo about their day, those are
(04:22):
boring.
Those are not high volatility.
What's high volatility iscompanies that are borderline
bankrupt, zombies, you know, thethe ones, the meme stocks, and
those are what have doubled.
They're up 100% in six months.
And so in that regard, I mean,that that is the exact opposite
of what we would ever invest in.
(04:44):
Uh our strategy, efficientgrowth, leans toward maximizing
earnings growth.
So we we value profitability,making money.
We feel that making investing incompanies that make money is a
good thing.
Um, it also balances debt.
So a lot of the companies thatperformed especially well are
(05:05):
borderline uh you know debt.
They're zombie companies, right?
They they have so much debt andthe interest payments are so
high that they can't evengenerate enough cash to pay
them, and yet they're performingextremely well, whereas those
companies that have less debtare performing, you know,
they're they're just not keepingup because they're not as
exciting.
Uh so again, I kind of love it.
(05:28):
You know, yes, we've lagged inthe last uh few months, but
frankly, the last thing I wantto do is be talking about a
strategy or you know a servicewhere people would be chasing
and maybe the odds aren't intheir favor.
Whereas today, the the oddsappear by a number of uh you
know metrics to be as favorableas maybe ever.
SPEAKER_01 (05:53):
Yeah.
And so a quote uh used that Ilike buying a Lexus uh for the
price of a camera.
Can you talk to me specificallyabout the opportunity that
short-term underperformancemight actually present uh in the
context of your long-termframework, the best of the best
solution?
SPEAKER_00 (06:07):
Yeah, so our strategy again has a uh 12 over
a 12-year audited track recordas a 36 years worth of data,
like a real-time data history,and then a five-decade history.
So it's about as time-tested asit gets.
From 89 to 2012, 2013, theportfolio outperformed the SP by
(06:27):
roughly 3.5% or so before feesand did so with roughly 50% of
the average drawdown.
Uh now, those returns prior tome launching Running Oak aren't
audited, but I actually helped,I ran the portfolio for a chunk
of that.
Uh, my father created thestrategy, ran it for the rest.
And so it's real time, certainlyworth paying attention to.
(06:49):
And, you know, if you can getsomething that has provided that
significant of value for thatlong, right?
So three and a half decades ofoutperformance and less than
half of the downside, and thenyou get it, and you can get it
at a significant discount.
I mean, again, the lowestquality names have have just uh
(07:10):
you know skyrocketed in the lastsix months, right?
They're up a hundred percent.
Um, and then we've lagged that,thankfully.
I if I if we kept up with it,I'd say I tell our clients that
if we keep up with that, weshould be fired because we're
clearly not doing what we saywe're going to do.
Um, and so that that laggingactually, though, creates a
discount, right?
It whether the market continues,fine.
(07:31):
So then we would expect goodcompanies at some point to catch
up to bad companies.
And so that would create a nicelittle tailwind.
Or if the market struggles,which is often what happens when
you see this kind of speculativefervor that we've seen in the
last six months, if that happenswhere the market struggles,
great, that just creates thisbuffer for us to, you know, to
(07:55):
use that word again, bufferclient portfolios.
And so now is to use your quote,which I guess was my quote, um,
it's definitely like buying aLexus, you know, one of the best
performing for the price of aCamry.
Uh, it's it's it's a discountand it seems to be an ideal
time.
SPEAKER_01 (08:14):
Well, another quote you you know that you hear a lot
in investing is sell low, buyhigh.
Can you talk a little bit aboutthat sort of narrative and what
is actually going on right nowuh within the market?
SPEAKER_00 (08:25):
Yeah, so I I've kind of been using the the term very
recently um themes, memes, anddreams, because I I feel like
that describes the typicalclient portfolio better than
anything else at this point.
Uh, you know, not that long ago,if you asked someone how to make
(08:45):
money in in the markets and theywanted to be a little bit of a
jerk, they'd say buy low, sellhigh because it was so obvious.
Yet there's little to n littleto none of most clients'
portfolios are actually buy low,sell high these days.
Uh the part of that is due tothe popularity of index fund
(09:09):
investing.
And one of the things that manydon't realize is you know, index
funds have had a very positiveimpact on the investing universe
as far as bringing fees down.
And it's it's had, you know,it's it's made it more
efficient.
However, it's not uh you know apanacea, right?
(09:30):
It's it's not necessarily aperfect investment.
It has its own characteristics.
And if you really look at howpassive portfolios are built in
their simplest form.
So if we look at it from a stockby stock basis, we'll use Apple
because everybody knows it andit makes sense.
So let's say you know you've gota company and then you've got a
stock.
They're they're connected.
(09:51):
Let's say at some point themarket is efficient and the
value of the stock reflects thevalue of the company.
Uh now, let's say Apple.
Someone bought a MacBook or aniPhone and says, man, this is
the greatest.
Therefore, they turn around andbuy Apple.
Now, nothing changed with Appleas a company because they had
(10:11):
already bought the MacBook orthe iPhone, right?
So nothing changedfundamentally, but that demand
for that stock is going to pushthe price up.
That's what demand does.
It pushes prices up.
Now, because that price ishigher, it it now, Apple now
comprises a larger percentage ofthe index.
So now anybody else that investsin the index buys more Apple
(10:36):
because Apple is now overvalued.
So now let's say, let's take itone step further.
Let's say a momentum manager oror even somebody just chasing uh
performance says, oh, Apple'sflying.
And so they buy Apple becauseit's up.
Now that demand pushes Apple upmore.
Because Apple's price is higher.
Again, nothing's changed withthe company.
(10:56):
Company is just doing its thing.
Because the price of the stockis higher, it's now a bigger
percentage of the S P 500, whichmeans that the next person that
invests invests an even higherpercentage in Apple because it's
more overvalued.
So you're buying more and moreand more, the more and more
overvalued a company getsbecause it's overvalued.
(11:18):
It's the opposite of buying low.
It's buying high and then buyinghigher and buying higher.
Now, on the flip side, if acompany, let's say somebody's
MacBook crashes and they'relike, you know what, I hate
Apple, then they're gonna sellthe stock.
Now, even though they'd alreadybought the, I mean, I guess they
could return the MacBook andmaybe the value of Apple would
drop.
But let's say they haven't donethat yet.
(11:39):
So Apple's still sitting here asa company, but now the stock is
a little bit lower becausesomebody sold.
Now anybody that invests inNindex is going to invest less
in Apple because it'sundervalued.
And now let's say something I'vebeen thinking about a lot is all
these um, you know, these uh uh,you know, these these uh tax
(12:02):
loss harvesting strategies,right?
So now because Apple's down,people are gonna sell it because
they're like, oh, we can realizea loss.
That's going to push Apple downmore because people are selling.
Now, Apple, even though nothingchanged with the company
whatsoever, now that it's moreand more undervalued, SP
investors are investing less andless and less.
(12:22):
So it's the opposite of buy low.
So again, it's buy high, buyless if it's undervalued, and
then there's no selling.
It just goes up and up and upand up and up until maybe at
some point it hits a you know aspot where it's just top heavy
and can't continue, and then itcomes down.
The only time the SP 500 willever sell is if the committee
(12:46):
that runs the SP says, you knowwhat, this no longer, we don't
think this should be part of itanymore, so we're gonna kick it
out.
So again, it's not buy low, sellhigh.
It's buy high, buy higher, buyeven higher, buy more and more
higher, never buy low, or buyless low, and then never sell.
Um, and that has become a verylarge percentage of most
(13:07):
people's portfolios.
Um I'm currently reading theBogle effect, which is the most
recent biography on Jack Bogle.
And one of the comments that'smentioned multiple times is the
hollowing out of core.
So core is kind of the centralor sort of foundational part of
someone's portfolio.
So hearing the hollowing out,that doesn't sound good if your
(13:30):
core is being hollowed out.
Now, they don't necessarilyimply it in that way.
The way that they're using it isthe fact that uh index funds
have basically wiped out allmutual funds or active manager
in that core space, which meansthat it's basically that core
space, the foundation ofportfolios has been replaced
with index funds, which as wejust described, buys higher and
(13:52):
higher and higher and higher,never sells until maybe they
sell at the very, very, very,very bottom.
Um and so the core's beenhollowed out, to quote them.
Um, because the core has beenhollowed out and because of the
dominance of passive investing,many investors have now, on
(14:12):
whether the active side orallocators have now invested
around the periphery, often inthemes.
So you've got thematic investingin ETFs, many of which are
really cool.
Um, although I don't know how Ifeel about the 5x ETFs.
I don't know if those count asthemes or not, but that's those
are pretty nuts.
Regardless, you know, whetherit's robotics, whether it's AI,
(14:35):
um, playing themes can be reallyinteresting.
It can be a really way tocomplement, but most of these
have no valuation component.
There is no buy low, sell highcomponent for the majority of
these thematic ETFs.
So now you now we know the thecore, the majority is buy high,
buy higher, buy higher, buyhigher, never sell.
(14:56):
And then the themes are youknow, investing in pockets or
you know, certain um parts ofthe market that you want more
exposure to, but there's no buylow, sell high there.
And so it's evolved into thisscenario today where the
majority of people's portfolioshave no buy low, sell high
(15:20):
aspect to it.
Keep in mind, again, that's themost common sense, most obvious
way to make money investing.
We've all said, we've all kindof made fun of people by saying
just buy low, sell high.
People don't do it anymore.
And they, and that's not becauseit doesn't make any more sense,
because this still makes just asmuch sense as it ever did.
They've just stopped doing it.
Um, and it and they've stoppeddoing it because we've focused
(15:42):
on fees over common sense andnumbers and valuations and
companies.
Uh, you know, fees dominateeverything, and then we've got
the themes to sort of try tocompensate on that.
To wrap all of that up, runningOak is buy low, sell high.
Uh, we are very focused onvaluations.
(16:03):
We intentionally invest incompanies that, according to our
numbers, are attractivelyvalued.
We want to buy low.
And then what reallydifferentiates us versus the
majority of managers is we havea very disciplined um sell
signal when a company hits acertain point beyond where we
feel is fair value and we feelthat it should go down, we sell.
(16:26):
We don't own companies thatshould go down.
Um, so again, it's buy low, sellhigh.
And it's it's just such anobvious common sense uh way to
invest that everybody knows andno one is doing now.
And we are running oak as areturn to buying low and selling
(16:46):
high.
At least, at least use it forlike a part of your portfolio
because doing the opposite justdoesn't make sense.
And that's precisely howeverybody's portfolio is now
constructed.
It's it's wildly alarming.
SPEAKER_01 (16:59):
Yeah, well, that was a great description and also a
good reminder of back's the youknow main point of the
philosophy of uh investing.
Um I just want to pivot now uhbefore we we start to wrap up,
but you've been building a newvideo series called Not So
Passively Aggressive.
I aimed at education.
How does that tie into yourfunds philosophy?
And and what are you hopingviewers will take away when they
(17:22):
watch it?
SPEAKER_00 (17:23):
So I took a 99% pay cut to start my own company,
which was built around thestrategy that my father created.
And I did so because I realizedthat what I thought was my dream
job was a little soul-sucking attimes.
It was, you know, I was I didwell and and I felt good about
(17:45):
you know success, but it waslargely doing playing a
high-stakes video game for amulti-billionaire family.
And I didn't feel like I wasproviding a whole lot of good.
Uh, you know, this strategy, mythe strategy that my father
created, running a sufficientgrowth strategy, first of all,
just is common sense.
And I feel like the world hasgotten away from common sense.
(18:07):
Um, as I just described, I mean,we've gotten a away from buy
low, sell high, which is such asimple and obvious way to
invest.
And people just aren't thinkingabout it anymore.
And there's good reasons whypeople aren't thinking about it
anymore.
Uh there are, you know, we're inan industry built around money,
(18:28):
and people are gonna do thingsfor to make more money.
And, you know, a lot of this,while I think that uh the more
and more I learn about JohnBogle, I love what he created
and I love the value ofVanguard.
But there are other companiesthat are kind of, you know, uh
competing with Vanguard thathave a little bit of a history
(18:48):
of maybe not looking out for theclient's best interest.
And one of the things that torecognize about passive
investing is that it is not afree gift from the gods.
Um, everything has a give andtake, everything has a cost.
And these companies, whetherit's standard poor's, BlackRock,
Fidelity, these companies aremaking a lot of money.
(19:08):
Uh, they're not just giving youthis free passive portfolio out
of the goodness of their hearts.
They're making a ton of money.
And and they make money based onselling.
Uh, and I feel like there's beena lot of sales efforts that have
misled people to believe thingsthat aren't true.
One of the things that reallyunsettles me is this belief that
(19:31):
people should not think aboutinvesting.
If you really think about theamount of effort and time and
maybe even misery that goes intosaving money to retire, right?
So, like a person might work 40,50 hours a week, um, will hope
50 weeks a year and they get twoweeks of vacation for three to
(19:54):
four decades to try to save acertain amount of money so they
can provide this high quality oflife for their children, to
retire, whatever.
They're working so hard.
And most people are not workingjobs that they love, right?
And they're doing it to squirrelaway this small amount of money.
And then to think that they'veworked so hard to over a long
(20:14):
period of time amass this amountof money, to then not think at
all about what they're doingwith it, to listen to people who
are selling them stuff andtelling them don't think, just
put it with us.
There's no major decision inlife where you'd say, don't
think.
Somehow this is the onlydecision where you're like, ah,
don't think about it.
Now, there's reasons that led tous being here, which is uh, you
(20:38):
know, for a long period of time,when investors chased returns,
when investors did certainthings, yes, it destroyed value.
But that doesn't mean weshouldn't try to learn and try
to better ourselves and try tohave a better grasp of the
decisions that we're making andthe impacts that they're gonna
have on our future, your abilityto retire.
(20:58):
So that's that was a long-windedway to say that the whole point
of not so passively aggressiveis to educate, to try to just um
help people think a little bitmore of the risks that they are
taking.
For instance, again, what Idescribed about passive
investing, it's it's it's greatfor certain things.
(21:21):
It's cheap, awesome.
Like paying less fees if you'reget if you can get the same
thing elsewhere, awesome.
But just know that it is amomentum portfolio.
It does really well whenmomentum is hot.
It's not an all-day, all-weatherportfolio.
There are gonna be periods whereit does really poorly.
And we've just been through thehottest period in history of
(21:44):
momentum, which has led peopleto think, you know what, we
don't have to think about this.
We're just gonna make moneyevery single day.
And that's just not the case.
Um, and that's called not sopassively aggressive to coin a
few friends who I ran up by,they're like, yeah, that fits
you perfectly.
You're very far from passiveaggressive.
So um, you know, uh ideally, ifanyone watching this happens to
(22:08):
see uh a not so passivelyaggressive video and you feel
it's of merit and could helppeople, please like it.
Um pass it along because thegoal is to help as many people
as possible, and I'd appreciateyour help in doing so.
Same with this video.
Hopefully this video helps aswell.
SPEAKER_01 (22:27):
Where can our viewers go to find the video
series that you're uh releasing?
And also where can people go ifthey want to dig deeper into run
and your philosophy or connectwith you?
SPEAKER_00 (22:37):
Um to find not so passively aggressive.
I am very begrudgingly anduncomfortably going to be
posting it everywhere I canbecause again, the goal is to
help as many people as possible.
And if people don't see it, thenI'm not really helping anybody.
Um and I'm not selling anythingon it, so I'm not even helping
myself by doing it.
Uh so it'll be available on youknow Apple, anywhere you can see
(23:01):
a podcast, Apple, Spotify,YouTube.
I've never posted a video onInstagram or TikTok, but I I
might do it.
Uh we'll see.
So please keep an eye out forit.
And then as far as me personallyor Running Oak, um, you can find
our we got a shiny new website,runningoak.com or
runningoaketfs.com.
(23:23):
Um, I'm also begrudgingly doinga lot more on LinkedIn, so hit
me up on there.
Uh, I'd love to talk, love tohelp however I can.
SPEAKER_01 (23:33):
Thank you uh so much for joining me.
Thank you to everybody forwatching.
Be sure to like, share, andsubscribe for more episodes of
Lead Leg Live.
SPEAKER_00 (23:41):
Thank you for having me.
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