Video Closed Captioning:
good morning good afternoon good evening
folks michael zuber one rental at a time
back with this thursday guest friend and
expert jonathan tumley how you doing sir
i’m great michael how are you well
i don’t know
today is 20 years
20 years ago today
is a painful reminder
20 years ago today a company called
enron went bankrupt
this is particularly damaging to me
because it was the first of two
corporate frauds
that burn me and help me lose 80 of my
portfolio in a very short time so
i don’t remember that finally but i do
remember being an idiot
what i remember about enron was they
were the smartest people in the room
they couldn’t do any wrong we had
rolling blackouts in california they
were trading energy and doing all these
things and they were they can’t lose
company
this is why i have a really nasty
aversion
to companies that come out
cocky like they are the best they got
like we got the most phds or the most
rocket scientists or this that or the
other thing the people that put out that
aura
i run from because of this so i i don’t
think you were an enron investor at
least i hope you weren’t because it was
painful but i know you know that time 20
years ago today
enron uh showed that yeah you know what
you can have fraud in a
uh a company that was audited by arthur
anderson i think
um
one of the big five which is now the big
three because bad things happened it
took officer anderson down yeah
single-handedly yeah because they had
audited books and uh again i was an
investor significant portion of my net
worth in it
was winning and then not and it was a
fraud was it a fraud and there’s nothing
i could have done and again i’m freely
i’m willing to admit that i’d stop doing
the work by then but even if i had
their financials were audited they had
signed sealed and delivered and it was
complete smoke and mirrors
burn people yeah i mean i’m sure that i
was exposed to enron through mutual
funds and stuff that i
owned because they were everybody was
investing in enron you had to have a
piece they were they were doing so well
and
you know when this when the the whole
thing blew up it turned out that you
know they were they were making
themselves look good by parking all
their losses and shell companies that
were off the books off the books yes
i mean which never like i have never
actually understood how
you
like you can have anything off the books
right and have it certified i mean i get
it right exactly
like you’re a criminal you have two
books right once you got there
i get it but not a public just two sets
of books but like you know but also but
i i think if i remember the story
correctly though
that
the off-the-book stuff was not illegal
right it wasn’t like oh not at the time
it wasn’t it wasn’t like it wasn’t known
about it was just like well because it’s
this certain thing
you don’t have to have it on your books
right so what they were doing was
actually
like they created a fraud but the
accounting the way that they did the
accounting worked right the account it
was it was
it was okay to have like this is what
happened like
they it was okay to have certain things
off your books right
but the stuff that they put off the
books was stuff that they weren’t
allowed to put off the books right so
they they hid it in these otherwise
legitimate vehicles
right so that
and but the existence of the vehicles
themselves was legal right
which is which is what i don’t
understand like how that could be like
it should all like well clearly it
wasn’t because people went
got convicted uh arthur anderson went
bye-bye
yeah it was it was bad but again the
other thing i remember as this uncovered
is
it was rotten from top to bottom right
there were traders
now you got audio reports or emails or
whatever it was talking about hey we’re
going to cause a blackout in california
watch this you know they push a button
um
i want to relate this to our previous
conversation because the reason that
they got away with it as long as they
did was because the stock market was
cranking right and
nobody looks under the hood when things
are going well right but when things go
badly
like nobody looked under the hood of
what bernie madoff was doing oh exactly
things went badly right yeah and it goes
out oh look at that and
this this is and it gets really easy to
commit fraud
when in an environment where
everyone’s making money
and you know nobody has an incentive to
upset the apple cart because it’s all
good yeah right and so and nobody and
the people who get in and get out are
fine like there were a lot of people
that made a lot of money with bernie
manoff oh it was the people who came in
late or reinvested their profits with
him that lost but the people who were
got in early on the pyramid scheme
right they did really well yeah right so
and
the the thing is like when you talk
about arrogance too the arrogance of
enron the smartest guys in the room i
mean there was another going back a
little bit earlier back into the late
90s you had long-term capital amounts
same right and it was icky feeling yeah
it was the same it was the same thing it
was the we can’t lose
because we have perfectly hedged
everything we have algorithms that
we are smarter than everyone we’re
smarter than the market we we have
algorithms that are gonna
no matter what happens we’re covered and
all we can do is make money and be and
we’re like super smart mit quant guys
and trust us right and no one has ever
done this before yeah i remember until
the market
found the week you know like not the
achilles someone was looking for the
market but the right combination of
things happened where it all
everything that was supposed to be
perfectly hedged all went in the same
direction in that direction was bad yeah
and they they nearly tanked the entire
financial system yeah right they had to
be bailed out so
it that arrogance is always something
to watch out for when you’re investing
whether it’s and you’re not going to
know where it is i guarantee i can’t
guarantee anything but there we are in
that kind of market today where it
wouldn’t shock me in the next recession
or as warren buffett says tide going out
that there is another one or two
complete frauds buried in this soup
somewhere oh i’m certain of it i mean
and i
we’re gonna have accounting scandals i
mean look companies are up to their
years in debt right they’ve been they’ve
been with cheap debt they’ve been taking
on
tons and tons and tons of debt over the
last 10 years and
that’s just not a good
thing right and we’re we’re going to see
some nasty stuff when the tide does go
out i also think like
you know in unregulated markets like
crypto and stuff like that there i mean
we already know that there are there are
frauds there they just don’t get much
attention but there have been several
coins coins i can’t see they weren’t
even coins they just people invested
ideas
this thing that they were told is the
next bitcoin and it was a fraud from the
get-go like it wasn’t even it wasn’t
even like like madoff started out good
and it went bad right you know enron
probably started out fine it went bad
along the way some of these things were
just like from the very start they just
some of these these coins and the thing
that made that amazes me is i literally
see crypto guys going like oh yeah that
one was a fraud but i only had a little
bit invested in so it really doesn’t
matter like that’s that’s just part of
you you’re talking yourself yeah it’s
part part of the game that this was a
fraud and and like because my other
coins are doing well
look some of those coins may be fraud
they just are working it they’re still
working yeah they’re on the up they’re
on the upside right like and then and
you know and some of them are just just
gonna tank right so it’s just
beware again you know we’re sort of
repeating the theme but just be do the
work
do the work be aware of arrogance don’t
follow the crowd don’t just take
people’s word for it right you got to
look under the hood
and
you got to work with people that you
trust and you shouldn’t trust them
because they sound so confident you
should trust them because
because
they’ve done the work they’re willing to
answer tough questions from you
right they’ve thought about the bad the
downside yeah you know they don’t have a
glib answer
to what happens in this scenario oh it’s
not going to happen right like like that
and i’ve seen people answer questions
that way oh it’s just it’s not going to
happen yeah it would happen to us we’re
different yeah um
you know don’t worry about it right
because of x y and z oh there’s a
housing shortage therefore the price of
housing could never go down
right i mean it’s it’s
those should be red flags for you when
you’re dealing with people the humility
the
being able to admit that maybe they’re
wrong maybe they’re not going to get it
right but they’re they’ve tried to
protect against
the downside uh you know those are the
kinds of people that you need to be
working with not the ones who are not
the ones who are just going to pump you
up with rah-rah it’s great and
you know jonathan do you think it’s fair
to say that sometime in the next decade
or so we’ll have another recession
yes yeah absolutely yeah the business
the business cycle is real folks there
is going to be the tide comes in and
right now the tsunami is very big so in
my experience when it gets this nutty
the retreat is going to be something to
see
i mean i do think that we had you know
we lived through this very interesting
time over the last couple of years where
there’s there’s some evidence that a
recession was starting in 19 yeah just
before covert hit right and
like early january 2020 right and so
and then kovid just sort of overwhelmed
the whole thing of course we had the
massive covert recession but like it
didn’t it was a recession but it didn’t
feel like a recession because it was
just the government shutting everything
down and like what does that mean we
haven’t dealt with this before and then
all the money flooded into the system
and then the markets went wild again and
so all
coveted in the government responses to
kobe just masked everything right and i
think the bill is coming due yeah i do
too and i and it’s you know we never
got to have like
the air let out of the balloon a little
bit so that it doesn’t pop we just blew
up the balloon even more and you could
even say going back to the great
recession too we kind of did the same
thing like we the great recession was
supposed to like fix all the problems
watch the system right and it didn’t it
just all we did was pump it back up
again without without addressing the
fundamental issues so now we’ve got kind
of like a bubble
blown on top of a bubble that was blown
on top of a bubble and it’s just
it’s
it’s a frightening situation you got to
be thinking about the downside i mean
i’m always i’m
i mean i’ve always been that kind of
person like when things are too good it
just makes me anxious it makes me
anxious yeah people think i’m an idiot
they’re like you’re missing out on an
opportunity and like that’s fine i sleep
at night i was gonna say yeah there’s a
lot of people today especially the last
week where their investments are
suddenly keeping them awake
folks that isn’t that is your internal
clock telling you that you might be too
too leveraged and i know the last year
you stop like a baby because everybody
wins when it goes up
last week’s been a reminder and i think
today’s an update so you know today this
will come out people will be like ah you
guys you guys are old you’re crazy you
didn’t buy the dip you shut up
it’s okay it’s all right i’ll i’ll i’ll
i’ll wait and buy things for pennies on
the dollar yeah i mean i think you know
the dips by the dip right so
the dip the i’ve seen the meme right
yeah yeah which dip are you so jonathan
this has been a great conversation thank
you for letting me relive a painful but
memorable part of my life i still carry
the baggage today it’s why i run from
ceos that are cocky i just
run from that i just hate that it just
grades on me so jonathan how can people
find you and be part of your world
because you’re doing some amazing stuff
well uh come join our free facebook
group uh called the multi-family
investment community we’ve got about 12
000 people in there
and uh just you know answering questions
just
helping folks out helping each other out
uh that just like i said search for it
on facebook multi-family investment
community and the other way is just
google my company two bridges asset
management and uh join my investor list
if you’re so inclined
folks again if you’re an accredited
investor do yourself a favor right now
go to two bridges asset management and
uh register just to see what a a good
proposal looks like for some of the
nonsense i see come across my emails so
again go fill it out if you’re
interested go for it if not just see
what just see what a good proposal looks
like yeah and i’ll just be clear we’re
not actively not working
i mean we just did we just did a capital
raise which is now done uh so we don’t
have anything right now so you won’t see
anything but join the list and when it
comes it comes on the next deal you’ll
see what you mean you’re not doing deals
just to get the fees jonathan
stop it
why are you doing that
take care of yourself man thanks thanks