A Cornucopia of "Rule Breaker Investing" Goodies

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This video was recorded on Oct. 25, 2023.

David Gardner: It was a month of character, of Foolish truths I hold to be self-evident, and of financial horror stories. Dear listener as you continue to walk down the road, the path of life, thank you for inviting in a Fool to walk alongside you once again this week. As Shakespeare once wrote, I'd rather have a fool to make me merry than experience to make me sad. Well, from the US to Germany and back again, it's the October 2023 Mailbag. We're talking investing business and life, only on this week's Rule Breaker Investing.

It's the Rule Breaker Investing podcast with Motley Fool co-founder David Gardner.

David Gardner: Welcome back to Rule Breaker Investing. Happy and well, not quite end of October. This month, the final Wednesday of October is the 25th. About as far as you can be from the end of a month and still call it the last of that day of the month, the last Wednesday the 25th of course, many of us, especially here in the United States, looking forward to next week and Halloween. I'm also looking forward to next week, because I get to welcome a new friend onto this podcast, especially if you're a gamer but even if you're not, I think you're going to really enjoy meeting Elizabeth Hargrave. She is the designer of the fantastic global best selling tabletop game, Wingspan, and of course it's several expansions. Elizabeth Hargrave will be here with me in Fool studios next week. We have that to look forward to on 11/1. But that's then, this is now. Let's go back over what we did together in October. There were three October podcasts preceding this Mailbag we started on October 4th, does character always win with Ed Brooks of the Oxford Character Project. Had so much fun sharing Ed with you. A friend I've got to know in recent years and just honored to have had him on this podcast talking about what character is. Answering that compelling question, does character always win? Also good naturedly playing my buy, sell, hold game near the end of that interview. Thank you again, Ed Brooks. On October 11th, next up, something I do once every two years. Nine Foolish truths I hold to be self-evident. They generally stay the same those nine truths. Well, I was going to say one year to the next, but really it's two years to the next and yet there's always something new to say or reflect. Wouldn't just want to mail it in and say 2023 is the same as 2021 or 2019. Really those years were radically different from each other, but truths have a good habit of living on. It was a delight to return to that series and the biennial performance of Nine Foolish Truths was on October 11th of course last week. Hope you enjoyed financial horror stories, volume 2 with our pal Robert Brocamp Pro absolutely bringing it with his six stories, fun titles. Speaking of bringing it, let's go to some hot takes from, well, I used to say Twitter, but I guess I need to say X now. Hot takes from X, reflecting on last week's podcast in particular at GarovK Investor Garovkumar.

Thank you Garov for this. Really enjoyed listening to this episode. It was fun and scary. At the same time Rick's sound effects were flame emoji. I agree, Rick, thank you so much for the effort that you put in to bring alive those financial horror stories that we tell that week. Every year, it's a new tradition on this podcast scams a big focus. This time we'll have some mailbag about that in a little while, but thank you again to Rick Engdahl for his special extra performance last week. Michelle K, @Michelle K444 Part 2 referring again to the Volume 2 of our horror stories last week. Part 2, Michelle writes, was equally as scary as the first one loved it at Robert Brocamp and my own, David's connections to the exorcist segment was cool. Your parents chose the right option. Michelle gives a wink emoji, and says, I don't like scary movies either. If you didn't get a chance to hear last week, I just mentioned briefly early on in my life, our family house in Georgetown in Washington DC, was being vetted as a potential site.

For the movie, The Exorcist and my parents didn't need to think about it too long, having had one meeting on that. They turned away the producers and said, no thanks, because our kids would be scared to death to move back into the house that became the exorcist house so I do agree, Michelle, my parents chose the right option. Five rule breaker mailbag items for this month, October of 2023. Here comes rule breaker investing mailbag item number 1. This one from my friend Martin Triggs. Martin, thank you for this note. In fact, this was tweeted out in this way, and Martin, you were reacting to my nine foolish truths that I hold to be self evident at Triggs 1 Martin on the X formerly known as Twitter. Martin, you wrote, simply how we need to be reminded in these times that there are way more good guys than bad guys and that we can own a piece of businesses working for profit doing great things. Thank you for a great podcast as a lifelong sailor, Martin writes, I also love the analogy of investing to sailing. Well, is it not evident to us all how much the good guys do outnumber the bad guys even now and I know there are some hard things happening in this world, so naturally we start to worry that there aren't enough good guys but not only is it true that the good guys outnumber the bad guys pretty dramatically globally, they are outperform them economically too. It's not even close and for very logical reasons, let's talk about this briefly. Good guys like to trade with each other and grow prosperous together. That's what builds and bulks up economies, productions of goods and services that people actually want, goods and services chosen by free consumers.

When a country figures out how to do that well, including trading with others to obtain the raw materials or other resources necessary to produce an iPhone or a broadway play, or a fine plate of text Mex food. When a country figures out how to do that, well, prosperity ensues and it's good. It's goodness. It's people freely trading with each other. On the other hand, people don't want to work with the bad guys. For a variety of reasons, what they stand for, what they do, the inability they have to build trust with others, and so what happens to the bad guys. Well, their economies suffer and that further weakens them and causes them to be outnumbered and pushes them to the edge of relevance. Russia's economy, highly dependent on natural not human resources, has no recognizable culture of demonstrated entrepreneurism globally. Try to name Russian products in your market with Russian brands that you appreciate. It's hard to think of even one. Hamas, really every terrorist organization is poor. They rely on surprise and brutality.

They have leadership toxic to their own people. Not just to others, but to the people they supposedly lead, or I guess you would just say rule because they're not looking after anyone's best interests other than their very narrow destructive ones and it's horrible to think such people live in our world and it turns out though, that this kind of person has been around since time immemorial and by the way, outnumbered since time immemorial. Do the good guys always win, Martin? I think you and I would say absolutely not, but do they? Most of the time. Yes, I would say, especially these days and for very logical reasons, it's called economics or as Tom Soul would say, basic economics. I'd say the good guys don't just outnumber the bad guys they outdo them economically and again, it's not even close. Let's play a market cap game show Lightning Round, which is larger, Apple's market cap or Russia's gross domestic product. Got your answer? Beng Apple's market cap. The economic damage that aggressors do to their own economies in this world today is tremendous. The news will be more focused on which bomb may have hit which city. Much more invisibly and importantly is what happens to weak economies when they stop trading and making consumer products and instead their trade and productivity shifts to weapons.

In conclusion, Martin, I think leadership in the modern era is about what you can enable your economy to do for world leaders. What can you enable people to do? Your people enable, not someone else's people or attack. Israel and Palestine very much on many, many people's minds today. Worldwide, I had the good fortune in 2014 of getting to visit both Israel and Palestine and of the many experiences I had over that roughly 10 day period, the one that really still stays with me was at an event hosted one evening by the Parents Circle Families Forum. Let me just tell you briefly about what the Parents Circle Families Forum is, and this is in their own words, from their website. The Parents Circle Families Forum is a joint Israeli-Palestinian organization made up of more than 600 bereaved families. Their common bond is that they have lost a close family member to the conflict. But instead of choosing revenge, they've chosen a path of reconciliation.

Through the different works of the Parents Circle Families Forum, these bereaved members have joined together to take tens of thousands of Palestinians and Israelis on their personal journeys of reconciliation. It's often raw and always emotional, but out of these interactions comes change. Not the kind of change that makes headlines, but a more personal and profound shift in perspective. For many, it is the first time they have seen the other side as human. Now that's, again, in their own words, from a website. But my experience that night was there were two people, a man and a woman. One a father, the other a mother. One was Israeli, the other was Palestinian. Both of them extremely well-educated and articulate, and both of them telling a heartbreaking story about how their 19 or 20-year-old was found dead on the other side, because of the other side. Both of them, again, instead of choosing revenge, chose reconciliation.

They expressed love and admiration for the other person, again, the Israeli dad, the Palestinian mom, and of course, heartbreak for the loss that each had suffered something that no parent ever wants to have happen, no one ever wants to feel or be part of. But when you've lost something so dear to you, a family member, it is so brave and courageous to choose reconciliation, and that's what the Parents Circle Families Forum does, and it's neutral in the sense that it's a joint Israeli-Palestinian organization. That was probably my most moving moment that I remember from my trip to that area nine years ago, and I know they're having vigils today, and that is a strong and admirable organization. Good guys. Next up, Rule Breaker Investing Mailbag item number 2. Thank you, Mark D. Thank you, Mark, for just writing me back. This is a simple one. Hi, David. Thank you for your thoughtful reply to my question in the September mailbag. I was as impressed that you selected that question as I was with how you answered it, and I'm going to pause it right there and say, Mark asked a simple question and kind of a tough question, he said, some of my favorite things at The Motley Fool, for example, the departure of Chris Hill or the closing down of one of Mark's favorite services.

Mark said, some of these things are giving me not a great feeling about the Fool right now. What's going on? I did my best to answer directly, Mark, and I really appreciate that not only did you like my answer, but that you took the time to come back and let me know afterward. You go on to say in your note, you are right, I do care about how The Motley Fool fairs, because I'm in this for the long term, and I hope to partner with the Fools for the distance. Many thanks, Mark letter D. Well, thank you, again, Mark. What I particularly appreciate, beyond just that you took the time to write me back, is as I suspected, your care comes out of a concern and a desire to be partners, as you say, for the distance. I really appreciate that. Every business benefits so greatly from people who really care that that business exists. I see that all the time in Conscious Capitalism. That's where I'm spending this week, by the way, in Austin, Texas at the Conscious Capitalism annual summit. I see it among so many different businesses. The businesses that customers really love, the ones they would dearly miss if they went away.

Certainly, now in our 30th year at The Motley Fool, I hope we are one such business ourselves. Mark, as I assured you last month, I assure you again that things are very strong. At our company we certainly have our ups and downs here, but with our 500 plus employees working hard to make the world smarter, happier, and richer every day, I'm extremely proud of where we are right now. It's always sad when we lose a good person or decide to close down a service. But then new people and new services show up and keep showing up, I think, in support of a world that we all want to be, smarter, happier, and richer. Thank you again, Mark, for writing. Rule Breaker, Mailbag item number 3. This one from long time Fool and frequent correspondent. Always appreciated, Dave Geck. Dave, thank you for writing in, again, this month. You wrote a long note. I'm not going to share it. You tell a military story from your past, but ultimately, that story is about the importance of owning our outcomes, about accepting responsibility, and Dave, the reason you wrote that note is because you were reflecting back on the Ed Brooks' conversation about character this month.

As I read your note I was thinking about Warren Bennis and his wonderful book, On Becoming a Leader, which I've so enjoyed going back to over the years. Warren presents, in that book, four lessons of self-knowledge, and lesson number 2, as we try to get to know ourselves across our whole lives long, it never really stops peeling back each layer of the onion of ourselves' self-knowledge. The second lesson, Warren says is, and I quote, accept responsibility, blame no one, end quote. I was thinking about this because some of the political ads are starting to pop up as I watch TV this time of year. Often it seems to me the exact opposite of what passes for leadership in politics today, where there's so much blaming of the other. How refreshing it is to be reminded that true leaders and true leadership accept responsibility and blame no one. Now, Dave Geck, I know your own background in the military, in your case, the army explains this pretty well in your note. You mentioned, and I quote, at West Point, during your first year, you only had four answers.

Dave writes, "Yes, sir. No sir. No excuse, sir, and sir, I do not understand." Dave says, "Which you soon learned, by the way, that last one, not a good choice to use in response." Dave goes on, though, I do not believe anyone ever gave a reason for the third response, that would be, no excuse, sir. Dave says, "I believe it was to develop the characteristic of accepting responsibility. This is a characteristic every good officer should have and for good reason." Well, Dave, your note also causes me to accept responsibility for a mistake I made last month that you point out, and that's what I'm going to share from your note. I made a math error, and I need to own that. David Geck writes, "David, probably someone will have pointed out what I'm about to say, but I will mention it anyway. On my way back from Greece, Thursday, I was listening to your podcast and the section on the hapless Minnesota Twins baseball team, when I heard you say the chances of them losing 18 games in a row with a 40% chance each time of winning was about 1:300 or 0.0038."

I'm afraid I'm going to have to call you out on this and ask to see your work. Since their chances of winning was given at 40% 0.4, their chances of losing any individual game was therefore 0.6 or 60%. Now given that they are independent events, the chances of losing two games in a row would therefore be 0.6*0.6 or 0.36, so the chances of losing 18 in a row is 0.6*0.6 18 times, or of course, 0.6. Isn't it fun to read math over a podcast, 0.6^18, by the way, you are, of course absolutely right David. I don't even know what I was doing. Maybe I stopped counting past 11 or 12 on the way to 18 because it's too painful to think about losing 18 consecutive postseason games. Anyway, Dave goes on my calculator, puts this chance at 0.0001016, or about one in 10,000. Truly a rare event, the twins did something historic and mathematically very rare, Dave closes, and Owen add my name to the anti-Oxford comma. It is twisted, tortured, and useless. Dave does not include the Oxford comma after tortured quite on purpose.

I'm sure it is twisted, tortured, and useless. Just saying, but keep me out of it. I don't want to become involved. Which he says is my pat response after throwing gas on a flame of any conversation where disagreement is present, keep me out of it. I don't want to become involved. The only thing that is more irritating, Dave concludes, is pronouncing the T in often. Insert Pat response here, signed David Geck. Well Dave, thank you again for that correction. As somebody who appreciates math and often knows something about how to calculate probabilities I can't believe. I believe that I'm so glad you took me to task and called me out. I think we all learned a little bit more about probability, thanks to Dave. We also learned a lot more about character, thanks to Ed Brooks this month. Again, thank you to Ed, and I'm glad you enjoyed that, Dave. I really appreciate the yes sir, no sir, no excuse sir. I don't understand the only four answers you're allowed to give your first year at West Point. Let's move on to rule breaker investing mailbag item number 4.

This one from Martin Rommel reading in from Massachusetts. Hello, David, longtime listener here who started as a reader. I'm a stock advisor member for about the last 20 years. I don't even remember when I started, Martin writes. Two thoughts. Number one, a tip for cautious beginners. This is for cautious investing beginners, Martin writes put half your money into an S&P index fund and invest the other half in individual stocks. That takes all the work out of benchmarking your performance because you just compare the fund with the rest of your portfolio. Starting with our first book, the Motley Fool Investment Guide, we advocated putting your initial money into an S&P 500 index fund or a total market index fund. They function much the same, basically, a fund that just buys every stock on the market or on an index and gives you extreme diversification as a consequence of doing so. It's also pretty easy to do. It's pretty explainable.

There's not a lot of complication to it, and most people are not going to lose too much money in a fund like that, especially over time. Since the market tends to go up nine or 10% on an annualized basis, it's an easy, quick way to begin investing. Martin and I appreciate that you're mentioning that here and you're also saying, hey put half, half in that and half in individual stocks. Now, for a lot of listeners of rule breaker investing, they're heavily invested as MI, just in individual stocks, I really don't have funds in any meaningful way in my own financial life. But certainly for many beginners, the idea of even buying a single individual stock, even listeners of this podcast, many still will have not and understandably, it represents an additional risk that you're taking new learning that you're going to need and be generating for yourself, which is actually one of the great reasons to invest in stocks, you'll learn. But for a lot of people, they don't necessarily feel that prepared to put that much into individual stocks. But I appreciate this point that you're making Martin that 50, 50.

Because part of the magic part of the trick there is that you now know how your stocks are doing against the market itself. If you have even amounts in both, and I know Martin for you as a longtime stock advisor member, you probably are well past the point where you have 50% in stocks I bet it's a lot more than that. That would be true in most people who have used stock advisor, Motley Fool Stock Advisor, our flagship service for a long period of time where we just give out one individual stock recommendation after another month by month, year by year. Anyway on to Martin's second point, he writes, did I miss somebody recommending to put my approximately 10% cash cushion into a money market fund? He gives an example of GABXX, which is the Gabelli money market fund. These earn more than 5% these days. What are your thoughts? Cheers and fool on Martin Rommel.

Well Martin, here are my thoughts in brief. First of all, the stock market competes against money markets for your dollars and mine. Normally, as I just mentioned, when the stock market returns 9% or 10% annualized, not in any given year, of course, the market could be up 30% or down. 40%, the ladder does not happen very often, but it can happen from time to time when you average it all out. Of course, it comes to something like 9% or 10% annualized. That's a really great return when money markets or interest-bearing vehicles short term oriented money market interest-bearing vehicles have interest rates closer to 1% which has been true in recent years. That's not much competition for the market. Most people don't want to take a risk-free, even though it is relatively risk-free 1%, and get too excited about that. It takes many, many years to make that, turn money into anything big over time, but when all of a sudden money market rates again almost risk-free interest-bearing rates of 5% yields when that is a present possibility. As you point out Martin it is. Now, that makes it hard for the stock market because people say, I could get my stock market return of nine or 10% but it might be down this year. Whereas with very little risk and as even just a park, short-term money, which is a big reason to use money market funds in the first place. By the way, a lot of motley fuel members use money markets to park their money, to let it accumulate some so that they can bulk invest it into the market, maybe at periodic times during the year. A nice reason for money markets, but when those money markets themselves pay 5% interest, it makes it awfully competitive with market rates.

That explains some of the market's recent weakness these last few months. Certainly, it's something to keep an eye on. I don't think high interest rates are particularly sustainable. Well, anyway these are my general thoughts. I think that it's understandable that people would be moving some of their money out of the market and getting 5% interest. I also think that if you are a regular earner and so many listening are it's awfully nice to be able to park your money into something in the short term that pays you a 5% benefit annualized for leaving your money there. But for most of us, we should be using those funds not as a real savings vehicle but more as an on-ramp, in my experience, an on-ramp into stock market investments or index fund investments. Anyway, Martin, thank you for a lovely note and follow on. Onto our final mailbag point this month. Rule breaker, mailbag item number 5. This one coming in from Andres Tom in Germany. Hi David, thank you for this month's podcast episodes. I have my own stories to share for two of the October episodes.

First is about the character trait of punctuality. My mentioning in this case me, David mentioning that Germans appreciate this trait. As I did the value of character episode with Ed Brooks and Andres, I hope I got it mostly right. It has generally been my experience with a few of my German friends that they seem to care more about being on time or me being on time. That many of my American friends and Ed and I had a fun riff around that. Andreas goes on In his note, you might be surprised that we certainly appreciate punctuality, yet I would also go with hold in the buy seller hold game. Ed gave a hold to punctuality as a virtue. That was the question I had for Ed Brooks. Is punctuality a human character? Is that character virtue or not? Ed said hold and Andres you agree, saying when it comes to our trains punctuality in Europe. Switzerland, Andreas calls out is superior and not only appreciates the value of punctuality but lives it. Hence, if we Germans were to be buying that as a value, we should live up to it as well.

Andreas goes on, I show patience most of the time when trains arrive late here in Germany because I don't know what happened before the train arrived, and usually the staff is not at fault, so complaining or yelling at them won't fix anything. Therefore, I'd rather buy patience than punctuality. I think you just hit the key point right there. Well said, Andreas I agree that patience exceeds punctuality when we talk about human character and the virtues that we're all trying to espouse and to live, let's be buyers together, Andreas have patience, and that certainly means a lot to us as investors as well. Let me go on to your second story. I quote, as for the horror stories I could tell one of my own. When I had a scammer try to rob me, I knew from the very beginning that something was off and wanted to know what scam I was dealing with. The first WhatsApp message came from a UK phone number that someone was claiming to be in Germany, claiming to know me without providing my name and then in quotes, realized that they added the wrong number. Now, since I had time, I wanted to see where this scam was going because accidental messages never happened to me, Andreas writes. The Asian girl in the photo looked definitely different from the German phone number she switched to afterward. I think this number switch made it easier for the scammer or scammers to know which time zone the potential victim is residing in, depending on their own phone number. Next up, she told me about a fashion company in Singapore that she owns and makes money with.

I checked the website and the last fashion collection they published was two years prior. So I assumed this company had been shut down already. The funniest part was a "recent picture her playing virtual golf in an underground facility." I asked her where she was in Germany and she said she was visiting a friend in Thuringia, one of the German Federal States. Why is it funny? You may ask yourself, well, if you want to play golf, Andreas writes, there are a few golf clubs in Thuringia and there's no need to spend several thousand US dollars on virtual technology. Also the tremendously wealthy people who could afford such technology don't live in Thuringia. I was reverse searching this photo with Google, which revealed that it's a common leisure activity, virtual golf in Singapore where there is no space for real golf. I learned something new about the world that day, writes Andreas, and this whole scam attempt suddenly felt worth it. Even up to this point, I did not understand what the scam was about and I kept this entertainment going for about two more days because I was so curious about the actual scam.

She kept referring back to how rich she was and then asked the magical question, are you investing, to which I replied, yes. I also mentioned that I own a bit of crypto, which is when the whole scam got into motion, and text messages were sent faster than I could even type them. Therefore, those messages must have been prepared. The scammer promised to earn me tons of money through crypto. The idea was that I should just enter data on a shady website which they would use to withdraw my crypto funds. Now, I tried to get a federal organization involved at this point and also reported the number on WhatsApp, but nobody cared to block this account or number. I still have the number in my WhatsApp history.

I see the photos changing occasionally, and I therefore believe that this scammer or scammers are still active to this day, which means that this story still continues in other people's lives and I don't know what I could have done better to stop the scammers. Asking the police is also not a suitable option. The digital world is often, and this is in quotes with the capital N, is often Neuland in our police and government agencies, that term neuland, N-E-U-L-A-N-D, neuland means new ground, and in this context is a German insider joke referencing a comment made by Chancellor Angela Merkel when she said that the Internet is no Neuland, no new ground anymore. Andreas concludes, there are only a few procedures within German government institutions that actually facilitate digital offerings today. Our country is far behind in its digitization endeavors. For German citizens, it therefore feels like our government and our laws treat the Internet like its neuland, despite the high adoption rate of smartphones and Internet usage by our society. Hence, I recommend to everyone to stay vigilant and don't get fooled, small F, yet stay Foolish, capital F, Fool on, Andreas Ham. Andreas and everybody else listening, I don't know if you've ever seen James Veitch's TED talk entitled, This is what happens when you reply to spam email. But it is just nine minutes and 49 seconds I see here on YouTube as I'm looking at it, and it's pretty hilarious and I think you would really enjoy not just you Andreas, but everybody, if you haven't seen James Veitch's comic TED talk. It is a true life story where he responds to the Nigerian Prince scam and has a back and forth set of emails and texts with the person on the other end of that. It's highly worth watching. That's the first thing that I thought about as you told your story, Andreas. But I also want to say one Fool to another, thank you for your note and for this education that you gave me in culture, in this case largely in German culture.

Across the world we speak, we speak many different languages. Sadly, for me, I only speak one. Although I put some points up on Duolingo here in 2023 learning a bit of Espanol, but let me thank you, Andreas, that you speak English, that you've taken the time to learn more than one language, because that is what has enabled this fun closer to this month's mail bag, that you can express in my language, good thoughts and sentiments. First, you are helping us with our character and I agree that patience is a stronger buy than punctuality. Then you shared your own financial horror story in honor of last week's podcast. Though fortunately, there wasn't much to scare us in your scam experience. Really more than anything, it showed your own good nature, your curiosity, and your concern for others when you try to point this out. But in neuland, it seems this has attracted little attention. Well, across the world we do speak many different languages. But there is one language that, when you think about it, is a bit more universal.

And that is the language of capital F, Foolishness. That's the cultural tie that we have as fellow Fools. Foolishness is the language that blends humor with common sense, that harbors interest in others for their own sake. That invites, does not turn away, invites constructive criticism. Foolishness champions freedom and independence, and suggests you do it your own way. I would say Foolishness is also imaginative, colorful and lighthearted. It questions authority and at its root, I would say dwells humility, a humility that helps you, me, we, Fools, realize we'll never have all the answers. Yes, stay Foolish out there Andreas Ham and all my other Foolish friends. Thank you for a wonderful October 2023 for this podcast. Looking forward to Elizabeth Hargrave and Wingspan next week. Then I think we're going to do pet peeves the week after that. It's about that time of year. Have a great week. Fool on.

As always, people on this program may have an interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com