Episode #5: Jared Dillian, The Daily Dirtnap, “If You Think 2016 is the Opposite of 1981, then You Should Do the Opposite”

Episode #5: Jared Dillian, The Daily Dirtnap, “If You Think 2016 is the Opposite of 1981, then You Should Do the Opposite”

jared

 

Guest: Jared Dillian is the editor and publisher of The Daily Dirtnap, strategist at Mauldin economics and author of the free 10th Man newsletter. In a previous life, Jared was head of ETF trading at Lehman Brothers where he did a fair amount of trading proprietarily.

Date: 6/20/16     |     Run-Time: 41:52

Summary: Meb starts by asking Jared to discuss a point from one of Jared’s newsletters: “If you think 2016 is the opposite of 1981, then you should do the opposite. In 1981, you should have bought stocks, sold gold, and bought bonds…” Jared gives us his thoughts, discussing how the landscape is far different now than in ’81, from heightened regulations to left-leaning policies. How should your portfolio respond? This dovetails into Meb and Jared discussing their “desert island” strategies (what would you invest in if you were about to be stuck on a desert island for 10 years). Then we hop to the Fed… Jared has a great quote “The Fed will pursue the path of least embarrassment.” He goes on to say how the fear of being embarrassed is the primary thing driving all the Fed’s decisions. What does this mean for their future decisions? They then switch gears, discussing a specific market bubble happening right now (it’s up 37% year-over-year). The problem is it’s going to pop – with “big implications for the global economy.” What is it? Find out on Episode #5.

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Links from the Episode:

Running Segment: “Things I find beautiful, useful or downright magical”:

Transcript of Episode #5:

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Meb: Hello, friends, and welcome to the Meb Faber show. This is your host Meb Faber. We have a great guest today, Jared Dillian. Welcome to the show.

Jared: Thanks. Thanks for having me.

Meb: For a little bit of contextual background, some of my listeners may not be familiar with you. You have, like myself and many of our guests so far, a bit of an atypical background, finding your way to Wall Street. Could you give maybe a kind of a brief, or not so brief, intro of how you ended up where you are?

Jared: Well, I was a third generation coast guard officer, and I went to the Coast Guard Academy for college, and graduated in ’96.

Meb: Where is that, by the way?

Jared: That’s in Connecticut, it’s a new one in Connecticut. It’s just like the other military academies. Most people haven’t heard of it because it’s much smaller. There’s only about 900 cadets. They graduate about 200 a year. It’s like a tiny version of the Naval Academy. My first couple of tours out of the academy, I spent a couple of years at sea out of a [inaudible 00:02:32], out of Washington state, and then I was doing Intel stuff at the Pacific headquarters in Alameda, California.

And sort of while this was going on…the coast guard was never really for me. First of all, I get violently ill on a boat. It just seemed the military lifestyle just wasn’t working for me. I really became interested… Actually, I started researching personal investing when I was about 22. And I had no exposure to any business, anything at all up until this point. I was a math major in college. So I started studying mutual funds, and I started studying efficient market theory. The first Wall Street book I ever read was [inaudible 00:03:10], and I read John Bogle, and I read all this efficient market stuff, and I kind of disagreed with it, but I really didn’t know why.

And so I decided to go to business school, and I went to business school in the University of San Francisco part-time while I was still in the coast guard. And then also at the same time, I got a job on PCX Options Exchange in downtown San Francisco. So I was doing that part-time, going to school part-time, and then working for the coast guard full-time. And so my first real introduction to capital markets was in the Options World, which I think if anybody is going to start anywhere, that’s the best way to do it. Just start with the hardest thing first, and then everything else is easy after that.

I really learned a lot while I was there, and it was course, it was during the dot-com bubble. So I’m on the P. Coast, and we’re trading options on Microsoft, and Inktomi, and PMCS, and Rambis [SP], and all the stocks. So out of there, I got a job at Lehman Brothers, and I started in 2001 during index arbitrage, and I did that for a couple of years. I excelled at that, so then they made me head of the ETF desk, and I ran the ETF desk from 2004 to 2008. My career there ended in the bankruptcy, and it was right after that that I started my newsletter The Daily Dirtnap.

Meb: For listeners, this is a pretty much daily piece you put out, right?

Jared: Yeah, it’s a daily piece. I’ve been doing it pretty much everyday since 2008 now. It’s a bit institutional in nature. It’s intended for sophisticated investors. I would say most of my client base is institutional. I’ve been doing it for a while. It’s a great piece. I really love doing it.

Meb: One of the reasons we wanted to have you on the show is that this is one of the few pieces I do read every day, so kudos to you. I once had a friend describe your writing style as…he said, “You know what, he writes like a man.” And I don’t know what that means, but it was meant as a compliment. So the name of the newsletter is The Daily Dirtnap. Comes out pretty much every day, and it’s pretty wide-ranging. And it really feels like it’s from a trader’s perspective. And so what I wanted to do today is touch on a few topics. There’s some issues you’ve been talking about in the last few weeks. And by the way, you’re now located in South Carolina, right?

Jared: Yeah, that’s right.

Meb: All right, so about as far as you can get from Wall Street as possible, which is wonderful, because if you read a lot of Jared’s work, it tends to be very atypical, a lot of opinions that aren’t necessarily maybe in the mainstream. I’ve spent time in your area in South Carolina, but when I was in high school, we used to go down to the beach there, and I spent at least a little bit of time dancing in the cages of the Spanish Galleon, but that was many years ago. Many, many lifetimes ago. All right, let’s get started.

There’s a couple of different questions. First is, in one of your recent issues, you say, “If you think 2016 is the opposite of 1981, then you should do the opposite. In 1981, you should have, one, bought stocks, sold gold, and bought bonds. So now, you should sell stocks, buy gold, sell bonds.” Is this something that is playing into your thesis? And there’s a couple of different kind of spider webs that this was going off. And this may have been out of the piece called “The Best Investing Book of All Time”, which maybe you could share what book that is, and a little bit about that line of thinking.

Jared: So I think the best investing book of all time was written in 1981, and it was by Gary Shilling and Kiril Sokoloff, and Kiril, obviously, does 13D now. Gary Shilling is still pretty well-known as an economist. Their thesis back in 1981 was that inflation, which was then about 14% a year, that it was going to come to an end. That inflation was going to drop. And if you think inflation is going to drop, you think interest rates are going to come down, you think bonds are a massive buy, you probably think stocks are a massive buy, then you probably think that commodities are vastly overvalued. So they came out with this book in 1981, and actually, I met Gary Shilling in a conference. I met him in SIC just about a month ago. And we hadn’t met before, so I introduced myself to him, and I said, “Sir, you wrote the greatest investing book of all time,” and he just started cracking up.

He said, “That book was the biggest bomb of all time.” The biggest bomb. In 1981, everybody thought that we were going to get hyperinflation, inflation was going to go on forever, and nobody wanted to read a book about how inflation was going to end, nobody believed them. He told me what the print run was. They printed thousands of copies. They literally were just giving them away for free. They just couldn’t sell the book. And if you think about the types of financial books that were selling back in 1981, it was Don Casey’s “Crisis Investing”. That was a big bestseller.

Gary Shilling and Kiril Sokoloff, their advice was much better. If you bought bonds in 1981 and held them for any length of time, you were pretty happy. Stocks were about as cheap as you could probably get. Honestly, the big reason they came up with this thesis, their number one reason wasn’t even really economics, it had to do with the regulatory environment. And so what they said was is that regulation increase the cost of everything. You have to comply with regulations, it just adds costs to whatever product you’re selling. And so in the ’60s and ’70s, we had developed this really overactive regulatory state. And in the late ’70s, towards the and of Carter’s presidency, they were starting to deregulate stuff, particularly the airlines, that was the most famous example, but all kinds of stuff.

Kiril and Gary Shilling said that this inflation, that was caused by regulation, they called it inflation by [inaudible 00:09:05]. And since we were entering this period of deregulation, that was going to go away, and costs were going to come down, and it was going to be a powerful deflation area for us. And now, if you think about what the political environment looks like in 2016 versus 1981, I mean, 1981 was a free market revolution. Ronald Reagan was elected, we took tax rates from 70% down to 28%. I mean, it was cataclysmic. And what kind of revolution are we having now?

I mean, the Republican candidate is, I would not characterize as a free market candidate, Bernie Sanders almost beat Hillary Clinton. We’ve moved very, very far left since then, and regulations during the Obama administration just shot up dramatically. All of this is going to feed into inflation at some point in the future, and everything that worked in 1981, the opposite is going to work today, which means we are going to have more inflation, which means it’s bad for bonds, which means it’s good for commodities, it means probably bad for stocks, too.

Meb: We did a recent piece, and it’s sort of tangent [inaudible 00:10:12] this, and it’s not a system. Us being quants here, it’s not a system I would put money to, but it’s something that’s more just kind of representative of what’s going on in the world right now. This was actually in our first book back in ’08 where we said, “This is just a fun study, we’re going to look at asset classes, the big ones. So US stocks, foreign stocks, bonds, if they are down multiple years in a row, and future two-year returns from then.” And what we found, which is not surprising to most people, will be that the more down years in a row an asset class had, first of all it’s very rare, so for three years down the road, that happened to the long bond, like you mentioned in the late ’70s. And then again, in that big bear market coming out of the boat when you were talking about in the early 2000s, for stocks, foreign stocks, and emerging.

So only four times in the past 40 years for the major assets, we had that just happen last year for emerging markets and commodities. And as many people know, emerging markets tend to have a fairly high exposure, or correlation, to what commodities are doing. So coming into this year, future returns are usually the 20-plus% range for that sort of setup, which is sort of representative. And you were kind of talking about these tectonic plates that are shifting, and these aren’t necessarily one quarter, or even one year trades, these are trades that can last many years. And I think you mentioned at one point, you said if, “I was to get arrested and go to jail for 10 years,” what would be the trade that you mentioned? You said, “If I get 10 years, close your eyes, go to jail.” What’s the trade?

Jared: I mean, it would something derivative about what we were just talking about. It would probably include EM. This was from one of my issues.

Meb: I mean, it’s the same thesis, but I think you may have actually said commodities. Same thing, same general thesis, though.

Jared: Yeah, I think about that a lot, because if people make money being smart, people also make money by being really dumb. And if you think about that, there’s a lot of really unsophisticated people that get rich because they get in the right asset class and don’t touch it for 20 years, and just ride it. And so I think about that a lot. If I weren’t allowed to touch my portfolio, if I went to jail and I couldn’t trade for 10 or 20 years, how would I want to leave it when I went to jail? I would not be in bonds, let’s put it that way.

Meb: It’s interesting, because I’ve often set, “My desert island portfolio strategy would be managed futures,” which is a trend-falling type of strategy. I don’t know if that’s a really fair desert island strategy, because that would require someone to be actively trading it, and I didn’t want to say, “Get put in jail for 10 years,” because the only time I’ve been arrested in my entire life was for drinking a beer when I think I was 20 years old in Myrtle Beach, South Carolina.

For some reason, this conversion is having all of my skeletons come out of the closet. But down there they just take you to the jail, write you a ticket, let you go. It wasn’t too bad, listeners. Okay, let’s shift gears a little bit. And by the way, at end of that conversation, there is a quote I just loved. You may want to talk about it, maybe we could just move on in the same theme, which you said, “I sort of feel compelled to remind people that the moral significance of inflation and deflation. Deflation is people doing good, inflation is people screwing up.” And I thought that was a really interesting statement. You want to talk about that at all, or you just want to move on from here?

Jared: Sure. I mean, if you think about the deflation area, or disinflation area and environment, we’ve had, over the last 20 or 30 years, and keep in mind that, by the way, this disinflation has not been consistent across all products or sectors. It’s really existed mostly in technology. And Peter Thiel has talked about this, too. One of the reasons they had persistent deflation in technology is because it’s unregulated. There is virtually no regulation on computers, on phones, or anything like that, so you can do whatever you want, and there’s constant innovation. There’s lots of regulation on drilling for oil, or railroads, or stuff like that, and prices never come down.

If you think about these deflationary forces, that is a product of capitalism working. That is what capitalism is supposed to do. It’s supposed to make costs come down all overtime, and when it’s allowed to work, it does work. What you’ve had the last six to eight years is central banks globally sort of fighting against that. And they’re sort of confusing good deflation with bad deflation. And there is such a thing such as bad deflation, sort of what Japan has. But just as good deflation where parties come down because of capitalism, because of competition, you want to let that happen, and central banks have been fighting against that and trying to create inflation instead.

Meb: And the funny quote you had in one of your pieces recently, in June, was that, where as it says, “Do you remember last year that we said, ‘The FED would pursue the path of least embarrassment.'” And I thought that was such a wonderful phrase, because as people talk about the emotions that drives markets, there’s the greed in fear which people always talk about, and then the buffet monger crew often talks about envy being what drives markets in many ways. And I thought this was interesting just kind of talking about. It’s not necessarily getting it right or doing the right thing, but it’s just not being embarrassed about their policy in general.

Jared: If you work for the government, and I used to work for the government, and I said, in the beginning of the piece, I said I used to work in the coast guard. In the coast guard, the worst possible thing, if you work for the government, is to be embarrassed, is to look bad. Because there’s no PNL. For me, the worst thing for you and me is to lose money, that would be the worst thing in the world. But if you work for the government, it’s to be embarrassed.

And so the FED is very concerned with making sure that their policies look good in hindsight, and they never want to be seen doing the wrong thing. And that fear of being embarrassed motivates all their decisions. And I have to say, it’s gotten worse over time. The Volcker FED didn’t care. The Greenspan FED cared a little more, Bernanke cared a little more. The Yellen FED is very preoccupied with not doing or saying the wrong thing. Leads to all kinds of bad decisions.

Meb: I was just looking and there’s a website that I frequent often, we mentioned it in a prior podcast, called Charitybuzz. I saw that you could have, similar to the buffet style, auctions where you can go and have lunch with buffet, but for some reason people pay…I think this year it went for like $3.2 million. Ray Dalio, who runs the largest hedge fund in the world, Bridgewater, and Volcker had…I think his was like $5,000 maybe, and I was like, “Oh my God, that’s almost worth me just flying to New York and have lunch with him.”

I mean, can you imagine one of the most amazing architects of modern day financial system, and for some reason, nobody is interested. I don’t know why. Let’s switch gears a little bit. I’m actually giving a speech later this Summer in Vancouver, and I was reading through some of your issues, and it seemed like you think I should probably be looking to do a little house-hunting when I’m up there. You talk a lot about Canada. Maybe talk a little bit about our thesis, what’s going on in the world, or the Canada’s world, but also, you talk a little bit about New Zealand, and some other countries, and maybe just kind of expand on some of your ideas there.

Jared: This started with Canada back in early 2013. I’ve been in Canada there for about three years now. It was all based on housing. I mean, the Canadian market being goofy is not a new phenomenon. It’s been goofy for about five years now. And I don’t know if you saw this static, but the median house in Vancouver is up 37% year over year, in Toronto, it’s 15. And the average house in all of Canada is now $510,000. So that’s the median house in all of Canada.

So they have a massive housing bubble, and it absolutely refuses to pop, and one of the reasons is because interest rates in Canada are very low, overnight rates are a half percent. The bond market is pretty beat up. I want to say 10 years, or around 1.2% or something like that. And everybody’s heard about Chinese money coming in, and everybody’s heard that the energy sector blew up in Calgary. Alberta real estate is down quite a bit, but it hasn’t spread to the rest of the country yet. But if you look across the world, all these countries where you have these commodity currencies, like Australia, New Zealand, and to a lesser extent, Sweden.

There’s a handful, about a half dozen developed countries out there that have huge housing bubbles. I mean, just massive. I don’t know what the catalyst is going to be, the macro catalyst, to sort of make these all pop a the same time, but it’s going to have global effects. It’s not just going to be isolated to Canada, or to Australia. Probably going to happen in a coordinated fashion, and there’s going to be big implications for the global economy.

Meb: How do you implement this thesis? Because it’s a little bit easier, perhaps, in the US when the real estate bubble was kind of going on. And by the way, I have friends in Canada, and for many of them , it’s a well-known situation. I had one buddy who was trying to sell his house, but his sister wouldn’t move out, and he would just, every day, would wake up just sweating, saying, “I got to get out of this house.” I know that it’s ridiculous pricing, and you hear all the stories about buyers just buying on the scene. What’s the investment thesis there? How can you implement a trade on this?

Jared: Well, there’s three different [inaudible 00:20:05] for the trade. There’s two that are good, and one that is hard. First of all, the Canadian dollar, which by the way, for full disclosure, I’m short, and I got short a couple of years ago, but it started around [inaudible 00:20:17], and now it’s around 128. And it’s probably, if you do have a crisis in Canada, it’s going to go 160 or higher in dollar CAD. So the currency is really where the escape valve is, because the Bank of Canada is going to cut rates from 50 basis points to zero. They probably cut negative, they probably do QE.

And so if you think that the FED is even contemplating hiking, that currency cross goes massively in your favor if you’re short CAD. And you can play the interest rates through interest rate features. You can do the same thing in Australia. You can do the currency. And the hard part of the trade is you can be short the banks. And the banks are very hard to short. They pay 5% dividends. They’re hard to borrow. Retail investors in Canada pile into them constantly. There’s massive short squeezes. That has been a much harder than financial stocks in the US in 2005 and 2006, and it continues to be a difficult short.

Meb: I apologize with my poor Canadian friends, if the loonie does get pounded, but I would love that to happen, because about three out of my five bucket list key destinations are across Canada, and the Powder Highway, with Revel Stoke. So it would make the ski trip that I’ve always dreamed of doing a lot cheaper. But that’s an interesting one to keep an eye on. I agree, the banks can be tough, but the loonie may be in trouble. I’m looking down on kind of your portfolio update, and you do publish your portfolio to readers in your trade, which kudos to you. A lot of commentators take that stance of just talking about ideas but don’t talk about the actual implementation. And I see further down the list, you actually have some coal holdings. Can you talk about that briefly?

Jared: You ever do one of those trades where it’s just sort of contrarian for the sake of contrarian? Coal had been in just a relentless bear market. And this was probably about six months ago, and I said, “We’re coming up towards the election.” I am one of the many, many investors that got burned on BTU bonds. I bought the unsecureds. I said, “If you think that there’s even a 50-50 chance of a republican getting elected, all the pain in coal just kind of goes away, and I’m just willing to take that as a coin flip.” I have a small holding in a coal ETF KOL, and like I said, I bought the unsecureds for BTU. And I’ve got to tell you, I sure lost money in that trade, but it’s been educational. I’m more of a equities, macro FX rates guy, I don’t know a lot about credit. And so this trade has just hair all over it, and I’ve learned a lot about how credit works in the bankruptcy process and stuff like that. So the money I lost in it is almost worth the education. But actually, I still hold the bonds, and depending on what I get in the workout, I might end up not losing money anyway.

Meb: The coal trade is interesting, going back to that study I was talking about earlier of down years in a row, you can download US stock sector and industry data on the French [inaudible 00:23:20] database, going all the way back to the ’20s. And so we ran a similar study on, actually, sectors and industries, which being more concentrated than asset classes and more volatile, you would expect more down years in a row sort of phenomenon. And coming into this year, we actually wrote an article called “Why You Should Ask For Coal (Stocks) In Your Stocking This Year”, because coal stocks, along with a few other investments, I believe DN [SP], and of course, the gold miners, basically anything metals in mining had been down five years in a row. And that’s an incredibly rare…I mean, it happens something like 0.1% of all years, there had been only one instance of an industry, or sector, or anything, to my knowledge, that’s been down six years in a row, and that was actually also coal stocks, but during the Great Depression.

So, so far, that trade’s working out great. This year, coal, gold miners, again, all those seem to be flying off the shelves, but certainly, wouldn’t have been true last year. All right, I wanted to do about one or two more market questions, then I want to a little bit about your writing process in general. I believe when you and I met, we were in a conference we were both speaking, and I think you were on some sort of options, tail-hedging sort of panel, and you do talk a lot about volatility, and options, the volatility of volatility. So what’s kind of your thinking about having a portfolio for a lot of our investors, or buy-and-hold-type of people that have a set allocation, but trying to think about whether it’s volatility, or black swans, or tail-hedging? Whatever it may be. I know those all are not the same thing. How do you think about that world? What’s your general philosophy on those sort of trades? Because I know you talk a lot about these kind of long volatility pay-offs at some point, but maybe you can make a few comments on…that’s a broad topic, but any general thoughts there?

Jared: You have a pretty good memory about that conference. I actually forgot about that panel discussion. I think what I was talking about at the time, this was about back in 2012, I was talking about tails, and how people would like to buy the down-tail, but nobody buys the up-tale. And I think the S&P 500 was around 1,500 or 1,600 at that point. I was telling people that I was buying the 2,500 strike calls out a couple years. That trade almost worked. It almost worked. When you’re thinking about tails, there’s actually two. The tail-risk hedge funds, they’re all focused on the down-tail. So they’re focused on buying calls in yen, or buying calls in gold, or buying calls in BIX, or buying puts in the SMP. And my argument was that you should focus on buying the puts index, or you should focus on the other tail, too.

And in terms of volatility, around 10 years ago, there was sort of this idea that you could own volatility as an asset class. You backtested holding the BIX with a stock portfolio, it improved your portfolio characteristics, and it improved your sharp, just improved your portfolio characteristics. There was this rush to try to secure the ties, VIX, and turn it into a ETF, and they did. They did with VXX. And anyone who’s ever played around with VXX knows that it just goes down day, after day, after day relentlessly, which is a feature of how BTF works, rolling VIX futures from one month to the next, and it has to pay this just enormous carry of about 25% or 30% a year.

So there’s this huge carry that you have to pay just to hold volatility. I think people have sort of been disabused of this notion that you should have volatility as a hedge because it’s an expensive hedge if you’re paying 25% or 30% a year in carry just to hold onto this thing. People have gotten more creative, they have some more sophisticated Ball ETF, stuff like that. I’m sort of old school. if I want to trade volatility, I’ll actually trade the listed options and deal the hedge to them. I’m really into the higher-order Ball products, but there’s a lot of interesting stuff going on there.

Meb: We think a lot about that world, and I think that’s an important comment about the upside-tail as well. And a lot of people, they’re so focused on the downside of everything, but you can have environments where if you’re not exposed to the upside, you never participate in that. The compound return you see over the last 100 years for stocks, or bonds, or whatever it may be, includes all periods. And it includes the periods where people, after the bear market freak-out, then they no longer may have exposure. Or even in good times. Over the last seven years, how many people have sat on the sidelines because they said there’s no way that, even if stocks are expensive, there’s no way that the market can continue going up, and we know that that’s possible.

Shift gears a little bit, and we can always go back to this, but I want to talk a little bit about your writing process. And so listeners, by the way, Jared has a new book coming out, should be out by the time this podcast gets uploaded this week, called “All The Evil of This World”, which is such a wonderful title. And I spent the last week reading through it, and I actually probably was in San Francisco… I lived in San Francisco for about a year and a half, in…what was this, ’03, ’04, and I was in Tahoe, as well. So we may have crossed paths in one of those years, I’m not sure. But it takes place in kind of the San Francisco area. But talk a little bit about, first, about your writing process, both for the daily newsletter, as well as for the book, and how you go about it. Is it a set nine to five sort of thing, or is it like…some writers, you write from 10 p.m. to 2 a.m. How do you go about churning all of this great content?

Jared: Like you said, I churn out a lot of content. I mean, I write three pages a day for The Daily Dirtnap. I write for Mauldin Economics a weekly piece and a very large monthly piece. I write for Forbes, I write for a couple of other places. And two books, and I just started the third one this weekend. I mean, it’s a lot. On an average day, I’m probably writing 2,000 to 4,000 words a day. My process is I turn on the computer, number one, I open Microsoft Word, number two, and number three, I start writing.

I have to treat it like a job. And it is nine to five. I’m sitting here in my office in Myrtle Beach. I put on a suit, most days, and sometimes maybe just slacks and a shirt, and I go into work, and I work in my office, I work a full day, and then I go home. I’ve never really been one of these people who just sort of get struck by creativity in the middle of the night, and I have to get up and write and stuff. No. It’s a job for me.

Meb: There’s a great quote, and I’m going to probably muck it up, but it was something along this line of, “Writing is an easy process. All you’ve got to do is sit down on your typewriter,” which, by the way, it shows the date, “Sit down on your typewriter and open up a vein.” And it’s challenging for me because I go through a very much a…I don’t have particularly a manic personality, but my writing comes in bunches. So for very much for the books or whitepapers, it’s all I can focus on for about a week, or a month, and then I just have to dead stop. But it’s funny when you talked about going to the office and wearing a suit because I worked at home for about a month when I lived in Lake Tahoe, I was actually working in the finance space. For the first week, maybe, was getting up, showering, shaving, wearing business casual sort of outfit.

Fast-forward a week, I’ve gained like 20 pounds, I’m wearing pajamas at 3 p.m., and I have a beard. Every 10 minutes, you’re like, “Well, maybe I’m going to go see what’s in the fridge. Maybe take a little break and get a snack.” So I think you’re right about having to have that discipline because it can be a little challenging otherwise. We tend to be pretty casual here in our offices in Los Angeles, but it can certainly be a slippery slope as well. I want to talk about one or two more things. So let’s talk about the new book. So the new book is going to be out…and this is fiction, or based on your experiences, but essentially, not a non-fiction finance book. And it’s your second book, right?

Jared: Yep. First one was “Street Freak”, which was a memoir of my time at Lehmen Brothers, and this is a novel, and it takes place around a real trade when 3Com spun off Palm Pilot in March of 2000. It was sort of at the top of the bubble. It is a novel, and there’s seven characters, and there’s seven chapters in the book. Each chapter is one character. It’s a couple hours out of these people’s lives over the course of the day, and they’re all connected by this one trade.

Meb: And so is this traditional publisher or self-publisher? How did you go about it?

Jared: It’s kind of a hybrid. It’s a hybrid between traditional and self. And I’ve got to tell you, as you can imagine, it was a hell of a book to find a publisher for because it’s about as niche as you can possibly get. There’s a lot of [inaudible 00:32:37] jargon. It’s going to be over the heads of a lot of people. It’s kind of a disturbing book. It’s very dark. It really isn’t for everyone. So I ended up doing this hybrid deal with a company called INscribe Digital, and basically, there is a physical book on CreateSpace, and then it’s pushed out to 300 different digital outlets, including Amazon and Barnes & Noble, iBook, stuff like that. So it is pretty much everywhere, which is nice.

Meb: Did they design the cover? Did you design it? Because it’s a nice cover.

Jared: Thank you. No, I hired some guy in London to do it over the internet.

Meb: Smart man. I have so many buddies who publish through traditional publishing and let our friends at the big houses design some of the covers, and it’s some of the most…like geometrically-neon shapes on almost every cover. And when we did traditional, because I’ve done both, and they would send us some cover designs, and you look at this and you say, “I’m pretty sure this is the same cover that’s on three or four different books.” But anyway, [inaudible 00:33:38]. I’m just always curious about how people think about it.

So I’m going to ask you a question that we ask every listener, and if you don’t have an answer, I actually have an answer for you from one of your issues, and maybe more embarrassing for you than to answer on your own. But we always say, “If you have something,” and it could be a website, it could be a place to visit, it could be a recipe, it could be anything, then we say, “You find beautiful, useful, or downright magical.” And I have one, and I’ll start. Actually, I’m going to give two real quick. Two apps that I love that I’ve used in the past year that just work and are seamless. And this says a little bit more about my lifestyle, so if you need to plan ahead for eight months, it’s probably not going to work for you.

Hotel Tonight is a wonderful app. I think a lot of people know about it now, but it allows you…and originally, it was just if you wanted to book a hotel for tonight. And it gives you a selection of…so if you travel to New York, for example, it gives you a selection of the best hotels in New York, often for half off. I’ve seen them from 2/3 off the price. Now, it’s even more user-friendly, because it lets you book, I think, for up for a full week, a week ahead of time, and it’s really a seamless app. And then a close tangent to that in this sort of app economy is what we call…I sold my last car using an app called Beepi. If you have a car that’s been…within the last 10 years, for example, the floor is CarMax. You can take it to CarMax because you know that’s the floor price you could sell this car.

And you could probably get a higher price at something like Craigslist, eBay. Huge pain in the ass, though. You have people come into your house, they want to test drive it, they want to take it to a mechanic. Beepi will come out to your house, inspect the car, take it for a quick test drive, email you, I don’t know if it’s the next day, two days later, an offer, and that offer was probably 20% higher than CarMax. You can accept it or not, and they list it on their website for a month. If someone buys it, they show up to your house, give you a check, take the car, drive away. Or if no one buys it in a month, they buy it. So anyway, check out both of those. We’ll put up all these notes in the show notes. Do you have something for us? Any ideas?

Jared: I have a secret weapon when it comes to shirts. I am just religious, I just swear by these shirts. So they’re called ETON, E-T-O-N. It was actually named after the British boarding school. And this is a Swedish company. Ever heard of Swedish shirt-makers, these shirts, they are expensive. With tailoring, it’s going to be about $300 a shirt.

Meb: So these are dress shirts?

Jared: Yeah, dress shirts. Yep. You can roll it up in a ball and put an anvil on it, and then a week later, pick it up, put it on, and your body head will just make all the wrinkles go away within 10 minutes. They’re indestructible, they don’t stain. Every shirt I’ve had that I’ve owned for years just never falls apart. They look amazing. I always get compliments on them. The $300 that you’ll spend is totally, totally worth it. Definitely, get your money’s worth. Swear by these shirts.

Meb: That’s perfect for me because I spend a lot of time wrinkling and spilling crap all over all my clothes. You know what I was going to use for you if you didn’t have anything was you mentioned in one of your speed rounds. And so, listeners, Jed does a speed round at some of his issues where it’s kind of a stream of consciousness, thoughts on whatever. And you said, “I’m not much into viral internet crap, but if you have three minutes, listen to Grace Vanderwaal’s audition on America’s Got Talent.” I’d heard about this and seen it go by. I hadn’t listened to it. I listened to it last night, and you’re pretty right on, spot on. That was awesome-pipes out of a 13-year-old girl. And I think she’s from New York.

Jared: She’s from upstate New York. I mean, really, the amazing thing about her is that…you’ve seen 12 or 13-year-olds that can sing. That’s not new. There’s two things that are different about her. One is she’s a musical prodigy. She’s been writing music since she was three years old, and these songs that she writes, I mean, they’re just incredible. The other thing is when she sings, it’s like hearing the emotions of somebody who’s like 40 years older. The maturity…it’s hard to explain. When she gets to the quiet parts of the song, the whole place was just silent. I mean, it’s just amazing. I said in a later piece that I really thought that she is a once-in-a-30-year type of talent. Like Michael Jackson, people like that. She’s that good.

Meb: However, I’m going to read the line before this. So this is going to be the big caveat for…you’ve also gone on record saying, “‘I Want It That Way’ is the best pop song ever created, ever. Better than Michael, better than Madonna, better than everyone.” So take what has just been said with a grain of salt, listeners, if you don’t think that’s the best pop song ever.

Jared: Backstreet Boys.

Meb: All right, look, let’s wind it down a little bit. Where can people find you if they wanna find more information?

Jared: So The Daily Dirtnap is www.dailydirtnap.com. That’s where you can get information about the newsletter. A subscription costs $600 a year. I also have stuff on Mauldin Economics, so if you go to mauldineconomics.com. I write a free newsletter for them that anybody can sign up for, and I also have a cheaper version that you can get for $200 a year, which is a monthly piece. In terms of the book, just go to Amazon and search on, “Jared Dillian.” You can get either of my books. And like we said, by the time this comes out, the books should be live. Then there’s also my author website, which is jareddillian.com.

Meb: And you’re also starting to tweet a little bit more now, right?

Jared: I guess. I really wish I had more of a presence on Twitter. I’m usually busy writing, and I’m not really focused on getting the tweets out. So I have a little bit of a presence on Twitter.

Meb: What’s the handle there?

Jared: @dailydirtnap.

Meb: And the only thing, we’ve gone almost a full hour without explaining what Dirtnap is. The readers will probably wonder why you have this newsletter called The Daily Dirtnap with a high production cost, I imagine, drawing of someone jumping off of a cliff is what it looks like. I hope you have the same designer from the book.

Jared: No, I didn’t have.

Meb: But explain what The Dirtnap is for all the listeners.

Jared: So when I started in this business on the P. Coast, like I said, back in ’99, the P. Coast was full of all these surfer traders. And it was California. All these California dudes trading options, and they had their own lexicon, and they would sit there and look up at the screens and say, “Dude, the spoos are taking a hell of a Dirtnap.” Dirtnap was their word for the market going down. So in time, stocks went down, which was not very [inaudible 00:40:40], they would say, “The market was taking a Dirtnap.” So I just picked that up, and I took it with me to New York, and I tried to spread it everywhere. So everybody says Dirtnap now.

Meb: And you actually refer to your readers as, “Dirts.”

Jared: Yep.

Meb: Well, look, thanks for being on today for the listeners. We’ll put all the show notes on here, we’ll put links to the shirts, to the videos, to Jared’s new book “All The Evil of This World”, which should be dropping tomorrow, Tuesday the 21st. It would always help us out if you go onto iTunes, subscribe to the podcast, and if you love it or hate it, rate it there as well. Jared, thanks so much for being here today, and I wanna thank all the listeners for listening in. Good investing.

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