Kevin Carter (00:03:51):
And then I was told that I could start Monday to which I immediately responded, “How can I possibly start Monday? I don’t know anything about investing.” And the guy who interviewed me said, “Well, go buy this book.” And he took out a piece of paper and he wrote down, A Random Walk Down Wall Street. And so I went and bought that book and read it. And as you know, it’s a book all about indexing and efficient markets written by a Vanguard board member and Princeton professor. So I read that book and I showed up Monday morning at Robertson Stephens & Company in the mutual fund group, which was booming, and got into the investment business that way, which was an active operation. This was not an index-based operation, an active stock-picking operation focused on growth companies, but I pretty quickly gravitated towards Omaha and so-called value investing. So that’s how I started.

Kevin Carter (00:04:41):
And then I worked as an analyst for a few local investment firms, and I really wasn’t a great student in college or high school for that matter. But once it mattered, I started to really pay attention and read everything I could find about investing, including the Berkshire Hathaway annual reports and Phil Fisher and Peter Lynch. And so I’m an active person first, but in 1995, I read the Berkshire Hathaway annual report. And in it, Warren Buffett said most investors, both individual and institutional, would be better off buying index funds. That sort of rocked my brain because I worked in the active business and had been taught we can beat the market and we’re smart and we do a lot of research.

Kevin Carter (00:05:30):
And so of course we can beat the stock market and the sort of hero of that approach to investing, Warren Buffett, was telling me and everybody else that read his annual report that everybody would be better off if they just indexed and didn’t do what I did for a living. And so that really got me thinking and maybe dig into why on earth he would say that. So that was pretty important in shaping my career.

Kevin Carter (00:05:53):
And then I guess importantly to the story is that in 1998 I was a young, cocky value investor, Charlie Munger wannabe, and this company, amazon.com, had come public. I thought, well, this is crazy. It’s just a bookstore and there’s no moat to it and it’s got an incredible valuation and it’s got to be a short. I’d sort of had a disillusionment with the investment industry and I had come to believe that the mutual fund industry was just gross in terms of helping investors. It’s a really great business for the people that own the mutual fund companies. It’s not a great way for investors to maximize their returns.

Kevin Carter (00:06:37):
And so there’s a book called Where Are the Customers’ Yachts that I had picked up and thought about. So I decided to kind of take some time off that I was still investing my own money in. And so I shorted amazon.com in the spring of 1998 and in about a day I lost a third of my small net worth. But that same day I saw something happen in the stock market which basically changed my life. I saw a company called K-Tel, changed its name to K-Tel.com, and K-Tel was a record company that used to sell, they’d advertise on TV and 800 number to dial-up and buy rock albums, compilations, greatest hits of the ’70s or whatever. So I knew the company from the TV ads when I was a kid. And all of a sudden they had changed their name from K-Tel to K-Tel.com and the stock went from a dollar to $30. And as I said, I had also lost a lot of my own money that day shorting amazon.com.

Kevin Carter (00:07:33):
But when I saw the company change its name and go up from a dollar to 30, I said, wait a minute, I’ve heard about this. This is something that’s happened in the past. Companies changing their names. And so I went up into my library and I found my copy of A Random Walk Down Wall Street and I opened the chapter on valuations and bubbles. I found a quote from the 1960s before I was even born and it was about a company. The quote was you take a company called Shoelaces, Inc that sells for eight times earnings and change the name to Silicon and Electronic Furth-Burners. And by doing that, the stock that used to sell for eight times earnings can now sell for 60 something times earnings. And I said, oh my gosh, this is exactly what just happened.

Kevin Carter (00:08:19):
I need to call the guy that wrote this book, and I knew his name, Burton Malkiel, a pretty well-known person. And so I used the search engine of the day, which I think was, I forget the name of the search engine that I used. It wasn’t Google. I searched for Burton Malkiel and up came his Princeton website. He’s a Princeton economist, and it had his phone number and his office hours. I dialed the phone and I said, “Gee, Dr. Malkiel, I don’t know you.” And he answered the phone himself, by the way. That was sort of surprising. I assumed he’d have a secretary or something that would answer the phone, but he answered the phone. And I said, “Gee, Dr. Malkiel, I don’t know you, but this just happened and it’s right out of your book.” I told him about K-Tel and the changing of the name.

Kevin Carter (00:08:58):
He seemed very interested and asked me to fax him over a printout from Bloomberg about the story. I did that and we talked again on the phone, and that was it. So I met him on the phone and I thought that was really cool because he was a legend in the world of investing in his book, A Random Walk, [which] was the best-selling investment book or one of them.

Kevin Carter (00:09:18):
Anyhow, a year later as I had taken a year off and I was sort of pondering like, okay, what’s the best way for people to invest? My wife and I took a trip around South America and Africa and I sort of just kept this little notebook and doodled out thoughts about investing and tried to just boil it down to its simplest pieces. What I realized first and foremost is that the way to invest is to first start doing it and do it again and again and again. Just start investing, start at whatever you can afford to invest. When you’re in your 20s, that might be 100 bucks a month or 200 bucks a month or maybe 500 bucks above.

Kevin Carter (00:09:54):
And then what you should do with that money was debatable, whether you should take stocks like Warren Buffett or buy index funds like Warren Buffett tells you to do. But either way, the most important thing is to start saving. And the problem was back then in particular if you wanted to save $100 or $500, the only thing you could put that money in was a mutual fund because to buy stocks, first of all, you had to buy whole shares. Secondly, you had to buy 100 shares unless you wanted to pay an additional odd lot fee. And so a company that had a $25 stock, all of a sudden if you want to buy a round lot of 100 shares, that’s $2,500. And if you only wanted to buy five shares or 10 shares, the commission would be something like 20% of your money.

Kevin Carter (00:10:40):
And so I thought so long about this and I thought, you know what? We need to make a system where people can invest $2.50 in Coca-Cola, or $20 in Berkshire Hathaway. I just became obsessed with what is needed to really democratize, if you will, investing and let the little guy invest directly into stocks without having to pay some rich mutual fund manager to do it for them. So that is what became my first entrepreneurial endeavor, and I asked Burton Malkiel, I called him back on the phone and said, “Hey, Dr. Malkiel, we talked on the phone last year and talked about K-Tel.” He said he remembered, but I have a feeling perhaps he didn’t and he’s just a very nice man, but he said he remembered. I told him about my idea and asked him if he’d be on my advisory board. He said he loved the idea and thought it would be good for investors, but he wouldn’t agree to be on my advisory board until we met.

Kevin Carter (00:11:41):
And so we scheduled a lunch in Princeton, New Jersey, and I flew out to Princeton and met him at his office. We walked a few blocks to a lunch spot called La Herves. And then we had a three-hour lunch. And from the moment that lunch ended until now, we’ve been business partners on several different things.

Robert Leonard (00:12:04):
That is an awesome story and background and there are so many different things that I want to touch on. Going back to when you first started at that mutual fund, if you guys were an active mutual fund and the guy that was hiring you knew that, why would he give you a book, specifically that book on efficient markets?

Kevin Carter (00:12:21):
That’s a great question. I don’t think I’ve ever totally pondered that, so I don’t know that question. And to be totally frank and candid, that individual, which obviously did me a big favor by telling me to go buy that book, I mean, it really became central to my career. He represents everything that I despised about the mutual fund business. So this is a great irony that the person that represented the dark side told me to buy the book that represented the force if you will. So, I don’t know why he told me to do that, but he did.

Robert Leonard (00:13:01):
Likewise, I’m a big value investor and Warren Buffett follower. I’ve actually been out to Omaha a few times for the meeting and I’ve read that annual letter where Buffett recommends ETFs. And I think most people should probably just passively invest in ETFs, but I also have a belief that individual investors can beat the market if they do their due diligence and do their research. But what I often see is that mutual funds are used as the benchmark. If you look at data that says why individual investors can’t beat the market, they almost always use mutual funds or money manager data to show why individual investors can’t beat the market. And I think there’s a huge disconnect there because mutual funds have a lot of things about their business that individual investors don’t have that make it much harder to beat the market. Were there any revelations that you had when you worked at a mutual fund versus what you can invest in as an individual investor?

Kevin Carter (00:13:53):
Well, there were lots of revelations. I mean, there was the revelation that the people that own the mutual fund company made lots and lots and lots of money and had yachts literally, and that performance was fleeting or outperformance seemed to be fleeting. But that day when I read that quote from Warren Buffett in the annual report about indexing, I dove in and I stumbled on Bill Sharpe’s piece. The Nobel prize-winning economist has a paper called The Arithmetic of Active Management. And it lays out in very concise, simple terms. It’s a mathematical fact that the average active mutual fund will underperform the index funds. And it’s very simple and it comes down to the fees.

Kevin Carter (00:14:39):
The average active mutual fund between their management fees and other expenses is still probably at least one and a half percent and maybe even two or two and a half percent depending on the tax issues. And meanwhile, the people at Vanguard and other places will give you the universe of stocks, the index, for basically nothing. And so you’ve got a built-in one and a half to 2% advantage that way. And because everybody has to own the stock, so for every active mutual fund that outperforms, there’s going to be an active mutual fund that underperforms pre-fees. But when you add fees to the mix, it slides the bell curve in a way that’s very simple and it’s mathematically not deniable that the average active mutual fund will underperform the index funds. It’s just a mathematical fact.

Kevin Carter (00:15:33):
But kind of to your question, the reason that’s also true is because of diversification. Mutual funds by definition are diversified. Some of them own, literally the active funds sometimes own hundreds of stocks. And mathematically, once you own 50 stocks, you basically own the stock market and your chances of outperforming it in any meaningful way is slim. Now, obviously, if you make a bet on one sector that’s focused, you can win. But ultimately you can certainly beat the market. I mean, just look at Tesla. There are lots of people that bought Tesla and they certainly beat the market. I bought Tesla and beat the market. Unfortunately, I sold it many, many years ago, but on paper, it still had a great game. But there’s no doubt you can beat the market. You just can’t expect to beat the market if you’re using a traditional active mutual fund.

Robert Leonard (00:16:25):
Going back to when you shorted Amazon, what lessons did you learn from that? Did you learn that you can’t short stocks based solely on valuation? And that’s one of my big principles is that I can not allow myself to ever short a stock based solely on valuation because the market can stay irrational far longer than I can stay solvent. And that’s a quote I got from a book, I don’t remember which book.

Kevin Carter (00:16:47):
Well, I’m trying to remember who said that. First of all, and I’m even more embarrassed, for the three years before I shorted amazon.com, I worked for a group called Feshbach Brothers, and Feshbach Brothers were the premier short-selling professional firm. They had the best performing hedge fund in the country, short only from ’85 to ’90 before I joined them. Now, they had gotten blown up in 1991. As Joe Feshbach used to tell me, in 1991, they lost half of the money and the other half the investors took back. But before ’91, they had been the top-performing hedge fund short only, and they were classic dumpster divers. They were the guys that exposed ZZZ Best Carpet, which was a high-profile fraud by this guy, Barry Minkow, who’s now I think an expert in fraud after he got out of jail.

Kevin Carter (00:17:45):
So these guys told me that over and over again. Valuation shorts, don’t do that. Don’t do that. And yet here I was, cocky and just convinced that there’s no way that this company had a moat, that yeah, they were first but they’re just selling books and that’s not going to work. So many lessons from this. I found as I was cleaning out my closets over the COVID, I stumbled on my actual report I wrote for myself where I said that… This is when Amazon had a $1 billion market cap and I think my conclusion was that any rational businessman would be happy to sell it for $200 million if they could.

Kevin Carter (00:18:28):
I think probably the biggest lesson that carries forward is valuation and value investing historically sort of stuck on price to earnings and price to book. And the reality is that ultimately earnings are all that really matters. I mean, as Warren Buffett says, in the short-term, the market’s a voting machine; in the long-term, it’s a scale. And the thing that goes on the scale is the cash that’s coming out of the operation. And so a lot of times, you’ll see companies that aren’t focused on that. They’re not focused on E, they’re focusing on G, growth. And so rather than seek to squeeze out profits, they’re running into greenfields, if you will, and growing their business.

Kevin Carter (00:19:10):
And so that’s one thing that I very much took a while as a value investor to see and accept that, that the world has become a lot more open to companies not making money, not reporting earnings that justify their valuation in the current quarter. And so that’s probably the biggest takeaway. The growth is very, very, very important. The PE is important eventually, but if you’re able to keep growing, a lot of times it’s more sensible for you as a long-term business owner and a long-term investor than to not get focused on the current earnings.

Robert Leonard (00:19:52):
Do you think one of the reasons why people aren’t as focused on earnings today is because they’re not looking at it as a business owner? I think a lot of people look at it as a blip on a screen rather than that share representing ownership in the business. Because if you thought about it as an owner and you actually truly own that business, of course, as an owner, you want earnings to come out every year so you have cash flow. And if you are thinking about the stock market correctly, and the way I like to invest, and a lot of people recommend such as yourself and Warren Buffett you should think about it that way, do you think that piece is missing today?

Kevin Carter (00:20:23):
It’s totally missing. I mean, that is a huge problem, and that’s it. You are buying a company. You are the owner of whatever stock you buy. I can’t recall it with any kind of precision, but the best piece about this is Mr. Market, which I think comes from Ben Graham but maybe via Warren Buffett. But the Mr. Market concept is very important. The idea simply is that you’re a business partner with the stock market or Mr. Market, and he’s very irrational. He’s a very emotional business partner and every day he’s willing to either sell you his piece of the company or buy your piece of the company, but you own part of the company, and understanding that is very important.

Kevin Carter (00:21:05):
But I think the counter of that is that as a business owner, you should be thinking long-term. But the problem is, I think a lot of investors in the stock market don’t think long-term and they let the stock price dictate their feeling on how good of a company is Tesla or how good of a company is Google, whatever. And that’s a real problem. It’s a problem for professional investors as well. I mean, as somebody whose focus has had a particular sector that we invest in has dropped 30% in the last two months. And so we have lots of people, phones ringing and people are nervous and want to know why the market went down. They lose track of the fact that we’re still up significantly over the long-term and had the best performance of everybody in our category last calendar year and the calendar year before.

Kevin Carter (00:22:00):
But people, they see that, what Mr. Market’s doing, even if it’s just a month or a two month period, and they forget that this is a, in its best purest execution by an investor, this is a 10, 20-year timeframe that you should be looking for. I mean, the long-term focus is so, so important for investors, but it’s so hard for them to stay locked into that, especially when they can see the prices going up and down, and in particular down is the problem with them usually.

Robert Leonard (00:22:34):
Everything we just talked about and you being an investor so focused on earnings, value investing, valuations, how’d you get involved with Tesla?

Kevin Carter (00:22:42):
Well, this is a good story. It was about eight or nine years ago when I decided that my family needed a better car in terms of being environmentally friendly because we had three children, all of which went to school, to three different schools. We had a Suburban and a Chevy Tahoe. My wife would get into the Chevy Suburban. All of the kids started at different times. And so she’d get in the Suburban and she’d drive six or seven miles round trip to drop off one child in basically the largest vehicle in the world. And then she’d drop off the next one and then do the same thing. And then they added a Whole Foods to our town with a small parking lot. My wife would tell me about the dirty looks she’d get from people in their Prius’s as she was trying to navigate the Suburban around.

Kevin Carter (00:23:35):
And so I was already on the lookout for an electric vehicle or a hybrid. I had decided that the one that seemed the most practical to me was the Toyota Camry Hybrid, which there was a car service in New York I used called New York Green Car, which that was the car they had. They were just nice and simple and tight room enough for a family. So then I was on my bicycle one day. Back then I was riding my bicycle 20 miles a day, basically to my hometown and back, the town I was born in and back. I was riding along the street and I saw this car and I said, what is that? That’s a good-looking car.

Kevin Carter (00:24:13):
I went over and saw it and it was a Tesla Model S, which I knew what Tesla was. If I had an opinion on it, before that I was somewhat dubious because I think of the automobile business as perhaps the worst business in the world, or one of them, slightly better than buying airplanes and flying people around. I looked at it and I said, “That’s a good-looking car.” And I said, “Huh.” I got back home. I went on the website for Tesla and I looked at the price and the performance figures. And I thought, “Wow, this is kind of a bargain.” I had a relative that always had the high-end Porsche, the four-door Porsche Panamera I think it’s called which by the time he walked out of the door, it was $150,000 car.

Kevin Carter (00:24:57):
The Tesla looked a lot like it, and it was half the price and faster and electric. I thought, “Wow, this is pretty slick.” And then I noticed that they had an option where you could get two seats in the very back that would face backwards. So you can get a seven-seat model S. I looked at that and I thought, “Wow, maybe I can replace the Suburban with the model S.” And I started thinking about the whole business model. I remember thinking, this all happened in a couple of three-week periods. One day, I saw my wife. I was walking through the kitchen. I said, “You know what? I think this Tesla could really work.” I said, “When you go to the Whole Foods in our town,” which is just over the hills from Berkeley, California, so it is an environmental awareness zone. And I would say, “When you go to the Whole Foods, every third-time car is a Prius. Like we must have the most Priuses per capita in the world, but the Prius is parked between a Mercedes-Benz and a BMW.”

Kevin Carter (00:25:58):
And so I said to my wife, I said, “I think this is the Prius for rich people,” was my quote. My wife literally hit me on the chest and said, “You have to buy that stock.” And the next day was tax day, I think I want to say eight years ago. I bought the stock for $57 a share, but pre-split. It very quickly went to over a hundred dollars a share, like in a couple of weeks I doubled my money and I thought, “Okay, that was fun.” And then I said, “I need to go drive one of these cars.” And so I scheduled the appointment at the Tesla factory. They had a showroom, I don’t know if it’s still there, but one of the few showrooms they had in the Bay Area was actually at the Tesla factory.

Kevin Carter (00:26:43):
So I signed in on the iPad and I thought there were a lot of good parts to the business model, even if it wasn’t an electric car. There were a lot of advantages I thought to the business model and not having the dealerships and all the inventory and just the car buying experience, well, as it is still so rough. So I signed in and waited and the guy came out and said, “Hi, Kevin.” I said, “Yep.” Put a picture of my driver’s license or whatever, scanned it, I’m sure, through his iPad. We walked out to go for my test drive and we walked up to the car and the first thing I said, yes, I could see the car had the back seats. I said, “Can I see the backseats before we even get in?” And he said, “Sure.” He opened the trunk and the two seats were there facing, again, backwards.

Kevin Carter (00:27:26):
I looked at him, I said, “Can I get in?” And he said, “No, you can’t get in.” He said, “You have to be five feet tall or shorter.” And then he said, “Actually 4’11”. That immediately took the wind out of my sails because my children were already well above that. My children are all, even my daughters, are pushing six feet. So anyhow, I was disappointed. But anyway, we took the test drive and it was just amazing. Driving the thing and smoothness and the acceleration and the fact of that heavy center of gravity with the battery underneath the car. I finished my test drive and as I was walking out of there, I said to myself, “I’m never buying a gasoline-powered automobile again and there’s probably no company in the world I’m going to spend more money within the coming 30 years.”

Kevin Carter (00:28:24):
And I quickly estimated that I could end up spending hundreds of thousands of dollars between myself and my family on this company’s products. And that was it. I drove away in my Chevy Suburban or Tahoe. And then I got on the waitlist for the  Model X, which was what I do with the whole of my family. And then at some point, I needed the money because I had a pretty good gain in the first couple or three years and I sold it thinking, “Wow, it’s really gotten expensive.” I needed the money to deploy on to something else. And I have calculated how much money I left on the table and it makes me nauseous, but that’s how I got involved with Tesla.

Kevin Carter (00:29:07):
I’m a huge supporter of it and actually, there are a lot of problems with this ESG meets investing thing, not with the idea but with the way that it was playing out and not resulting in the outcomes, I think, people were hoping [for]. But as part of our ESG policy for our own company, since all we can really control is what we do is that we now provide a Tesla to all of our employees after they’ve been here for a year as part of our environmental efforts. And someone asked me, “Well, why not just any electric vehicle?” And my response was, “There wouldn’t be any other electric vehicles if Elon Musk and Tesla hadn’t done their incredible thing that they’ve done.” So I wish I was still a shareholder, but I’m still a big fan.

Robert Leonard (00:29:54):
So what do you make of the run that Tesla went on over the last six months? How do you think about that as the investor you are today?

Kevin Carter (00:30:03):
I think that Elon Musk is the most important human we have on the planet. And while I haven’t looked at the financials or the market cap or the projections for Tesla, obviously there are lots of people that have done that and do that, but I think whatever it’s worth to shareholders, I don’t know, but it’s got to be the most valuable company to the planet in terms of helping to shift the environmental issues in a meaningful way. When I see the CEO of Mercedes-Benz showing off his new electric car, and I see that Porsche has sold more electric 911s than regular 911s, that wouldn’t have happened had it not been for Tesla. There’s no way. It would have been probably a decade or more before those things would have occurred. So in terms of value to the planet and the people of the planet, I don’t know what the market cap is, but it’s probably worth more to the planet than its market cap, but I don’t know about for investors.

Robert Leonard (00:31:05):
Fast-forwarding to where you’re at today, you’re an expert on emerging and frontier markets, but a lot of people listening to the show are not and I would include myself in that group. For those listening who may not know exactly what emerging or frontier markets are, please explain to us what they are and which countries they consist of.

Kevin Carter (00:31:28):
Sure. I didn’t know anything about China either before I got dragged in, which was 16 years ago. What had happened was, the fractional share brokerage company that we started we sold to E-Trade in the year 2000. And then after that, we had another idea that has also become mainstream, which was called direct indexing. We started a firm called Active Index Advisors that would allow investors to basically buy a managed account that rather than try to beat the market, it tried to match the market on a pre-tax basis, and then allow people to customize their holdings and also try to beat the market on an after-tax basis by loss harvesting. And so we started this company called Active Index Advisors and the flagship product was the active S&P 500 where we would buy 50 or 100 stocks that were in the S&P in a way that would match the performance of the broad index.

Kevin Carter (00:32:24):
But if you wanted it to be about tobacco stocks or oil companies, you could customize that way, but then you could also do loss harvesting. So if the autos were down, you could sell General Motors and take a loss and replace it with Ford. And so at the end of the year, you’d have the same pre-tax return as the index, but you could beat the index on an after-tax basis, which has worked extremely well. If there’s one way you can easily beat the index, it’s to copy the index and do loss harvesting. We sold that company to Texas at the very end of 2004. And at the same time a few months before we sold it, Google went public. And when Google went public, they asked my partner Burton Malkiel to give a talk to their employees about investing.

Kevin Carter (00:33:06):
I wasn’t involved with that, but I knew Burton did it and it sounded cool. Everyone was talking about Google. It was the hot IPO. And a few months later, a guy from Google called me and said, “Hey, I heard about this active S&P 500. I want to invest with you.” And I said, “Well, great. You’ll have to get an advisor at Morgan Stanley or Credit Suisse or Deutsche Bank because that’s where we’re available.” And he said, “No, I don’t want to do that. I want to just invest directly with you.” And so I ended up becoming the advisor to that Google engineer and several of his other Google engineer friends that were all very early employees and all very wealthy even just right after the IPO.

Kevin Carter (00:33:45):
And meanwhile, Burton had gotten interested in China. And so he’s going back and forth to China. A couple of his colleagues at Princeton were Chinese and had gone back to teach economics in Beijing. They said, “Bert, you have to come see what’s happening. Our economy is coming back. It’s real and it’s capitalist and you have to come see it for yourself.” And all of his back and forth resulted in a white paper that was published in the Journal of Investment Consulting in 2005. And the Google people found out about this and called me and said, “Can Burton come talk about investing in China?” And I said, “Sure. Next time he’s in San Francisco, we’ll come down.”

Kevin Carter (00:34:29):
And so 16 years ago last month, we drove from San Francisco to Mountain View one morning and Burton gave his talk about investing in China. And then all these Google people looked at me and said, “We want to invest in China.” I had no idea what that even meant. At the time I didn’t know anything about China. I had traveled in some other emerging markets, but I had no interest in China, very little knowledge of it.

Kevin Carter (00:34:54):
But somehow from that moment, and the moment that talk ended until today, my entire life has become involved with trying to figure out what does that even mean to invest in China and how should an investor do that? And so I didn’t know anything either. And just in terms of the way to think about China in the investment world, there are basically four categories of companies, or rather four geographic asset class delineations. You have the United States stock market, then you have international developed. So the developed countries other than the United States, which is largely Europe, Japan, Canada, Australia. So that’s the international developed world. And then you have the emerging markets, which are China, India, Brazil, et cetera.

Kevin Carter (00:35:43):
And these are, simply say that these are countries that have lower per capita GDPs. They have incomes of $2,000 a year or $5,000 or $10,000 a year, and not the sort of 30, $40,000 a year incomes that we might have. So that’s what the emerging markets are. There are a little less than 30 of them. And then there’s a whole nother category called frontier markets, which are like the junior pre-emerging markets. These are places like Vietnam and Nigeria.

Kevin Carter (00:36:11):
And so in terms of investing internationally, the way I would summarize it for your audience is that the developed international, the Europe, Canada, Japan, Australia group, that’s a pretty staid set of economies and markets and companies. You have the pharmaceutical companies, the auto companies. You have the very dynamic US stock market, also a developed market. And then finally you have the emerging markets and that’s where I’m focused on, emerging and frontier markets. And frankly, everybody should really be focused on them. I mean, ultimately they’re the world. That’s 85% of the world’s people are in emerging markets and 90% of the people that are under the age of 30 are in emerging markets. So this is really the world and it’s really the future even more so based on demographics.

Robert Leonard (00:37:02):
There’s a bias called the home-country bias, which refers to an investor’s tendency to favor companies from their own country over those from other countries. It’s not unique to just the US. It actually happens worldwide. Why do you think this is? What are investors potentially missing by focusing only on their domestic markets?

Kevin Carter (00:37:24):
Well, I mean, why it exists I think is… It occurs not just in investing when people are comfortable with things they’re familiar with. And by definition, these are foreign countries. And so that home bias is prevalent everywhere. Now, fortunately for US investors, we have a very dynamic market of amazing companies that have grown, and grown their earnings and grown their value. The same can’t be said for a lot of the other developed markets that don’t have the sort of innovation that we have. What are people missing out on? There’s probably other things that they’re missing out on, but what we do and we are focused on, I think particularly your audience, they should get familiar with and comfortable with this because this is where the future’s happening now.

Kevin Carter (00:38:12):
If investors aren’t looking outside of the US, they’re missing what I believe is the fastest growing sector in the world, which are the emerging markets internet companies, the Googles of Russia and Brazil and the Amazons of India and these types of things. We’ve seen how much wealth has been created and how these companies have disrupted all of our economies. but that certainly there are people losing as Amazon and Facebook and Google and Netflix are winning. But the same thing’s happening all over the world. And again, because emerging markets are where all the people are, in many ways, it’s a much bigger deal.

Kevin Carter (00:38:49):
And again, I’m obviously biased because this is what our focus is. But essentially when you look at investing in emerging markets, there are really two things historically that I’ve told people they need to know based on my 16 years of experience. The first thing is that the thing that’s emerging is the people. You’ve got billions of people moving on up and they want stuff. They want more and better food, more and better clothing. They want appliances. They want entertainment. They want vacations. They want cars. And they want their kids to go to college. This is a well-documented story and it’s a huge deal. McKinsey and company call it the greatest growth opportunity in the history of capitalism as all of these billions of people want the same sort of stuff that we have.

Kevin Carter (00:39:39):
And so that’s the first thing people should be focused on and why they should be interested in the emerging markets in particular. And then the second thing I tell people about emerging markets is that the traditional indexes, the traditional ETFs are terrible and you won’t make money investing in emerging markets even though emerging markets are growing. And the reason is that the stocks, the companies that comprise the indexes, they’re not great businesses at all and they’re certainly not capturing the real growth. I remember after Burton gave his talk that day 16 years ago, we drove back to San Francisco and the first thing I did is I walked over to our portfolio managers and I said, “Look, the Google guys want to invest in China.” Give me a list of all the companies in the China ETF for my shares, which has the ticker symbol FXI, because I assumed that for the Google people, that’s what we would use.”

Kevin Carter (00:40:41):
Before they gave me the list, Burton pulled me aside and he said, “Look, when you look at the list of all the companies in the China ETF, you’re going to see that most of them are Chinese government-owned banks and oil companies.” And I said, “Yeah, I’ve heard about this.” He said, “Let me give you another example of how these companies work.” And the example was, you’ve got a Chinese manufacturing plant with 15,000 employees and it’s been losing money for a decade and it’s about to run out of money again. And so the management team goes across town to the Chinese government-owned bank and says, “Hey, we need more money.”

Kevin Carter (00:41:16):
Now, a normal banker would say, “No, you can’t have any more money. You didn’t pay us back the last money we loaned you. So you’re basically bankrupt.” But the state-owned banker says, “Well, if you run out of money, then these 15,000 people are all going to be out in the streets protesting that they don’t have jobs.” And so the bank makes another loan. When Burton gave me that example, it made me literally nauseous inside because with my simple Omaha brain, earnings equal value and the growth of earnings equals the growth of value. And if you’re telling me the people that run these companies don’t care about that, why would you invest in them at all? And in the case of the China index, it was over 80% government-owned banks and oil companies, and it was less than 10% in the consumer stocks.

Kevin Carter (00:42:04):
If you look at the broader emerging market products from Vanguard or iShares or Schwab, there’s still about a third, over 30%, in state-owned enterprises. These things are terrible. They’re full of corruption. You’ve got the best example in Brazil where Petrobras, which is the Brazilian state-owned oil giant, think of it as Chevron meets the Department of Motor Vehicles. It was being systematically looted of billions of dollars by people, including the last two presidents of Brazil who both went to jail for basically stealing your money if you’re using a traditional approach. That’s the second thing to know about emerging markets is if you’re expecting the broad indexes to catch the growth for you to make money in emerging markets, I think you’re going to be waiting a long time. And I think that ultimately this is a problem because people have invested in the emerging markets. They’ve heard this incredible growth story, how these GDPs are growing twice as fast.

Kevin Carter (00:43:07):
And for the last 14 years, if you invested in the broad emerging market index 14 years ago, you just got back to break even in the last few months. So you’ve got nothing. So you’ve had all this growth that’s happened, but investors haven’t made any money. It drives me crazy when I see, which I see over and over again, emerging markets have become the biggest value trap in the world because I see a chief investment officer every month or two from some big firms will say, “We are very bullish on emerging markets.” Look how cheap they are, the PEs 12 or 13. And the S&P 500, it’s twice as expensive as the PEs 24 or 25. So it’s half the cost of the S&P and the economies are growing twice as fast. So I’ve got twice the economic growth, half the valuation. How can that not be a bargain?

Kevin Carter (00:44:04):
If you knew what the Agricultural Bank of China was, you probably wouldn’t want to own it for three times already. So I think this is a real problem because people don’t realize that ultimately when you buy an ETF, no matter what the title is, you’re buying the companies and becoming an owner of the companies that are in that ETF. And if those companies are not trying to grow your value or in the case of emerging markets, if they represent the legacy economy, the corrupt government-owned economy, you’re not going to make any money. And so you really need to be focused on where the real growth is and get more precise in your allocation and that’s where the consumer is in emerging markets.

Robert Leonard (00:44:46):
I’m so glad you just had that discussion because that was one of my biggest questions. One of the reasons why I haven’t had a lot of international exposure in my own portfolio is because of that exact reason. When I look at the broad ETFs for all of these emerging markets, if you look over the last 10 years, they really, basically you’ve made no money and it makes no sense to me why I would invest there. And I know historical performance is not indicative of future performance, but to me, I say, well, if this hasn’t happened for 10 years and there’s been growth, what is the catalyst now that’s going to lead to growth? And I just couldn’t see it. So for exactly all the reasons you just said, I never bought those ETFs.

Kevin Carter (00:45:21):
People ask me how much money should I invest in emerging markets and what I tell them is if you mean the Vanguard fund or the iShare’s fund, you shouldn’t put any in emerging markets. What I concluded after my first eight years was that investors in emerging markets should do what we call emerging markets 3.0, and it’s a concept that I lived. I didn’t call it that. I stumbled on a blogger that covers endowments and he wrote a white paper and I knew exactly what he was talking about because I lived it. And so from the moment that talk ended, 16 years ago, [the] first thing we did was Burton and I launched a number of Chinese ETFs with Guggenheim partners, which are now owned by Invesco.

Kevin Carter (00:46:03):
But I spent most of my time in New York City and Boston with a couple of dozen of the biggest family offices and foundations and endowments, including several of the Ivy League endowments and I watched how they were evolving their approach as they increased their allocation from small to medium to large, those that are over 10%. But then when they get to that 3.0 version, the 10, 12, 15% allocation, they don’t just buy the index because they’ve seen that they haven’t made any money in that. They’ve seen people go to jail. They get a little bit more precise. And so the best example of this was Yale University David Swensen, who recently passed away. He took a Chinese kid that was an analyst for the endowment and said, “Here’s $50 million. Go back home and find some good growth investments for us.” But most investors weren’t David Swensen and didn’t have $50 million to deploy.

Kevin Carter (00:46:58):
And so what I told people was, look, this is easy. The way you want to invest in emerging markets is you want to buy the emerging market consumer sector. That’s what’s emerging, the people. They want stuff, you invest in the stuff that they want. That was easy to do because there’s an ETF that tracks the emerging market consumer sector. It owns the 30 largest emerging market consumer stocks, and it has the ticker symbol ECON, E-C-O-N. Now, I have nothing to do with that fund. I never knew anybody that worked at that fund, but I knew it existed. And so when people would ask me what’s the best-emerging markets ETF, I said ECON.

Kevin Carter (00:47:41):
It was about seven and a half years ago that I decided I had lost my way as an investor. I was this young, cocky value investor, Charlie Munger wannabe, but somehow I got mixed up with this Vanguard guy at Princeton. And now I build Chinese index funds for a living. I’ve obviously lost my way and I need to get out of this because I’m getting older every day and I want to do my stock-picking. And so I told the Guggenheim people I would support their efforts, but I was going to set up my own investment partnership, which I had modeled after the original Buffett part.

Kevin Carter (00:48:18):
And once I had it all organized, I opened an account and put my own money into it and I bought five stocks, all five of which were parts of this emerging market consumer story. And after a few days, I thought, “Well, I should at least go around town and see if any of my friends want to invest in this partnership with me.” And so I scheduled some appointments. In the morning of those meetings, I made a few slides to show the people I was going to be meeting with. And one of the slides was a list of the five companies that I had invested in. The first three companies on the slide were all part of the emerging market consumer ETF.

Kevin Carter (00:49:02):
They were three stocks trading in Hong Kong Want Want, which is like the Nabisco of China, branded crackers, and snack foods. The second and third companies, sportswear companies trading in Hong Kong Li-Ning and Peak Sports, which you can think of as the Reebok and Converse of China. So those were my first three stocks, all of them in the database called consumer and all of them part of the emerging market consumer ETF. But then I had two other stocks that I had invested in that were in the emerging market consumer ETF, but they were clearly plays on the emerging market consumer. They were put in the database as technology companies. The first one traded on the New York Stock Exchange was WUBA, W-U-B-A, which is the Craigslist of China. And then the fifth and final company trading on the NASDAQ is called Mercado Libre, MELI, which is the Amazon and PayPal of Brazil and Mexico and every other country south of our border.

Kevin Carter (00:50:07):
And after I made that slide, I looked at it and I thought, well, the first three companies, the consumer companies are great. They’re growing at 15 or 20%. I think they each have a moat in form of brand equity, to use a Buffett term, and the management owns the same stock that I own and at least I can expect that they are wanting it to be worth more. But then I looked at the two other companies that weren’t called consumer companies even though they obviously were. They were growing at 100% and had incredible margins. WUBA had a 94% gross margin, which is where I look for moats and that is still by far the highest gross margin I’ve ever seen. So these companies were growing seven times as fast as the regular consumer companies. They had incredible profitability.

Kevin Carter (00:50:57):
And while the PE multiples were higher, the PE multiple divided by the growth rate, the PEG ratio, which is the only multiple investors should care about, the PEG ratio was in fact lower than the consumer companies and quite reasonable. And I just remember thinking these are the two best companies I own and they’re not even in this emerging market consumer ETF I tell people to buy. And that was it. I had that thought. I drove around town and I had a few meetings and got some checks. I was on my way back home and I was at a stoplight and my phone rang and it was a friend of mine with a three-year-old daughter. She said to me, “What’s the best-emerging markets ETF for my daughter’s college fund?” I started to tell her to buy ECON because that’s what I always told people.

Kevin Carter (00:51:49):
But then a light bulb magically appeared above my head and I said, “Wait a minute. The best way for investors to invest in emerging markets for the long-term doesn’t exist.” And I drove right back to my office and started to organize EMQQ that afternoon. It launched 100 days later on November 12th, 2014. So I think that the way that investors should invest in the emerging markets is the way that I created because someone asked me that question at an opportune time and thought I knew the answer. And now it turns out for the last six and a half years since this it’s been a product tracking this, it has been by a pretty good margin the best way to hop into the growth of emerging markets.

Robert Leonard (00:52:36):
I actually just had someone who listens to the show send me a DM last week on Instagram and asked me if he should focus on his home stock market in Australia or if he should invest in the US. He went on to tell me he’s a newer investor and wasn’t sure where or how to start. For someone like this, whether they’re in Australia looking to potentially invest in the US or if they’re in the US and they’re looking to potentially invest outside of their country, where do they get started? How do they even get started?

Kevin Carter (00:53:05):
First of all, I’ve become quite radicalized in my thinking about this, how investors should approach their asset allocation, how much should they have in their own country? How much should they have in bonds? This whole idea of modern portfolio theory and the making of pie charts and asset allocations, I’m rejecting all of it now. A lot of this has happened just in the last year, but any young person, and let me also say I’m obviously, this is self-serving and I am in a position of conflict, but I have become quite convinced that any young investor who has 5, 10, 15, 20 years timeframe have a meaningful part of their investment portfolio in the emerging market internet companies. And I think that while they will be more volatile, this is where the growth is.

Kevin Carter (00:54:07):
And so, I don’t know. I’m sure there are wonderful companies in Australia. I’m sure there are some wonderful growth companies that will be worth a lot more in five years, in 10 years. I know there are some wonderful growth businesses in the United States, and I’m sure there are wonderful growth businesses everywhere. But the emerging markets internet group I believe is the fastest growing sector in the world not just today but ever in terms of public companies because what’s happening in the world is this. So when I got that call, as I mentioned, from my friend about seven and a half years ago, I answered it on my iPhone. That was a pretty new device in my life seven and a half years ago.

Kevin Carter (00:54:52):
I had an iPhone but it had only been in my pocket for a couple of years and I was already seeing how it was changing my family’s consumption. Like back then, my family used to go to the Target store four times a week, which was easy to do. It’s only a few miles from our house and we have a car and the roads are paved. But all of a sudden these brown trucks started showing up in front of my house once a week, and then twice a week. And now before the coronavirus came to town, my family didn’t go to Target anymore and the trucks were in my house 20 times a week dropping stuff off.

Kevin Carter (00:55:26):
So if you think about how the smartphone has changed our consumption. But remember, I had a computer for 20 years before I got a smartphone. So what EMQQ represents is really three megatrends, three of the most powerful themes in the world in one easy group. So all of those billions of consumers are getting their first computer ever, and it’s not on their desk and it never will be. So the first megatrend is 85% of the world’s people want to save stuff we have. The second megatrend is called the computer, but it’s in the pocket and it doesn’t have an Apple logo. We’re talking about 60, 80, $100 Android-based smartphones, which are bringing the computer to the world for the first time. And they’re bringing with it the third megatrend, which is another thing that we take for granted, something I’ve had for 25 years here in San Francisco called the internet. So I had internet access in the Marina District of San Francisco in 1995 on a telephone line. And now the internet shows up wherever I am.

Kevin Carter (00:56:34):
Well, most of the world never got wired. And so you have this once-in-a-lifetime generational confluence of these three megatrends, billions of people getting a computer, getting the internet. And importantly, because the consumption infrastructure in the emerging markets is by definition undeveloped. And when I say that, the consumption infrastructure, I’m talking about bank accounts with debit cards, I’m talking about TVs on the wall with 1,000 channels, and I’m talking about Target stores. Because the emerging markets don’t have those things like we do, they’re leapfrogging past us and going to the cutting edge of consumption in a digitized fashion.

Kevin Carter (00:57:25):
This is a very big deal, and as I said, this sector, I’m not 100% sure of anything in the world, but I’ve offered a $100,000 reward to hundreds of CFA members. I’ve probably given close to 100 presentations to the CFA societies around the world that I’ve offered cash rewards. I’ve asked everybody I know that’s smarter than me and older than me if they can think of a sector that’s ever grown this fast, which by the way, the average revenue growth for the sector for the last 11 years annually was 37%. And for the decade ended with 2019, it was almost 40%. So I’m not sure but I think this is not only the fastest-growing sector in the world but the fastest-growing sector in the world ever. And I think on top of that, it’s a very profitable sector. I think these businesses have moats, many of them.

Kevin Carter (00:58:16):
Again, I’m radicalized and I’m obviously in a position of conflict of interest in that I generate revenue based on people using this approach, but it’s worked and I think it will continue to work for long-term investors. We’ve had a decent selloff recently and I think that the PEG ratio is now down again below one. So, I don’t know if I went off in the wrong direction. I can’t speak for the opportunities in Australia versus the US but I can tell you there is one very large opportunity that I think any young investor should be focused on. And it’s the same kind of things we’ve seen in our own lives with Google, with Facebook, with Amazon. Everybody else in the world is doing the same thing with their localized versions of those things.

Robert Leonard (00:58:59):
One of the biggest concerns a lot of investors have when investing internationally is fraud and accounting standards. Since China has been growing so rapidly, it has grown an interest from investors. But there are concerns of fraud there frequently. We recently saw the fraud with Luckin Coffee or the Starbucks of China. That’s not to say that fraud doesn’t happen domestically as well because of course, it does. We’ve seen quite a bit of it here in the US too, but it seems to be more of a concern when investing internationally. How do investors combat against this, when investing internationally?

Kevin Carter (00:59:32):
Okay. Let me first say, as I mentioned earlier, the biggest problem in emerging markets of the state-owned enterprises, which have all sorts of corruption, maybe not outright, maybe not fraud in the way you’re thinking, but they definitely have problems with governance. Let me say this. With regards to the Chinese companies and the Chinese, anything Chinese, people have I think too strong of skepticism and suspicion around whether or not you can believe the numbers, whether it’s the GDP numbers or the accounting of the publicly traded companies. And this is a big problem.

Kevin Carter (01:00:08):
Let me tell you how to think about this. In terms of the internet companies, another reason why I think investors should feel very comfortable with the emerging market internet sector is that most of the companies in the EMQQ index trade in the United States on the New York Stock Exchange or the NASDAQ. And the reason is this. These companies, they’re getting started by local entrepreneurs like Jack Ma at Alibaba, but they’re getting funded by professional US institutional investors. They’re getting funded by Harvard and Stanford and Yale’s endowments. They’re getting funded by US corporate investors. Jerry Yang led a billion-dollar investment into Alibaba, which turned into 50 billion. In my very favorite personal story from the last couple of years, Berkshire Hathaway bought 5% of a Brazilian FinTech company called Stone which went public on the NASDAQ and is part of the EMQQ world.

Kevin Carter (01:01:10):
So the point is these companies have very good corporate governance because of the capital formation process they’ve gone through. So in emerging markets where your biggest problem is corporate governance and people going to jail like the last two presidents of Brazil and the last president of Korea, you could actually sleep better at night. These companies on an absolute basis, they have very good corporate governance and on a relative basis to things like Petrobras. I think they have fantastic corporate governance.

Kevin Carter (01:01:41):
Now, in the case of the China companies and the distrust around China, let me tell you what we have. I spent a couple of weekends last year during the lockdown going through every single Chinese company listed on the US exchange because you may know that there’s this effort being made to “delist Chinese companies from the US stock exchanges”. That finally was signed by the president and passed in the fourth quarter. But it was first passed by the Senate in May. And when it passed, I watched the press conference from the Senator that sponsored it. He said, “We just want Chinese companies to play by the rules. All the other companies play by the rules, but the Chinese companies don’t play by the rules.”

Kevin Carter (01:02:25):
And so I had two questions immediately. What rule are we talking about and who in the world is in charge of enforcing the rule? I mean, it doesn’t make any sense. You’re saying that Chinese companies are just showing up at the New York Stock Exchange and say, yeah, we’re not going to follow the rules. We’re just going to start trading here. Like it didn’t make any sense to me. And so what turned out was that in 2002, almost 20 years ago, we put in place an organization called the Public Company Accounting Oversight Board. The reason it got put in place is because Enron, which was considered the most respected company in the United States for two years in a row, according to Fortune Magazine, turned out to be a big accounting fraud.

Kevin Carter (01:03:07):
So one of our leading companies was a big fraud. We passed Sarbanes-Oxley and created the PCAOB. And one of the things that they were supposed to be able to do was to review the audit notes, the paperwork associated with the audits of any company that trades on a US exchange. And as it turns out, there are three countries in the world that don’t allow that: France, Belgium, and China. I don’t know what’s going on in France and Belgium, but I do think it’s ironic that Anheuser Bush, which is about as red, white, and blue as you get, they are also on the list of companies that would be delisted if they don’t comply because they’re technically a Belgium company now.

Kevin Carter (01:03:49):
But in the case of the Chinese companies, there are about 150, maybe 200 companies, and I went through every single one of them. And the way to think about the Chinese company, the Chinese stocks in the United States, you’ve got three groups. The first group is the state-owned enterprises, the Chinese banks and oil companies, and phone companies. You don’t want to invest in those anyhow, but those are the reason that these rules were never enforced because those companies, including the Chinese state-owned oil companies, were already trading on the New York Stock Exchange when we passed the bill 20 years ago. The lobbyists went to Washington and said, “Look, the Chinese government is not going to let you come in and review the audit of the Chinese government-owned oil company.” And so we didn’t enforce our own rule for 18 years, which frankly gives me more questions about how we operate then the veracity of Chinese accounting. But the state-owned enterprises, those are the reason we didn’t enforce the rule. You don’t want to invest in those at all.

Kevin Carter (01:04:53):
The next group of companies trading on the NASDAQ or the NYSE is what I would call the real Chinese growth companies. There are about 50, maybe 60 of these companies now. Most of them are internet companies and they’re part of EMQQ index, Alibaba, et cetera. And of those 60 real Chinese growth companies, there are a couple dozen or maybe less than 20 non-internet companies. There are some education companies. There’s a REIT. There are some healthcare companies. And yes, there was Luckin Coffee, which was as you know a super turbocharged growth competitor of Starbucks. And that was a real company, but it did get ahead of itself and they did manufacture a few hundred million dollars in revenue. That blew up in their face and the stock got crushed and delisted and investors lost some money. So that happens.

Kevin Carter (01:05:52):
The reason we have Sarbanes-Oxley and the PCAOB is because the most respected company in the United States was a huge fraud. So that’s happened. It will happen again. I am not aware of any of the internet companies having any irregularities. There’s one actually that doesn’t sound or smell exactly right to me. But most of these companies, they have been founded by locals. They’ve been funded by US institutions from the beginning, which is why they trade on our exchanges. They’ve had real investment banks, real US accounting firms. So I think you can trust them with the caveat that you can’t trust everybody. A lot of times these companies, like Enron, are hard to identify.

Kevin Carter (01:06:38):
Now, the third group of companies is where the problem is. When you get past the top 50 companies, which are the state-owned enterprises and the internet companies, then you get to the 100+ Chinese penny stocks. I was shocked that there were so many of these things still in existence because 12 and 13 years ago, early in my China days, mom and pops investors would find me and they’d say, “What do you think about China battery or China roadway systems or China lighting?” And it took no more than 30 seconds in any of those cases to identify the company as unquestionably a pump-and-dump Wolf of Wall Street penny stock fraud, which is a problem that I thought had gone away because it was so prevalent. So many people lost money. So many people lost money to the point where everybody says you can’t trust the accounting.

Kevin Carter (01:07:39):
But those weren’t Chinese companies or Chinese frauds, those were Long Island in Florida, Wolf of Wall Street, pump-and-dump Stratton Oakmont frauds, and the bad people were not Chinese. There certainly were some Chinese people complicit in these things, but that was the real problem. And I was shocked that these companies still existed. My favorite stock was stock 154 on the list called China Bat Group. This is May last year when the COVID was kind of coming on hot and going through all these Chinese penny stocks, I get to one of them and it’s called the Bat Group and I’m thinking, oh my gosh, maybe there’s actually bats involved. I went to the company’s website and all it is is a page with a picture of a Lamborghini and a Ferrari and it says China Bat Group. Their logo is Batman’s logo, by the way. And it says China’s first publicly traded luxury cars rental company, NASDAQ, and then it has the ticker symbol.

Kevin Carter (01:08:41):
Now, that is a classic pump-and-dump. There’s no business there. It’s just they’re touting that it’s NASDAQ listed. They’ve got misspelled words. Both public and luxury are spelled wrong. And the business they claim to have is you can rent a Ferrari or a Lamborghini for an hour or two to impress somebody in Beijing. That’s what they claim their business is. Then I pull up the ticker symbol on Yahoo Finance to see what the stocks have been doing and I see that the company’s name has been changed. It’s got the same ticker symbol, but now it’s not called China Bat Group, it’s called TD Holdings and there’s a press release telling me how they changed their name because they changed their business model. And instead of renting Ferraris and Lambos to young Chinese people, now they trade non-ferrous metals. They’re a commodities trading firm.

Kevin Carter (01:09:34):
My point is there is a ton of fraudulent Chinese companies, but they’re all penny stocks and most of them, most of the bad people are not Chinese. And part of the problem is you have these two junior-level NASDAQ exchanges which are not the real NASDAQ. They’re like the junior, double junior NASDAQ with very low listing requirements. Anyhow, that’s a very long answer. Accounting frauds happen all over the world. I don’t think that the Chinese internet companies are the problem, but there are some Chinese companies that are clearly to be avoided by investors.

Robert Leonard (01:10:14):
Kevin, thank you for joining me on the show today. For those listening that have enjoyed this conversation and want to learn more about you, international markets, some of your funds, where’s the best place for them to go?

Kevin Carter (01:10:26):
Well, you can find me on LinkedIn or you can go to emqqindex.com. That’s the website, the same as the ticker. Emqqindex.com is where you’ll find out all about us.

Robert Leonard (01:10:39):
I’ll be sure to put a link to the fund and Kevin’s LinkedIn in the show notes below. Kevin, thanks so much for joining me.

Kevin Carter (01:10:46):
Thanks for having me.

Robert Leonard (01:10:47):
All right, guys. That’s all I had for this week’s episode of Millennial Investing. I’ll see you again next week.

Outro (01:10:53):
Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.