Stand Alone: A Conversation with Martin Sosnoff | tastytrade Documentaries

if you would've told me when I was in the war or even when I graduated City College that you can end up from Wall Street I'd look at you and say you're crazy I don't even know what the Wall Street is I think every day is an adventure if you're involved with the financial waters I think there is something you can do as an armchair investor when you have a point of view which is confirmed by what you see no matter what the financial press is saying on what Wall Streeters say you go the other way I'm Thomas Osman this is my family in fact it's my mom and dad's wedding day my grandparents are here my great-grandmother's here and my uncle's Bruce and Martin I was always curious how did my uncle Martin get started in the financial markets my father and uncle grew up a 964 Sherman Avenue in the South East Bronx just a few blocks away from Yankee Stadium at seven years old my uncle would sell newspapers to fans coming in to watch the games it was his first business venture my grandfather had a tailor shop on 128 Street and convent Avenue in Harlem he worked a lot of late nights so my grandmother would make him a hot dinner and then my uncle would bring it down to him in Harlem one night my grandfather took my uncle Martin to a music school on a hundred and twenty-fifth Street and asked him to pick out an instrument that he'd like to play Martin chose the alto saxophone bought it on layaway for $35 shelling out a dollar a week in twenty-five cents less to pay for the music lessons my uncle sold cat balloons at events like parades through the Bronx and I had an air pump I would blow up one balloon and go down the block yelling Kepler's capital UN's order of peace the markup was like maybe two or three hundred percent he'd go down to Lower East Side buy a gross of balloons for 20 bucks and sell them all for 60 Martin's talent as a saxophone player continued to grow he plays horn in the closet of the family's three room apartment so the neighbors wouldn't complain and he wound up developing a big brilliant tone one of my grandfather's customers at the tailor shop was the jazz great Dizzy Gillespie so my grandfather did what any proud dad would do my father says the Disney will help me know it he says you know my son Martin the wonderful musician so dizzy says you know we're rehearsing down in Times Square in the studio he said send him down can listen he can fit in if you want soon after meeting Louis Armstrong my uncle realized that the public persona of these great musicians was very different than their private one they may have been all smiles to the audiences but Martin decided to give up the sax and move on to something else even though Martin had limited business skills at this point he did have some experience speech writing for generals then while in the Army Reserves in New York City Martin was part of a unit filled with lawyers doctors and Wall Streeters it was there he became friends with Bob Soho the research director for EF Hutton and Bob said why don't you come down in the morning and rewrite some of these reports I got these guys left over from 1929 a camp right over me at EF Hutton Martin introduced a newsletter about the electronics industry analyzing companies like Bell Laboratories which had just invented the transistor the newsletter went out every morning to all the branch offices via teletype by summer's end soho offered martin a job then he looked down at martin shoes I was wearing the the Mexican for watches and he said do me a favor get yourself a pair of shoes with shoelaces all right and that's how my career Wall Street Stocks in almost sixty years of investing martin has not only shown a keen sense of the markets but also of the art world you gave me my first share of stock what was that I was gonna ask you if you remember what you gave me a shirt you gave me one share of American Telegraph before it was I think before it was AT&T I held it forever I never sold it I don't know where it is you gave me actual certificates and I think the stuff funny that's funny I don't even remember I think I was about 15 or 16 years old it's funny because that was a engagement for me that got me interested in matters I remember you getting involved in as a broker well first personal this has got to be year what fifth year 50 what year is this for you in the business you started in 1959 1959 yeah Wow so fifth what am I saying fifty-six years something like that Wow okay that's unbelievable I'll say yeah I was a junior security analyst I had that was the first job yeah the first job mm-hmm how old are you me I'm 84 84 yeah what drives you today you told me a few minutes ago that you know you have to get to work this afternoon well I I think every day is an adventure if you're involved with the financial market there are always things happening or not happening but you can react to UM so I'm still excited about every day the bill Ranger so I'm excited about being in a business you know change inside I'm the same way every day the bell rings and I get all fired up isn't that a reason that like directionally as kind of us as a consumer society we should hit everybody kind of involved or engaged in finances well I'll tell you how I got in I became an independent money manager sure I was working for the Rosenwald family the founding family of Sears as their senior money manager serials was selling at 30 times earnings in 1968 I said this is crazy you got to diversify and I said by the way I want you to let me run a hedge fund and I'll take 50% of the profits and you takes it they said okay and it was very successful the people funded it they did or you didn't i I funded it with the clients and they were quite out there was only about a handful of guys doing this really most people didn't even know what a hedge fund was in the 60 I was gonna say did they even call him hedge funds missus yeah they call him but they was George sorro's part and Biggs myself a few others and all of a sudden I made a lot of money and one day I woke up and I said to myself you know the rosewall's of wonderful people I don't want to work for anyone anymore I was in my 30s I said I want to be independent with respect to Marcus yeah we we consider ourselves I consider myself an opportunist and I assume you yes similar definitely is the opportunity driven by other people's fear you know I can only answer that question by examples cutlery the classic one the Cuban Missile Crisis mm-hmm I was a young security analyst at EF Hutton at the time and the ticker was an electrical mechanical ticker he was running six hours late and it was mid-afternoon and our ship was gonna intercept the Russian transport that was still bringing medium-range missiles to Cuba and the market assumed that this is a potential disaster world war three I decided that I was gonna take the optimistic side that the Russian freighter would stop and this crisis would end and I think I had about $50,000 to my name at that time still in my mid-20s whatever so I bought the iconic names Polaroid Xerox who would sentence Italia basically you know gone as company and IBM I bought twice as much stock as I was entitled to buy I did something which by the way was stupid because 20 years later there was in a symposium at Princeton and Castro was begging the Russians to arm the missiles for up to Castro those missiles would have hit every city on the eastern coast it came that close and the Russian said yet you know we're not going to do this so in retrospect I was lucky how long did it take for the market to bounce back up was an stay the next day and the next morning I got a call from the head margin clerk and he said what are you doing I said well I got carried away and he said well we're gonna restrict your account I said what does that mean he said well you're gonna have to put up cash for everything you buy and how I said how long will that last he said thirty days and he said if you're a good boy for 30 days we'll tear up this infraction and only wait I walked home across the I lived in Brooklyn Heights then I walked across the Brooklyn Bridge and I said to myself from bridge so I deserve to have lost all right it was too hard to call but let's go to Black Monday people don't quite understand what happened in Black Monday you know Black Monday was in October sometime I don't know number 19 yeah all right the market had peaked on August 26th how do I know that that's my birthday and so the market was already going down and it was going down for some very good reasons the administration was considering taking away the tax deduction on interest from that corporations were involved in doing deals that alone was a very good reason for the market to go down it would have destroyed deals Wall Street had already gone down to the administration and said look it's not just us you're gonna kill you're gonna kill the economy and you're gonna create a panic and they stopped so there was a lot of things brewing in August and September that public and financial journalists had no idea even what's going on so you could say sitting in your at your desk this is a internalized man Mae a phenomenon and it's scurrilous it doesn't have any meaning and you went in you boy so and this happens in every cycle did you buy yes that day or the next day you know so so I traded the entire day of the 1987 crash I was 29 30 years old right and kind of similar to what happened to you in 1962 and that was a tough day to buy because we had never seen anything like that before mm-hmm so especially and literally Wall Street had broken down yet broke down traded traders were not answering their phones and making bid making markets we were making markets but we had no hedge right the problem is there was nowhere to look go to lay off any transitions do you see those kind of opportunities all the time I get like do you build your your portfolio around opportunities from other people absolutely you know but I wouldn't describe it as fear I would call it a misapprehension of what a company really is for example I always want to own companies where there's a lot of controversy over their futures good example is Boeing and this 707 which came out in like 1960 I said to myself this plane is gonna revolutionize world I was a young security analyst I called up chief financial officer I'm the young analyst at EF Hutton can I come out to of the plant and talk to you said sure come on out so I go out there and he said before we talk he said I'm gonna give you a bicycle and the plant wasn't written and the plant was like you know 600 yards long he said here's your bicycle and go around all the workstations you know they were getting the planes and ask anything you want of anyone who's working on the floor and I did that and I got so many ideas and understood how this plane was now going to revolutionize air travel but create real estate values and hunt you know in the Hawaiian Islands and so on 500 rural person to implement that you had to go to the next level you know of comprehension that one concept alone of how the jet aircraft would revolutionize travel and change real-estate values was invaluable for me it made me my first you know the serious money but you you know could an individual do that all by himself I don't know today nor they would not give you a bicycle right and let you reference rise and ask questions but you see Wall Street was a very small place then yeah there weren't too many smart people yeah are there a lot of smart people on Wall Street today yeah who worked very hard but they sort of cancel each other out you know that's problem was there every time when you you let your ego get in the way yes what tell me well it was doing a hostile tender for Caesars world I mean excuse me so I never should have done that first of all it was it it took me away from the money management business for one out of your element I leveraged myself to the health and I suggest have done I should just gone for a board seed like they do today and work internally to get things done and but that was purely a go and I paid I paid big for this was Caesars the biggest percentage investment that she ever made personally but they were equivalents through quote yeah I like what one point I own 15 percent in New York Times I remember that was that like 1981 and I sold it I was smart I saw it as soon as the operating margins got up by solid when it comes to seeing price extreme in the markets do you consider that to be two-sided meaning when something gets expensive you'll also sell it right and and would you short a stock I don't show it anymore you don't short anymore and I don't I do it because it creates tension for me mental tension which I don't want and it interferes with the other side what is what is too low that I should be buying so I have no interest in in shorting because I just think it screws up your head do you think that an individual investor with 10000 or $50,000 or $100,000 I used to think that investor should consider both sides the market like being able to be long something and short something well question is of what what does he bring to the table just I think the more I think there's something you can do as an armchair investor that's you know if you're not in a business you can do a lot of reading certainly but you got to be able to say everyone's walking to the left but they should be walking to the right for the following reasons the economy is gonna get better if Federal Reserve's not gonna get in your way really a corporate operating profit margins I have a sense could be better in other words you can do that you can have a point of view you're not gonna always be right but when you have a point of view which is confirmed by what you see no matter what the financial press is saying or what Wall Street is saying you go the other way when you're within the consensus you should start to worry you don't want to be in a consensus at any time is that what you mean by when you wrote on the title of your book stand alone to win big yeah stow efficient-market theorists would suggest that the Federal Reserve has know where the central bank has has no influence over long-term rates and even less influence on on potential and short-term rates that they're all cyclical whereas you know I'm curious as to your take on that today all right and this Federal Reserve has absolute control of short-term rates money market rates they can do whatever they want they don't have any control over long-term rates and that was proved by Paul Volcker in 1982 now in 1982 the Teamsters in the UAW were basically running a country labor costs were going up 8% a year threats of strikes major industries shutting down a railroads and Paul Volcker who was a very thoughtful guy and knew how to stand alone said I'm gonna rid the country of inflationary expectations he had to take interest rates short rates and long rates 15% to get it done and I remember I was in my office and girl motors building but for the partners and I had bought five-year Fannie Mae paper yielding 15% and they wanted to throw me out of the 42nd floor that's how crazy it was but so the Federal Reserve in this tense went to such an extreme they had the full control and you could imagine what they did to the home building industry home builders were sending them two by fours in the shape of a cross and now you can look under every rock that there is no inflation for the obvious reason that materials prices are disaster major American corporations are not expanding domestically so the labor pool is adequate labor has no leverage you know to speak of so there is no inflation this is the most widely heralded quarter point increase which is totally meaningless you know it's just that you got to think about financial journalism you got to put something on a front but it's not news but I don't I can't find any inflation anywhere except in art prices or I didn't what does scare you the level of the market do you mean the level of yes and peace yeah it's it's full if you look at it historically the market is today is where it's been before when interest rates and inflation have been very low so you got to look at corporate profits and say where's the leverage there isn't a lot of leverage left in the system and that's why there's this tremendous concentration in Internet stocks you know you know take your pick Amazon Facebook Alibaba all good companies but selling pretty high prices but very viable right but over time does the game of reducing basis ever come into a consistently reducing cost basis do you believe that that's like a viable strategy for building wealth well sooner or later it will work for you who you know but you know how do you do that you know everyone's fallible it's hard to do but if you believe the markets fully priced you got to stay out for a while so in the morning you look and see what's going on in the world that you look and see what's going on in the domestic markets here like bonds and elusive markets bonds and my iPad goes on at 6:00 in the morning and I know what's happening in London and what happened in China and so on and so forth yeah that's a start how much does market correlation play a role in the way you manage money does that play a role in like like if you're long Google will you not buy another stock that's highly correlated or will that not play a role I would look at it somewhat differently you know I would look at it first what percentage of your assets do you want in the Google's of the world the internet stocks and you would correlate that with the rest of the market that there are certain sectors the markets are very unattractive right now it may stay unattractive for another year more so you don't want on those and then you got to look at the financial stocks and what's happening in the world and energy the fact that there are a lot of mid-size banks that probably have too much energy alone remember the continental Illinois bank went bankrupt from making oil field loans to the Texas operators I guess that was in the 1987 when money was there Yeah right all traders in Chicago that's where we held our money here we we like to talk about the management of winning trades more than we like to talk about the management of risk and losing trades what's your take on that in other words we think the importance is on entry not on exit what do you feel about that I argue about this every day with what you know with our staff that entry level is very important and usually we like to build positions let's say we like coca-cola for example which we don't well by 1% position and then we'll live with it and then build that position or sell it out but we wouldn't just run in on put 5% of our money if you had to invest in a hedge fund today would you know I'm not saying 100% yeah but when I look at the 13 apps of the big ones you know the ones ranging from 10 to 20 billion or more I wouldn't touch them because I don't like structurally what they're doing I don't like the idea of having 50% of moria money in for stocks when you're doing working for the public basically and and you I think that's very dangerous so I think the problem I have with the big operators today they they have to be right about what they're doing or they're gonna lose badly so I don't like the structure of their investments and I would stay away who would Martin sazonov invest with if Martin sauce knife was not a money manager or how would Martin sauce knife invest if you were not a money manager so if you weren't able to do it yourself what what do you do I would I would be defensive in other words I would say I gotta get off my motorcycle you know I've done it and I would be defensive not hysterically defensive I I would choose maybe a half a dozen great companies today and just put some money in them but that's very dangerous based on valuation based on change you know there's a very important concept most growth stocks have five years of plenty and then they top out very few last ten years see you gotta have that in the back your mind there's a series of books written about kind of that exactly that which is the life cycle of today's company which is gifts 5 to 15 years and it's absolutely true they say if you don't disrupt your own company you will not survive but that's the amazing thing about some of the companies like Facebook and Amazon and you know they've been able to reinvent themselves every couple of years right and that's why you want to be with how do we make this instead of an old person's game into a young person's game or at least a certain level of engagement well you got to be thoughtful and say you know I want to understand the dynamics of these issues and and then you sort of get further into it you know I don't think you get into it the point where you're reading 10 Kay's and 10 cues but you got to have a basic understanding of how markets function and what they represent and valuation you don't have any sense of valuation very difficult to invest there's a lot of really smart people on Wall Street so how does genius fail well out of ego for example you still believe in what you're doing and I analyze this I looked at all the 13s of all the major of high intensity players and what you see is very interesting nobody practically nobody owned stocks like Google and Amazon and Apple they don't own they all own what I call one-off stocks all right stocks that are difficult to analyze the controversial I think that's out of ego that they think they can analyze a company or a sector better than anyone else and they can evaluate the management and then they can put 20% of their assets in a medium-sized company and that's that's that's ego so it's basically I think you structure your portfolio in a way where if you're wrong you're going to get killed and the idea in this business is to be around to fight another day if you would have told me when I was in the war or even when I graduated in City College that you could end up from Wall Street I'd look at you and say you're crazy I don't even know what the Wall Street is well you know serendipity is a great force if you take it you know he's fried I was very lucky it was more than serendipity that my uncle was able to achieve the success he has had the markets as well as in life it was hard work dedication and the tenacity to get information then taking that information and doing something with it I'm Tom saws not and that is how you stand alone hey there hope you like this video click below to watch more videos subscribe to our channel and check out tastytrade.com for more great research and content

Channel: tastytrade

Views: 14,871

Rating: 4.988338 out of 5

Keywords: documentary, wall street, Martin Sosnoff, Investing, Finance, tastytrade, interview, investor, Forbes, Atalanta Sosnoff Capital, SEC, FINRA, CEO, hedge fund, money manager, market, stock

Id: 2vo0k9HYM50

Length: 29min 26sec (1766 seconds)

Published: Tue May 03 2016