From Third World to Top of the World – Paul Mampilly

From Third World to Top of the World – Paul Mampilly

From Third World to Top of the World – Paul Mampilly

From the Third World … to the top of the world. Paul Mampilly’s humble beginnings in India and “appreciation for change” drove him to become one of the most effective money managers on Wall Street. Mampilly discusses his success, his approach to investing and his desire to help Main Street Americans flourish in the stock market with his friend and colleague, host Charles Mizrahi.

Topics Discussed:

·      A Friend & Colleague (00:01:31)

·      Life in India (00:05:12)

·      Starting Young (00:12:57)

·      An American Education (00:18:12)

·      Journey to Wall Street (00:25:14)

·      The Financial Crisis (00:31:29)

·      Serving Main Street (00:43:29)

·      Paul’s Approach (00:48:25)

·      America 2.0 (00:56:09)

·      Catching the Next Wave (01:00:22)

·      More from Paul Mampilly (01:03:10)

Guest Bio:

Paul Mampilly is a Wall Street legend with a knack for staying ahead of the curve. Despite his incredible success as money manager — even during the 2007-2008 financial crisis — Mampilly decided to step away from the big leagues in order to help everyday investors achieve their goals. Today, he publishes his flagship newsletter, Profits Unlimited, along with a number of other financial publications — all of which can be found on his website, PaulMampillyGuru.com.

Resources Mentioned:

·      Profits Unlimited

·      Bold Profits Daily

·      PaulMampillyGuru.com

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Read Transcript

PAUL MAMPILLY: We used to run out to my grandfather’s gate to stare at a car because that was a technological marvel that we had very little access to. Running water was something that we had—however, it stopped all the time. Electricity went out all the time. So, I come from, as I tell people, another planet and another time, obviously a different country… And so, I definitely have an appreciation for change.

PAUL MAMPILLY: When I first went to visit my parents in Dubai (my parents left India when I was about five or six years old, and my father got a job in Dubai), which was still pretty far behind the United States or Europe. Nonetheless, they were so far ahead of India in terms of development. And then, coming to the United States at 18 to go to college and seeing what the United States had done in 30, 40, 50 years was just astonishing—incredible. And so, I have a deep appreciation for America, for what it’s done, for the extraordinary. I mean, there’s nothing else you can say. What other country has the 200-year track record of this country—of incorporating innovation, using it to make people’s lives better?

CHARLES MIZRAHI: My guest today is Paul Mampilly. Paul retired from managing money when he was just 42 years old and at the top of his game. In 2006, the owners of $3 billion firm Kinetics Asset Management recruited him to manage their hedge fund. After he joined, the firm’s assets under management soared from $3 billion to $25 billion. Everyone took notice—from Barron’s, who named the fund one of the world’s best, to a prestigious foundation that invited Paul to take part in an investment competition it was hosting. The foundation wanted to see what he could do with $50 million. Paul was able to achieve a 76% return during the 2008-2009 financial crisis and won the competition.

CHARLES MIZRAHI: Paul has come a long way from his birthplace in India. Growing up in India, he attended boarding school until he was 16 years old, and then arrived in the U.S. a few years later. Today, Paul is the editor of Bold Profits—a research newsletter that has hundreds of thousands of subscribers. Now he uses his skills and experience as a financial analyst to provide investment research to Main Street investors. Some of Paul’s recommendations have gone on to make triple-digit returns for subscribers. I recently sat down with Paul to talk about how he achieved the American dream, and what opportunities he sees for stocks as we enter what he coined, “America 2.0.”

CHARLES MIZRAHI: Paul, thanks so much for coming on today’s show. I greatly appreciate it, and I was really looking forward to this conversation all week knowing you were coming.

PAUL MAMPILLY: Charles, a great honor to be with you. Thank you so much for having me on! I’ve been looking forward to this since the moment you invited me on, so I’m super stoked to be here.

CHARLES MIZRAHI: Alright, great. So, Paul, before we talk about what kind of great money manager you are and how you’re giving your subscribers—zillions of them… How many subscribers do you have now?

PAUL MAMPILLY: Profits Unlimited—which is our flagship newsletter—has about 140,000 subscribers. Something like that.

CHARLES MIZRAHI: And then you have an e-zine—a free list—which has oodles of subscribers, right?

PAUL MAMPILLY: Bold Profits Daily—which is the free e-letter from our sub-publisher (as we’re both part of the greater Banyan Hill family)—has in excess of 300,000 subscribers. Maybe more. Sarah, my publisher, would be upset that I don’t know this… It could be much more. It’s at least 300,000.

CHARLES MIZRAHI: It just keeps growing.

CHARLES MIZRAHI: Full disclosure, folks… Paul and I are colleagues and good friends, and we work with the same publisher, Banyan Hill Publishing. And you’ll see throughout this conversation that we have totally diverse viewpoints on the market and on investing, but we can still smile and work for the same company because there’s many ways to skin a cat. No one has a monopoly on ideas.

PAUL MAMPILLY: This is true. And Charles, you’re a legend. I remember reading of you from when I was starting to make my way on Wall Street in New York.

CHARLES MIZRAHI: Great! I didn’t know that, but that’s nice to know.

CHARLES MIZRAHI: Alright, Paul, before we get into how well you’ve done… And I’ve got to say, man… There are industries and stocks that I put in my “too hard” pile which you go ahead and recommend them, and they go up three digits in a short amount of time. And I look and say, “How did I miss that?” Then, I just realized it’s totally out of my circle of competence.

CHARLES MIZRAHI: So, before we even get into that, how big your circle of competence is and what you’re looking at… You are an American dream. You were born in India. And what was your life like there?

PAUL MAMPILLY: My life in India… Time stood still in India when I was a kid, Charles. We used to run out to my grandfather’s gate to stare at a car because that was a technological marvel that we had very little access to. Running water was something that we had—however, it stopped all the time. Electricity went out all the time. So, I come from, as I tell people, another planet and another time, obviously a different country… And so, I definitely have an appreciation for change.

PAUL MAMPILLY: When I first went to visit my parents in Dubai (my parents left India when I was about five or six years old, and my father got a job in Dubai), which was still pretty far behind the United States or Europe. Nonetheless, they were so far ahead of India in terms of development. And then, coming to the United States at 18 to go to college and seeing what the United States had done in 30, 40, 50 years was just astonishing—incredible. And so, I have a deep appreciation for America, for what it’s done, for the extraordinary. I mean, there’s nothing else you can say. What other country has the 200-year track record of this country—of incorporating innovation, using it to make people’s lives better in every way?

PAUL MAMPILLY: And so, I am incredibly grateful for having been given this chance. And I always have had a huge, huge thing in my heart for America and this belief in the American spirit, the American people and, in the end, some of that sort of bleeds into how I see the world and companies… I believe that only Americans would ever even think of making these companies. No one in India would ever—in the way, at least, I see it—think to start companies like these.

CHARLES MIZRAHI: So, you were born in India. Your parents leave when you’re pretty young—what, five years old or so?

PAUL MAMPILLY: Right. I mean, India was a dirt-poor country when I lived there, and my father, like many other people that are enterprising, was looking to escape India. And my mother tells the story that he saw this tiny little ad in the newspaper—in the days of paper newspapers—for this job in Dubai. In that time (we’re talking about the 1970s), nobody’s heard of Dubai. They just found oil. They were starting to recruit people to sort of develop that country. And my father applied for this job, and he got this. And against everyone’s advice—everyone told him not to go—he told them, “Hey, I have nothing to lose. I am going to go.” And that made him. Because Dubai essentially was a dollarized economy because of oil.

PAUL MAMPILLY: And he started to earn significantly more money than he did in India, which then allowed him to eventually send me to the United States to get an education. From India, in that time, it would have been completely unaffordable for me to ever come here to study and have my parents pay for it. So, that’s the sequence of events that allowed me to end up being in the United States.

CHARLES MIZRAHI: You went to boarding school when you were in India?

PAUL MAMPILLY: That’s correct. Because at the time my father and my mother went to Dubai, there were really no schools there. It was so early in its development. So, for Indian people, education is primary, and my parents found boarding schools that would take my sister and I. So, I spent from about the time I was six until I was 16 in boarding schools. I saw my parents either once or twice a year, either during summer vacations and winter vacations, and the rest of the time, I was really surrounded by 300 other kids playing games. In India at that time, we had no television, there was no Internet… So, you played a lot. You read a lot. You talked a lot. And that was my childhood.

CHARLES MIZRAHI: To become a money manager—to become a successful one at that—I’ve always found that you have to just rely on yourself, have confidence in what you do and look at the world in a way that… If everyone says it’s raining and you see it’s sunny, you have to stick to your convictions. I just wonder… That kind of upbringing–living in a country which, back in the day, was really third-world…

PAUL MAMPILLY: Yes, 100%.

CHARLES MIZRAHI: …and really raising yourself. Being a kid in a boarding school for your formative years—that must have built a lot of self-reliance.

PAUL MAMPILLY: I believe that that that way of growing up definitely built a lot of self-reliance, a lot of confidence in making decisions, trusting your judgment despite, perhaps, anybody else saying something… I mean, part of being in boarding school at that time was traveling by myself, both by buses, trains and planes within India and outside of it. And so, responsibility and making decisions where if you make the wrong decision, the consequences can be high. If you’re a child traveling by yourself, you trust the wrong person or you go in through the wrong place. And in India, at that time, things could go wrong. And so, you do have to make the right decisions—pretty much all the time. So, that definitely drives a certain confidence.

CHARLES MIZRAHI: Looking back on that, I know you have kids and I have kids—we talk about that often—could you see putting your kids in that kind of situation today? It boggles my mind.

PAUL MAMPILLY: There’s no need to anymore. And I always feel like there’s an arc of development in terms of the way we raise kids—the way we lead our lives. And so, for example, there were no car seats—even in the United States, I believe, in the 1960s, 1970s and, perhaps, even into the 1980s… And today, obviously, we know that you put a child in the car seat. So, there’s an arc of development. And I personally consider myself sort of lucky to have had the experience that I’ve had—that my parents gave to me. My mom and dad were generous enough to give me that opportunity. They picked a great school. There was no hardship of any kind. For India, it was a very incredible school. It’s still ongoing. We had a swimming pool. We had tennis courts. So, this was definitively no hardship. I had great teachers and a fantastic group of students around me.

CHARLES MIZRAHI: I guess I’m thinking of like Victorian England—sent off to a boarding school, you know? And no one comes to even visit you on Christmas. But great—that’s a super!

CHARLES MIZRAHI: OK, so you come to America—you’re 18 years old—and you wake up one morning and say, “I want to be a hedge fund manager”? How does that work?

PAUL MAMPILLY: I’ve always loved the stock market, Charles. I believe I was about 14 or 15, and there was something about the 1929 crash in my history book. And I recall the story about the stock brokers killing themselves—jumping off a building. And it just struck me as, like, “Wow, so the stock market thing must be a very powerful thing that it would make someone want to take their own life.”

PAUL MAMPILLY: And to a kid in India that has no experience in the stock market… There might have been a very crude stock market in India in the 1970s. However, it had no real role in society. It’s something that was undiscussed by people. So, it was like: “This must be a very powerful thing called the stock market.” And it drove a curiosity that persisted, both in India and then, certainly, once I came to the United States. I remember going to the library to go find books about this stock market thing and trying to read about it and understand it. And that is like the beginnings, really, of my love for stocks, speculation, the markets and what sort of underpins and drives them.

CHARLES MIZRAHI: That really goes with what Warren Buffett said—that he started investing when he was 11 years old, and he laments that he started late. He wishes he started earlier. And when I’ve met many legendary investors, I’ve found that—like yourself—they all started out young. It was always a fascination—not just when you were 26 years old.

CHARLES MIZRAHI: I remember going to the library and reading when I was 10 or 11 years old. And just I learned about monopolies and about minerals and how you take market share. It just absolutely fascinated me. And even though Wall Street was only 40 minutes from my house, it could have been on the other side of the world. I had no opportunity to go there when I was a young kid. My father was a working man. He was a warehouse manager. And I had no contacts. And it seems to be that you follow that same thing. It’s that kind of burning desire of, “Wow, this is a challenge. It’s exciting. It’s something I want to learn about.”

PAUL MAMPILLY: This is right. And Warren Buffett and Charlie Munger talk about how most people that are good at investing, speculating—whatever you want to call it—and even trading… There’s a natural curiosity that drives you to constantly push to ask a question to which there is a series of answers. There’s definitively no single answer. And then, there’s an element where your curiosity pushes you to act, to trust your judgment and to take on that uncertainty which then, if you are right, there is a reward for.

CHARLES MIZRAHI: You know, so many people have saying to me throughout the years—young guys and girls coming out of school—”I want to get into this game.” You and I both were hedge fund managers. I started my own money management firm when I was only 22 or 23 years old. And they said, “What trait do I need to have?” And I said, “If you love learning and love reading, this business is going to be a lot easier for you.” Do you agree with that?

PAUL MAMPILLY: 100%!

CHARLES MIZRAHI: As I look at your book case of well-worn, well-read books there, right?

PAUL MAMPILLY: I have to admit, I have not read all of them. I have read many, many of them. And if I was to pan this camera around, there’s actually another bookcase of this size from the other side of my wall. And that’s because when you read a great book, the thing that I learned to do was to then go look at the sources that they cited and then buy some of those books. And now, you have that chain reaction of stacking knowledge upon knowledge. You now have a whole series of ways of thinking—examples and analogies and understandings—that you can now bring to bear upon a situation and a judgment that you need to make a decision.

CHARLES MIZRAHI: If you love learning and you love reading, you’re halfway there. It’s just temperament. But it really has to be that curiosity of finding out stuff that is out there and you just start seeing it differently. As Buffett said, you don’t need a genius IQ of 130. You give away 20 points and you still do OK. The point is that you have to be curious to keep learning and reading because most people don’t. They just don’t bother.

PAUL MAMPILLY: This is true. I believe that while many people want the rewards of investing, the work is something that is driven by love. You have to love it, to do it innately… And it’s hard to force yourself to do something that you dislike. Steve Jobs, in his commencement speech, if you’re doing the work that you love—and Buffett talks about this—it never feels like you never work.

CHARLES MIZRAHI: If you love what you do, you never work a day in your life.

PAUL MAMPILLY: That’s right.

CHARLES MIZRAHI: Beautiful. Love it.

CHARLES MIZRAHI: So, now you’re in the United States. You go to college. You went to Montclair?

PAUL MAMPILLY: Right. This is a very first-generation college kind of school. And the reason for it was that my father could afford it. It was much cheaper. It was called Montclair State College back then. It’s called Montclair State University. It takes his name after the town that it’s located in. And my father could afford it. And it gave me, essentially, a ticket.

PAUL MAMPILLY: It had the benefits of being near New York. I remember going in college to visit the stock market, which was a very thrilling affair. However, I could never really connect what was going on the floor of the New York Stock Exchange back then. It was floor-traded, rather than computer traded like today—what I was interested in—and I came to that part of it much, much later on. However, it was near New York and it gave me a base of some things. And to some extent, I wonder if you feel the same, which is… A lot of what was—and I believe still is—being taught, which is efficient market theory, also showed me what to ignore over time.

CHARLES MIZRAHI: Yeah, absolutely. Efficient market hypothesis—just to share with our listeners—is that the market is totally efficient and the price you see trading for that day for that company has the smartest and best minds all agreeing, so there’s no inefficiencies in the market. But it’s like the bumblebee. I don’t know if this true or not, but no one told the bumblebee it can’t fly because its wingspan is too small.

CHARLES MIZRAHI: An official market hypothesis really doesn’t account for so many people who have a consistent approach that’s based in rationale and research and logic that have consistently beaten the market over decades. And Buffett says that it’s always great to play a game against someone who believes you can’t win. So, to play against the efficient market theory is a great game.

PAUL MAMPILLY: For someone like him… Buffet could never exist in the efficient market world. How could somebody accumulate 10% of Coca-Cola in an efficient market? I mean, this is where he’s known to be buying and still even with people seeing that, the market was still inefficient. They were even unwilling to copy him.

CHARLES MIZRAHI: I want to talk about ’07 through ’09. But before I talk more about that, I want to touch on one thing… Efficient market hypothesis went through the floor when Treasury bills traded negative. Negative. So, here were intelligent investors more concerned with the return of their money than the return on their money. In an efficient market, that should never happen.

PAUL MAMPILLY: The efficient market is missing certain very basic elements, such as human psychology.

CHARLES MIZRAHI: Yeah, definitely.

CHARLES MIZRAHI: OK, so before we even talk about that, I just want to get on to how you started. You went to college… By the way, this is just absolutely amazing and I love what you say. Because I only went to one year of Brooklyn College, and then I dropped out to trade on the floor of New York Futures Exchange.

PAUL MAMPILLY: Smart man. I wish I could have done that. You definitely saved yourself a lot of time effort. And this is why you’re so far ahead of everyone in terms of like, you got started early and you also went through that independent thinking process of being on your own. So, well done.

CHARLES MIZRAHI: Thank you. I just couldn’t sit still. You know, I was sitting in class and listening to lectures and I said, “Gosh, I’ve got to get out of here.” So, I got my education on the floor of the New York Futures Exchange.

CHARLES MIZRAHI: And you went to Montclair. I just want to point this out… There are so many students throughout this country who are saddled with enormous, enormous college debt, which I don’t know how they’re getting out of and it’s so hard to even walk away from. I love what you said: that Montclair was a college your father could afford. You walked out, I’m sure, with very little debt—if any.

PAUL MAMPILLY: Right. I mean, I’m grateful that my father paid for a lot of my college. I did work to the extent that I could on campus and things like that. However, college didn’t cost the kind of money that it eventually began to cost starting the late 90s and early 2000s. And I believe that even the vast majority of my cohort of fellow students had no debt and would never have considered college if they felt they were going to go anywhere near as far into debt as the current generation of millennials and some numbers of Gen Z also are in.

CHARLES MIZRAHI: They’re starting 10 yards behind the starting line! Waking up one morning at $150,000 to $200,000 in debt with a college degree. And you can’t get away from that debt anymore. I think it follows you everywhere. So, there’s no caves you can hide in where you don’t have to pay it. And I know some of my sons’ friends, are in really serious situations because no matter what they’re making now, they still have to keep feeding this debt, and interest keeps growing and growing.

PAUL MAMPILLY: This is right, and personally, I always feel for this generation that they have to carry this. Nonetheless, I have to say that I have many millennial friends, and I am always raised by their general sense of optimism, despite what has been a very challenging period for this generation. They see their parents liquidated in the 2000 crash, 9/11 occurs which then sets a whole series of things underway… Obviously, a kind of bear market in technology and innovation unfolds post-2000. Then you have 2008 where they themselves now get liquidated. And then, we’ve had a series of crashes since then which very few people talk about.

PAUL MAMPILLY: I remember a very difficult trading environment in 2011, again in 2014—certainly for technology stocks, but genuine crash, 50%, at the end of 2015, early 2016. And so, this is a generation that, whatever their upbringing, they are now totally toughened up by experience of going through this world. And I believe in them because, ultimately, I believe in America and I believe that this generation will come through and end up doing great things. And yes, they’re starting a little bit behind. However, there’s time and I believe in them. I believe that they’re going to make a comeback and the history will be written at the end rather than right now.

CHARLES MIZRAHI: Love it.

CHARLES MIZRAHI: OK, so you graduate college, you land on Wall Street in 2006… Tell me about that.

PAUL MAMPILLY: So, I actually graduated from Montclair in 1991, and I wanted to—in some way, shape or form—follow that instinct of wanting something to do with markets. Now, coming from Montclair State, there was no real ability to get into any of the skilled parts of Wall Street. Being a trader, being an analyst, being a portfolio manager… Those were all largely reserved for the elite folks—the people that go to Harvard and all of those people.

CHARLES MIZRAHI: I just want to interject one thing here just for our listeners to hear this… There are many firms that will not even interview you if you did not go to an Ivy, and many firms won’t even interview you if you didn’t go to Wharton or get an MBA. So, when you’re talking about trying to get into the upper crust, into the real jobs on Wall Street which pay the big numbers that everyone hears about, it’s a very, very small group of people that can make that cut.

PAUL MAMPILLY: This is right. So, I found a back-office job at a company that’s no longer around called Bankers Trust, and it was essentially due very clerical work. Nonetheless, it represented an in to at least the industry that I wanted to be in. And I refused offers that were actually for more money to be in it. I remember a job offer from the Limited to do import export processing, which actually sounded like fun. I could travel. However, I kept my eyes on the prize, which is that I wanted to—at that time—to be an analyst or trader because I felt these were the two things. One, processing information, and two, making decisions. And I felt that these are the two things that I really wanted to do. And how could I get there? I knew I could never get there directly, so I had to go through a winding road to eventually arrive at those places.

PAUL MAMPILLY: So, I joined Bankers Trust as—I believe the job was—an account administrator. Essentially, I did some very simple, rudimentary accounting—paperwork. And then, I was able to move to something a little bit closer to money management. I became an assistant portfolio manager at the private bank. And from there, I became an analyst for a mutual fund—all within the same company. Bankers Trust got bought by the giant German bank called Deutsche Bank somewhere in there. And then from there, I sort of now arrived at the skilled positions and I continue to move on.

PAUL MAMPILLY: I left Bankers Trust and went to a Dutch firm called ING, where I was an analyst again, and then eventually arrived, in 2006, at Kinetics Asset Management. And where I was sort of now where I wanted to be when I first graduated college. I was managing money where I had my fingers actually on the buy and sell buttons where I could decide what to buy, what to sell, when to buy, when to sell… And that was in 2006. So, it was a long journey, but it’s been well worth it.

CHARLES MIZRAHI: I just want to point something out… The more people I speak to, the more people I interview, it’s really more of the same. And it’s really such a great lesson. Your first job, your first position, whatever… Money should not be an issue. It’s just getting your foot in the door. Just get into that environment. If you don’t get on the bench, you can never get in the game. And you got a back-office job way beneath what you really wanted to do. But it was the path to where you wanted to go. So, kudos to you. That’s what many people just don’t get. Everybody wants—especially kids coming out of college—to start up here. And really, just get into the proper environment. The quality of the person will dictate how much they make, but you’ll never know if you don’t get into the game.

PAUL MAMPILLY: This is true. However, I’m sympathetic to the young folks. I doubt I was happy going through that, for sure. I wanted more money, more responsibility… Nonetheless, there were no choices where I where I wanted to go. There was no choice but to take the paths that were open to me—to walk through the doors that were open rather than focus on doors that were closed. I simply said, “Here’s a door that’s open. Let me walk through that.” That led to another door. And that’s definitely been my way.

CHARLES MIZRAHI: My thing was I couldn’t get hired. I didn’t have a college degree. I didn’t have any connections. So, I basically borrowed money to become a floor trader. Then when I started my own money management firm, I just did that simply because no money management firm would hire me! What were my credentials? One year of Brooklyn College? A year-plus of floor trading? I just said, “I have to make my own way.” And, as I say, it’s basically balls and a vision. You’ve just got to have that kind of attitude, and the vision of where you want to be. And every day, just keep pounding away at it. There’s no real secret to it.

PAUL MAMPILLY: Yeah. As they say in New York, Charles, you have chutzpah.

CHARLES MIZRAHI: That’s right—100%. I love it.

PAUL MAMPILLY: Because it takes some serious guts to put your own money on the line for something that you have no gauge to know if it’s going to work out. If so, when? It’s jumping without a net, and good on you!

CHARLES MIZRAHI: You know what the thing was, Paul? What was my downside, right? I was sharing a room with my brother in my parents’ house. So, if it didn’t work out, I still had the bed, you know. So, what was my risk? I’ll start again. You know, it was a concern of failure. Failure was never an option because I figured, “I’ve got to do this.” There were no ifs, ands or buts. I’m not going to take a job working in a retail store or running a warehouse. Those things I wanted to avoid at all costs. I wanted to get into this business. I said, “I’m going to find a way.” And you did the same. So, that’s great. That’s really super.

CHARLES MIZRAHI: You end up, in 2006, at Kinetics, they let you manage money and you’re there right before the world goes into the abyss—the financial world.

PAUL MAMPILLY: Right, right. I mean, unfortunately, no one told us prior to that. Nonetheless, I have no idea where you were in 2006 or 2007. However, if you were in New York, this felt like the top of the world. I can recall it was good times all around. The real estate market was booming. The investment banks were booming. There was this air of what felt like extraordinary confidence. However, in hindsight, it was clearly arrogance, hubris and stupidity on some level, as we later found out and after 2008.

PAUL MAMPILLY: And so, as 2006 and 2007 unfolded, Kinetics was booming. I believe that when I joined Kinetics, it had something like $3 billion under management. A friend of mine, who had actually started the firm, started the hedge fund at Kinetics with something like a quarter of $1 million, which he begged for. I think he said he took like 500 meetings just to get that seed money. And at the peak, Charles, the hedge fund had about $5.6 billion in it. I remember seeing the statement. I think it was November of 2007, $5.6 billion. and then Kinetics, as a firm, had $25 million. So, in two years, it had gone at gone eight X in terms of assets under management.

PAUL MAMPILLY: And so, we were on top of the world. Everyone wanted to be my best friend and Kinetics’ best friend. And then 2008 unfolded. And you can probably recall the first sort of really big warning that something was wrong was Bear Stearns in February. And the various interventions tried to make you forget it. And then there was Fannie Mae and Freddie Mac, which sort of then preceded what was the big really the big implosion, which was Lehman. And from then on, the world was never the same.

CHARLES MIZRAHI: If you didn’t live through that, you don’t really appreciate what an amazing job Paulson did as secretary of Treasury, and Geithner and Bernanke to keep the world alive. Major corporations weren’t able to make payroll. Their financial world collapsed—literally collapsed. Capitalism was almost kaput.

PAUL MAMPILLY: I have to add… Ben Bernanke created—on the fly—a number of programs to simply allow GE to have enough money to make payroll because the commercial paper market was completely frozen. Nobody wanted to buy or was willing to lend. Everybody just wanted to hold cash, which then circles back to this efficient market view… Human psychology is such a critical element to the markets, to the economy. And you have to account for that.

PAUL MAMPILLY: Nonetheless, 2008 meant the end of all of that—those good times. And obviously, people liquidated a lot of their funds… And it was a difficult period of time, certainly, to be running a hedge fund that. All hedge funds, as you know, are levered up. And I can recall moments of time because, of course, our hedge fund was—like all hedge funds—seeing redemptions. I was trying to extract liquidity from the market when no one wants to give it to you. I learned a lot about trading and the element of human psychology by trading through that moment.

CHARLES MIZRAHI: Yeah. It was just absolutely amazing. And the problem is that every 10 or 12 years, we have another one of those in a different form because the original people move on. The new guys at the desk are 30-plus years old. And they were getting drunk in college during ’07 and ’08. Now, they don’t have that experience… but I don’t want to talk about that as of yet.

CHARLES MIZRAHI: So, in ’07 and ’08, you’re managing a fund. I think you get a foundation which gives you guys $50 million or so?

PAUL MAMPILLY: Right. So, you would never write this in a script… So, sometime in June of 2008, prior to people understanding that essentially one world was ending, a very prestigious foundation of one of my investment idols. (They’ve asked me to keep their name out of anything that I mention for privacy reasons, which I want to respect.) They said, “Hey, we are going to give eight money managers $50 million apiece.”

PAUL MAMPILLY: And there was, of course, a compensation structure associated if you won the competition. And I forget who the big money managers that were assigned. Most of them are no longer around from what I call. Nonetheless, they gave us $50 million. And there were special rules to this competition. You could only own a maximum of 10 stocks. You were not allowed to buy U.S. stocks. They could be ADRs… So, no U.S. stocks. You couldn’t have more than two stocks in any sector or industry. So, you could have less than 10, but I think it was at least two. So, there were all these rules…

CHARLES MIZRAHI: There was no shorting?

PAUL MAMPILLY: No, there was no shorting allowed. It was long only.

CHARLES MIZRAHI: So, long only, no more than 10, no more than two per industry and no U.S.?

PAUL MAMPILLY: Correct.

CHARLES MIZRAHI: That limits the world down considerably.

PAUL MAMPILLY: Right. So, I picked 10 stocks and starting—I believe—about September or October, right before Lehman happened, I told our trading desk that we were going to buy. It was pretty clear we’re in a crisis by that point when Fannie Mae / Freddie Mac happened.

PAUL MAMPILLY: So, we were going to buy over four or five months. We were going to put this to work every week. And we had, essentially, a trading program. And so, we just went and consistently bought these 10 stocks—literally every day for something like all the way into February. And with that, we were done.

CHARLES MIZRAHI: February ’09?

PAUL MAMPILLY: Yes.

CHARLES MIZRAHI: OK, so just to put this in context, Lehman Brothers fails September ’08. You’re buying along the way. The bottom of the market is March 2009. And then it goes on an amazing bull market ride. So, my question, Paul, is: Why were you buying these stocks? The world was collapsing… What were you seeing that no one else saw?

PAUL MAMPILLY: Well, I’ll tell you an anecdote as well around this… So, prior to starting to buy, the foundation had asked us if we could notify them when we were going to actually use the cash that they had sent us. And so, I remember writing the emails to the foundation committee member, and I remember the response back: “Really? You’re going to buy into this?” And they said, “You are only one of two people that are actually going to utilize the money. Everyone else is going to stay in cash.” So, I have no idea if that’s what was persisted but at that moment. And so, I was like, “Yeah, absolutely.”

CHARLES MIZRAHI: Now Paul, let me interrupt you… This is a foundation—which will go unnamed for now—where its founder and legendary investor made his mark by buying right before World War II. And when the country looked terrible and was coming out of the depression, the economy was just getting back, and prices were extremely depressed. You had to be a nut to be buying that. And this particular person bought, and they give their money out and you’re one of two. It’s just interesting how that worked out.

CHARLES MIZRAHI: I think the difference between you and I, just for an example… There’s the company as it stands now, which more or less we could both value the same way and figure out what that’s worth. Then there’s the X Factor. Where do you see a three to five years out? So, that’s where it’s like in the cartoons—the coyote going over the cliff and keep running and there’s nothing under it and then eventually it falls. It’s how much is one willing to pay for that future? And if you have a high level of confidence and it’s a very high probability event, then you’re willing to pay much more because it’s selling for a pittance where it is now. So, I think that’s what a lot of investors just don’t get. It’s not that you’re going off and paying any price. It’s your research. You’re examining the industry and seeing the trend. It’s a very high probability event that this company will produce X, even though it doesn’t look like that today. Do I have that right with you?

PAUL MAMPILLY: But the idea was some of the things that you mentioned. In other words, I was tracking what Bernanke was doing, what Geithner was doing, what Paulson was saying… And also, there were some things that I could see—even internal to us. In other words, I could see that we had a flood of redemptions actually into August and September. And into the actual implosion event, a lot of people had done 50% or 60% of their selling. And while we did get a crush of additional selling, it was less intense, actually, than the selling that we had experienced prior to this.

PAUL MAMPILLY: And past that, there was a lot less intensity. Prices were being marked lower. However, we ourselves were seeing actually very little in terms of additional. It suggested to me that perhaps the people that decided that they wanted to stay in were going to stay in.

CHARLES MIZRAHI: They were just exhausted out of there.

PAUL MAMPILLY: Correct. And to the extent that these programs were going to work—interest rates were brought to zero, all those programs that Bernanke introduced to try and liquefy various markets, Obama was being elected, there was talk of a stimulus that might be larger… If any of this worked, I felt that there would be at least something that was a little bit better. And I felt a little bit like my father in the sense that… Obviously, they never said, “Hey, we’re going to come and extract a pound of flesh if you lose the money.” They did say to go and try to make money. And I felt that this was something that I had prepared for—all these books I had read, all the situations I put myself in, both personally and professionally… This was a prize fight that I was ready for. And if you are unwilling to fight when you’re given a chance at the prize fight, then you don’t deserve to be there.

PAUL MAMPILLY: So, I felt that this was my moment and I should take it. And we took it. And that account, when they stopped counting—which was, I believe, one year from the point at which we started—was up 76%.

CHARLES MIZRAHI: Wow.

PAUL MAMPILLY: So, it not quite doubled at 76%.

CHARLES MIZRAHI: How did the nine other guys do?

PAUL MAMPILLY: You know, they never told us what the other ones did. However, we won. And we know because they gave us an extra $50 million to manage. That was the prize for winning. They were going to give you additional money.

CHARLES MIZRAHI: By the way, for those listening, the way the hedge fund industry works, the more assets you have, the more fees you can charge. So, by giving you more money, it’s a happy day. You get to charge more management fees, and possibly incentive fees. So, it’s oxygen for the hedge fund industry.

PAUL MAMPILLY: And especially in 2009. While the rest of things were going down, we were getting money in. And only that… We got paid a very nice performance fee for the original $50 million, which was definitely very much appreciated.

CHARLES MIZRAHI: Wow! That’s great. It doesn’t get better than that, right? So, you’re making money while the world is collapsing, coming out No. 1… You decide at 41 or 42—a pretty young age—that “I’m out of here.”

PAUL MAMPILLY: Yeah. I had kids. I had my son in early 2008, and I was living in New York. And I never could really see myself raising my kids in New York, and certainly not in the way that I was then at that time… the hedge fund lifestyle of needing to travel all the time to go visit clients and go raise money. And I wanted to make a break from there. And that was something that was in the back of my mind. Certainly, 2008 simplified my choices, and it made me think of time a little bit like the way COVID today is simplifying choices. And 9/11 did that as well. And I felt that, well, I want to raise my kids in a different place. And I decided in 2010 that I would like to leave New York, and go someplace else.

PAUL MAMPILLY: So, I moved to North Carolina and left New York. However, I kept my job because the internet, by then, was a big enough part of how everyone operated. I felt that, as long as I had an airport and an internet connection and obviously a phone, I could travel when I needed to communicate with anybody. In many ways, I anticipated the work-from-home movement. With tools like Zoom or anything like that, it would have been even easier. Nonetheless, it was there enough that you could really operate in that way. So, I made that choice to leave New York and move to North Carolina in 2010 or so.

PAUL MAMPILLY: And from there, being that I was a little bit ahead of where the management of Kinetics was, they felt that having someone North Carolina was perhaps something that was a little bit difficult for them. And so, we parted ways amicably. And that’s how I ended up in this business that we are both in: the investment newsletter advisory business. In looking around for things to do, there were a couple of things that really became something that I felt like this was my moment to do something.

PAUL MAMPILLY: One is that I’ve always felt that I wanted to do something that I could really affect more peoples’ lives—if I was good at doing something, that I would like to do it for more people. Because oftentimes, as you know, you have to have money to give money to somebody to manage. And a lot of the folks that you and I now serve have a lot less money than the clientele that we used to serve. And so, I wanted to kind of switch teams. I wanted to serve regular people. And if I believed in what I was doing, then I could try and serve many more people. And that was something that now I could do by entering the investment newsletter advisory business, where the entry is what, $49? Your newsletter goes for $49—same thing with mine—which just about anyone can afford.

CHARLES MIZRAHI: Right.

PAUL MAMPILLY: So, that’s the choice I sort of made. I parted ways, and then I was looking for an opportunity that allowed me to sort of step away from what I was doing and step through another open door. I knew someone that was at Agora—who I had met in a different life when I write a blog on behavioral finance—and that person was intrigued by my blog. They came to meet me… And seven years after that connection, I end up at Agora, which owns Banyan Hill, our publisher. And he recruits me in. And that begins my journey in this business.

CHARLES MIZRAHI: Absolutely outstanding. So, you started Bold Profits about how many years back?

PAUL MAMPILLY: So, essentially, that starts in 2016. June 1, 2016 is the first issue. Profits Unlimited goes out, and we issued our first buy recommendation associated with a video presentation—a promotion, as they call it in our business—on the Internet of Things. And we recommended STMicroelectronics, which is a chip company. That was our very first recommendation. And that’s how the Profits Unlimited and Bold Profits story begins.

CHARLES MIZRAHI: So, your approach when you started your newsletter was to look for stocks that are on the cutting edge and about to enter a new era. For example, Internet of Things wasn’t as popular then as it is today. It’s kind of ubiquitous now. But back then, it was still early.

PAUL MAMPILLY: Right. It was still something that people could find out about if they were really reading technical journals and things like that. However, it was felt that it was still five to seven years ahead. In other words, a lot of the protocols were still sort of raw. Security wasn’t worked out. And at that point in time, chip companies were seeing none of the volumes that would eventually begin to appear now that you have hundreds of thousands of devices connected to the Internet from all different areas.

PAUL MAMPILLY: I counted, in my house… I have 23. Devices connected to the Internet. I’ve got smoke detectors, thermostats, security cameras, locks, computers, cell phones… So, we’d anticipated that world, and I generally tend to be an early adopter. And so, in 2016, I already had begun to put some of these internet-connected switches and things like that. So, I had a good semblance of understanding of how this was going to unfold.

CHARLES MIZRAHI: And over the years, it wasn’t a one-hit wonder. You’ve had multiple triple-digit gains. I think that for several stocks you had over 400% to 500%—four- and five-baggers—or, I think, a little more than that even. But this wasn’t a one-time thing. You have an approach that basically goes with a six-step process. You just don’t take any stock or any company goes through a filter of yours, right?

PAUL MAMPILLY: Right, I call it “Going Upness,” which many people hate. I consider myself a medium-term speculator. In other words, generally speaking, I’m in something for three to five years. If it can continue, then I’m going to be in it a little bit longer than that. However, that’s my viewpoint.

PAUL MAMPILLY: And so, Going Upness is a six-step system. And the essence of it is really in the sense that the gains that you get ultimately come from someone paying a higher price, and to focus my process on that. And that’s ultimately the distillation of 15 to 20 years of reading, thinking, interacting— which is: What is the benefit that I want to get out of the market? And for me, it’s price gains in that three- to five-year time period. Sometimes, it’s related to a technological development that’s underpinning it. Nonetheless, the actual price gain is delivered by the next person coming in and bidding the price up, perhaps to own it. Perhaps they themselves are a speculator. However, I rarely focus on their motivations. I’m focused on my price. And generally speaking, I’m early enough that I can also leave ahead of perhaps the very, very speculative peaks that that might come later—that might risk all of the gains.

CHARLES MIZRAHI: How do you figure out the price to pay for the stock?

PAUL MAMPILLY: So, I just generally focus on the fact that early on, most people tend to be too price-sensitive, and then, much later on, they’re completely insensitive. So, being that, generally speaking, I’m in technological trends quite early, most people will underestimate the size of the growth, the magnitude of the growth, as well as how long that growth is going to continue. And as a result, in the near-term timeframe, something may seem very, very expensive.

PAUL MAMPILLY: Netflix might be a good example of it in the sense that if you believe that just their existing business is all that they are going to have, then you would say, “Well, that’s a very expensive stock.” If you were willing to think three to five years ahead and see a continuation of that growth at a very high magnitude, then you would be far less price sensitive in the current period and you would be willing to take it on.

PAUL MAMPILLY: So, those kinds of assumptions—which are a little bit of thin air—you look forward, and there’s nothing in front, and you have to make a judgment which is: Do you believe this? Do you have conviction that this is going to unfold? Do you have some understanding of what’s there? And oftentimes, with many of these things, I’m an early adopter. I was using Netflix in the late ’90s. So oftentimes, I follow my own instincts. You’ll see the Apple computer behind me. I bought that that computer in 2003, just as Apple was making themselves very much into a mainstream brand. And even very early on, Apple stock was thought to be priced too high. And much later on, once a lot of the gains were in, people felt that now it was more reasonably priced. But the persistence of growth was very high at a very high level.

CHARLES MIZRAHI: I think the difference between you and I, just for an example… There’s the company as it stands now, which more or less we could both value the same way and figure out what that’s worth. Then there’s the X Factor. Where do you see a three to five years out? So, that’s where it’s like in the cartoons—the coyote going over the cliff and keep running and there’s nothing under it and then eventually it falls. It’s how much is one willing to pay for that future? And if you have a high level of confidence and it’s a very high probability event, then you’re willing to pay much more because it’s selling for a pittance where it is now. So, I think that’s what a lot of investors just don’t get. It’s not that you’re going off and paying any price. It’s your research. You’re examining the industry and seeing the trend. It’s a very high probability event that this company will produce X, even though it doesn’t look like that today. Do I have that right with you?

PAUL MAMPILLY: Approximately, it’s a judgment call in the end. Because at the moment, there’s a lot of questions. Tesla is a great example of this, Charles. Today it’s worth more than every car company, I believe, in the world put together. And the standard way of seeing it would say, “Well, obviously, that’s a bubble.” However, if you look out five to seven years and it turns out that they are going to dominate the new industry, people might challenge me on that of electric vehicles and autonomous vehicles. So, there’s an energy shift and a technology shift there of what potentially is a much larger industry. In other words, where the existing industry sort of goes away and now you have autonomous electric transportation and they’re going to have, let’s say, a 40% market share… Well, that’s a multitrillion-dollar business. And for them to have a persistent market share five, seven, 10 years from now… If you believe that with confidence, you have no issue paying the price. So, it all really comes down to how much confidence you are willing to put into this. And obviously, if you get it wrong, the outcome can be very, very poor. So, it’s definitely a different way to go through the world.

CHARLES MIZRAHI: So, about a year or so ago, you came out with—and I think you were one of the first because I haven’t seen it anywhere else other than you—America 2.0. Just in two sentences, what the heck is America 2.0?

PAUL MAMPILLY: America 2.0 is essentially a view of the world that says that there is an existing world that is going away and being replaced by a new world of technologies, of ways of doing things, products and services. It is going to totally supplant everything that exists today in a very similar way to what you might have experienced if you lived about 100 years ago where you had multiple technological trends all occur about the same time in transportation with the steam engine steamship all the way to the plane, communication, telegraph, telephone, television… All of this technology stacking up at approximately the same time, which completely altered the experience of life for Americans. And I know that if you were to talk to a centenarian, they actually now are going through sort of their third iteration of human life, one that they were born into, one that they sort of come to pass in their teens and early 20s… And this is a completely different way of like this internet, digital sort of revolution—completely supplanting old ways through new ways. And that is encapsulated in one term: America 2.0.

CHARLES MIZRAHI: If we had this conversation back in February of last year, February 2020, it still would have been fuzzy. But by the end of 2020, it makes all the sense in the world. We had more technological changes and innovation that pushed it much further down the line. For example, working at home, internet connections, broadband, Zoom, school, buying cars… It absolutely just blew everything up in a really short span of time.

PAUL MAMPILLY: That’s 100% right. And the thing is it only feels like it all happened last year. The truth is that those have been sitting there winding up like coiled springs, just waiting, increasing their capability, increasing their competence, increasing their ability for more and more people to adopt it immediately… And that is often the nature of innovation: It never diffuses in the way that people imagine. It’s created. It sits there. The existing technology continues to dominate for a long period of time. It’s first slow, and then, it’s sudden. And that allows the technology to mature, to go through the period for a company to build a business model around it so there’s enough benefit… And now for, perhaps, the lead to be big enough over the existing technology where it makes complete economic sense, social sense, behavioral sense for a lot of people to adopt it.

CHARLES MIZRAHI: Like, for example, Zoom. A year and a half ago, a few people used it. Now, it’s become a verb.

PAUL MAMPILLY: This is correct. No different than Google. I can recall the first time I started to use Google in the late 1990s and how easy it made my job as an analyst. And that became a verb as well—to Google things. There’s no other way to do it.

CHARLES MIZRAHI: Unbelievable.

CHARLES MIZRAHI: So, we have to wrap up. You’ve got to come back again. Promise me we can do this a couple of months from now, because I’d love to. There are hours we can talk for, but we just don’t have the time.

PAUL MAMPILLY: 100%.

CHARLES MIZRAHI: So, I want to leave our listeners with this… You were right with the Internet of Things. America 2.0. You picked this before COVID, so you didn’t have any idea that the innovation was going to happen this quick. And as smart as you are, I don’t think you picked that one. You happened to be in the right place at the right time. Who saw that?

PAUL MAMPILLY: I would never pick that way of diffusing innovation.

CHARLES MIZRAHI: Unbelievable.

CHARLES MIZRAHI: If I had one good trend that I wanted to ride, what two or three industries do you see over the next three to five years that are going to catch a tsunami wave? And this innovation that we have with Internet of Things, America 2.0 is just going to be as plain as the nose on my face… What would that be?

PAUL MAMPILLY: The really easy one that you can see is in finance and money. This is a world that has been coddled by regulators where they’ve stayed away from most innovation, essentially just ring-fencing themselves. And now, the innovation is upon them, whether it be through financial apps of various kinds. I believe the current financial system, as it stands, is decrepit, it’s obsolete, it’s creaking… And I believe there is going to be an explosion of introduction of products, services that you can see that you are going to really wear… The way that we get loans, the way we bank, the way we do all the things that are important to human life are going to radically change in the next three to five years, where the old way will just seem so bureaucratic, so cumbersome, so expensive, so inefficient…

PAUL MAMPILLY: And so, I would say that’s a solid trend where it’s happening.

CHARLES MIZRAHI: What would you pick to invest in that? What would you get—an ETF or particular company?

PAUL MAMPILLY: In our portfolios, there are various companies that are widely available and talked about. I’m sure you actually use them, whether it be PayPal or CashApp or Venmo. These are all things that, if you talk to people, they’re starting to use. And the existing crisis of COVID, where people no longer want to touch paper money, has really acted as a huge accelerant for this, where now so many people no longer want to take cash. Whereas before you needed to persuade people to do that, now they’re willing to take an app. So, the companies that control these technologies—PayPal, Venmo, CashApp…

PAUL MAMPILLY: Then there’s new innovations coming in insurance. There’s a company like Lemonade and Root that are bringing this digital revolution into insurance. However, right now, you would have to have some faith that this is going to unfold and, second, that this is the company that is going to benefit from it. So, there’s always risk in making these bets, which is that even if you’re right about the trend, you still have to pick the right companies. And this is why most people prefer to wait until the signs of success are much clearer.

CHARLES MIZRAHI: Right. So, Paul, where can people get in touch with you?

PAUL MAMPILLY: I believe that the place that they can go is PaulMampillyGuru.com. That’s sort of like the hub website where all the publications, including how to sign up for Bold Profits—our free e-letter— is on, and also description of all the various newsletter services that go under Bold Profits under my name, including Profits Unlimited that I refer to.

CHARLES MIZRAHI: Beautiful. And I don’t agree with all your picks. I agree with some of them. But the point is, it makes interesting reading. It makes you think. And you’re looking at things as not where they are today, but where they’re going to be three to five years out. And you’ve been so right for so long a period of time. So, all the power to you, my friend. That’s fantastic.

PAUL MAMPILLY: Charles, it’s always an honor, and appreciate your compliments. I consider you a legend, a role model. Thank you so much.

CHARLES MIZRAHI: Paul, thank you so much. I greatly appreciate you being on the show. Thanks again.

PAUL MAMPILLY: Bye, Charles. Thank you.

CHARLES MIZRAHI: Thanks for listening to this episode of The Charles Mizrahi Show. If you’re a new listener, welcome. If you’ve been listening for a while, we’re glad to have you back. Either way, we’d love to know what you think of the show. Please leave a review if you listen to an Apple podcast. Reviews make it easier for others to find the show. You can also see the video of the interview on The Charles Mizrahi Show channel on YouTube.

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