Probably my biggest investment mistake was the emotional reaction I had to the 2016 election of Donald Trump. So when he was elected in 2016, I sold all my stocks. That was stupid. The market ripped for the next year. There was so much insecurity about him actually winning that the fear had been priced in. Stocks ripped up. The government is or the economy is an iceberg where I think 90 to 95% of it is below the surface. And what the government does does matter, but the majority of the economy just grinds on regardless of who is tweeting what or not tweeting what or who has prostate cancer or doesn't have prostate cancer.
Is the American economy a ticking time bomb? And would you give up Sweden's social safety net for greater opportunity in the US? Today, we're answering your questions on investing through uncertainty, becoming a better manager, selling a business, and more. I have not seen or heard these questions. Question number one. Question number one comes from Whiskey Ejac. All right. Hey Scott, longtime listener and fan. For someone who has done all the right things in the realm of investment for my entire life, it's starting to feel like the American economy is a ticking time bomb. Can you give me some feedback on why that might be an irrational or emotional feeling? Even a diverse portfolio is starting to feel unsafe. I could handle a short-term 20% drop. How sure are you that we can bounce back and that a dollar cost average approach can still be the right way to invest in the coming years?
I think everyone's asking this question, but as my friends at Roltz Management, uh Barry Rit Holtz and Josh Brown say, if you had bought stocks on days where they hit all-time highs, you'd be up. You would have outperformed the market. In other words, yeah, is the market overvalued? Yes. But do we know when it's going to correct? No. And trying to time the market has proven to be impossible. And kind of the best strategy is to always be in the market. But perhaps when it gets this frothy by most traditional metrics or all traditional metrics, you may want to think about further diversifying such that if and when there is a correction, you have the Kevlar diversification. But trying to guess when the top happens is dangerous.
Probably my biggest investment mistake was the emotional reaction I had to the 2016 election of Donald Trump. I think that Donald Trump, and by the way, I've lost a lot of viewers here. I think it pays to be more tempered and not talk about politics on a show like this. But in some I think the president is a [__] idiot and a stain on the American experience and that the grand sum of all of these head up your ass economic and uh foreign policy decisions will eventually crash this economy or result in long-term structural damage that will take decades if not generations to repair. So when he was elected in 2016, I sold all my stocks. That was stupid. The market ripped for the next year. There was so much insecurity about him actually winning that the fear had been priced in, stocks ripped up.
The government is or the economy is an iceberg where I think 90 to 95% of it is below the surface. And what the government does does matter, but the majority of the economy just grinds on regardless of who is tweeting what or not tweeting what or who has prostate cancer or doesn't have prostate camp. By the way, that made sense for Joe Biden to run again. Who gets metastatic prostate cancer? 81 year olds or 82 year old. G when will these people just if all of a sudden every person over the age of 72 had to resign? If we had to lose Netanyahu, Putin, and Trump, would the world be worse off? Anyways, enough already.
But what we had for me was an emotional decision and I sold everything. I had at that point a lot of capital gains. So immediately I lost probably 20 I was living in New York at the time. So I lost probably a third of the gains to taxes. And then 6 months later I ended up buying back in at in a market that was 10 or 20% more expens. So you could argue at least notionally that decision cost me 40% of my liquid net worth in stocks. So, what do you do when you think things are way overvalued? You diversify. But I think you always want to be in the market. If you wanted some insurance, you could try and get sophisticated and buy some longdated puts or maybe sell covered calls against your existing positions.
But generally speaking, I think what you want to do is diversify and recognize that just being in the S&P is not diversification because 40% of it is in a small number of companies. Uh valuations are elevated. The cape ratio, that's the price of the market divided by 10 years of company earnings adjusted for inflation. It's meant to smooth out spikes. It tells you how many years of profits you're paying for a dollar of earnings. The long run average is about 17. And get this, right now it's 41. That's the second highest in 145 years. Guess when the highest was? Yeah, you got it. December of 1999. Uh, however, it's a bit of a poor timing signal again because when it's high, sometimes it goes much higher. I think you want to stay in the market.
The current economy has been described as K-shaped. The line for wealthier households invested in the stock market is going up and to the right and the line for everyone else is flatter or going down. In other words, wealth concentration may be an argument for owning productive assets, not abandoning them. You want to be part of that upper part of the K and in assets be an owner. The biggest difference in our economy is we keep transferring wealth and opportunity from the owners to the earners. At some point that's, you know, that that is going to collapse on itself. Uh, how confident should you be in a bounceback? Recovery isn't always quick. It took about four years after 2000 and about four years after 2007. And we've had decades through the latter half of the last century where the market was essentially flat. But the evidence is clear. Continuing to buy beats stepping aside and um uh over the medium and long term, you want to be in the market just diversified.
Having said that, I am taking down my leverage. I, you know, leverage is how smart people go broke and I'm being diversified. And right now, I I'm in a different stage of life life. I'm not looking to get rich. I'm looking to not get poor. I try to not have more than 5% or of my assets in any one thing. I'm overinvested in real estate, but I have no leverage on the real estate so I can endure a down cycle. And I'm fairly diversified across asset classes. I try to diversify out of America and quite frankly that's been a bad strategy so far for me. Those stocks are down but I've decided that I want to sleep at night and I want to diversify. Most people get wealthy through concentration of their human capital and they go 110% all in on one thing. But once you get an asset base of any real wealth, I would argue that the most underappreciated word in the English and investing language is the following. Diversification.
Question number two comes from opposite speaker 8200 on Reddit. They say, "Hi, Scott. I'm 41 and living in Stockholm with my wife and two young children. I have a PhD in life science and about 7 years of commercial experience working in sales towards pharma and biotech. I keep coming back to one question. Should we make a big move to the US?" If you were in my position, 41 years old with two young kids, a solid career, and a comfortable life in Sweden, would you take the risk and move to the US in pursuit of greater opportunity or accept that the grass may simply look greener from Stockholm? Thank you for a great show.
Okay, so without knowing your specific situation, the kind of the trade-off or the fulcrum here is that the US offers a much larger life sciences market and potentially greater financial upside, specifically stock options in a more robust private equitydriven market in pharma, right? You'd rather be good to great in the US than average in Stockholm. And by the way, the majority of us are average. Uh the US is one of the world's largest bioharmaceutical markets and the global leader in research and development. US biioharmaceutical companies spent 96 billion on R&D in 2023, accounting for over 20% of total sales. In 2025, the US biotech sector hit 232 billion in revenues with over 72 different companies generating more than 500 million in sales.
However, Sweden also has a significant life sciences industry. The sector accounts for about 10% of the country's exports and its market size has doubled since 2022 to 474 billion or about 50 billion US. Is that croner? What are they called? Was it Croner up there? By the way, I was just in Stockholm. Jesus Christ, I was there in July. I'll move. Let's swap. Oh my god, that's a beautiful city on their bikes roaming around. Everyone, Hi, how are you? Yeah, I'm great. Enjoying all this free healthcare. How about you? Anyway, UNICEF ranks the US 40th out of 41 wealthy countries for the quality, accessibility, and affordability of its child care system. In some, if you don't have a support system or the money to hire a support system, the US sucks to have kids. Nordic countries ranked near the top. Sweden also devotes a much larger share of its economy to early childhood education and care. One and a half% of its GDP compared with just a quarter of a percent in the US.
Look, this is what it comes right down to. The first is, do you have alignment with your partner? I I'm in London. I don't want to be in [__] London. It's raining outside and 55 degrees see above London. But my partner really wanted to live here. And I figured out early that my role in life is to make my kids and my partner happy. Not because I'm a good person, but because it makes me happy when they're happy. Do you have alignment with your partner? Does she really want to go? Does she have a great support system in Stockholm and is going to be upset living in the US, or is she ready for a new adventure? Like, get alignment with your partner. That way, if it doesn't work out, that's okay. You both agreed to it. And if it does work out, you can both celebrate your collective victory.
Do you have the money or the professional currency to get the kind of job that's going to help you uh make up for the socialist gap? The socialist gap being free healthcare and child care. That's real cabbage. If you got a great offer from Fizer or Merc or some cool or Gilead or whatever, that's not going to be an issue. You will have the cabbage to do it. And there is more upside for the extremely talented or andor the extremely lucky in the United States. The reason why Nordic countries always score towards the top in terms of a general happiness across their population is that in America, we've decided the key to happiness is how much [__] you have. Whereas the Nordic countries have figured out that happiness is not only a function of your stuff, but it's a function of an absence of anxiety of things being taken from you.
So if you have the alignment and the market currency to get the cabbage in the US to fill in that socialist gap and take away that anxiety, then brother at 41, if you have alignment, I say roll and come to the US. In general, after having molested the earth for the last 35 years as a strategy consultant and investor, my reductive analysis of the world is the following. The US is the best place in the world to make money and Europe is the best place to spend it. It sounds as if you're still in the making money part of your life. So, if you have the opportunity and the currency and the offer, do it. Also, let the market decide. You're going to need more money in the US, substantially more money. Do you have an offer for more money? If you do, then boom, America, here we come. If not, then it's great to live in Stockholm with a wife and kids.
This is the mother of all good problems. Do I stay in one of the most beautiful, empathetic cities in the world with a wife and kids and have a lovely life or do I go for it and move to the US and if things don't work out, you can always pull the rip cord and move back still as a fairly young man with a young family to Stockholm. Again, what's the fulcrum here? The market. Got to get alignment with your partner. But assuming you have that, does the market value your currency, your professional currency, enough in the US to make up for that gap in social services? We'll be right back after a quick break.
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