“Really? That’s all the time you spent?”

I said,”Yessir. It doesn’t take long to pull weeds.”

I think I was twelve.  The mailman had suggested to Walker Fry, the richest guy in Huntington, Oregon, population 530, where I grew up that the Quast kid would be a good choice to keep the weeds pulled.

Julius the mailman (also the gun dealer) said to me, “They say he’s three times a millionaire.” 

I’m always wondering who “they” are.

In 1980 that was a lot of money.  Walker Fry made it raising tomatoes near Fresno.  He kept a hunting cabin and a kennel of dogs in Huntington, curiously. It’s not the end of the world but you can see it from there. 

It used to be that the central valley of California grew everything, including avocados. Now it’s all grown in Mexico (and you know the drug cartels run the avocado farms). 

My cattle-ranching dad told me the small outfits would all go away because free trade with Argentina and Bolivia and so on would undercut the beef market.  He was right. All the little ranches in that part of the country are gone and Huntington is a welfare town.

It’s one example. 

Go to Switzerland and everything is Swiss. Sure, Switzerland has bilateral trade agreements with other countries. But even the facial tissues are made in Switzerland.  It’s about as nice a country as you’ll find. I always say that if you can’t find me, check Lucerne.

Switzerland isn’t trying to beat China at anything.  Switzerland is trying to be great for the Swiss people.  Anyone who tries to tell you that tariffs are inflationary doesn’t understand variable global standards of living.  My dad said, “If I need to make a dollar and a rancher in Bolivia needs 50 cents, free trade means I’ll get a welfare check and we’ll eat Bolivian beef.” 

I give you Huntington, Oregon.

What’s this got to do with the stock market and this image from S&P Global (with special thanks to our supplier of sector data)?

It’s a similar disconnect.  An example of looking at things the wrong way.  The graph shows that the only net buyer of US equities is indexes and Exchange Traded Funds.  Institutions – meaning stock-pickers – retail money, hedge funds, are all net sellers of equities. 

Not because they want to sell.  I wrote Jan 15 that Capital Group, the only strict stock-picker left among the 25 largest owners of US equities, was diversifying away from its core stock-picking business to try to stem year of outflows. Stock-pickers have had more outflows than inflows every year since 2008.

These other constituencies are selling because it’s exceedingly hard to deliver alpha. Renaissance Technologies for a long time did it with quantitative data.  Citadel, Jane Street and Susquehanna, three of the biggest arbitragers in the world, are now larger than nearly all stock-pickers (nearly $2 trillion combined 13F assets, mainly in options) by trading ETFs, equities, options. 

So why are public companies spending hundreds of millions of dollars every year trying to reach net sellers? 

It’s a simple question. 

Every public company has a fiduciary responsibility to create shareholder value. Mathematically, it happens one way:  Attracting money.  The more money that chases your equity, the higher the probability you’ll create shareholder value. 

So how do you attract Passive money?  I’m happy to explain it to your Board!  It’s not with ESG and it’s not by arguing that you belong in some index (that’s intellectual property). 

It’s how you present yourself to the market and how you deploy shareholder capital. It starts with understanding what money buys.  As I’ve said repeatedly, it’s not in how you differentiate yourself.  In fact, doing that harms your Passive holders.

The only net buyer in the market isn’t looking for stories. It’s buying products.  It wants beta. Not alpha. 

And the tariff collectors, the machines like Citadel, Jane Street and Susquehanna, get rich. The machines facilitate access to the market and make loads of dough for doing it. The Trump administration is following Citadel’s lead. Not a bad idea.

And you public companies?  You’re selling products to one large consumer (rather like we sold herds of cattle to a handful of big buyers).  You should have a strategy for that. For fifty years, investor relations has been doing the same thing: Telling a story. 

It’s time to sell products.  And you need a plan. We’ll implement one for you.