1 00:00:02,240 --> 00:00:06,439 Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg 2 00:00:06,519 --> 00:00:10,280 Speaker 1: Radio this week on the podcast I Know, I say 3 00:00:10,320 --> 00:00:12,480 Speaker 1: I have an extra special guest all the time, but 4 00:00:13,200 --> 00:00:15,760 Speaker 1: I really have an extra special guest. His name is 5 00:00:15,840 --> 00:00:19,960 Speaker 1: James Montier. You know him from his years as partners 6 00:00:20,000 --> 00:00:24,360 Speaker 1: with Albert Edwards at both Dressner and Society General. He 7 00:00:24,600 --> 00:00:29,080 Speaker 1: is currently on the asset allocation team at GMO. And 8 00:00:30,560 --> 00:00:33,919 Speaker 1: I know James in passing for many years and I 9 00:00:33,920 --> 00:00:37,199 Speaker 1: have been chasing him down to come into the studio 10 00:00:37,360 --> 00:00:41,600 Speaker 1: to record one of our little chats, and he is 11 00:00:41,640 --> 00:00:45,040 Speaker 1: so difficult to pin down. He is located in the 12 00:00:45,120 --> 00:00:47,840 Speaker 1: hinterlands of the UK. He's not even in London. He's 13 00:00:48,280 --> 00:00:52,040 Speaker 1: hiding in an undisclosed location north of UH, north of 14 00:00:52,080 --> 00:00:55,120 Speaker 1: the city UH. And he is in and out of 15 00:00:55,120 --> 00:00:59,160 Speaker 1: Boston and New York so frequently it's tough to grab him. 16 00:00:59,160 --> 00:01:01,720 Speaker 1: But since we're all sheltering in place and he has 17 00:01:01,760 --> 00:01:04,720 Speaker 1: nowhere to go, I was able to pin him down 18 00:01:04,760 --> 00:01:07,399 Speaker 1: for the better part of an hour and got to 19 00:01:07,440 --> 00:01:11,440 Speaker 1: ask him about half of the questions I want to UH. 20 00:01:11,520 --> 00:01:15,679 Speaker 1: James is really a fascinating thinker. UH. He describes that 21 00:01:15,800 --> 00:01:18,840 Speaker 1: as his job. He gets paid to sit and think 22 00:01:19,240 --> 00:01:22,360 Speaker 1: about the difficult questions that other people don't want to 23 00:01:22,360 --> 00:01:27,759 Speaker 1: think about. He also has written pretty extensively, not only 24 00:01:27,800 --> 00:01:31,720 Speaker 1: about behavioral investing in finance, but about some of the 25 00:01:31,800 --> 00:01:37,319 Speaker 1: challenges of being a value investor and looking at markets 26 00:01:37,360 --> 00:01:41,880 Speaker 1: from a perspective of having a margin of safety. Regardless, 27 00:01:42,160 --> 00:01:45,440 Speaker 1: you will find this to be an absolutely fascinating conversation. 28 00:01:45,800 --> 00:01:49,840 Speaker 1: He is a really thoughtful, intriguing guy and he did 29 00:01:49,880 --> 00:01:52,720 Speaker 1: not hold back at all. So, with no further ado, 30 00:01:53,040 --> 00:02:00,560 Speaker 1: my conversation with GMOs James Montier vis his Master's Business 31 00:02:00,760 --> 00:02:05,640 Speaker 1: with Barry Ridholts on Bloomberg Radio. My extra special guest 32 00:02:05,720 --> 00:02:09,720 Speaker 1: this week is James Montier. He is a member of 33 00:02:09,760 --> 00:02:14,880 Speaker 1: the investment committee for GMO, the famed investment farm headed 34 00:02:14,919 --> 00:02:18,919 Speaker 1: by Jeremy Grantham. Previously, he worked at Dressner as well 35 00:02:18,960 --> 00:02:23,639 Speaker 1: as Society General as a market strategist. He has an 36 00:02:23,760 --> 00:02:28,160 Speaker 1: ardent reputation on Wall Street. He has been named Best 37 00:02:28,200 --> 00:02:32,320 Speaker 1: Strategist a number of years and has a reputation as 38 00:02:32,360 --> 00:02:37,919 Speaker 1: both a bear and a value manager. James Montier, Welcome 39 00:02:38,040 --> 00:02:41,919 Speaker 1: to a Shelter in Place edition of Masters in Business. 40 00:02:42,520 --> 00:02:44,720 Speaker 1: Thank you very much, Barry to delight to be here. 41 00:02:44,960 --> 00:02:47,160 Speaker 1: Let's talk a little bit about your current gig. You're 42 00:02:47,160 --> 00:02:51,000 Speaker 1: working at GMO, where you've been for a couple of years, 43 00:02:51,040 --> 00:02:55,600 Speaker 1: but before you started at GMO, you were at Society General. Uh, 44 00:02:55,840 --> 00:02:58,400 Speaker 1: tell us a little bit about your role there. Sure. So, 45 00:02:59,000 --> 00:03:00,840 Speaker 1: I've done a lot of things over the years, and 46 00:03:01,639 --> 00:03:04,840 Speaker 1: incredibly I've been at GMO for for over a decade now, 47 00:03:05,440 --> 00:03:09,160 Speaker 1: which is is startling, um and testament to how time 48 00:03:09,160 --> 00:03:13,000 Speaker 1: flies when you're actually enjoying yourself. Um. So what I 49 00:03:13,040 --> 00:03:15,880 Speaker 1: do the GMO is is essentially asked the questions that 50 00:03:15,919 --> 00:03:19,679 Speaker 1: people don't want to be asked. My finally found a 51 00:03:20,720 --> 00:03:23,640 Speaker 1: job that I am perfectly suited for. My job is 52 00:03:23,680 --> 00:03:26,799 Speaker 1: to think about all the places we could be wrong, um, 53 00:03:27,320 --> 00:03:31,000 Speaker 1: whether that's in in kind of the micro level or 54 00:03:31,040 --> 00:03:33,040 Speaker 1: indeed at the macro level. So I spend all of 55 00:03:33,080 --> 00:03:37,560 Speaker 1: my time worrying about what the models are missing, um 56 00:03:37,760 --> 00:03:39,920 Speaker 1: for part of my job. And then the other part 57 00:03:39,920 --> 00:03:42,120 Speaker 1: of my job is is really something to the table 58 00:03:42,200 --> 00:03:45,360 Speaker 1: when when things get cheap. So when I joined GMO, 59 00:03:46,320 --> 00:03:49,040 Speaker 1: jeremy terms and said to me, look, one of the 60 00:03:49,080 --> 00:03:51,120 Speaker 1: things that we really want you to do is when 61 00:03:51,160 --> 00:03:54,160 Speaker 1: you think things are cheap, really really scream and shout 62 00:03:54,200 --> 00:03:56,880 Speaker 1: and make sure that we're not missing out. I've only 63 00:03:56,880 --> 00:03:59,000 Speaker 1: had to do that a couple of times, which is 64 00:03:59,360 --> 00:04:01,240 Speaker 1: a sad refle action on the state of the markets 65 00:04:01,320 --> 00:04:04,000 Speaker 1: that I've I've had to sit through for the last 66 00:04:04,040 --> 00:04:07,440 Speaker 1: decade or so. Um, but it is. It's a kind 67 00:04:07,440 --> 00:04:10,800 Speaker 1: of perfect job. There are essentially two jobs at GMO 68 00:04:10,880 --> 00:04:13,480 Speaker 1: you would love and one that you you really wouldn't want. 69 00:04:14,440 --> 00:04:16,599 Speaker 1: The two that you would love the one that that 70 00:04:16,680 --> 00:04:19,640 Speaker 1: Jeremy has as as chief strategist. I'm the one that 71 00:04:19,720 --> 00:04:23,760 Speaker 1: I have, which is effectively minister without portfolio. The one 72 00:04:23,800 --> 00:04:25,800 Speaker 1: you really wouldn't want to have is is poor old 73 00:04:25,839 --> 00:04:28,839 Speaker 1: Ben ben into the head of our allocation because he 74 00:04:28,880 --> 00:04:30,760 Speaker 1: gets to sit there and has to kind of listen 75 00:04:30,760 --> 00:04:33,160 Speaker 1: to Jeremy and listen to me and then try and 76 00:04:34,040 --> 00:04:37,280 Speaker 1: build that into a real portfolio. So his is the 77 00:04:37,360 --> 00:04:40,200 Speaker 1: job you definitely wouldn't want. Mine is a is a 78 00:04:40,200 --> 00:04:43,800 Speaker 1: pretty sweet gig. So part of your description is to 79 00:04:44,000 --> 00:04:48,000 Speaker 1: pound the table when things get cheap. Markets just dropped 80 00:04:48,040 --> 00:04:51,960 Speaker 1: thirty five percent last month. Was there any table pounding 81 00:04:52,000 --> 00:04:54,240 Speaker 1: going on at GMO? Where did they not get cheap 82 00:04:54,360 --> 00:04:58,919 Speaker 1: enough that there there was there wasn't decent table pounding 83 00:04:58,960 --> 00:05:04,160 Speaker 1: going on. I was being very very excited about particularly 84 00:05:04,200 --> 00:05:07,479 Speaker 1: non US based equities. The US didn't get cheap enough 85 00:05:07,600 --> 00:05:13,320 Speaker 1: for my particular brand of value, but emerging markets were 86 00:05:13,320 --> 00:05:16,400 Speaker 1: looking really really cheap, and a lot of the international 87 00:05:16,400 --> 00:05:20,240 Speaker 1: markets Europe was was looking pretty pretty damned exciting as well. 88 00:05:20,600 --> 00:05:23,640 Speaker 1: So there was a fair amount of table pounding, and 89 00:05:24,000 --> 00:05:26,760 Speaker 1: hence the reason why I actually put pen to paper 90 00:05:27,120 --> 00:05:29,320 Speaker 1: a couple of weeks ago and wrote a piece on 91 00:05:29,839 --> 00:05:32,880 Speaker 1: fear and the psychology of bear markets to to try 92 00:05:32,920 --> 00:05:37,280 Speaker 1: and galvanize people to to action, because it struck me 93 00:05:37,320 --> 00:05:40,520 Speaker 1: that this was one of those opportunities where where prices 94 00:05:40,560 --> 00:05:45,320 Speaker 1: and fundamentals were potentially getting dislocated. So let's talk about 95 00:05:45,400 --> 00:05:50,160 Speaker 1: the prior time prices really got cheap. You and your 96 00:05:50,600 --> 00:05:55,120 Speaker 1: partner over at sak Gen and Dressner, Albert Edwards, were 97 00:05:55,279 --> 00:05:59,160 Speaker 1: famously bearish heading into the YO eight or nine crisis. 98 00:05:59,760 --> 00:06:03,640 Speaker 1: Were you looking at that had made you that negative 99 00:06:04,279 --> 00:06:08,680 Speaker 1: on equities prior to the Great Financial Crisis? So I 100 00:06:08,680 --> 00:06:11,400 Speaker 1: think from from our perspective, there were a kind of 101 00:06:11,560 --> 00:06:15,400 Speaker 1: number of events that were going on the really kind 102 00:06:15,400 --> 00:06:18,200 Speaker 1: of triggered our caution. But the most obvious one was 103 00:06:18,320 --> 00:06:23,240 Speaker 1: kind of the immense housing bubble the we've been talking 104 00:06:23,279 --> 00:06:26,560 Speaker 1: about for in fairness a couple of years before the GFC. So, 105 00:06:26,680 --> 00:06:29,960 Speaker 1: as usual with most of my work, I find it's 106 00:06:30,000 --> 00:06:32,280 Speaker 1: it's best to read it, then put in a drawer 107 00:06:32,279 --> 00:06:33,920 Speaker 1: and forget about it for two years, and then take 108 00:06:33,960 --> 00:06:36,880 Speaker 1: it out and actually act on it UM because it 109 00:06:36,920 --> 00:06:40,120 Speaker 1: seems to take about that long for for my my 110 00:06:40,240 --> 00:06:43,760 Speaker 1: sense of timing to come good. But it was it 111 00:06:43,839 --> 00:06:47,080 Speaker 1: was really the housing market and the economic imbalances that 112 00:06:47,200 --> 00:06:51,800 Speaker 1: were so um obvious to anyone who kind of studied 113 00:06:51,839 --> 00:06:55,000 Speaker 1: the flow of funds, who looked at the sectoral balances 114 00:06:55,040 --> 00:06:58,160 Speaker 1: for the us UM, there there were just such obvious 115 00:06:58,360 --> 00:07:04,839 Speaker 1: glaring um imbalanced is that that were unsustainable UM. And 116 00:07:04,920 --> 00:07:09,120 Speaker 1: as ever, an unsustainable process can't go on forever, but 117 00:07:09,160 --> 00:07:11,920 Speaker 1: it generally goes on for longer than one imagines. And 118 00:07:12,120 --> 00:07:15,000 Speaker 1: that was one of the things that we were really 119 00:07:15,240 --> 00:07:18,960 Speaker 1: battling with UM was was the kind of when, and 120 00:07:19,280 --> 00:07:22,120 Speaker 1: it is every time when when we get bearish, it's 121 00:07:22,160 --> 00:07:26,120 Speaker 1: the the when is always the problem. But the economic 122 00:07:26,120 --> 00:07:28,520 Speaker 1: imbalances were just so marked, but it was it was 123 00:07:28,560 --> 00:07:31,960 Speaker 1: hard not to be bearish. Coupled that with what was 124 00:07:32,000 --> 00:07:35,920 Speaker 1: a pretty damned expensive market on the simple Chiller style 125 00:07:36,120 --> 00:07:39,920 Speaker 1: valuation as cycnically a justice fee, and it led us 126 00:07:39,920 --> 00:07:42,640 Speaker 1: to be yeah, as bearish as as I think we've 127 00:07:42,680 --> 00:07:46,520 Speaker 1: probably ever been. Yeah, that that timing issue is always 128 00:07:46,560 --> 00:07:52,560 Speaker 1: problematic because, as we've seen over various cycles, expensive stocks 129 00:07:52,640 --> 00:07:55,840 Speaker 1: can get much more expensive and cheap stocks can get 130 00:07:56,280 --> 00:07:59,760 Speaker 1: much cheaper. Is it really just a two year lag? 131 00:08:00,080 --> 00:08:02,760 Speaker 1: How do you deal with I guess we could call 132 00:08:02,800 --> 00:08:06,040 Speaker 1: that the momentum issue when you're looking at either cheap 133 00:08:06,200 --> 00:08:10,440 Speaker 1: or prices stocks. Yeah, it's it is. It is a 134 00:08:10,440 --> 00:08:13,200 Speaker 1: momentum issue. You're absolutely right, And it is both momentum 135 00:08:13,200 --> 00:08:16,560 Speaker 1: in terms of the movement of prices and also momentum 136 00:08:16,560 --> 00:08:20,040 Speaker 1: in terms of the underlying economics of the situation as 137 00:08:20,040 --> 00:08:23,200 Speaker 1: well on occasion. And I think the way I've been 138 00:08:23,240 --> 00:08:25,640 Speaker 1: forced to reconcile it is to say, look, I simply 139 00:08:25,680 --> 00:08:29,640 Speaker 1: don't know. I never know when something is going to 140 00:08:29,640 --> 00:08:34,520 Speaker 1: to unravel. Um. I can often see the the unsustainable 141 00:08:34,600 --> 00:08:37,200 Speaker 1: nature of what is happening, but it doesn't tell me 142 00:08:37,240 --> 00:08:40,080 Speaker 1: anything about timing. And I think that's one of the 143 00:08:40,120 --> 00:08:42,160 Speaker 1: things that that really harks back to some of the 144 00:08:42,200 --> 00:08:45,120 Speaker 1: writings of Ben Graham Ben Graham said there were two 145 00:08:45,120 --> 00:08:49,280 Speaker 1: ways of thinking about investing in the market, the way 146 00:08:49,320 --> 00:08:52,280 Speaker 1: of timing and the way of pricing UM. And the 147 00:08:52,280 --> 00:08:54,760 Speaker 1: way of timing was trying to effectively guess what was 148 00:08:54,760 --> 00:08:57,720 Speaker 1: going to happen UM. And that is essentially next to 149 00:08:57,760 --> 00:09:00,160 Speaker 1: impossible as far as I can concerned. I think there 150 00:09:00,160 --> 00:09:02,520 Speaker 1: are potentially people who can do it. I just know 151 00:09:02,600 --> 00:09:05,560 Speaker 1: that I am definitely not one of them. UM. And 152 00:09:05,720 --> 00:09:07,480 Speaker 1: on the other hand, there is the way of pricing. 153 00:09:07,800 --> 00:09:09,839 Speaker 1: And on the way of pricing, you you simply follow 154 00:09:09,880 --> 00:09:12,160 Speaker 1: the rules of valuation. Now, if you're going to do that, 155 00:09:12,559 --> 00:09:15,280 Speaker 1: you're going to need to have a long time horizon, 156 00:09:15,679 --> 00:09:18,120 Speaker 1: and that is one of the most important, if not 157 00:09:18,240 --> 00:09:20,960 Speaker 1: the most important colory of being a value based investor 158 00:09:21,240 --> 00:09:23,720 Speaker 1: is you're going to have to be long term. And 159 00:09:23,760 --> 00:09:26,760 Speaker 1: the problem is, of course, as we well know, everybody 160 00:09:26,800 --> 00:09:29,559 Speaker 1: starts off as a long term investor, but as soon 161 00:09:29,600 --> 00:09:32,160 Speaker 1: as they hit a patch of poor performance, they become 162 00:09:32,760 --> 00:09:35,240 Speaker 1: rather too short term UM. And that is why I 163 00:09:35,280 --> 00:09:39,800 Speaker 1: think so many people struggle with the whole staying true 164 00:09:39,840 --> 00:09:42,920 Speaker 1: to being a value based investor over any length of time. 165 00:09:43,640 --> 00:09:47,040 Speaker 1: Sounds like the Mike Tyson quote everybody has a plan 166 00:09:47,120 --> 00:09:50,280 Speaker 1: until they get punched in the face. You're saying, right, 167 00:09:50,440 --> 00:09:55,640 Speaker 1: exactly plans of of investors work great until there's a 168 00:09:55,679 --> 00:09:59,040 Speaker 1: little volatility in turbulence like we've seen earlier this year. 169 00:10:00,600 --> 00:10:04,080 Speaker 1: Exactly right. It's it's precisely that. It's it's easy to 170 00:10:04,120 --> 00:10:07,520 Speaker 1: have a plan, UM. It's the discipline of sticking to 171 00:10:07,600 --> 00:10:10,839 Speaker 1: that plan. And it's one of the reasons that I 172 00:10:10,960 --> 00:10:13,560 Speaker 1: enjoy my time at GMO so much is because we 173 00:10:13,640 --> 00:10:17,720 Speaker 1: have a discipline. We have a series of valuation based 174 00:10:17,760 --> 00:10:22,800 Speaker 1: forecasts that help us anchor UM and in psychologies, you know, 175 00:10:22,840 --> 00:10:26,000 Speaker 1: I have a great interest in psychology. UM. There is 176 00:10:26,000 --> 00:10:28,840 Speaker 1: an expression which is if you cannot d buy us, 177 00:10:28,920 --> 00:10:31,120 Speaker 1: then re buy used. And what that really means is 178 00:10:31,160 --> 00:10:34,440 Speaker 1: it's incredibly hard to stop people being people. UM. It 179 00:10:34,559 --> 00:10:38,040 Speaker 1: is our very nature. So instead of trying to stop 180 00:10:38,040 --> 00:10:41,160 Speaker 1: them being UM people, the best thing to do is 181 00:10:41,200 --> 00:10:43,440 Speaker 1: to try and, knowing that they're going to fall into 182 00:10:43,480 --> 00:10:46,920 Speaker 1: these behavioral pitforces, to design a process that will actually 183 00:10:47,360 --> 00:10:53,760 Speaker 1: allow them to UM benefit from those same behavior pitface 184 00:10:53,880 --> 00:10:56,680 Speaker 1: is kind of like nudge if you like UM, and 185 00:10:56,679 --> 00:10:58,240 Speaker 1: and the way that we do it is to have 186 00:10:58,280 --> 00:11:00,960 Speaker 1: that valuation discipline. So when the world is falling apart. 187 00:11:01,559 --> 00:11:04,480 Speaker 1: Our value models are all else being equal, going to 188 00:11:04,520 --> 00:11:06,839 Speaker 1: be saying, hey, look things are getting cheap, you should 189 00:11:06,920 --> 00:11:09,920 Speaker 1: be buying UM. Now we are just as much human 190 00:11:09,960 --> 00:11:12,559 Speaker 1: as everybody else. And I'd like to sit around and go, well, 191 00:11:12,600 --> 00:11:15,880 Speaker 1: you know what, owen the models know what? What? You know? Why? 192 00:11:16,000 --> 00:11:17,959 Speaker 1: What happens if the world does end tomorrow? That kind 193 00:11:17,960 --> 00:11:22,280 Speaker 1: of thing. But having that conversations at least step in 194 00:11:22,280 --> 00:11:24,880 Speaker 1: the right direction and seeing those numbers. When you're seeing 195 00:11:24,920 --> 00:11:28,680 Speaker 1: you have double digit rates of prospective return UM, you 196 00:11:28,760 --> 00:11:30,880 Speaker 1: have to be really, really sure that you know something 197 00:11:31,280 --> 00:11:34,360 Speaker 1: the model doesn't in order to override it. Let's talk 198 00:11:34,400 --> 00:11:38,760 Speaker 1: about behavior and valuation. I love this quote of yours. 199 00:11:39,559 --> 00:11:42,680 Speaker 1: Leaving the trees could have been our first mistake. Our 200 00:11:42,679 --> 00:11:46,160 Speaker 1: minds are suited to solving problems related to our survival 201 00:11:46,800 --> 00:11:51,720 Speaker 1: rather than being optimized for investing decisions. Explain that if 202 00:11:51,760 --> 00:11:54,559 Speaker 1: you would. Of course, so, I think it's it's kind 203 00:11:54,559 --> 00:11:57,760 Speaker 1: of important that we acknowledge that we are the way 204 00:11:57,800 --> 00:12:00,880 Speaker 1: we are because of the solution UM evolution has has 205 00:12:00,920 --> 00:12:04,160 Speaker 1: designed us to work. But evolution is in essence a 206 00:12:04,160 --> 00:12:08,440 Speaker 1: glacial process. It does not reflect the world we live in. 207 00:12:08,920 --> 00:12:11,480 Speaker 1: UM you know, we are really designed for the African 208 00:12:11,559 --> 00:12:14,560 Speaker 1: savannah of a hundred and fifty thou years ago, not 209 00:12:15,480 --> 00:12:18,719 Speaker 1: certainly the industrial age of a hundred years ago, let 210 00:12:18,720 --> 00:12:22,040 Speaker 1: alone the information age in which we find ourselves drowning today. 211 00:12:22,120 --> 00:12:25,960 Speaker 1: So I think that the brain is a product of 212 00:12:25,960 --> 00:12:29,200 Speaker 1: those same evolutionary forces that have designed us in every 213 00:12:29,200 --> 00:12:33,560 Speaker 1: other regard, and that means our brains are not well 214 00:12:33,600 --> 00:12:37,800 Speaker 1: adapted to the problems we're trying to solve. And so 215 00:12:37,960 --> 00:12:40,240 Speaker 1: if we think about fear is a really good example 216 00:12:40,280 --> 00:12:45,200 Speaker 1: of this um in evolutionary terms. The cost of getting 217 00:12:45,200 --> 00:12:48,280 Speaker 1: it wrong is is pretty terrible. So if you see 218 00:12:48,360 --> 00:12:54,000 Speaker 1: a twig and you think it's a snake, that's fine, right, 219 00:12:54,440 --> 00:12:57,040 Speaker 1: you stepped out the way, you took a slightly wider path, 220 00:12:57,120 --> 00:13:00,000 Speaker 1: but it was fine. Get that wrong, and the downside 221 00:13:00,160 --> 00:13:04,360 Speaker 1: is its potentially pretty pretty terrible. If you think it 222 00:13:04,400 --> 00:13:05,760 Speaker 1: was a twig, in your step on it, it turns 223 00:13:05,800 --> 00:13:07,600 Speaker 1: out as a snake and it bites you. You You are 224 00:13:07,800 --> 00:13:13,000 Speaker 1: evolutionary toe um. And so the brain is is designed 225 00:13:13,120 --> 00:13:16,120 Speaker 1: to work in a certain way, and when it comes 226 00:13:16,120 --> 00:13:20,199 Speaker 1: to fear, is designed to to make very short, quick 227 00:13:20,280 --> 00:13:24,760 Speaker 1: decisions that will keep us alive. Now, the problem is 228 00:13:24,840 --> 00:13:28,080 Speaker 1: that when it comes to investing, and let's say markets 229 00:13:28,080 --> 00:13:31,320 Speaker 1: are falling, as they obviously have been over the last 230 00:13:31,360 --> 00:13:35,080 Speaker 1: month or so. UM, then what we're doing is we're 231 00:13:35,080 --> 00:13:38,600 Speaker 1: triggering out fear response. And there was a wonderful behavior 232 00:13:38,679 --> 00:13:45,080 Speaker 1: experiment by shivn and some co authors who looked at 233 00:13:45,160 --> 00:13:50,199 Speaker 1: the impact of fear on investment decision making. And they 234 00:13:50,760 --> 00:13:52,640 Speaker 1: set up a really simple game where you've got to 235 00:13:52,720 --> 00:13:55,920 Speaker 1: choose over twenty rounds each round whether you wanted to invest, 236 00:13:55,960 --> 00:13:58,840 Speaker 1: and they wanted to see if you suffered a loss 237 00:13:58,840 --> 00:14:01,480 Speaker 1: in the previous round, would it impact your decision to 238 00:14:01,520 --> 00:14:04,240 Speaker 1: invest in the next round, And obviously it shouldn't if 239 00:14:04,240 --> 00:14:07,920 Speaker 1: you were rational. UM. What they found was for for 240 00:14:08,040 --> 00:14:12,200 Speaker 1: normal people people like you and I, UM, that actually 241 00:14:12,280 --> 00:14:15,320 Speaker 1: it did when you lost money in the previous round, 242 00:14:15,320 --> 00:14:17,520 Speaker 1: they were much much less likely to invest in the 243 00:14:17,559 --> 00:14:21,760 Speaker 1: next round. That wasn't true for a subset of people 244 00:14:21,840 --> 00:14:25,400 Speaker 1: they examined, and that subset were very unusual. They had 245 00:14:25,440 --> 00:14:28,080 Speaker 1: a specific form of brain damage which meant that they 246 00:14:28,120 --> 00:14:31,560 Speaker 1: could no longer feel fear. There amigl dala, which is 247 00:14:31,600 --> 00:14:33,680 Speaker 1: one of the brain center of fear of being irreprotably 248 00:14:33,760 --> 00:14:38,480 Speaker 1: damaged UM, and so they behaved much more like a 249 00:14:38,560 --> 00:14:42,240 Speaker 1: model of rationality. They invested irrespective of the outcome in 250 00:14:42,240 --> 00:14:45,840 Speaker 1: the previous round. So our brains are designed by this 251 00:14:45,960 --> 00:14:49,520 Speaker 1: process is evolution to work in certain ways that keep 252 00:14:49,600 --> 00:14:53,400 Speaker 1: us alive but don't give us necessarily the correct outcome 253 00:14:53,400 --> 00:14:55,600 Speaker 1: when it comes to the world in which we're trying 254 00:14:55,640 --> 00:14:59,960 Speaker 1: to think today in investing. So the secret too good 255 00:15:00,000 --> 00:15:03,360 Speaker 1: investing is really just a modest amount of brain damage. 256 00:15:04,440 --> 00:15:06,920 Speaker 1: I I'm standing by that, and then I'm pretty sure 257 00:15:06,960 --> 00:15:10,600 Speaker 1: most of my friends, with the test of that, I 258 00:15:10,680 --> 00:15:13,560 Speaker 1: can't say, I can't say I disagree with that. So 259 00:15:13,560 --> 00:15:18,000 Speaker 1: so or or if not brain damage, at least a 260 00:15:18,080 --> 00:15:23,280 Speaker 1: little bit of behavior control that doesn't look like the 261 00:15:23,320 --> 00:15:27,840 Speaker 1: typical normal human being and is a little more embracing 262 00:15:27,880 --> 00:15:37,160 Speaker 1: of risk than our evolutionary history might imply. Absolutely absolutely so. 263 00:15:37,160 --> 00:15:39,560 Speaker 1: So let's talk a little bit about how some of 264 00:15:39,600 --> 00:15:45,320 Speaker 1: these behavioral biases manifest themselves among investors. When I look 265 00:15:45,360 --> 00:15:47,440 Speaker 1: around the world and I look at some of the 266 00:15:47,560 --> 00:15:53,200 Speaker 1: areas that you have described as cheap emerging markets Europe elsewhere, 267 00:15:53,320 --> 00:15:57,840 Speaker 1: especially away from the United States, investors seem to really 268 00:15:58,680 --> 00:16:02,640 Speaker 1: hate those areas and have voted with their dollars how 269 00:16:02,720 --> 00:16:06,560 Speaker 1: much of this is a rational response to problems in 270 00:16:06,640 --> 00:16:09,360 Speaker 1: em and problems in Europe, and how much of this 271 00:16:09,480 --> 00:16:16,480 Speaker 1: is just being too fearful for attractively priced stocks. Yeah, 272 00:16:16,600 --> 00:16:20,120 Speaker 1: that is the the the pertinent and peronnial question that 273 00:16:20,120 --> 00:16:23,720 Speaker 1: one has to ask, um. And the answer is we 274 00:16:23,840 --> 00:16:26,680 Speaker 1: we can never be sure, or at least anyone who 275 00:16:26,680 --> 00:16:28,640 Speaker 1: says that's sure is is probably a liar or a 276 00:16:28,720 --> 00:16:32,920 Speaker 1: fall or some linear combination of the two, because you 277 00:16:32,960 --> 00:16:36,080 Speaker 1: can't know, And so all you can do is say, 278 00:16:36,240 --> 00:16:39,560 Speaker 1: have I got sufficient margin of safety? And it goes 279 00:16:39,600 --> 00:16:41,960 Speaker 1: back to good old Ben Graham. Um. I know I 280 00:16:41,960 --> 00:16:44,400 Speaker 1: sound like a broaden record always quoting Ben Graham, but 281 00:16:44,680 --> 00:16:47,600 Speaker 1: to me, he really is one of the most insightful 282 00:16:48,880 --> 00:16:54,120 Speaker 1: of histories examples of great investors, because he always said 283 00:16:54,120 --> 00:16:55,920 Speaker 1: you have to operate with the margin of safety, because 284 00:16:55,920 --> 00:16:58,960 Speaker 1: you know that if you're dealing with something like them. Yes, 285 00:16:58,960 --> 00:17:03,320 Speaker 1: they have much legal standards, much poor report corporate governance 286 00:17:03,320 --> 00:17:06,320 Speaker 1: than than say the US does, but we all know that, 287 00:17:06,840 --> 00:17:10,640 Speaker 1: and that's already in the price. And so if those 288 00:17:10,640 --> 00:17:14,000 Speaker 1: things then look really cheap, you're like, well, look, let's 289 00:17:14,000 --> 00:17:18,080 Speaker 1: take gas from as an example, the Russian energy company. 290 00:17:18,359 --> 00:17:22,400 Speaker 1: It trades on a pee of about two times, which 291 00:17:22,480 --> 00:17:25,960 Speaker 1: is clearly ludicrous. Nobody thinks gas From is worth two. 292 00:17:26,359 --> 00:17:31,560 Speaker 1: It's either worth zero because Putin thinks it belongs to him, 293 00:17:31,680 --> 00:17:33,240 Speaker 1: or it's worth a lot more than two. But it 294 00:17:33,280 --> 00:17:36,040 Speaker 1: trades on two um. And you're like, well, look, I 295 00:17:36,080 --> 00:17:38,440 Speaker 1: am being paid a lot to take on that risk. 296 00:17:38,480 --> 00:17:41,280 Speaker 1: Now push comes to shove, I will probably lose because 297 00:17:41,320 --> 00:17:44,120 Speaker 1: Putin owns tanks and I own bits of paper, and 298 00:17:44,200 --> 00:17:46,720 Speaker 1: his tanks will trump my bits of paper. But in 299 00:17:47,200 --> 00:17:50,000 Speaker 1: every year that I get that carry on on gas From, 300 00:17:50,240 --> 00:17:54,200 Speaker 1: it's paying out a dividend yield of six seven percent um. 301 00:17:54,240 --> 00:17:57,000 Speaker 1: That's a very nice return for taking that degree of 302 00:17:57,080 --> 00:18:01,280 Speaker 1: risk um every year without any worry about anything else. 303 00:18:02,080 --> 00:18:04,919 Speaker 1: And ultimately, you know, as long as you size a 304 00:18:04,960 --> 00:18:08,760 Speaker 1: position like that appropriately, I think it just makes a 305 00:18:08,760 --> 00:18:12,879 Speaker 1: great deal of sense because your marginal safety is so high. 306 00:18:13,280 --> 00:18:19,240 Speaker 1: So what are the credible reasons for this ongoing gap 307 00:18:19,280 --> 00:18:23,760 Speaker 1: and valuations between a country like the United States that 308 00:18:24,520 --> 00:18:28,800 Speaker 1: arguably still has the rule of law and countries like 309 00:18:28,960 --> 00:18:32,920 Speaker 1: Russia that have been described as you know, a criminal 310 00:18:33,119 --> 00:18:37,400 Speaker 1: organization with a standing army. How can an investor confidently 311 00:18:38,080 --> 00:18:41,960 Speaker 1: put money at risk in a place like China, like Russia, 312 00:18:42,440 --> 00:18:44,800 Speaker 1: where you never know how the rules are going to 313 00:18:44,960 --> 00:18:48,160 Speaker 1: change from quarter to quarter, a month to month. It's 314 00:18:48,240 --> 00:18:51,280 Speaker 1: it that is, and that is why they trade cheap, right. 315 00:18:51,320 --> 00:18:53,720 Speaker 1: You're absolutely right. You You you have a lower degree 316 00:18:53,760 --> 00:18:56,960 Speaker 1: of confidence, and you have to scale your positions appropriately 317 00:18:57,720 --> 00:19:00,639 Speaker 1: so you you don't put everything in to rush. He 318 00:19:00,760 --> 00:19:04,920 Speaker 1: don't put everything into China. You build a diversified portfolio 319 00:19:05,560 --> 00:19:10,200 Speaker 1: across any number of countries ranging from the ones with 320 00:19:10,320 --> 00:19:13,480 Speaker 1: the greatest corporate governance risk China and Russia, up to 321 00:19:13,640 --> 00:19:17,680 Speaker 1: two places that have considerably less Taiwan career. Um. They're 322 00:19:17,720 --> 00:19:21,320 Speaker 1: not perfect by any means, but you are being compensated 323 00:19:21,480 --> 00:19:25,520 Speaker 1: an awful lot for the risks involved right now. At 324 00:19:25,600 --> 00:19:28,520 Speaker 1: least not always the case, but right now, that is 325 00:19:28,640 --> 00:19:32,160 Speaker 1: the the the return you are getting I think way 326 00:19:32,320 --> 00:19:36,760 Speaker 1: outweighs the risks you are undertaking. Um. And so to me, 327 00:19:36,920 --> 00:19:41,000 Speaker 1: the arithmetic of the situation says, look size and appropriately 328 00:19:41,080 --> 00:19:46,119 Speaker 1: and invest with a degree of confidence. Um. But acknowledge 329 00:19:46,119 --> 00:19:48,919 Speaker 1: the fact that yes, you are taking on more risks 330 00:19:49,080 --> 00:19:52,040 Speaker 1: and therefore you you want that greater return. That's why 331 00:19:52,080 --> 00:19:54,200 Speaker 1: these things are priced at a discount, even on the 332 00:19:54,280 --> 00:19:57,240 Speaker 1: normal times. Now right now, that discount is way wider 333 00:19:57,280 --> 00:19:59,800 Speaker 1: than normal times, So your margin of safety is is 334 00:20:00,080 --> 00:20:03,480 Speaker 1: much greater than than average, which is why these things 335 00:20:03,480 --> 00:20:06,960 Speaker 1: to me look very attractive. So so, speaking of that 336 00:20:07,160 --> 00:20:12,520 Speaker 1: giant spread between EM and developed nations, especially the US, 337 00:20:13,400 --> 00:20:17,240 Speaker 1: I'm assuming you're predicating some of this on the concept 338 00:20:17,320 --> 00:20:21,400 Speaker 1: of mean reversion, that eventually stocks that are expensive will 339 00:20:21,440 --> 00:20:24,400 Speaker 1: come down in price, stocks that are cheap will rise 340 00:20:24,440 --> 00:20:28,280 Speaker 1: in price, and things will revert to normal. But we've 341 00:20:28,280 --> 00:20:32,760 Speaker 1: seen like a decade of EM underperforming the US. Are 342 00:20:32,800 --> 00:20:36,920 Speaker 1: you counting on mean reversion to to shift this or 343 00:20:37,040 --> 00:20:41,200 Speaker 1: is something more fundamental happening that's kept this spread as 344 00:20:41,200 --> 00:20:45,960 Speaker 1: wide as it's been for as long as it's been. Well, 345 00:20:46,320 --> 00:20:50,000 Speaker 1: it's it's exactly the debate that we have had internally. Interestingly, 346 00:20:50,119 --> 00:20:54,280 Speaker 1: the strangely enough, given how wrong we have been on 347 00:20:54,320 --> 00:20:57,760 Speaker 1: the U s UM, it is certainly the question that 348 00:20:57,800 --> 00:21:00,119 Speaker 1: we have spent an inordinate amount of time trying to 349 00:21:00,960 --> 00:21:04,200 Speaker 1: understand is how how could we be wrong? What could 350 00:21:04,320 --> 00:21:09,240 Speaker 1: stop mean reversion? What are what are the rational reasons 351 00:21:09,359 --> 00:21:13,439 Speaker 1: for the US having such a premium valuation relative to 352 00:21:13,440 --> 00:21:17,359 Speaker 1: the rest of the world. UM And unfortunately, when when 353 00:21:17,400 --> 00:21:20,480 Speaker 1: we've done that. I've personally, I have found most of 354 00:21:20,520 --> 00:21:24,600 Speaker 1: the explanations to be very wanting. UM. So you know, 355 00:21:24,680 --> 00:21:27,119 Speaker 1: one of the most common ones, low interest rates, just 356 00:21:27,160 --> 00:21:31,560 Speaker 1: doesn't cut the mustard on on multiple different levels. First, 357 00:21:31,680 --> 00:21:37,240 Speaker 1: there is no provable relationship between interest rates and valuation. Uh. Second, 358 00:21:37,320 --> 00:21:40,000 Speaker 1: there are any number of other countries that have low 359 00:21:40,359 --> 00:21:44,879 Speaker 1: interest rates Europe, Japan for forever um, yet they haven't 360 00:21:44,960 --> 00:21:48,840 Speaker 1: enjoyed high multiples UM. So you you you automatically begin 361 00:21:48,880 --> 00:21:54,120 Speaker 1: to question the sanity of that statement, the low rates 362 00:21:54,119 --> 00:21:57,640 Speaker 1: of the justification for high multiples. I think the one 363 00:21:57,680 --> 00:22:03,760 Speaker 1: where I have perhaps the most sympathy, but still not 364 00:22:04,440 --> 00:22:08,280 Speaker 1: I don't find overwhelmingly compelling is that the US has 365 00:22:08,920 --> 00:22:14,040 Speaker 1: um higher quality companies UM. And I think that is 366 00:22:14,200 --> 00:22:18,320 Speaker 1: in essence true. There are some exceptional businesses that happened 367 00:22:18,359 --> 00:22:22,000 Speaker 1: to be domiciled in the US, but I simply don't 368 00:22:22,040 --> 00:22:26,160 Speaker 1: think it justifies the degree of the premium that we 369 00:22:26,280 --> 00:22:29,840 Speaker 1: witness UM and so I come down still on the 370 00:22:29,880 --> 00:22:33,080 Speaker 1: side of mean reversion. Yes, it's it's taken a long time, 371 00:22:33,119 --> 00:22:35,000 Speaker 1: and that's how you end up with cheap markets, right 372 00:22:35,119 --> 00:22:37,439 Speaker 1: or expensive markets is if they go on for a 373 00:22:37,440 --> 00:22:40,040 Speaker 1: long time. And Rudy Dawn Bush always used to say, 374 00:22:40,080 --> 00:22:42,000 Speaker 1: these things go on for longer than you expect and 375 00:22:42,040 --> 00:22:45,600 Speaker 1: then end faster than you expects. Um. And they've certainly 376 00:22:45,640 --> 00:22:49,119 Speaker 1: fulfilled the first part of that over over the last decade, 377 00:22:49,160 --> 00:22:52,520 Speaker 1: where emerging has got cheaper and cheaper and the US 378 00:22:52,560 --> 00:22:55,840 Speaker 1: has become more and more expensive. UM. So certainly are 379 00:22:56,200 --> 00:23:00,000 Speaker 1: our faith has been well and truly tested. But as 380 00:23:00,040 --> 00:23:05,680 Speaker 1: of yet, I haven't found a compelling, sensible explanation that 381 00:23:06,200 --> 00:23:10,040 Speaker 1: explains that differential. I think it was at Sajen you 382 00:23:10,119 --> 00:23:14,240 Speaker 1: pend a piece that I've always really liked called the 383 00:23:14,440 --> 00:23:17,600 Speaker 1: Seven Immutable Laws of Investing. That that's got to be 384 00:23:17,640 --> 00:23:21,960 Speaker 1: at least a decade old, right, that one was? Yeah, 385 00:23:22,119 --> 00:23:24,679 Speaker 1: I think I wrote that for GMO. Actually, so it's 386 00:23:24,680 --> 00:23:27,600 Speaker 1: about a decade old. Tell us how you assembled that list. 387 00:23:27,640 --> 00:23:31,160 Speaker 1: It's a nice run of severn different bullet points. Will 388 00:23:31,240 --> 00:23:34,240 Speaker 1: will go over some of them. But what was the 389 00:23:34,280 --> 00:23:38,080 Speaker 1: process like of putting that list together? It was it 390 00:23:38,200 --> 00:23:43,359 Speaker 1: was really an exercise in in trying to distill um 391 00:23:43,520 --> 00:23:49,199 Speaker 1: the experience of myself and many others um into something 392 00:23:49,240 --> 00:23:53,840 Speaker 1: that was easily digestible. Uh and uh as I realized 393 00:23:53,880 --> 00:23:56,720 Speaker 1: as I described that I've committed one of the sins 394 00:23:56,760 --> 00:23:58,920 Speaker 1: I hate, which is kind of the great dumming down 395 00:23:59,000 --> 00:24:03,680 Speaker 1: of everything. The reduction of anything important to two D 396 00:24:03,880 --> 00:24:08,280 Speaker 1: forty characters drives me to distraction. And I suddenly struck 397 00:24:08,400 --> 00:24:10,639 Speaker 1: that the Seven Immutable Laws was an attempt to do 398 00:24:10,680 --> 00:24:14,719 Speaker 1: exactly that, which is somewhat embarrassing, But it was really 399 00:24:14,720 --> 00:24:18,919 Speaker 1: about trying to distill the wisdom of a great deal 400 00:24:19,000 --> 00:24:23,560 Speaker 1: of UM investors past who I had respected, Ben Graham, 401 00:24:23,640 --> 00:24:29,080 Speaker 1: John Maynard, Kane's Sir John Templeton, Warren Buffett, obviously numerous 402 00:24:29,080 --> 00:24:32,480 Speaker 1: others UM, and and really come down to a list 403 00:24:32,520 --> 00:24:36,800 Speaker 1: of things that I would help to be always true 404 00:24:37,480 --> 00:24:40,280 Speaker 1: UM that if I had to to kind of pass 405 00:24:40,280 --> 00:24:42,320 Speaker 1: this on to my kids without ever being able to 406 00:24:42,359 --> 00:24:44,720 Speaker 1: talk to them again, what would I tell them were 407 00:24:44,760 --> 00:24:47,920 Speaker 1: the kind of the rules they had to follow UM 408 00:24:48,320 --> 00:24:52,840 Speaker 1: in order to to make sensible investment to suck decisions. 409 00:24:52,880 --> 00:24:56,200 Speaker 1: So you've mentioned always insist on a margin of safety, 410 00:24:56,280 --> 00:25:00,840 Speaker 1: which I associate with both Ben Graham and Klarman, who 411 00:25:00,840 --> 00:25:04,639 Speaker 1: had a book of the same name. Let's talk about 412 00:25:04,880 --> 00:25:09,280 Speaker 1: rule number two, which I'm gonna assume is channeling John Templeton. 413 00:25:10,040 --> 00:25:14,200 Speaker 1: This time is never different explain the thinking behind that. Right. 414 00:25:14,280 --> 00:25:17,080 Speaker 1: So I think that there that was really born out 415 00:25:17,080 --> 00:25:21,800 Speaker 1: of thinking about our experience of bubbles, and particularly talking 416 00:25:21,840 --> 00:25:24,800 Speaker 1: with my my former colleague and very good friend Edward Chancellor, 417 00:25:25,840 --> 00:25:29,200 Speaker 1: who very wonderful book called Devil Takes Behind Most, which 418 00:25:29,240 --> 00:25:34,560 Speaker 1: is an extraordinary history of speculative mania. UM. And it 419 00:25:34,680 --> 00:25:38,520 Speaker 1: struck me that looking at his work, looking at Charles 420 00:25:38,640 --> 00:25:42,520 Speaker 1: Kindelberger's Mania's Panics and crashes, UM, there were an awful 421 00:25:42,600 --> 00:25:49,240 Speaker 1: lot of similarities to our experience with manias, bubbles and 422 00:25:49,640 --> 00:25:53,320 Speaker 1: these kinds of environments. UM. The course, the details are 423 00:25:53,359 --> 00:25:58,280 Speaker 1: always different, UM. But actually there is a core of 424 00:25:58,840 --> 00:26:02,840 Speaker 1: rhyming within each of these experiences that is always true. 425 00:26:03,440 --> 00:26:08,040 Speaker 1: And therefore it was indeed Sir John Templeton who said, um, 426 00:26:08,160 --> 00:26:12,560 Speaker 1: the the foremost dangerous words is at this time is 427 00:26:12,560 --> 00:26:16,040 Speaker 1: never different. Probably five most dangerous words invested this time 428 00:26:16,119 --> 00:26:21,000 Speaker 1: is never different. Jeremy Grantham takes a slightly different view, UM, 429 00:26:21,160 --> 00:26:25,360 Speaker 1: and and said, from a value manager's perspective, the most 430 00:26:25,440 --> 00:26:30,479 Speaker 1: dangerous word UH this time is is is never different 431 00:26:30,480 --> 00:26:32,840 Speaker 1: in the in the slightly different way. UM. He points 432 00:26:32,880 --> 00:26:36,639 Speaker 1: out that he we constantly assume mean reversion um. And 433 00:26:36,720 --> 00:26:39,840 Speaker 1: perhaps that that that can be an error sometimes um, 434 00:26:40,080 --> 00:26:44,840 Speaker 1: so that they become pretty pretty dangerous. Whereas everybody seems 435 00:26:44,920 --> 00:26:47,240 Speaker 1: to believe to me that this time is different is 436 00:26:47,280 --> 00:26:50,280 Speaker 1: the the usual explanation. So the tech bubble is the 437 00:26:50,320 --> 00:26:53,720 Speaker 1: prime example. Going through the tech bubble. Oh, you don't 438 00:26:53,800 --> 00:26:57,800 Speaker 1: understand this time is different because bang bang bang bang bang, um, 439 00:26:58,119 --> 00:27:02,639 Speaker 1: which it's just it's ever been true. Yet. I didn't 440 00:27:02,720 --> 00:27:06,439 Speaker 1: understand that shiny phones were going to change the world 441 00:27:06,520 --> 00:27:09,200 Speaker 1: back then. Um. In fact they did. The Internet did 442 00:27:09,280 --> 00:27:11,840 Speaker 1: change the world in ways that I couldn't even begin 443 00:27:11,880 --> 00:27:15,119 Speaker 1: to imagine, but generally not in a highly profitable fashion 444 00:27:15,640 --> 00:27:18,600 Speaker 1: um and certainly not the fashion that people were pricing 445 00:27:18,640 --> 00:27:23,320 Speaker 1: in in So to me, remembering that this time is 446 00:27:23,359 --> 00:27:28,520 Speaker 1: never different is really just reminding ourselves that human experience 447 00:27:28,840 --> 00:27:33,280 Speaker 1: is sadly not linear. It has to been more cilical. 448 00:27:33,480 --> 00:27:36,080 Speaker 1: Seth Klarman, whose book you mentioned, The March in the Safety, 449 00:27:36,840 --> 00:27:41,360 Speaker 1: has a wonderful discussion in it about collacterized bond obligations 450 00:27:41,960 --> 00:27:49,160 Speaker 1: UM during the early nineties, which have unparently uncanny parallels 451 00:27:49,560 --> 00:27:55,480 Speaker 1: with the experience with collacterized loan obligations in two thousand, 452 00:27:56,200 --> 00:27:59,320 Speaker 1: two thousand seven, two thousand and eight um, and you 453 00:27:59,320 --> 00:28:03,720 Speaker 1: you constantly we find that um, these parallels come back um, 454 00:28:03,760 --> 00:28:08,439 Speaker 1: and Galbraith had a nice expression which was, um, the 455 00:28:08,480 --> 00:28:12,000 Speaker 1: world keep coming, and finances the one industry where we 456 00:28:12,080 --> 00:28:14,959 Speaker 1: keep reinventing the wheel each time in the slightly more 457 00:28:15,080 --> 00:28:19,040 Speaker 1: unstable fashion, which I kind of like is a summation 458 00:28:19,160 --> 00:28:22,920 Speaker 1: of most of the kind of problems of finance, but 459 00:28:23,000 --> 00:28:26,159 Speaker 1: remembering that this time is never different. It is just 460 00:28:26,480 --> 00:28:29,680 Speaker 1: a reminder that we've seen most of this before. We've 461 00:28:29,680 --> 00:28:31,879 Speaker 1: seen this movie before. We know how it ends, and 462 00:28:31,960 --> 00:28:36,199 Speaker 1: it generally doesn't end well. So the asset classes and 463 00:28:36,240 --> 00:28:40,280 Speaker 1: the circumstances and the specifics may change from cycle to cycle, 464 00:28:40,680 --> 00:28:47,240 Speaker 1: but it sounds like human nature itself is immutable, exactly right, precisely. 465 00:28:48,040 --> 00:28:50,520 Speaker 1: So there's a couple of others that that I like, 466 00:28:50,800 --> 00:28:53,440 Speaker 1: be patient and wait for the fat pitch. That that 467 00:28:53,520 --> 00:28:58,320 Speaker 1: sounds like you're channeling Warren Buffets. They're a bit exactly that. 468 00:28:58,320 --> 00:29:01,959 Speaker 1: That is definitely a buffet, is the fat pitch. And 469 00:29:02,000 --> 00:29:04,240 Speaker 1: Ted Williams and had to learn a lot about baseball 470 00:29:04,280 --> 00:29:06,680 Speaker 1: to understand that one, which is not easy, as you 471 00:29:06,720 --> 00:29:09,680 Speaker 1: can tell from my accent. Um. But once they got 472 00:29:09,680 --> 00:29:10,880 Speaker 1: me to hang of it. I said, oh yeah, I 473 00:29:10,880 --> 00:29:14,720 Speaker 1: get it. Um really about waiting for those good opportunities. 474 00:29:14,760 --> 00:29:17,200 Speaker 1: You know that there are long amounts of time when 475 00:29:17,600 --> 00:29:19,520 Speaker 1: doing nothing is the right thing to do. And that's 476 00:29:19,560 --> 00:29:24,680 Speaker 1: really hard because people expect their investment managers to be active, 477 00:29:24,720 --> 00:29:27,520 Speaker 1: to be doing stuff. But there are long periods when 478 00:29:27,640 --> 00:29:30,160 Speaker 1: there are no fat pitches in which case you shouldn't 479 00:29:30,160 --> 00:29:34,640 Speaker 1: be doing stuff. Um, don't, don't do something just fit 480 00:29:34,680 --> 00:29:37,080 Speaker 1: their kind of thing, um And And that can be 481 00:29:37,200 --> 00:29:41,680 Speaker 1: very hard to to justify, but it allows you to 482 00:29:42,680 --> 00:29:45,280 Speaker 1: right It allows you to exploit the opportunities when they 483 00:29:45,320 --> 00:29:49,600 Speaker 1: do come along. So number four is a real challenge 484 00:29:49,760 --> 00:29:54,640 Speaker 1: because I'm reminded in the scene, uh from the money 485 00:29:54,680 --> 00:29:58,280 Speaker 1: Python movie Life of Brian where Brian is speaking to 486 00:29:58,320 --> 00:30:02,640 Speaker 1: the multitudes and says, you're all individuals, You're all different, 487 00:30:03,120 --> 00:30:06,040 Speaker 1: and every one of them repeats in unison, we are 488 00:30:06,080 --> 00:30:09,520 Speaker 1: all individuals, we are all different. And and number four 489 00:30:09,640 --> 00:30:14,240 Speaker 1: is be a contrarian. How challenging is it to be 490 00:30:14,360 --> 00:30:19,000 Speaker 1: a contrarian with so much career risk and so much 491 00:30:20,000 --> 00:30:25,920 Speaker 1: peer pressure to do what the crowd is doing. Absolutely, 492 00:30:25,960 --> 00:30:30,760 Speaker 1: and it's really I think the essence of investing um 493 00:30:30,880 --> 00:30:33,680 Speaker 1: and you can trace that back to to Ben Graham, 494 00:30:33,760 --> 00:30:37,600 Speaker 1: the Maynard Kanes, Um. They all have quotes. In fact, 495 00:30:37,640 --> 00:30:40,840 Speaker 1: every good value investor I think has a quote on 496 00:30:40,960 --> 00:30:44,560 Speaker 1: the importance of being contrarian UM. And one of the 497 00:30:44,560 --> 00:30:48,320 Speaker 1: contributions I think UM Jeremy Grantham has has really made 498 00:30:48,560 --> 00:30:51,200 Speaker 1: to our understanding of that is why it is so 499 00:30:51,280 --> 00:30:54,800 Speaker 1: hard to do. And there are two different sources of 500 00:30:55,840 --> 00:30:58,520 Speaker 1: hurdles if you like that we have to overcome. One 501 00:30:58,640 --> 00:31:01,720 Speaker 1: is is human nature. Human nature tells us that it 502 00:31:01,840 --> 00:31:03,760 Speaker 1: is warmer and safer in the middle of the herd, 503 00:31:03,840 --> 00:31:06,760 Speaker 1: and we should probably stay there, um. We don't like 504 00:31:06,880 --> 00:31:10,200 Speaker 1: to look different with social animals. And then there is 505 00:31:10,320 --> 00:31:12,400 Speaker 1: on the other the other set of hurdles are really 506 00:31:12,400 --> 00:31:15,600 Speaker 1: what one would describe as UM, the institutional imperative, and 507 00:31:15,880 --> 00:31:20,920 Speaker 1: that's really Kane's observation about career risk, which is obviously 508 00:31:21,160 --> 00:31:24,040 Speaker 1: it is far better for reputation to fail conventionally than 509 00:31:24,080 --> 00:31:28,160 Speaker 1: to succeed unconventionally UM. And the combination of those two 510 00:31:28,200 --> 00:31:31,280 Speaker 1: that that innate human desire to be similar to other 511 00:31:31,320 --> 00:31:38,320 Speaker 1: people and then the overlay of the institutional framework really 512 00:31:38,360 --> 00:31:43,760 Speaker 1: do make it incredibly hard to be a contrarian. But Ultimately, Uh, 513 00:31:43,800 --> 00:31:46,560 Speaker 1: this is a Templeton quote. If you want different results 514 00:31:46,600 --> 00:31:48,520 Speaker 1: from other people, you have to do something different from 515 00:31:48,560 --> 00:31:51,640 Speaker 1: other people. Um. And so we we we end up 516 00:31:51,680 --> 00:31:54,160 Speaker 1: there saying, Okay, you you just have to be a contrarian. 517 00:31:54,200 --> 00:31:56,800 Speaker 1: It doesn't mean you have to be a blind contrarian. 518 00:31:56,880 --> 00:31:59,960 Speaker 1: Doesn't mean you have to be unthinking. I suggest both 519 00:32:00,000 --> 00:32:03,480 Speaker 1: to those of foolish. But I think ultimately you have 520 00:32:03,640 --> 00:32:06,560 Speaker 1: to be prepared to look different if you want to 521 00:32:06,600 --> 00:32:10,400 Speaker 1: achieve a decent set of investment results, or at least 522 00:32:10,400 --> 00:32:13,840 Speaker 1: different ones. And that is something that people find incredibly 523 00:32:13,880 --> 00:32:17,160 Speaker 1: hard to do. So you wrote these in two thousand 524 00:32:17,120 --> 00:32:20,400 Speaker 1: and eleven. They're published on the GMO side. If you 525 00:32:20,440 --> 00:32:24,080 Speaker 1: were rewriting this list today, would you change any would 526 00:32:24,120 --> 00:32:28,240 Speaker 1: you shift the order around? How has a decade altered 527 00:32:28,280 --> 00:32:32,600 Speaker 1: your perception of this list of seven immutable laws of investing. 528 00:32:34,640 --> 00:32:37,400 Speaker 1: I'm kind of glad to say I wouldn't rewrite any 529 00:32:37,440 --> 00:32:40,880 Speaker 1: of them. Um, I'm glad to say the immutable part 530 00:32:40,960 --> 00:32:44,280 Speaker 1: is still true. Um. I never really thought about the 531 00:32:44,440 --> 00:32:47,120 Speaker 1: order that they were just kind of I didn't write 532 00:32:47,120 --> 00:32:52,280 Speaker 1: them in any specific order of importance. Um. And so 533 00:32:52,320 --> 00:32:56,000 Speaker 1: I think all seven of them are probably as true 534 00:32:56,040 --> 00:32:59,320 Speaker 1: today as as they were when I wrote them. Um, 535 00:33:00,040 --> 00:33:04,840 Speaker 1: but I'm glad to say I definitely wouldn't rewrite any 536 00:33:04,920 --> 00:33:08,200 Speaker 1: of them. Uh. Let's talk a little bit about your 537 00:33:08,320 --> 00:33:13,520 Speaker 1: role of GMO. What does being on the asset allocation team? 538 00:33:13,560 --> 00:33:17,040 Speaker 1: They're INTEL, so it's it's my role is is a 539 00:33:17,080 --> 00:33:20,760 Speaker 1: research role um and and that's one that I I 540 00:33:20,800 --> 00:33:25,200 Speaker 1: thrive on. M I enjoy and then enjoy is solving puzzles, 541 00:33:25,520 --> 00:33:30,280 Speaker 1: and to me, investing is perhaps the ultimate puzzle. It's 542 00:33:30,320 --> 00:33:34,840 Speaker 1: never exactly the same um And there are always uncertainties, 543 00:33:35,320 --> 00:33:39,760 Speaker 1: and really my job is to sit there and think. 544 00:33:40,320 --> 00:33:42,680 Speaker 1: My my children asked me. My daughter turned around to 545 00:33:42,680 --> 00:33:44,440 Speaker 1: me and said, what do you do for a living, Dad? 546 00:33:44,960 --> 00:33:47,560 Speaker 1: And I said, well, I think, um And she was 547 00:33:47,840 --> 00:33:51,000 Speaker 1: I don't think enormously enamored with that answer, but it 548 00:33:51,120 --> 00:33:54,080 Speaker 1: is essentially what I am paid to do. I'm paid 549 00:33:54,120 --> 00:33:57,080 Speaker 1: to sit here and think about life, the universe and everything, 550 00:33:57,520 --> 00:34:01,040 Speaker 1: um and really understand end as much of that as 551 00:34:01,080 --> 00:34:04,600 Speaker 1: I can and make sure that that we are investing 552 00:34:04,600 --> 00:34:07,480 Speaker 1: in a way that that kind of makes sense. That 553 00:34:07,680 --> 00:34:11,839 Speaker 1: that reference sounded like a Douglas Adams title. So uh 554 00:34:12,040 --> 00:34:14,720 Speaker 1: so let me have you. Let me have you think 555 00:34:14,760 --> 00:34:19,200 Speaker 1: about something that I find a puzzle that I find 556 00:34:19,320 --> 00:34:24,120 Speaker 1: quite fascinating and challenging, And it has to do with valuations. 557 00:34:24,160 --> 00:34:27,600 Speaker 1: And the question is this, the world has changed over 558 00:34:27,640 --> 00:34:31,560 Speaker 1: the past century. Does it make sense to compare valuations 559 00:34:31,560 --> 00:34:35,160 Speaker 1: of today with those in the nineteen thirties and forties, 560 00:34:35,320 --> 00:34:38,920 Speaker 1: or or the nineteen eighties and nineties. How has the 561 00:34:39,080 --> 00:34:43,680 Speaker 1: inherent capital structure of companies, what they need in terms 562 00:34:43,719 --> 00:34:48,720 Speaker 1: of labor and material changed from I don't know, five 563 00:34:48,840 --> 00:34:54,799 Speaker 1: ten decades ago versus today's fast light UH to two 564 00:34:54,880 --> 00:34:59,360 Speaker 1: founders and a laptop and and the Amazon cloud versus 565 00:35:00,000 --> 00:35:04,360 Speaker 1: ons and tons of steel and factories and thousands of employees. 566 00:35:04,600 --> 00:35:09,560 Speaker 1: Do we really have the same valuator valuation metrics today 567 00:35:09,640 --> 00:35:15,560 Speaker 1: that we had early last century. It's an extraordinary good question. 568 00:35:15,640 --> 00:35:19,960 Speaker 1: I think that there is there is another Bend Graham 569 00:35:20,040 --> 00:35:25,120 Speaker 1: quote which is effectively um that the only constant is 570 00:35:25,200 --> 00:35:29,839 Speaker 1: change ah. And it is certainly true, right, And I 571 00:35:29,920 --> 00:35:33,359 Speaker 1: totally understand that when one's comparing long runs of data, 572 00:35:33,440 --> 00:35:37,960 Speaker 1: let's say, looking at a chiller kpe UM in the 573 00:35:38,000 --> 00:35:42,080 Speaker 1: eighties that reflected an environment which was essentially mainly railroads. 574 00:35:42,200 --> 00:35:46,080 Speaker 1: UM today that does not seem like a terribly useful 575 00:35:46,239 --> 00:35:50,640 Speaker 1: proxy for anything of any interest. However, I think it 576 00:35:50,760 --> 00:35:54,040 Speaker 1: is worth pointing out that in the eighties railroads we 577 00:35:54,160 --> 00:35:58,320 Speaker 1: were cutting edge, right. They were the railroad bone booms 578 00:35:58,320 --> 00:36:02,480 Speaker 1: of the eighteen fourties and eighteen seven um were the 579 00:36:02,520 --> 00:36:05,920 Speaker 1: cutting edge of technology. And so I think the stock 580 00:36:05,960 --> 00:36:09,960 Speaker 1: market obviously evolves over time. It's composition evolves over time, 581 00:36:10,680 --> 00:36:14,600 Speaker 1: but it is often with a strong technological bias. And 582 00:36:14,600 --> 00:36:17,960 Speaker 1: there's a wonderful book by a friend of mine called Sanding. 583 00:36:18,360 --> 00:36:19,960 Speaker 1: His name is Sandy there and the book is called 584 00:36:20,000 --> 00:36:23,360 Speaker 1: The Engines that Move Markets. He actually worked as the 585 00:36:23,360 --> 00:36:28,360 Speaker 1: head of research for Templeton a long time ago, UM. 586 00:36:28,480 --> 00:36:32,120 Speaker 1: And in that book he traces all of these waves 587 00:36:32,200 --> 00:36:36,680 Speaker 1: of technological innovation from the railroads through to the telegraphs, 588 00:36:36,719 --> 00:36:41,160 Speaker 1: to the radio, to television, to the automobiles, et cetera, UM. 589 00:36:41,280 --> 00:36:43,000 Speaker 1: And the one thing that they all have in common 590 00:36:43,239 --> 00:36:48,279 Speaker 1: is they start off generating enormous returns. People will then 591 00:36:48,360 --> 00:36:51,440 Speaker 1: drive the prices up to a bubble or something that 592 00:36:51,480 --> 00:36:57,440 Speaker 1: approximates a bubble. There they effectively extrapolate profitability ento prices 593 00:36:57,600 --> 00:37:02,600 Speaker 1: UM and eventually that bubble wines because the gains of 594 00:37:02,680 --> 00:37:07,520 Speaker 1: that technology end up with the consumers, not the producers. Um. 595 00:37:07,560 --> 00:37:10,920 Speaker 1: And to me, that is why I think that we 596 00:37:11,040 --> 00:37:14,320 Speaker 1: get these these kind of historical echoes. And it makes 597 00:37:14,760 --> 00:37:18,840 Speaker 1: some sense to to say, hey, look there are some 598 00:37:19,120 --> 00:37:23,000 Speaker 1: constants evaluation. That isn't to say every valuation metric is perfect. 599 00:37:23,120 --> 00:37:26,080 Speaker 1: It isn't. Price to book is a really good example. 600 00:37:26,400 --> 00:37:30,680 Speaker 1: Price to book gets distorted by things like buy backs um. 601 00:37:31,040 --> 00:37:33,640 Speaker 1: And so you end up with companies with negative book value, 602 00:37:33,640 --> 00:37:39,120 Speaker 1: which is essentially economically meaningless um. And so you have 603 00:37:39,239 --> 00:37:42,600 Speaker 1: to kind of you can't take um these things that 604 00:37:42,680 --> 00:37:46,840 Speaker 1: face value and say hey, look, uh yeah McDonald's is 605 00:37:46,880 --> 00:37:49,440 Speaker 1: trading on a negative book value. Yeah, because it's done 606 00:37:49,440 --> 00:37:52,920 Speaker 1: an enormous amount of buy backs um. And so I 607 00:37:52,920 --> 00:37:56,960 Speaker 1: think you do have to to apply some some thought 608 00:37:57,120 --> 00:37:59,799 Speaker 1: and and Beninker, my boss set to me the other 609 00:37:59,840 --> 00:38:02,279 Speaker 1: day we were having a discussion in a group, and 610 00:38:02,760 --> 00:38:06,359 Speaker 1: he said, we always reserved the right to use our brains. Uh. 611 00:38:06,520 --> 00:38:09,640 Speaker 1: And I think that is a sounder things for advice, 612 00:38:09,680 --> 00:38:12,000 Speaker 1: as I can imagine, we should always reserve the right 613 00:38:12,040 --> 00:38:15,200 Speaker 1: to use our brains. Um. And there will be times 614 00:38:15,280 --> 00:38:18,080 Speaker 1: when you you want to question stuff. The role of 615 00:38:18,080 --> 00:38:21,839 Speaker 1: the stock market itself has changed. The stock market used 616 00:38:21,840 --> 00:38:24,600 Speaker 1: to be a method of finance and companies. That hasn't 617 00:38:24,600 --> 00:38:30,200 Speaker 1: been true since UM Really the midnight UM companies do 618 00:38:30,239 --> 00:38:33,880 Speaker 1: not in general come to the market um to to 619 00:38:33,880 --> 00:38:36,680 Speaker 1: to raise capital and in equities unless the I p O. 620 00:38:36,760 --> 00:38:40,200 Speaker 1: Everybody else doesn't, and so the amount of buybacks far 621 00:38:40,320 --> 00:38:43,440 Speaker 1: outstrips the amount of I p o s, and so 622 00:38:43,520 --> 00:38:46,080 Speaker 1: what we actually see is negative icuants. So there are 623 00:38:46,160 --> 00:38:50,160 Speaker 1: differences that it's important to recognize, and one does have 624 00:38:50,239 --> 00:38:53,760 Speaker 1: to think carefully about the valuation metrics that one chooses 625 00:38:53,800 --> 00:38:56,239 Speaker 1: to use, but I think a lot of them, and 626 00:38:56,480 --> 00:38:59,800 Speaker 1: the higher the aggregate level that the more that makes sense. 627 00:39:00,239 --> 00:39:03,720 Speaker 1: So looking at a Shillo or KP for the aggregate market, 628 00:39:04,000 --> 00:39:05,960 Speaker 1: I think it's a lot more sensible than trying to 629 00:39:06,640 --> 00:39:10,120 Speaker 1: look at Apple or Google Amazon's shillape, which I think 630 00:39:10,200 --> 00:39:13,760 Speaker 1: is pretty meaningless. UM. So I think it does depend 631 00:39:13,800 --> 00:39:18,680 Speaker 1: on on the level of the analysis and the particular 632 00:39:18,760 --> 00:39:23,200 Speaker 1: specifics of the analysis. So using one's brain is highly recommended. 633 00:39:24,360 --> 00:39:26,040 Speaker 1: I can't can't say I argue with any of that. 634 00:39:26,600 --> 00:39:29,600 Speaker 1: Let let me have you use your brain on another 635 00:39:30,719 --> 00:39:33,520 Speaker 1: issue that that I've been and I think a lot 636 00:39:33,600 --> 00:39:37,640 Speaker 1: of people have been perplexed by. And that's the issue 637 00:39:37,920 --> 00:39:43,320 Speaker 1: of negative interest rates at a lot of industrialized nations. 638 00:39:43,880 --> 00:39:47,200 Speaker 1: We we briefly source some short term treasuries go negative. 639 00:39:47,360 --> 00:39:50,680 Speaker 1: United States. What does it mean to see so much 640 00:39:50,719 --> 00:39:54,080 Speaker 1: of the world dabbling with negative interest rates? And are 641 00:39:54,160 --> 00:39:58,799 Speaker 1: we going to see this in the United States? It's 642 00:39:58,840 --> 00:40:02,880 Speaker 1: fascinating right as people central banks from it when they 643 00:40:02,920 --> 00:40:07,040 Speaker 1: take rates negative. I genuinely don't understand what they're thinking. 644 00:40:07,880 --> 00:40:09,760 Speaker 1: I can get what you want to take the rates 645 00:40:09,840 --> 00:40:12,279 Speaker 1: row low if you're a central banker. I do not 646 00:40:12,400 --> 00:40:15,399 Speaker 1: understand negative of interest rates because negative interest rates are 647 00:40:15,480 --> 00:40:19,280 Speaker 1: attacks on banks. Now, don't get me wrong, I'm perfectly 648 00:40:19,280 --> 00:40:24,200 Speaker 1: happy at tax banks. But from a policy response to 649 00:40:24,760 --> 00:40:28,200 Speaker 1: effectively trying to create an economic stimulus, one of the 650 00:40:28,200 --> 00:40:31,040 Speaker 1: things I do remember from economics is that the taxes 651 00:40:31,080 --> 00:40:34,640 Speaker 1: are are a leakage. There are a break on economics, 652 00:40:34,680 --> 00:40:37,640 Speaker 1: not a not a not a stimulus um. And so 653 00:40:37,719 --> 00:40:41,200 Speaker 1: therefore relying on negative interest rates to try and boost 654 00:40:41,239 --> 00:40:45,239 Speaker 1: activity I think is kind of weird. Um. I don't 655 00:40:45,239 --> 00:40:48,680 Speaker 1: think it makes a great deal of economic sense. Um. 656 00:40:48,719 --> 00:40:50,840 Speaker 1: I think it also trying to blows up a lot 657 00:40:50,880 --> 00:40:54,319 Speaker 1: of people's models, because an awful lot of modern day 658 00:40:54,320 --> 00:40:57,920 Speaker 1: asset pricing for the better or worst takes it its 659 00:40:58,000 --> 00:41:00,719 Speaker 1: cue from from the interest rate. It's now. As much 660 00:41:00,760 --> 00:41:04,040 Speaker 1: as I don't think that's particularly sensible, UM, I do 661 00:41:04,080 --> 00:41:06,680 Speaker 1: acknowledge that a lot of people behave that way. UM. 662 00:41:06,719 --> 00:41:08,920 Speaker 1: And it does strike me that the negative interest rate 663 00:41:09,200 --> 00:41:13,200 Speaker 1: could potentially muck up quite a lot of that approach. UM. 664 00:41:13,280 --> 00:41:16,200 Speaker 1: And so I think it's uh, it's an odd policy 665 00:41:17,120 --> 00:41:21,680 Speaker 1: with unknown consequences which I do not think should be 666 00:41:21,719 --> 00:41:25,440 Speaker 1: pursued lightly. UM. As to whether the US is ever 667 00:41:25,480 --> 00:41:29,279 Speaker 1: going to get there, I have absolutely no idea. UM. 668 00:41:29,440 --> 00:41:32,920 Speaker 1: If I if I go back twenty years, I used 669 00:41:32,960 --> 00:41:35,160 Speaker 1: to be one of those people who said our interest 670 00:41:35,239 --> 00:41:38,319 Speaker 1: rates can't go below zero um, because you know, it 671 00:41:38,360 --> 00:41:42,200 Speaker 1: seems so unthinkable. Um. And yet I probably should have 672 00:41:42,280 --> 00:41:43,920 Speaker 1: to go back more than a decade, right, two decades 673 00:41:44,040 --> 00:41:47,280 Speaker 1: for me to have been saying that. Um. But fast 674 00:41:47,320 --> 00:41:50,719 Speaker 1: forward and there we are. We we've seen them, so 675 00:41:51,200 --> 00:41:54,320 Speaker 1: never say never. I guess right, it ain't called the 676 00:41:54,400 --> 00:41:58,520 Speaker 1: zero bound for nothing, Although I guess maybe you so, 677 00:41:58,520 --> 00:42:02,319 Speaker 1: so let me ask let me, let me ask you 678 00:42:02,400 --> 00:42:07,799 Speaker 1: a different policy question. You seem to be somewhat enamored 679 00:42:07,960 --> 00:42:13,759 Speaker 1: of modern monetary theory, which basically says, stop freaking out 680 00:42:13,800 --> 00:42:17,879 Speaker 1: over deficits. If the government issues currency and it's it's 681 00:42:18,040 --> 00:42:21,279 Speaker 1: has control of its own currency and can issue debt 682 00:42:21,360 --> 00:42:24,759 Speaker 1: that people want to buy, deficits, aren't the end of 683 00:42:24,760 --> 00:42:27,960 Speaker 1: the world. Tell us a little bit in this election 684 00:42:28,080 --> 00:42:32,080 Speaker 1: year what you think about modern monetary theory and what 685 00:42:32,120 --> 00:42:36,120 Speaker 1: it means for how we should be assessing how governments 686 00:42:36,520 --> 00:42:41,880 Speaker 1: will be interacting with markets. Yeah, I think n m T. 687 00:42:42,080 --> 00:42:48,040 Speaker 1: Modern monetary theory is UM. That that very um, that 688 00:42:48,040 --> 00:42:51,080 Speaker 1: that label tends to to get people's tackles rising. Right, 689 00:42:51,200 --> 00:42:53,520 Speaker 1: it's um. You know, it doesn't matter whether it's it's 690 00:42:53,560 --> 00:42:55,880 Speaker 1: on the right or the left, and people get very 691 00:42:55,960 --> 00:42:59,640 Speaker 1: upset and very passionate and start throwing Zimbabwe around is 692 00:42:59,719 --> 00:43:02,520 Speaker 1: and the hype of inflation of Venezuela and those sorts 693 00:43:02,520 --> 00:43:05,600 Speaker 1: of things. UM. But actually I think it's that the 694 00:43:05,680 --> 00:43:09,640 Speaker 1: core of what I perceive of monetary Modern monetary theory 695 00:43:10,200 --> 00:43:14,919 Speaker 1: is a descriptive model of how the world actually works. UM. 696 00:43:14,960 --> 00:43:19,680 Speaker 1: And it says that effectively, government don't have to finance 697 00:43:20,080 --> 00:43:22,719 Speaker 1: their their deficits if, as you say, they are what 698 00:43:22,840 --> 00:43:26,520 Speaker 1: we call monetarily sovereign, I they issue bonds in a 699 00:43:26,640 --> 00:43:32,000 Speaker 1: currency which they control. So it is absolutely a description 700 00:43:32,080 --> 00:43:34,440 Speaker 1: of the US, Japan, and the UK. It is absolutely 701 00:43:34,480 --> 00:43:37,880 Speaker 1: not a description of the Eurozone, where the country is 702 00:43:37,920 --> 00:43:42,439 Speaker 1: obviously issue debt in euros which they don't control. That's 703 00:43:42,480 --> 00:43:45,880 Speaker 1: in the hands of the c D. UM. So I 704 00:43:45,920 --> 00:43:49,080 Speaker 1: think there is this this kind of common belief that 705 00:43:49,719 --> 00:43:53,359 Speaker 1: governments are really like households, they have to live within 706 00:43:53,400 --> 00:43:57,080 Speaker 1: their means um and I think that's just fundamentally false 707 00:43:57,200 --> 00:43:59,840 Speaker 1: as a paradigm. And I think when you begin to 708 00:44:00,040 --> 00:44:05,200 Speaker 1: understand the way that government spend and and potentially the 709 00:44:05,200 --> 00:44:09,359 Speaker 1: reason why the money exists, um, it's really exists as 710 00:44:09,440 --> 00:44:13,880 Speaker 1: a form of debt settlement. And that is true pretty 711 00:44:13,920 --> 00:44:16,920 Speaker 1: much as far back as anybody can go. Um. The 712 00:44:18,160 --> 00:44:22,560 Speaker 1: geld is the word for for guilt and obligation, which 713 00:44:22,640 --> 00:44:27,839 Speaker 1: is is the the the the historical form of money 714 00:44:27,960 --> 00:44:30,960 Speaker 1: um and so I think it it's to my mind, 715 00:44:31,560 --> 00:44:36,000 Speaker 1: um m M T is a much more accurate description 716 00:44:36,040 --> 00:44:40,000 Speaker 1: of the way the world works, and therefore understanding how 717 00:44:40,040 --> 00:44:42,759 Speaker 1: the world works, which is ultimately kind of my aim 718 00:44:42,800 --> 00:44:46,080 Speaker 1: in life is goes back to the topic of on earlier. 719 00:44:46,360 --> 00:44:48,400 Speaker 1: I'm paid to sit and think and try and understand 720 00:44:48,440 --> 00:44:51,839 Speaker 1: the world. UM. Well MMT to me, it offers a 721 00:44:52,040 --> 00:44:56,120 Speaker 1: much better framework for understanding the way the world works 722 00:44:56,520 --> 00:45:00,279 Speaker 1: than a lot of other economics. And it does one 723 00:45:00,360 --> 00:45:04,040 Speaker 1: to say that, look, budget deficits are not nearly as 724 00:45:04,120 --> 00:45:08,040 Speaker 1: problematic as people believe. You know, there's a school of 725 00:45:08,080 --> 00:45:10,759 Speaker 1: thought that they lead to incredibly high interest rates. Well, 726 00:45:11,160 --> 00:45:14,080 Speaker 1: just look at the evidence. That's not the case right now, 727 00:45:14,080 --> 00:45:16,239 Speaker 1: And it hasn't been the case in Japan for a 728 00:45:16,360 --> 00:45:19,200 Speaker 1: very very long time, where they've run very low interest 729 00:45:19,360 --> 00:45:23,080 Speaker 1: rates and very big government deficits, and then quite rightly 730 00:45:23,400 --> 00:45:26,880 Speaker 1: they've had to do that, but it's certainly those deficits 731 00:45:26,920 --> 00:45:30,239 Speaker 1: haven't led to high interest rates. UM. Then you get 732 00:45:30,239 --> 00:45:33,880 Speaker 1: people turning around and saying, oh, well, printing money to 733 00:45:33,880 --> 00:45:37,000 Speaker 1: the finance budget deficits as inflationary, and you're like, really, 734 00:45:37,680 --> 00:45:41,040 Speaker 1: where's the evidence for that. Um. First of all, governments 735 00:45:41,400 --> 00:45:45,720 Speaker 1: don't actually worry about printing money, is how they've always acted. 736 00:45:46,320 --> 00:45:49,360 Speaker 1: You have to print money in order to spend it, um, 737 00:45:49,440 --> 00:45:51,520 Speaker 1: and to get it into circulation before people can even 738 00:45:51,520 --> 00:45:55,480 Speaker 1: pay their taxes. UM. So there's kind of a whole 739 00:45:55,560 --> 00:45:59,520 Speaker 1: series of myths that people have UM that are very 740 00:45:59,600 --> 00:46:03,719 Speaker 1: much caught up with the analogy of governments and households. 741 00:46:03,719 --> 00:46:07,520 Speaker 1: And it's certainly true for households they cannot live sustainably 742 00:46:08,080 --> 00:46:12,000 Speaker 1: beyond their means, but it is not the case for government. Um. 743 00:46:12,440 --> 00:46:15,440 Speaker 1: They can. They can as long as they meet the 744 00:46:15,480 --> 00:46:19,279 Speaker 1: criteria we we talked about earlier, that they are absolutely 745 00:46:19,280 --> 00:46:22,280 Speaker 1: capable of going out and spending. It's it's very interesting 746 00:46:22,360 --> 00:46:26,080 Speaker 1: that today we see a much broader acceptance of that 747 00:46:26,880 --> 00:46:30,279 Speaker 1: in the response to the various corona outbreaks around the 748 00:46:30,320 --> 00:46:33,719 Speaker 1: world and here in the UK, where government is underwriting 749 00:46:34,040 --> 00:46:37,560 Speaker 1: percent of people's wages um and and that would have 750 00:46:37,600 --> 00:46:41,880 Speaker 1: been unthinkable. Uh. You know, we saw the conservative government, 751 00:46:42,560 --> 00:46:45,799 Speaker 1: right we we saw what happened post financial crisis when 752 00:46:45,840 --> 00:46:50,439 Speaker 1: the Wistarians were in control and we're more focused about 753 00:46:50,520 --> 00:46:55,040 Speaker 1: balancing budgets than helping the economy recover. That didn't end 754 00:46:55,120 --> 00:46:58,600 Speaker 1: especially well in the UK or the United States? Did it? 755 00:47:00,160 --> 00:47:03,040 Speaker 1: Not exactly right? In the US you had the slowest 756 00:47:03,040 --> 00:47:06,160 Speaker 1: and weakest recovery ever um and in the UK it 757 00:47:06,239 --> 00:47:10,240 Speaker 1: was a total disaster. We we essentially didn't have any recovery. 758 00:47:10,400 --> 00:47:13,600 Speaker 1: Um and so the the Austerians and the kind of 759 00:47:13,640 --> 00:47:17,080 Speaker 1: advocates of sound finance, which is the balance you must 760 00:47:17,120 --> 00:47:23,200 Speaker 1: balance the budget, etcetera. I think renolds with sensible evidence 761 00:47:23,280 --> 00:47:26,840 Speaker 1: based economics, and I'm a big fan of evidence based anything, 762 00:47:26,880 --> 00:47:31,400 Speaker 1: evidence based medicine, evidence based investing, evidence based economics. One 763 00:47:31,440 --> 00:47:36,480 Speaker 1: should always mark one's beliefs to market. Check the real world, 764 00:47:36,560 --> 00:47:40,479 Speaker 1: see how it looks. So last quote of yours before 765 00:47:40,520 --> 00:47:43,600 Speaker 1: we get to our speed rounds, and I want you 766 00:47:43,680 --> 00:47:48,520 Speaker 1: to expound on this. Don't equate happiness with money. Materialistic 767 00:47:48,600 --> 00:47:56,600 Speaker 1: pursuits are not a path to sustainable happiness. Explain. So. Yeah, 768 00:47:56,600 --> 00:47:59,200 Speaker 1: a long time ago, UM, I wrote a couple of 769 00:47:59,200 --> 00:48:02,640 Speaker 1: notes on on how to be happy. UM. And then 770 00:48:02,760 --> 00:48:05,640 Speaker 1: it just struck me as something that I spent a 771 00:48:05,680 --> 00:48:08,920 Speaker 1: long time working at investment branks at that stage, UM, 772 00:48:09,000 --> 00:48:12,200 Speaker 1: and I kind of was slightly worried that I looked 773 00:48:12,239 --> 00:48:14,360 Speaker 1: into people's eyes and it was like staring into the 774 00:48:14,440 --> 00:48:16,400 Speaker 1: zombie's eyes that they have. The lights were on, but 775 00:48:16,440 --> 00:48:20,400 Speaker 1: nobody was home, um, and they seemed dead on the inside. 776 00:48:20,560 --> 00:48:25,720 Speaker 1: And I really couldn't fathom how that could happen. UM. 777 00:48:25,760 --> 00:48:29,080 Speaker 1: And I began to do some research on on happiness 778 00:48:29,160 --> 00:48:32,279 Speaker 1: and the science of happiness. UH, and it turns out 779 00:48:32,280 --> 00:48:34,040 Speaker 1: there there are a number of people who have thought 780 00:48:34,040 --> 00:48:38,160 Speaker 1: about happiness UM. And one of the big difficulties is 781 00:48:38,200 --> 00:48:43,840 Speaker 1: that people tend to associate happiness with with wealth or 782 00:48:44,000 --> 00:48:46,200 Speaker 1: or income. And don't get me wrong, a certain level 783 00:48:46,200 --> 00:48:49,960 Speaker 1: of income is necessary, UM, But beyond that level of 784 00:48:50,360 --> 00:48:54,239 Speaker 1: kind of that threshold, it really isn't obvious that the 785 00:48:54,360 --> 00:48:58,840 Speaker 1: greater increases in wealth and income lead people to be happy. UM. 786 00:48:59,200 --> 00:49:02,160 Speaker 1: For the vast majority of people trapped in poverty, of course, 787 00:49:02,680 --> 00:49:05,560 Speaker 1: an improvement in their income would help them. But for 788 00:49:06,280 --> 00:49:09,600 Speaker 1: let's say, you know, the top uh ten percent of 789 00:49:09,600 --> 00:49:14,480 Speaker 1: the population, UM, increasing their material um worth is it's 790 00:49:14,520 --> 00:49:16,240 Speaker 1: probably not going to have a great deal of impact 791 00:49:16,280 --> 00:49:19,359 Speaker 1: on on their happiness. And I think that the problem 792 00:49:19,400 --> 00:49:22,319 Speaker 1: a lot of people have is UM what we call 793 00:49:22,840 --> 00:49:26,320 Speaker 1: headon hedonic adaptation, which is you get used to stuff 794 00:49:26,480 --> 00:49:30,080 Speaker 1: very quickly. UM. So you get a new car and 795 00:49:30,200 --> 00:49:34,000 Speaker 1: you really love it and it feels great, but within six, three, 796 00:49:34,440 --> 00:49:37,719 Speaker 1: twelve months, whatever it might be, it's just your car. Right, 797 00:49:37,800 --> 00:49:39,480 Speaker 1: your kids are in the back, they've scuffed up the 798 00:49:39,520 --> 00:49:41,920 Speaker 1: back seats, they've put their muddy boots on it, the 799 00:49:41,960 --> 00:49:43,840 Speaker 1: dog's been in the boot, and then it's really not 800 00:49:43,920 --> 00:49:46,880 Speaker 1: a new car, and it's devalued quite a lot in 801 00:49:46,880 --> 00:49:50,800 Speaker 1: your own eyes, let alone. It's it's economic worth um. 802 00:49:50,840 --> 00:49:53,279 Speaker 1: And so we we were on this what they call 803 00:49:53,360 --> 00:49:56,880 Speaker 1: the hedonic treadmill UM, that we we adapt very fast 804 00:49:57,160 --> 00:50:02,600 Speaker 1: to our environment, on our material all ownership. UM. And 805 00:50:02,800 --> 00:50:04,839 Speaker 1: this rang through with me was when I was young, 806 00:50:04,880 --> 00:50:08,000 Speaker 1: I spent a long time traveling the world, and some 807 00:50:08,080 --> 00:50:11,040 Speaker 1: of the poorest people were amongst the happiest I've ever met. 808 00:50:11,200 --> 00:50:14,239 Speaker 1: I was traveling in Thailand and there were people who 809 00:50:14,360 --> 00:50:17,520 Speaker 1: essentially had very very little, and yet they were absolutely 810 00:50:18,160 --> 00:50:20,279 Speaker 1: some of the nicest, friendliest people I've ever met, and 811 00:50:20,280 --> 00:50:22,279 Speaker 1: they were willing to share what little they had with me. 812 00:50:22,640 --> 00:50:26,200 Speaker 1: A stranger is just traveling through their village. UM. And 813 00:50:26,239 --> 00:50:30,120 Speaker 1: I started reading both science and then the dial Arma 814 00:50:30,800 --> 00:50:33,440 Speaker 1: on on happiness, and the dial Arma is an interesting 815 00:50:33,440 --> 00:50:36,799 Speaker 1: man because he very obviously a very spiritual individual, but 816 00:50:36,880 --> 00:50:40,520 Speaker 1: one who is absolutely certain that if science proved something 817 00:50:40,680 --> 00:50:42,800 Speaker 1: that he believes to be wrong, that he will update 818 00:50:42,880 --> 00:50:47,200 Speaker 1: his beliefs UM. And there I found a lot of 819 00:50:47,200 --> 00:50:51,600 Speaker 1: wisdom about UM. The way to be happy is not 820 00:50:52,280 --> 00:50:58,239 Speaker 1: surrounding oneself with materialistic possessions, but experiences. And for me 821 00:50:58,320 --> 00:51:00,439 Speaker 1: that that really rings true. And I think too many 822 00:51:00,480 --> 00:51:05,120 Speaker 1: people focused far too much on on money, UM and 823 00:51:05,239 --> 00:51:09,279 Speaker 1: materialistic pursuits rather than thinking about what might make them, 824 00:51:09,560 --> 00:51:14,320 Speaker 1: UM a happier individual. Tom Gilovich, I know, has written 825 00:51:14,360 --> 00:51:19,000 Speaker 1: some research that echoes exactly what you're saying. Experiences are 826 00:51:19,040 --> 00:51:23,600 Speaker 1: far more lasting and social than mirror objects. So I 827 00:51:23,640 --> 00:51:26,120 Speaker 1: know I only have you for a limited yep, I 828 00:51:26,160 --> 00:51:28,000 Speaker 1: know I only have you for a limited amount of time. 829 00:51:28,480 --> 00:51:31,640 Speaker 1: Let's jump to our speed round. Um. Normally these are 830 00:51:31,680 --> 00:51:35,239 Speaker 1: ten questions, but given our circumstances, we're going to keep 831 00:51:35,280 --> 00:51:39,280 Speaker 1: them to five. Uh. Tell us what you are watching today? 832 00:51:39,320 --> 00:51:43,080 Speaker 1: What are you streaming on Netflix or any other service? 833 00:51:43,120 --> 00:51:47,560 Speaker 1: What are you podcasting or listening to? I am something 834 00:51:47,600 --> 00:51:50,879 Speaker 1: of a luddite. I confess I'm probably much more likely 835 00:51:50,920 --> 00:51:52,839 Speaker 1: to be found reading a book than that I am 836 00:51:52,880 --> 00:51:56,360 Speaker 1: watching television. But I have to say on Netflix, I 837 00:51:56,440 --> 00:51:59,800 Speaker 1: did thoroughly enjoy Stranger Things. That to me was a 838 00:52:00,840 --> 00:52:05,720 Speaker 1: very well made and entertaining program. If you like Stranger Things, 839 00:52:05,800 --> 00:52:11,680 Speaker 1: let me recommend Electric Dreams. I think that's Amazon Prime, UM, 840 00:52:11,680 --> 00:52:13,840 Speaker 1: but it's a similar concept. We'll see, We'll see if 841 00:52:13,880 --> 00:52:19,840 Speaker 1: you like that. Early mentors Early mentors who influenced your career. 842 00:52:21,640 --> 00:52:25,200 Speaker 1: Albert Edwards above and beyond all else. My my we 843 00:52:25,280 --> 00:52:28,600 Speaker 1: spent scotsh nearly eighteen years working together, I think, um 844 00:52:28,680 --> 00:52:32,000 Speaker 1: and he had a huge impact on me from when 845 00:52:32,000 --> 00:52:34,880 Speaker 1: I was joined the team he was on when I 846 00:52:35,000 --> 00:52:38,799 Speaker 1: was a junior economists way back and all those years ago. UM, 847 00:52:38,920 --> 00:52:43,040 Speaker 1: I'm watching the way that Albert's worked and thought really 848 00:52:43,120 --> 00:52:47,080 Speaker 1: did define the way that today I work and think. 849 00:52:48,600 --> 00:52:51,680 Speaker 1: Quite interesting. You mentioned you're spending a lot of time reading. 850 00:52:51,760 --> 00:52:54,840 Speaker 1: Tell us some of your favorite books, fiction, non fiction, 851 00:52:55,400 --> 00:52:58,960 Speaker 1: finance or anything else. What have you been enjoying and 852 00:52:59,000 --> 00:53:02,600 Speaker 1: what are you looking forward to reading. I try to 853 00:53:02,640 --> 00:53:05,880 Speaker 1: read fairly widely. Um. I think one can often find 854 00:53:05,920 --> 00:53:09,799 Speaker 1: insights into all sorts of problems um from from very 855 00:53:09,800 --> 00:53:14,000 Speaker 1: different perspectives. But I think my favorite investment book is 856 00:53:14,040 --> 00:53:18,040 Speaker 1: probably SETH Carman's Marginal Safety, which we've we've mentioned earlier. 857 00:53:18,200 --> 00:53:21,640 Speaker 1: I think there is a tremendous amount of value in there. 858 00:53:22,200 --> 00:53:24,960 Speaker 1: Outside of that, I'm currently reading a book on biomechanics, 859 00:53:25,480 --> 00:53:29,279 Speaker 1: um I. I my big passion outside investing is is taekwondo, 860 00:53:29,840 --> 00:53:32,759 Speaker 1: and I was fortunate enough last week to take part 861 00:53:32,760 --> 00:53:36,240 Speaker 1: in the seminar with one of the Russian grand masters, 862 00:53:36,960 --> 00:53:41,520 Speaker 1: Grandmaster Kang and he's a big exponent of of understanding 863 00:53:41,560 --> 00:53:45,920 Speaker 1: biomechanics to to improve our taekwondo performance. And so I'm 864 00:53:45,960 --> 00:53:48,960 Speaker 1: trying to understand how physics applies to the human body 865 00:53:49,080 --> 00:53:52,359 Speaker 1: right now. Huh, give us one other. What else are 866 00:53:52,360 --> 00:53:55,960 Speaker 1: you reading and enjoying? Um? What else am I reading? Enjoy? 867 00:53:56,040 --> 00:53:59,960 Speaker 1: I actually enjoy? Really my guilty pleasure is airport thriller, 868 00:54:00,000 --> 00:54:04,000 Speaker 1: as I will read almost any airport thriller when I'm 869 00:54:04,000 --> 00:54:06,760 Speaker 1: stuck on a plane. I will quite happily dig into 870 00:54:06,800 --> 00:54:10,239 Speaker 1: pretty much any thriller. Um. So the lower brower, the better. 871 00:54:12,040 --> 00:54:17,160 Speaker 1: Give us an author's name of these low brow thrillersh me, 872 00:54:17,440 --> 00:54:20,759 Speaker 1: I I kind of I do like Mark Billingham. He 873 00:54:21,080 --> 00:54:25,680 Speaker 1: writes a series of detective novels that I find most enjoyable. 874 00:54:27,360 --> 00:54:29,880 Speaker 1: What sort of advice would you give a recent college 875 00:54:29,880 --> 00:54:33,200 Speaker 1: grad who was thinking about going into the investment field. 876 00:54:34,520 --> 00:54:42,200 Speaker 1: Don't do it, Go and do something future with your life. No. 877 00:54:42,400 --> 00:54:46,880 Speaker 1: I look, I think that the investing needs bright, sensible people. 878 00:54:47,280 --> 00:54:49,600 Speaker 1: But I kind of think there's an awful lot else 879 00:54:49,680 --> 00:54:52,719 Speaker 1: that people we need in this world, and investing is 880 00:54:53,160 --> 00:54:56,759 Speaker 1: probably not the highest and best pursuit. Um. I think 881 00:54:56,840 --> 00:54:59,480 Speaker 1: far too many people who go into investing are kind 882 00:54:59,480 --> 00:55:02,879 Speaker 1: of linded by the dollars um and so I think, 883 00:55:03,480 --> 00:55:05,600 Speaker 1: go and become a doctor or an engineer or something 884 00:55:05,640 --> 00:55:10,920 Speaker 1: that might actually help humanity. And our final question, what 885 00:55:11,000 --> 00:55:14,720 Speaker 1: do you know about your chosen fields of investing today 886 00:55:15,200 --> 00:55:17,440 Speaker 1: that you wish you knew thirty years ago when you 887 00:55:17,480 --> 00:55:21,920 Speaker 1: were first getting started. Oh man, that's such a good question, 888 00:55:22,000 --> 00:55:25,520 Speaker 1: I think. Um, I wish I knew not to be 889 00:55:25,600 --> 00:55:30,279 Speaker 1: so confident. Um My. My my very first job was 890 00:55:30,320 --> 00:55:34,840 Speaker 1: as an ex strategist and I had an incredibly humbling 891 00:55:34,920 --> 00:55:38,520 Speaker 1: lesson where I UM. I recommended a position that was 892 00:55:38,560 --> 00:55:42,120 Speaker 1: short the Swedish corona um based on some very bad 893 00:55:42,120 --> 00:55:45,560 Speaker 1: economic analysis that I've done. It turned out eventually to 894 00:55:45,600 --> 00:55:47,759 Speaker 1: be correct. But in the first week that we had 895 00:55:47,760 --> 00:55:50,759 Speaker 1: that trade on UM, the head of the four ex 896 00:55:50,840 --> 00:55:53,880 Speaker 1: division told me we lost more money in that on 897 00:55:53,960 --> 00:55:56,520 Speaker 1: that trade than I made in an entire year. Now 898 00:55:56,520 --> 00:55:58,280 Speaker 1: I was a graduate, so I didn't make a huge amount, 899 00:55:58,440 --> 00:56:01,480 Speaker 1: but it was an incredibly humbling experience. Uh. And I 900 00:56:01,520 --> 00:56:04,680 Speaker 1: think the older, again, the less certain I am about 901 00:56:04,719 --> 00:56:07,920 Speaker 1: almost everything, um, which is I'm not sure it's a 902 00:56:07,920 --> 00:56:10,520 Speaker 1: good thing or not, but certainly I wish the younger 903 00:56:10,560 --> 00:56:14,320 Speaker 1: me had not been quite as arrogant and um confident 904 00:56:14,640 --> 00:56:18,200 Speaker 1: as as I was. We have been speaking with James Montier. 905 00:56:18,719 --> 00:56:22,000 Speaker 1: He is the He is a member of the GMO 906 00:56:22,120 --> 00:56:26,720 Speaker 1: Asset Allocation Team. He is the author of such books 907 00:56:26,840 --> 00:56:32,320 Speaker 1: as Behavioral Investing, A Practitioner's Guide to Implying Behavioral Finance, 908 00:56:32,640 --> 00:56:36,680 Speaker 1: The Little Book of Behavioral Investing, and Value Investing, Tools 909 00:56:36,760 --> 00:56:41,480 Speaker 1: and Techniques for Intelligent Management. If you enjoy this conversation, well, 910 00:56:41,520 --> 00:56:43,040 Speaker 1: be sure to look up an Inch or down an 911 00:56:43,040 --> 00:56:45,719 Speaker 1: Inch on Apple iTunes and you could see any of 912 00:56:45,760 --> 00:56:49,400 Speaker 1: the prior three hundred such conversations we've had before. We 913 00:56:49,520 --> 00:56:52,879 Speaker 1: love your comments, feedback and suggestions right to us at 914 00:56:53,480 --> 00:56:56,520 Speaker 1: m IB podcast at Bloomberg dot net. I would be 915 00:56:56,560 --> 00:56:58,680 Speaker 1: remiss if I did not thank the crack staff that 916 00:56:58,719 --> 00:57:02,280 Speaker 1: helps us put together these conversations each week. Charlie Volmer 917 00:57:02,360 --> 00:57:05,520 Speaker 1: is my audio engineer. Michael Batnick is my head of research. 918 00:57:05,920 --> 00:57:09,799 Speaker 1: Attica val Bron is our project manager. Michael Boyle is 919 00:57:09,840 --> 00:57:14,200 Speaker 1: my producer. I'm Barry Retolds. You've been listening to Masters 920 00:57:14,200 --> 00:57:16,160 Speaker 1: in Business on Bloomberg Radio