WEBVTT - James van Geelen on Thematic Investing Right Now 0:00:03.120 --> 0:00:18.440 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:20.079 --> 0:00:23.400 Hello and welcome to another episode of the All Thoughts podcast. 0:00:23.520 --> 0:00:24.920 I'm Tracy Alloway. 0:00:24.640 --> 0:00:26.360 And I'm Joe. Why isn't thal Joe? 0:00:26.440 --> 0:00:28.760 Do you think it's fair to say that things seem 0:00:29.040 --> 0:00:30.760 a little uncertain at the moment? 0:00:31.680 --> 0:00:32.080 Well? 0:00:32.400 --> 0:00:34.400 Yes, Well what do you have in mind? 0:00:34.720 --> 0:00:35.040 Okay? 0:00:35.320 --> 0:00:37.959 Well, of course yes, and big things going on. 0:00:38.320 --> 0:00:43.680 So I was thinking particularly of three things. So number 0:00:43.680 --> 0:00:48.800 one is obviously US presidential elections, and things seem very 0:00:48.840 --> 0:00:51.760 uncertain on that front. We're not sure who's going to 0:00:51.800 --> 0:00:54.760 win in November. And more than that, at this point, 0:00:54.800 --> 0:00:58.040 I think we're not entirely sure who the Democratic candidate 0:00:58.320 --> 0:01:01.760 is going to be. There's uncertainty there. But then secondly, 0:01:02.520 --> 0:01:05.920 there's uncertainty about the direction of the stock market in 0:01:06.040 --> 0:01:08.840 a number of ways. So we have seen some of 0:01:08.840 --> 0:01:12.560 the error kicked out of the tires of big outperformers 0:01:12.560 --> 0:01:15.800 from earlier in the year. I'm thinking specifically of Nvidia 0:01:15.840 --> 0:01:18.920 and some of those big tech companies. They've come down recently. 0:01:19.319 --> 0:01:22.840 There are people talking about how AI is the future 0:01:23.200 --> 0:01:26.479 of industry, but there are also people talking about how 0:01:26.760 --> 0:01:29.679 AI is a massive bubble, and I think Goldman Sachs 0:01:29.720 --> 0:01:33.520 had that analysis out earlier this week talking about how 0:01:33.560 --> 0:01:36.520 there was no actual use case for AI, which seems 0:01:36.560 --> 0:01:39.039 to be the polar opposite of some of the enthusiasm 0:01:39.080 --> 0:01:42.120 in the market. And then thirdly, we still have that 0:01:42.240 --> 0:01:45.959 underlying economic tension where it seems like there are some 0:01:46.120 --> 0:01:48.880 signs of a slowdown, but the Fed so far is 0:01:49.000 --> 0:01:53.280 kind of resisting any pressure to cut interest rates. So 0:01:53.720 --> 0:01:55.640 lots of things up in the air at the moment. 0:01:56.160 --> 0:01:59.720 Yeah, I mean, like you said, uncertainty is always with 0:02:00.320 --> 0:02:03.840 in the market, but there are some really big questions. 0:02:03.600 --> 0:02:06.200 About things that are going on. The AI one in. 0:02:06.120 --> 0:02:09.120 Particular, because a lot of people, as you notice, like wow, 0:02:09.120 --> 0:02:10.959 they're really spending a lot of money on all this 0:02:11.120 --> 0:02:14.959 chips and electricity, and the payoff is ambiguous, and. 0:02:14.840 --> 0:02:16.360 So there are a lot of questions about that. 0:02:16.919 --> 0:02:20.920 Clearly, the political landscape, although you know, on questions related 0:02:20.960 --> 0:02:23.120 to the market. Look, the stock market's done really well 0:02:23.160 --> 0:02:26.320 under Joe Biden, it did really well under President Trump, 0:02:26.400 --> 0:02:29.000 seems to mostly go up over time. But yes, the 0:02:29.080 --> 0:02:31.320 age of uncertainty, I would not disagree with you. 0:02:31.720 --> 0:02:34.320 So all of this had me thinking, you know, if 0:02:34.400 --> 0:02:38.440 you're an investor, and particularly a thematic investor. At the moment, 0:02:38.480 --> 0:02:41.120 I think you're facing some tough choices because it's not 0:02:41.240 --> 0:02:45.280 just a range of uncertainties. In some respects, it's like 0:02:45.560 --> 0:02:49.600 polar opposite outcomes. You know, either you get Trump and 0:02:49.680 --> 0:02:51.840 everything that comes with it, or you get Biden and 0:02:51.880 --> 0:02:54.600 everything that comes with that, and some of that is 0:02:54.760 --> 0:02:56.200 very different totally. 0:02:56.240 --> 0:02:58.120 Well, the other thing that I've been thinking about in 0:02:58.360 --> 0:03:02.120 the AI conversation really has driven this home, which is 0:03:02.160 --> 0:03:05.640 that if you're a discretionary investor, now me, I'm just 0:03:05.720 --> 0:03:08.120 spy and die all the way. So I don't have 0:03:08.200 --> 0:03:10.080 to think about all this stuff because I own Nvidia 0:03:10.520 --> 0:03:13.520 and through my S and P five hundred index fund. 0:03:13.600 --> 0:03:14.160 But if in. 0:03:14.160 --> 0:03:16.760 Nvidia falls out of favor and something else rises, well 0:03:16.800 --> 0:03:18.560 I'll have that too, So I'm spy and die. But 0:03:18.600 --> 0:03:20.560 I understand that some people have to like beat the 0:03:20.600 --> 0:03:24.160 benchmark or beat the index, or justify why someone else 0:03:24.200 --> 0:03:27.840 would pay them fees to invest money on their behalf. 0:03:28.360 --> 0:03:31.040 Then of course you really have to get the call correct, 0:03:31.080 --> 0:03:33.760 because the only way that you beat the market over 0:03:33.840 --> 0:03:35.560 this year or last year is if you got the 0:03:35.600 --> 0:03:38.000 AI call, and if you weren't heavy on Nvidia or 0:03:38.080 --> 0:03:41.120 some of these other names. You almost certainly did not 0:03:41.480 --> 0:03:44.680 justify someone giving paying you money to invest, and so 0:03:45.160 --> 0:03:48.440 these are really tough questions for investors who have to 0:03:48.520 --> 0:03:52.480 like do well so to speak relatively to answer yes. 0:03:52.760 --> 0:03:54.760 So I'm very pleased to say that we have the 0:03:54.800 --> 0:03:58.160 perfect guest we are going to bring back on, James 0:03:58.240 --> 0:04:00.480 van Gielan. He is, of course the fault owner of 0:04:00.520 --> 0:04:03.880 Satrini Research. We spoke to him last year about one 0:04:03.920 --> 0:04:06.720 of his big investment themes, which at the time was 0:04:06.720 --> 0:04:10.960 ozembic and the associated GLP one weight loss drugs. That 0:04:11.160 --> 0:04:13.520 was a huge winner in the months since. We're going 0:04:13.600 --> 0:04:15.640 to get a handle on what he's looking at now 0:04:15.680 --> 0:04:19.520 and also his thought process for developing new investment themes 0:04:19.560 --> 0:04:21.960 at a time when a lot of things seem to 0:04:21.960 --> 0:04:24.960 be very uncertain. So James, thanks so much for coming 0:04:24.960 --> 0:04:25.760 back on all thoughts. 0:04:25.800 --> 0:04:26.719 Thanks for having me back. 0:04:27.200 --> 0:04:31.400 What are you looking at nowadays? To start with the 0:04:31.440 --> 0:04:33.040 easy question, Yeah. 0:04:32.720 --> 0:04:36.640 Well, you know, AI obviously is a huge theme in 0:04:36.720 --> 0:04:38.600 the market, and I think part of it, Yeah, have 0:04:38.640 --> 0:04:43.719 you really Yeah, it's this little thing. But I think 0:04:43.760 --> 0:04:49.239 that the most important way to basically track this theme 0:04:49.520 --> 0:04:53.560 is it's one of those technologically innovation driven kind of themes. 0:04:53.600 --> 0:04:56.320 And the way that I viewed thematic investing is along 0:04:56.400 --> 0:05:01.360 this spectrum of you have disruption or continuation, and then 0:05:01.400 --> 0:05:04.039 you have macro drivers or micro drivers. And I'm not 0:05:04.160 --> 0:05:08.039 talking about necessarily macro and the sense of macroeconomics, but 0:05:08.120 --> 0:05:12.919 you know, demographic shifts, even like consumer attitudes, the overton 0:05:13.000 --> 0:05:17.760 windows shifting, just big things changing versus big things staying 0:05:17.800 --> 0:05:20.720 the same. So over the past twelve months, you know, 0:05:21.320 --> 0:05:24.640 there have been probably ten or twelve themes that I 0:05:24.680 --> 0:05:28.479 think have really made themselves down in the market and 0:05:28.520 --> 0:05:32.840 the way that's as it's moved, and right now, there 0:05:32.880 --> 0:05:36.479 have been a few that I've probably overstayed my welcoming. 0:05:36.680 --> 0:05:38.560 I think that some of them are getting a little 0:05:38.600 --> 0:05:39.719 bit frothy. 0:05:39.880 --> 0:05:42.760 And you were early to AI, yeah. 0:05:42.440 --> 0:05:46.600 Yeah, and that's one of the risks of doing this 0:05:46.680 --> 0:05:49.880 kind of investing. You know, there's a great quote from 0:05:50.520 --> 0:05:53.920 Robert Schiller. Nobody has ever made a decision based on 0:05:53.960 --> 0:05:56.120 a number. They always need a story. I don't know 0:05:56.120 --> 0:05:58.479 if that's the exact quote, but another one of my 0:05:58.480 --> 0:06:03.800 favorites is Kyle Harrison said that price is a number 0:06:03.839 --> 0:06:07.359 today multiplied by a story tomorrow. And the way that 0:06:07.400 --> 0:06:10.480 I ve be investing is it's always going to prioritize 0:06:10.520 --> 0:06:13.440 a good story and a good narrative. And that's what 0:06:13.680 --> 0:06:16.640 has the making of a theme, because you need people 0:06:16.680 --> 0:06:20.119 to make the decision to execute a trade and move price, 0:06:20.160 --> 0:06:22.720 and then you also need on the other side something 0:06:22.760 --> 0:06:26.599 to actually happen in the real economy. And as far 0:06:26.680 --> 0:06:30.919 as artificial intelligence, this kind of fast moving innovative theme 0:06:30.960 --> 0:06:34.000 that we don't really you know, you can say what 0:06:34.080 --> 0:06:36.719 is AI going to look like five years out and 0:06:37.480 --> 0:06:40.880 you'll get five different answers from five different people. And 0:06:42.160 --> 0:06:45.279 I started from a place of you know, which became 0:06:45.560 --> 0:06:48.440 consensus very quickly with the picks and shovels, right, and 0:06:48.480 --> 0:06:50.279 then the picks and shovels of the picks and shovels, 0:06:50.279 --> 0:06:54.840 and then you get this thing where you know, during 0:06:54.839 --> 0:06:56.800 the gold Rush, it wasn't just everyone showing up to 0:06:56.839 --> 0:07:01.080 sell picks and shovels, just everyone waiting there. So we 0:07:01.160 --> 0:07:05.120 have to kind of look now for this controversial thing 0:07:05.200 --> 0:07:08.880 of does AI have use cases? And I think it's 0:07:08.880 --> 0:07:10.760 pretty clear that it does if you're looking for it. 0:07:11.680 --> 0:07:14.360 But in terms of like monitoring the way that it's 0:07:14.360 --> 0:07:18.960 going to progress. I think the biggest component here is 0:07:19.040 --> 0:07:21.800 going to be going from B to B to B 0:07:21.840 --> 0:07:27.360 two C. And what I said about two months ago 0:07:27.480 --> 0:07:29.679 was that the company that was going to make this 0:07:29.960 --> 0:07:33.720 really happen, it's not going to be Microsoft, you know 0:07:33.800 --> 0:07:36.600 with Chat, GBT and open AI. I think it's going 0:07:36.640 --> 0:07:40.920 to be Apple. And you know, if any company can 0:07:40.920 --> 0:07:43.000 get it done, it's going to be Apple. And you 0:07:43.120 --> 0:07:48.440 have this kind of dynamic where you need something to 0:07:48.600 --> 0:07:53.880 happen that forces people to use it. Right. It's kind 0:07:53.880 --> 0:07:57.440 of like like Facebook, right, or social media in general, 0:07:58.080 --> 0:08:01.840 where you know there was only so long you could 0:08:01.840 --> 0:08:07.080 go without being connected to everything and everyone. And Apple 0:08:07.600 --> 0:08:10.640 is you know, have you ever texted someone like, Hey, 0:08:10.680 --> 0:08:13.000 I'm coming over and then you get in the car 0:08:13.600 --> 0:08:16.200 and if it connects the car play, it'll give you 0:08:16.200 --> 0:08:19.720 a notification that says, like, you know, directions to Joe's house. 0:08:19.840 --> 0:08:20.720 Yeah. 0:08:21.160 --> 0:08:24.880 Your phone knows everything about you, right, And your phone 0:08:25.800 --> 0:08:27.960 knows who you are, it knows what you're doing, it 0:08:28.000 --> 0:08:29.920 knows what you want to do, it knows who your 0:08:29.920 --> 0:08:36.960 mom is. And that information combined with Apple's trust in 0:08:37.000 --> 0:08:41.800 the consumer, trust and the idea that they place of 0:08:41.840 --> 0:08:45.199 a high premium on privacy. You can't have this AI 0:08:45.240 --> 0:08:48.720 assistant that knows everything about you if you think that 0:08:48.760 --> 0:08:50.680 it's going to be stored on a server in Kubertino. 0:08:51.600 --> 0:08:54.080 It needs to be on your phone. So the next 0:08:54.120 --> 0:08:59.080 thing is how do we start having these big models 0:08:59.120 --> 0:09:02.360 that you know that are in these very big data 0:09:02.360 --> 0:09:04.640 centers and you know all this CAPEX that's spent on that. 0:09:05.440 --> 0:09:08.000 Now we have to just like every other technological trend, 0:09:08.000 --> 0:09:10.040 we have to miniaturize it, right, and we have to 0:09:10.240 --> 0:09:13.640 basically have your phone doing inference, you know, sending to 0:09:13.640 --> 0:09:15.360 those models, but also these smaller models. 0:09:15.600 --> 0:09:18.720 Can I push back on that real quickly because I've 0:09:18.760 --> 0:09:22.000 given up every piece of information about my entire life 0:09:22.080 --> 0:09:24.840 already to the internet at all. Yeah, of course I 0:09:24.840 --> 0:09:27.360 have just by existing in the world, right and I'm 0:09:27.400 --> 0:09:30.640 not and it all exists on servers somewhere in either 0:09:30.720 --> 0:09:34.560 Kupertino or Amazon servers or whatever. What is it about 0:09:34.640 --> 0:09:39.040 AI specifically that changes that need? Because like I said, 0:09:39.080 --> 0:09:41.240 I've given I didn't I don't want to. But just 0:09:41.480 --> 0:09:44.079 the reality of life in the world is my information 0:09:44.160 --> 0:09:44.840 is already out there. 0:09:45.280 --> 0:09:50.160 So AI has two sides, training and inference, right, And 0:09:51.080 --> 0:09:53.480 you can train on. You know, all this data that 0:09:53.520 --> 0:09:57.040 you've already given up to the faceless kind of entity 0:09:56.840 --> 0:10:02.120 that controls the world. But what AI brings about is 0:10:02.720 --> 0:10:08.520 in real time drawing conclusions from that data. And it's 0:10:09.760 --> 0:10:12.600 two sided. There's convenience and then there's privacy concerns. And 0:10:12.640 --> 0:10:15.480 I agree with you that convenience definitely outweighs privacy concerns 0:10:15.520 --> 0:10:18.360 when it comes to the consumer. But when you have 0:10:18.440 --> 0:10:22.080 this ecosystem that Apple has created with this walled garden, 0:10:22.960 --> 0:10:26.200 and then you kind of alleviate the privacy concerns and 0:10:26.240 --> 0:10:29.400 you have this constant inference that's going on, and there 0:10:29.400 --> 0:10:32.080 will come a time where you know, you'll be walking 0:10:32.080 --> 0:10:35.360 down the street and you'll say, I just called Tracy, 0:10:35.920 --> 0:10:37.640 you know a week ago. What did we talk about 0:10:38.080 --> 0:10:39.720 and when did we say we're going to meet? 0:10:40.040 --> 0:10:40.160 Oh? 0:10:40.080 --> 0:10:43.400 Okay, can you text Tracy and tell her, actually, I 0:10:43.400 --> 0:10:45.480 have a thesis that just got destroyed, so I don't 0:10:45.520 --> 0:10:48.080 really want to talk about that one. And you know, 0:10:48.200 --> 0:10:51.760 can you text Joe and let him know too, And 0:10:51.800 --> 0:10:53.720 then can you look at my calendar when am my velvement? 0:10:53.720 --> 0:10:55.720 You can be walking down the street. Yeah, And the 0:10:55.800 --> 0:10:59.880 productivity gains from your phone doing inference and inferring what 0:11:00.040 --> 0:11:02.800 it knows about you from that data. 0:11:03.000 --> 0:11:05.760 That's huge, real quickly. 0:11:05.960 --> 0:11:09.120 So you mentioned the picks and shovels and video, than 0:11:09.160 --> 0:11:11.600 the picks and shovels who provide the picks and shovels 0:11:11.800 --> 0:11:13.880 and people got to tell you about super micro and 0:11:13.920 --> 0:11:16.200 the racks and maybe Dell super Micro. 0:11:16.240 --> 0:11:16.800 I never heard of it. 0:11:16.960 --> 0:11:19.720 I've heard of it, just so we're clear your long Apple. 0:11:20.240 --> 0:11:24.800 Yeah, I'm any name that I mentioned inherently, I'm automatically 0:11:24.800 --> 0:11:25.520 going to be longer shot. 0:11:26.160 --> 0:11:30.320 Yeah, you mentioned the privacy concerns, and I just thought 0:11:30.320 --> 0:11:32.480 back to this moment. My husband and I were in 0:11:32.520 --> 0:11:35.800 our kitchen and we were talking about something really innocuous, 0:11:35.840 --> 0:11:41.600 like corn or something, and suddenly Alexa started telling us 0:11:41.640 --> 0:11:45.520 a joke about corn, and like we hadn't said Alexa 0:11:45.600 --> 0:11:48.120 or anything like that, it just started talking like clearly 0:11:48.240 --> 0:11:51.040 had been recording everything that we were saying. And I 0:11:51.480 --> 0:11:53.880 will admit that that was that was kind of a 0:11:53.960 --> 0:11:57.840 jarring experience. I would be less surprised if my Apple 0:11:57.880 --> 0:12:01.439 phone did that versus my Alexa that I use to 0:12:01.600 --> 0:12:03.240 turn on the lights and things like that. 0:12:03.400 --> 0:12:05.679 Yeah, it turns out that large language models are really 0:12:05.720 --> 0:12:06.600 good at language. 0:12:07.000 --> 0:12:08.400 Yeah, surprising. 0:12:09.840 --> 0:12:14.160 I think that the next kind of picks and shovels idea. 0:12:14.440 --> 0:12:16.360 The thing is everyone's always well, what are we going 0:12:16.400 --> 0:12:18.439 to invest in that's doing the use cases? And then 0:12:18.559 --> 0:12:21.560 those same people will come around and say, why are 0:12:22.040 --> 0:12:25.040 you know these five stocks driving the entire market? And 0:12:25.080 --> 0:12:29.600 the thing is the latency between a company starting and 0:12:29.640 --> 0:12:33.040 becoming successful and doing an IPO has gotten a lot 0:12:33.120 --> 0:12:36.880 longer in the past, like two decades, So if you're 0:12:36.920 --> 0:12:39.320 a public equity investor, you might not really get to 0:12:40.040 --> 0:12:41.960 the use cases that you can invest in are those 0:12:41.960 --> 0:12:45.560 five stocks and combine that with you know, everything else, 0:12:45.600 --> 0:12:48.160 and like you said, the uncertainty. When there's uncertainty, people 0:12:48.200 --> 0:12:51.120 tend to crowd into things that they know are going 0:12:51.200 --> 0:12:54.559 to work. I think that really the picks and shovels 0:12:54.559 --> 0:12:57.920 thing will probably play out again. But when it comes 0:12:57.960 --> 0:13:02.600 to EDJI and doing inference onto and kind of I 0:13:02.640 --> 0:13:06.079 mean this is probably a controversial statement, but I think 0:13:06.120 --> 0:13:10.720 that we might see the first real true replacement cycle, 0:13:11.360 --> 0:13:14.640 like real replacement cycle where Apple comes out with the 0:13:14.679 --> 0:13:18.400 new phone and it has all these productivity gains, and 0:13:18.440 --> 0:13:20.720 it has all this new hardware, and you know, it 0:13:20.760 --> 0:13:22.840 can do these things, and if you don't have that phone, 0:13:22.880 --> 0:13:24.960 you can't do it, and it becomes kind of like 0:13:25.040 --> 0:13:29.760 that sci fi movie Gatica, where you know, yeah, if 0:13:29.800 --> 0:13:31.920 you're left out, you're you're just you're just left behind. 0:13:32.000 --> 0:13:34.520 I've been wondering about this because at some point in 0:13:34.600 --> 0:13:38.959 my life it's stopped being important to upgrade. I mean, 0:13:39.360 --> 0:13:41.559 at some point in my life it's stopped being important 0:13:41.679 --> 0:13:44.360 or interesting to even tune into, like the new Apple events, 0:13:44.360 --> 0:13:46.719 and those used to be big events online, and then 0:13:46.760 --> 0:13:49.760 people stopped. And then at one point, if someone asked me, 0:13:49.960 --> 0:13:51.960 what iPhone do you have, I would have told them 0:13:52.000 --> 0:13:53.960 the anti Zycle. I have the iPhone five for whatever. 0:13:53.960 --> 0:13:55.840 I have no idea which one I have right now. 0:13:55.880 --> 0:13:57.960 I got a couple of years ago. It does everything 0:13:57.960 --> 0:14:00.559 I need. I have zero idea which one it is. 0:14:00.800 --> 0:14:02.880 So I've been sort of wondering. Yeah, So you think 0:14:02.880 --> 0:14:06.280 that there's the potential, at least for some unlock of 0:14:06.360 --> 0:14:09.160 new capabilities where the people who don't have that new 0:14:09.200 --> 0:14:12.240 phone actually feel, oh, I really just can't interact with 0:14:12.320 --> 0:14:13.920 the same way that people who have it do. 0:14:14.240 --> 0:14:18.120 Yeah, and that kind of replacement cycle drives that new 0:14:18.160 --> 0:14:21.480 picks and shovels thesis where you're looking at all these 0:14:21.560 --> 0:14:24.400 kind of you know, system on chip names, and that's 0:14:24.440 --> 0:14:27.400 where I see this theme that you know, everyone is 0:14:27.440 --> 0:14:31.680 talking about going But the thing about thematic equity is 0:14:31.720 --> 0:14:35.320 that if you let it, it just becomes momentum investing, 0:14:35.840 --> 0:14:41.000 because themes are stories, and stories translate into momentum very easily. 0:14:41.320 --> 0:14:46.160 And when people do an association with momentum, they're always 0:14:46.200 --> 0:14:50.240 thinking about kind of momentum inable market like what we've 0:14:50.280 --> 0:14:53.040 been seeing. And you know that's not the case at all. 0:14:53.200 --> 0:14:56.920 There was plenty of themes in twenty twenty two when 0:14:56.920 --> 0:14:59.360 everything else was going down. I mean, tech going down 0:14:59.520 --> 0:15:02.200 was a theme. You know, the interest rate hikes, the 0:15:02.280 --> 0:15:04.640 inflation for the first time that you know, that's a theme. 0:15:04.680 --> 0:15:07.040 That's a story that grabs people's attention and makes them 0:15:07.080 --> 0:15:11.000 go to their terminal and execute a trade. And same 0:15:11.000 --> 0:15:13.640 thing with energy, and you know, the war in Ukraine. 0:15:13.640 --> 0:15:19.400 And so I try my hardest to it's super cliche, 0:15:19.520 --> 0:15:23.400 but think a few months ahead at least. 0:15:39.240 --> 0:15:44.080 So for something like the US presidential elections. You know, 0:15:44.480 --> 0:15:46.960 again things are currently up in the air, and you 0:15:47.000 --> 0:15:49.000 can look at the polls and have a sense of 0:15:49.040 --> 0:15:52.720 who might have a lead, but overall it's pretty difficult 0:15:52.720 --> 0:15:55.640 to tell who's going to be in office come next year. 0:15:56.320 --> 0:15:59.640 How do you start preparing for something like that from 0:15:59.680 --> 0:16:01.640 an perspective. 0:16:01.920 --> 0:16:05.280 So if the question how do you start preparing the 0:16:05.400 --> 0:16:09.360 answer early early, you start preparing early. Right. No, I 0:16:09.400 --> 0:16:12.440 don't think that, you know, was anyone surprised that we 0:16:12.480 --> 0:16:14.640 have an election this year? Yeah? 0:16:14.680 --> 0:16:17.320 Some people, Yeah, you know, some people really are because 0:16:17.360 --> 0:16:18.920 of how few people have been paying attention. 0:16:19.280 --> 0:16:22.560 I mean, that's It's one of those things where I 0:16:22.600 --> 0:16:25.120 think it's like when you're a kid and you touch 0:16:25.160 --> 0:16:27.840 the stove and you get burned, and you're well, I'm 0:16:27.880 --> 0:16:30.880 not doing that again. That's how I think the twenty 0:16:30.960 --> 0:16:34.720 twenty election was for me. So as soon as I 0:16:34.760 --> 0:16:36.520 saw that the year was an election year, I started 0:16:36.560 --> 0:16:39.480 kind of preparing for this. This was back in January 0:16:39.480 --> 0:16:43.680 when the odds of Trump even being a nominee, right, 0:16:43.760 --> 0:16:46.160 or like being the Republican nominee, were like twenty percent. 0:16:46.880 --> 0:16:49.400 It was relatively easy back then to look at these 0:16:49.520 --> 0:16:56.440 very kind of exposed equities and say, this is a 0:16:56.520 --> 0:16:59.400 swap I guess on Trump being a nominee. 0:16:59.480 --> 0:17:02.720 So I've ied some cell side research about who would 0:17:02.720 --> 0:17:06.639 be exposed. One clever one the company five below. He 0:17:06.720 --> 0:17:09.720 sells a bunch of cheap stuff, which you can't sell 0:17:09.800 --> 0:17:12.680 cheap stuff if there's a massive tariffs on cheap stuff. 0:17:12.680 --> 0:17:15.120 And that stock has been Oh that's a total dog. 0:17:15.200 --> 0:17:17.480 That stock was over two hundred back in March and 0:17:17.520 --> 0:17:19.440 now it's at one hundred and two. Of the time 0:17:19.480 --> 0:17:21.640 we're talking about this, what stands out to you is. 0:17:21.600 --> 0:17:24.320 Being exposed depending on what the theme is there, I 0:17:24.600 --> 0:17:28.560 create either a long short basket to kind of gain exposure, 0:17:28.880 --> 0:17:32.040 because I don't ever want that kind of idiosyncratic like 0:17:32.160 --> 0:17:35.400 single name equity risk where a company ends up doing 0:17:35.400 --> 0:17:38.320 really well and has nothing to do with my actual thesis. 0:17:38.680 --> 0:17:42.359 So I constructed a basket that kind of played on 0:17:42.400 --> 0:17:44.840 a few different themes. Tariffs was a big one of them. Right, 0:17:45.359 --> 0:17:48.440 So you look at how much comes from China. First, 0:17:48.480 --> 0:17:51.919 you look at Trump's what he says, right, one hundred 0:17:51.960 --> 0:17:54.800 percent tariffs, sixty percent tariffs that you know, and the 0:17:54.840 --> 0:18:00.280 thing is protectionism from China. Trade that's not that's not 0:18:00.320 --> 0:18:03.119 a part is an issue anymore. Right, There are no 0:18:03.320 --> 0:18:07.280 China doves in the government. But Trump is certainly a 0:18:07.359 --> 0:18:09.840 unique brand of that when it comes to the trade policy. 0:18:10.320 --> 0:18:12.880 So that seemed like the most asymmetric way to kind 0:18:12.880 --> 0:18:18.040 of capture that. So you look at five below for example, restoration, hardware, 0:18:18.440 --> 0:18:22.400 floor and decor, you know, best Buy, these companies that 0:18:23.000 --> 0:18:26.840 really do a lot of business when it comes to China, 0:18:27.040 --> 0:18:29.719 and that's a lot of their impacosts and tariffs really 0:18:29.760 --> 0:18:31.959 would affect them. And that's your short side. And then 0:18:32.000 --> 0:18:34.479 you say, okay, well who is going to be all 0:18:34.600 --> 0:18:38.639 right here? And that comes down to pricing power. You know, 0:18:38.800 --> 0:18:43.280 if consumers start consolidating their spending because of tariff's, who 0:18:43.840 --> 0:18:48.560 can kind of keep that pricing power regardless? And like Costco, Walmart, 0:18:48.840 --> 0:18:53.480 some of the automotive parts like O'Reilly, that's your longside. 0:18:54.160 --> 0:18:56.199 So that makes up one component of the basket and 0:18:56.200 --> 0:18:59.040 then move on. Okay, And the thing is, for the 0:18:59.119 --> 0:19:02.399 past three three years, one of my exposures to a 0:19:02.440 --> 0:19:06.520 theme has been bidnomics. So you know, that was big 0:19:06.560 --> 0:19:12.320 on electrification and infrastructure spending and generally fading the idea 0:19:12.480 --> 0:19:14.680 that we could have a recession when fiscal policy is 0:19:14.720 --> 0:19:19.560 spending like a drunken sailor. And we said, okay, well, 0:19:19.600 --> 0:19:22.040 now we need some kind of offsetting beta. Here, we 0:19:22.080 --> 0:19:27.160 need some Trump beta. And there are these orphan equities 0:19:27.200 --> 0:19:30.320 like Fannie May and Freddie Mack. And you know, I 0:19:30.320 --> 0:19:32.040 looked at the story and I said, I don't think 0:19:32.080 --> 0:19:33.560 that that's going to happen. He didn't do it the 0:19:33.600 --> 0:19:36.360 first time, but it doesn't matter because it's a story. 0:19:36.640 --> 0:19:39.320 So people are going to take action based on that story. 0:19:39.840 --> 0:19:44.320 Then looking at things like private prisons and law enforcement. 0:19:44.480 --> 0:19:46.719 I remember that from twenty sixteen that was like a 0:19:46.720 --> 0:19:48.159 big Trump winner. 0:19:48.440 --> 0:19:50.800 Yeah, and that but that was when I was kind 0:19:50.840 --> 0:19:54.000 of looking at this. That I think was the first 0:19:54.000 --> 0:19:56.119 place that I start is basically sell side research is 0:19:56.200 --> 0:20:01.119 to see what is being said. And there were a 0:20:01.160 --> 0:20:04.840 lot of kind of well, here's how you know, these 0:20:04.840 --> 0:20:07.159 equities performed when Trump was president, and here's how they 0:20:07.200 --> 0:20:09.760 performed when Biden was president. And if you go into 0:20:10.160 --> 0:20:13.120 anything like that with that kind of thinking where you're 0:20:13.160 --> 0:20:15.520 just overfitting to like two periods of time, I mean 0:20:15.800 --> 0:20:18.280 when Biden was elected, if you had that kind of thinking, 0:20:18.320 --> 0:20:22.040 you would have went long clean energy right in short 0:20:22.240 --> 0:20:25.719 and short oil, and you would have gotten destroyed because like, 0:20:25.880 --> 0:20:27.560 no matter who's the president, there are going to be 0:20:27.560 --> 0:20:29.520 bear of force as at work, so you really have 0:20:29.600 --> 0:20:32.240 to try to specify and get rid of as much 0:20:33.119 --> 0:20:38.440 incongruous kind of correlation. So names like Axin or GEO 0:20:38.560 --> 0:20:43.040 Group or you know, Corcivic, those will probably benefit. I 0:20:43.080 --> 0:20:44.879 had kind of a fun one that was a company 0:20:44.880 --> 0:20:49.119 that makes the storefront glass for retail stores, because I figured, 0:20:49.119 --> 0:20:50.840 no matter who wins this election, there's going to be 0:20:50.880 --> 0:20:51.639 people that are angry. 0:20:54.320 --> 0:20:56.879 It's funny you mentioned fan you may equity because it 0:20:56.960 --> 0:20:59.800 still exists there. It's like a cockroach. But I've always 0:20:59.840 --> 0:21:02.040 though it's like the Boomer's crypto. 0:21:02.160 --> 0:21:02.760 It's like that. 0:21:02.840 --> 0:21:04.600 It's like if you look at like there is. 0:21:04.560 --> 0:21:07.880 A Fanny and Freddy Twitter, Yeah, and it's like they 0:21:08.200 --> 0:21:09.840 talk the same way that people are talking about the 0:21:09.920 --> 0:21:10.760 random token. 0:21:10.520 --> 0:21:12.879 But their money spends just as well, right, and it 0:21:12.920 --> 0:21:18.840 moves the bid up. Yeah. So I think that I 0:21:18.920 --> 0:21:22.679 came into this year all prepared, Right, here's how the 0:21:22.680 --> 0:21:25.160 basket is going to look. The thing that really made 0:21:25.160 --> 0:21:27.520 me the most satisfied about this, I mean, the basket 0:21:27.600 --> 0:21:30.000 has done quite well because Trump odds went from twenty 0:21:30.000 --> 0:21:32.080 percent of being the nominee to you know, sixty three 0:21:32.119 --> 0:21:33.200 percent of being the president. 0:21:33.320 --> 0:21:33.720 Uh huh. 0:21:33.760 --> 0:21:37.439 And the performances tracked that pretty well. And there are 0:21:37.440 --> 0:21:41.359 a few other aspects of that basket, but the thing 0:21:41.480 --> 0:21:44.359 that obviously didn't make me happy because something that I 0:21:44.400 --> 0:21:48.000