1
00:00:03,240 --> 00:00:07,560
Speaker 1: This is Masters in Business with Barry Riddholts on Bloomberg Radio.

2
00:00:08,400 --> 00:00:11,560
Speaker 1: I'm Barry ridh Hoults. You're listening to Masters in Business

3
00:00:11,560 --> 00:00:15,239
Speaker 1: on Bloomberg Radio. My guest today me Beine favor of

4
00:00:15,520 --> 00:00:18,959
Speaker 1: Cumbria Investments. I know MEB for a long time. He

5
00:00:19,040 --> 00:00:23,040
Speaker 1: does a lot of really really interesting things. And if

6
00:00:23,079 --> 00:00:25,919
Speaker 1: you're a quant, if you're a little bit lanky, you

7
00:00:26,040 --> 00:00:29,120
Speaker 1: probably know MEB for a very famous white paper he

8
00:00:29,200 --> 00:00:33,520
Speaker 1: wrote back in oh five oh six called a Tactical

9
00:00:33,640 --> 00:00:40,560
Speaker 1: Guide to Asset Allocation. And what's within this fairly simple

10
00:00:40,760 --> 00:00:45,360
Speaker 1: but very powerful theme is the idea of let's look

11
00:00:45,400 --> 00:00:50,360
Speaker 1: at allocating to various asset classes on a strictly tactical

12
00:00:50,400 --> 00:00:55,240
Speaker 1: basis with a quantitative methodology. That is simply a ten

13
00:00:55,320 --> 00:00:59,480
Speaker 1: month moving average when when any asset class breaks its

14
00:00:59,560 --> 00:01:02,760
Speaker 1: ten month moving average, which looks similar to a two

15
00:01:03,120 --> 00:01:05,800
Speaker 1: day moving average, but as a little little more sophisticated,

16
00:01:05,840 --> 00:01:08,520
Speaker 1: it doesn't have as many signals, not as many whipsaws.

17
00:01:08,560 --> 00:01:10,759
Speaker 1: You only get a signal once a month because it's

18
00:01:10,800 --> 00:01:14,279
Speaker 1: a monthly not a daily moving average. That's a sign

19
00:01:14,400 --> 00:01:18,640
Speaker 1: that markets are are in a significant down trend and

20
00:01:18,800 --> 00:01:22,960
Speaker 1: usually suggest that there's more downside. That paper coming out

21
00:01:23,000 --> 00:01:25,959
Speaker 1: as it did right before the financial crisis is one

22
00:01:25,959 --> 00:01:29,800
Speaker 1: of the most downloaded papers um of the past decade

23
00:01:29,840 --> 00:01:33,280
Speaker 1: in finance, and really uh turned a lot of people's

24
00:01:33,280 --> 00:01:39,080
Speaker 1: heads about how simple a a tactical portfolio could be

25
00:01:39,120 --> 00:01:43,319
Speaker 1: and yet still reduced volatility, reduced draw downs, and be

26
00:01:43,560 --> 00:01:47,640
Speaker 1: very competitive with a benchmark. But what MEB does these

27
00:01:47,720 --> 00:01:52,520
Speaker 1: days is essentially create new ideas for e t f

28
00:01:52,680 --> 00:01:55,120
Speaker 1: s and he has had a number of these that

29
00:01:55,160 --> 00:01:59,160
Speaker 1: have been very, very successful. The two we really spend

30
00:01:59,440 --> 00:02:02,440
Speaker 1: a lot of show today talking about. The one is

31
00:02:02,480 --> 00:02:06,680
Speaker 1: called shareholder value, and it's what happens if we sift

32
00:02:06,720 --> 00:02:11,880
Speaker 1: through the universe of of domestic or global equities and

33
00:02:12,120 --> 00:02:17,440
Speaker 1: evaluate them on the combination of dividend yields and stock

34
00:02:17,560 --> 00:02:20,480
Speaker 1: share buy back. As it turns out, when you screen

35
00:02:20,560 --> 00:02:24,240
Speaker 1: for those two factors, you eliminate a lot of junk.

36
00:02:24,320 --> 00:02:29,040
Speaker 1: When you're issuing a dividends, you can't phony up your accounting.

37
00:02:29,080 --> 00:02:31,280
Speaker 1: We've seen a lot of questionable accounting over the past

38
00:02:31,280 --> 00:02:34,200
Speaker 1: couple of years and decades. Hey, that dividend check has

39
00:02:34,240 --> 00:02:36,400
Speaker 1: to go out every quarter. There's no messing around with that.

40
00:02:36,760 --> 00:02:40,280
Speaker 1: So dividend yield turns out to be a fairly good

41
00:02:41,040 --> 00:02:43,840
Speaker 1: metric if you're looking for quality of earnings. There's no

42
00:02:44,560 --> 00:02:47,760
Speaker 1: it's very hard to phony up dividend yield because you

43
00:02:47,800 --> 00:02:49,960
Speaker 1: have to issue a check each quarter. And then the

44
00:02:50,000 --> 00:02:53,120
Speaker 1: same thing with share by back UH stock share by

45
00:02:53,160 --> 00:02:56,919
Speaker 1: back means that you're actually putting money to work buying

46
00:02:57,000 --> 00:03:00,480
Speaker 1: shares back, reducing the float, and that actually makes your

47
00:03:00,480 --> 00:03:04,200
Speaker 1: earnings on a per share basis look better. When you

48
00:03:04,280 --> 00:03:08,000
Speaker 1: do both of those things, buy back shares and increase

49
00:03:08,040 --> 00:03:11,400
Speaker 1: your divd ends, that tends to create a stock that

50
00:03:11,440 --> 00:03:14,919
Speaker 1: does better than average. And so the idea behind this

51
00:03:15,080 --> 00:03:18,640
Speaker 1: divon end slash share buy back e t F has

52
00:03:18,680 --> 00:03:22,160
Speaker 1: been here's a way to get a form of quantitative

53
00:03:22,320 --> 00:03:27,720
Speaker 1: management with a fairly low course ratio and not especially active.

54
00:03:27,720 --> 00:03:30,560
Speaker 1: It gets rebalanced quarterly. I know there is some activity

55
00:03:30,600 --> 00:03:33,680
Speaker 1: in it. I wouldn't call this a passive index, but

56
00:03:33,919 --> 00:03:36,280
Speaker 1: it's done fairly well. It's attracted a decent amount of

57
00:03:36,280 --> 00:03:38,839
Speaker 1: money in a fairly short period of time. UH. That

58
00:03:39,040 --> 00:03:41,640
Speaker 1: was the e t F that MEB put out a

59
00:03:41,640 --> 00:03:45,080
Speaker 1: couple of years ago. The most recent one he put out.

60
00:03:45,600 --> 00:03:49,920
Speaker 1: UM is this global value asset allocation and what makes

61
00:03:49,920 --> 00:03:54,160
Speaker 1: it fascinating is there is essentially zero fee associated with it.

62
00:03:54,360 --> 00:03:57,240
Speaker 1: There's no internal expense ratio where almost a zero internal

63
00:03:57,240 --> 00:03:59,880
Speaker 1: expense ratio, and there's no almost no close to buy it.

64
00:04:00,440 --> 00:04:04,040
Speaker 1: That's very unusual in the world of ETFs. But the

65
00:04:04,080 --> 00:04:06,640
Speaker 1: way MEB describes it, we're looking at a universe where

66
00:04:06,720 --> 00:04:10,320
Speaker 1: costs are compress and there is a pernicious effect of

67
00:04:10,400 --> 00:04:13,240
Speaker 1: costs over the long haul, and so that's why this

68
00:04:13,360 --> 00:04:16,599
Speaker 1: is developed. I know MEB for a good couple of years.

69
00:04:16,640 --> 00:04:19,200
Speaker 1: I find him to be as far as quants go,

70
00:04:19,360 --> 00:04:21,560
Speaker 1: and he describes himself as a quant light, but I

71
00:04:21,600 --> 00:04:25,479
Speaker 1: don't know if that's really accurate. As far as kuantsco,

72
00:04:25,760 --> 00:04:30,960
Speaker 1: he's very articulate. He speaks English well, um live, he's

73
00:04:31,000 --> 00:04:33,640
Speaker 1: a surfer dutey lives out in in California. And what

74
00:04:33,680 --> 00:04:38,000
Speaker 1: I mean by speaks English well, speaks English good is

75
00:04:38,040 --> 00:04:42,080
Speaker 1: that very often you get the mathematically minded people um

76
00:04:42,160 --> 00:04:45,480
Speaker 1: who are very intelligent, very erudite, but they lack an

77
00:04:45,520 --> 00:04:50,400
Speaker 1: ability to communicate on a simple basis with lay people

78
00:04:50,400 --> 00:04:54,040
Speaker 1: who may not have PhDs in mathematics or economics, and

79
00:04:54,040 --> 00:04:59,080
Speaker 1: and so you'll find his approach is very straightforward, fairly simple,

80
00:04:59,200 --> 00:05:03,839
Speaker 1: completely rational, completely evidence based. I think if you have

81
00:05:03,880 --> 00:05:08,240
Speaker 1: an interest in investing or the quantitative approach to to finance,

82
00:05:08,480 --> 00:05:11,640
Speaker 1: you'll find this to be a fascinating conversation. Without any

83
00:05:11,680 --> 00:05:15,960
Speaker 1: further ado, here is my interview with me Mand Fabor.

84
00:05:19,320 --> 00:05:23,640
Speaker 1: This is Masters in Business with Barry Ridholds on Bloomberg Radio.

85
00:05:24,120 --> 00:05:29,120
Speaker 1: My guest today is Meb Faber. He runs Cambria Investments.

86
00:05:29,120 --> 00:05:32,560
Speaker 1: He's the chief investment officer and founder. He's also the

87
00:05:32,600 --> 00:05:37,720
Speaker 1: author of a number of books, Shareholder Yield, The Ivy Portfolio,

88
00:05:38,120 --> 00:05:41,880
Speaker 1: Global Value. Meb, Welcome to Masters in Business. Great to

89
00:05:41,880 --> 00:05:44,200
Speaker 1: be here. Thanks so Meb and I know each other

90
00:05:44,320 --> 00:05:46,840
Speaker 1: for a good couple of years. Um, I've been a

91
00:05:46,839 --> 00:05:49,560
Speaker 1: fan of your research and writing for quite a while.

92
00:05:50,200 --> 00:05:53,240
Speaker 1: A little background on who you are. You're live in

93
00:05:53,279 --> 00:05:55,920
Speaker 1: Manhattan Beach in California, a little bit of an aspiring

94
00:05:55,920 --> 00:06:00,920
Speaker 1: surfer dude. UM graduated from University of Virginia, double major

95
00:06:01,080 --> 00:06:05,239
Speaker 1: engineering and biology. You're not the first double major we've

96
00:06:05,240 --> 00:06:10,279
Speaker 1: had with some science and either mathematics or computer science

97
00:06:10,360 --> 00:06:14,599
Speaker 1: or engineering. It's amongst the quants that seems to be

98
00:06:14,640 --> 00:06:18,120
Speaker 1: a fairly popular combination. You know, it gives you the

99
00:06:18,120 --> 00:06:20,480
Speaker 1: analytical background, right, or at least at least that's what

100
00:06:21,279 --> 00:06:24,040
Speaker 1: approach to how do I make sense of all this data?

101
00:06:24,279 --> 00:06:26,320
Speaker 1: How do I organize it? And what does it what

102
00:06:26,360 --> 00:06:29,320
Speaker 1: does it mean going forward? You have hold both the

103
00:06:29,480 --> 00:06:36,680
Speaker 1: Chartered Market Technician designation and the Chartered Alternative Investment Analysts.

104
00:06:36,680 --> 00:06:39,200
Speaker 1: That's something that I don't see a lot of these days.

105
00:06:39,440 --> 00:06:41,080
Speaker 1: I took him in the early days when the tests

106
00:06:41,080 --> 00:06:42,840
Speaker 1: for a lot easier, So I don't know if I

107
00:06:42,880 --> 00:06:46,400
Speaker 1: could pass them today, but both both good experiences. I

108
00:06:46,440 --> 00:06:48,800
Speaker 1: say that about the bar exam. Back when I took it,

109
00:06:48,800 --> 00:06:50,599
Speaker 1: it was, you know, a couple of drinks and and

110
00:06:50,640 --> 00:06:53,720
Speaker 1: that was it. Now it's a real test. So you

111
00:06:53,839 --> 00:06:56,760
Speaker 1: be let's talk a little bit about your background. What

112
00:06:56,760 --> 00:06:59,000
Speaker 1: did you do before you started working on the street.

113
00:06:59,520 --> 00:07:02,040
Speaker 1: So I was an engineer, you know, but by trade

114
00:07:02,120 --> 00:07:07,040
Speaker 1: and as an undergrad, and it was really smitten with biotech.

115
00:07:07,360 --> 00:07:09,159
Speaker 1: This is in the late nineties, so a lot of

116
00:07:09,160 --> 00:07:12,360
Speaker 1: the sequencing of the genome was going on really fun time, right,

117
00:07:13,120 --> 00:07:15,160
Speaker 1: and so I had take I was going to take

118
00:07:15,200 --> 00:07:17,240
Speaker 1: a year off after college, so I've done a bunch

119
00:07:17,240 --> 00:07:19,760
Speaker 1: of grad work as an undergrad, worked really hard and said,

120
00:07:19,760 --> 00:07:21,680
Speaker 1: you know, what, I'm gonna take a year off make

121
00:07:21,760 --> 00:07:24,360
Speaker 1: some money before I go back and back to grad school.

122
00:07:24,920 --> 00:07:28,280
Speaker 1: And because it could be in the life sciences five six,

123
00:07:28,320 --> 00:07:31,320
Speaker 1: who knows how many year process, right, So it took

124
00:07:31,320 --> 00:07:34,440
Speaker 1: a year off, worked as a biotech analyst for a

125
00:07:34,520 --> 00:07:37,720
Speaker 1: mutual fund that was called the Genomics Fund. Yeah, so

126
00:07:37,840 --> 00:07:41,360
Speaker 1: basically your timing was fantastic. You started right in two thousands,

127
00:07:41,360 --> 00:07:43,600
Speaker 1: and so this was what was so exciting. Look, the

128
00:07:43,600 --> 00:07:47,400
Speaker 1: Internet bubble is peeking and popping, the biotech bubble, same thing.

129
00:07:47,520 --> 00:07:49,840
Speaker 1: But I was working in d C and you had

130
00:07:49,840 --> 00:07:51,960
Speaker 1: a lot of the n I H A lot of

131
00:07:52,000 --> 00:07:54,520
Speaker 1: the stuff going on was right there, National Institute of Health.

132
00:07:55,040 --> 00:07:57,200
Speaker 1: I was taking classes at Hopkins and it was just

133
00:07:57,240 --> 00:08:01,400
Speaker 1: a really fun time. And so after that year and

134
00:08:01,600 --> 00:08:04,240
Speaker 1: near the end of two thousand, stocks it's started creating, right,

135
00:08:04,360 --> 00:08:07,440
Speaker 1: especially the biotech peaked in March of that year, and

136
00:08:07,480 --> 00:08:11,160
Speaker 1: we're down more about half. Nasdaq was cut in half

137
00:08:11,200 --> 00:08:12,800
Speaker 1: by the end of that year, more or less. And

138
00:08:12,800 --> 00:08:15,080
Speaker 1: so I was fascinated about the investment side. I mean,

139
00:08:15,240 --> 00:08:17,560
Speaker 1: the life science and size I love. But I said,

140
00:08:17,600 --> 00:08:19,559
Speaker 1: you know what, I'm not quite ready to go back

141
00:08:19,600 --> 00:08:22,640
Speaker 1: to grad school. I'm more interested in the investing world.

142
00:08:22,680 --> 00:08:24,680
Speaker 1: I was always terrible in the lab anyway I'd come in,

143
00:08:24,800 --> 00:08:27,640
Speaker 1: spill virus is everywhere, like just it was awful at it.

144
00:08:27,720 --> 00:08:29,920
Speaker 1: So I said, you know what I'm gonna I'm gonna

145
00:08:30,240 --> 00:08:32,680
Speaker 1: give this investing world a little more of a chance.

146
00:08:33,120 --> 00:08:37,240
Speaker 1: And then just slowly kept gravitating away from the biotech

147
00:08:37,360 --> 00:08:39,680
Speaker 1: and more towards the quant side of the world. And

148
00:08:39,720 --> 00:08:42,800
Speaker 1: pretty soon, you know, my hobby became the career and

149
00:08:42,960 --> 00:08:46,760
Speaker 1: vice versa. Not not a totally uncommon story. So as

150
00:08:46,760 --> 00:08:51,200
Speaker 1: you're going through this process of morphing from a biotech

151
00:08:51,280 --> 00:08:58,079
Speaker 1: and bioscience analysts to really a quant who your early influences,

152
00:08:58,160 --> 00:09:02,160
Speaker 1: who affected your thinking about that space? You know, a

153
00:09:02,200 --> 00:09:04,520
Speaker 1: lot of this was self taught in the sense that

154
00:09:04,600 --> 00:09:07,280
Speaker 1: I went out and read everything I could possibly find.

155
00:09:07,720 --> 00:09:11,200
Speaker 1: So what books really resonated with, what authors? You know,

156
00:09:11,240 --> 00:09:13,800
Speaker 1: who stayed with you, Because look, everybody in this business

157
00:09:13,920 --> 00:09:16,040
Speaker 1: has read, or at least people who are making an

158
00:09:16,040 --> 00:09:19,520
Speaker 1: effort have read hundreds of books. But everybody has a

159
00:09:19,559 --> 00:09:23,119
Speaker 1: short these dozen on my favorites. So there's the classics,

160
00:09:23,240 --> 00:09:27,319
Speaker 1: right that, there's a reason there's classics. Reminiscence of stock operator, right,

161
00:09:27,400 --> 00:09:31,240
Speaker 1: one of the best um, extraordinary popular delusions and madness

162
00:09:31,240 --> 00:09:33,199
Speaker 1: of crowds. And so one of the most important things

163
00:09:33,240 --> 00:09:35,560
Speaker 1: is trying to get a history of investing, so not

164
00:09:35,600 --> 00:09:37,440
Speaker 1: just what's happened here in the last ten years, but

165
00:09:37,600 --> 00:09:39,439
Speaker 1: what's happened the last hundred what's happened the last few

166
00:09:39,480 --> 00:09:42,800
Speaker 1: hundred years elsewhere in the world, to really understand what's

167
00:09:42,880 --> 00:09:46,680
Speaker 1: what's going on. My all time favorite investing book is

168
00:09:47,000 --> 00:09:49,640
Speaker 1: Trying for the Optimists. You know, it's a big coffee

169
00:09:49,640 --> 00:09:53,720
Speaker 1: table book, hundred dollars, but it's hundre and ten dollars

170
00:09:53,720 --> 00:09:57,440
Speaker 1: at Amazon. It's actually sitting in the shrink wrap on

171
00:09:57,640 --> 00:10:01,040
Speaker 1: my credenza in the office waiting for me to find

172
00:10:01,200 --> 00:10:04,200
Speaker 1: a week to attack it. It's it's just such a

173
00:10:04,280 --> 00:10:07,520
Speaker 1: great history of markets. What's happens. It will show you.

174
00:10:07,559 --> 00:10:10,720
Speaker 1: For example, if you're an Austrian in the beginning of

175
00:10:10,840 --> 00:10:13,959
Speaker 1: the twentieth century, you made no money on stocks, but hey,

176
00:10:14,000 --> 00:10:16,240
Speaker 1: if you're a US investor, where you may have been

177
00:10:16,280 --> 00:10:19,200
Speaker 1: domas out, you'd amazing returns. Just little things like this,

178
00:10:19,440 --> 00:10:23,840
Speaker 1: markets that disappeared or you know, shut down completely, like Russia,

179
00:10:24,200 --> 00:10:27,520
Speaker 1: just a great um starting point for investing. And so

180
00:10:27,640 --> 00:10:30,720
Speaker 1: and of course, a lot of the market wizard style

181
00:10:30,760 --> 00:10:35,880
Speaker 1: books right there, Some really just wonderful overviews of the personalities,

182
00:10:36,480 --> 00:10:41,120
Speaker 1: and all sorts of different types of investing styles. Right.

183
00:10:41,400 --> 00:10:43,960
Speaker 1: Some people were value guys, some people were momentum guys.

184
00:10:44,000 --> 00:10:46,679
Speaker 1: But what you learn is there's no one approach, right,

185
00:10:46,720 --> 00:10:49,599
Speaker 1: but many that people have perfected. Um that can that

186
00:10:49,679 --> 00:10:53,240
Speaker 1: can all work. The fiftieth anniversary of the Buffet Letter

187
00:10:53,320 --> 00:10:57,160
Speaker 1: came out, and the comments that some of us had was, hey,

188
00:10:57,200 --> 00:11:00,480
Speaker 1: instead of trying to be like Buffett, uh and invest

189
00:11:00,559 --> 00:11:05,199
Speaker 1: like Buffett, be like Buffett. Buffett found a formulation that

190
00:11:05,240 --> 00:11:08,280
Speaker 1: works for him, putting on his suit, putting on his

191
00:11:08,320 --> 00:11:10,839
Speaker 1: approach may not work for you, to thine own self

192
00:11:10,880 --> 00:11:15,320
Speaker 1: be true? How did that sort of philosophy of finding

193
00:11:15,360 --> 00:11:18,960
Speaker 1: what works for you end up pushing you where you

194
00:11:19,160 --> 00:11:22,040
Speaker 1: are today? Well, so I traded all throughout college like

195
00:11:22,080 --> 00:11:25,160
Speaker 1: a lot of people, right, I was making money hand

196
00:11:25,240 --> 00:11:28,000
Speaker 1: over fist, trading these internet names that you'd come back

197
00:11:28,000 --> 00:11:30,160
Speaker 1: from class and they would have doubled, right, you know,

198
00:11:30,240 --> 00:11:33,760
Speaker 1: and so confusing a bullmarket with intelligence, right, So, and

199
00:11:33,800 --> 00:11:36,040
Speaker 1: of course I blew up at some point. I learned

200
00:11:36,040 --> 00:11:39,160
Speaker 1: a lot of things, but it what's really important is

201
00:11:39,240 --> 00:11:41,800
Speaker 1: like you mentioned, understanding your own psychology. So I have

202
00:11:41,880 --> 00:11:45,080
Speaker 1: all the behavioral biases. I'm overconfident, I'll take way too

203
00:11:45,200 --> 00:11:47,760
Speaker 1: much risk, and so this is kind of the whole

204
00:11:47,760 --> 00:11:50,560
Speaker 1: point of becoming a quant. And it took years and

205
00:11:50,559 --> 00:11:52,160
Speaker 1: a lot of pain to learn this said. Look, I

206
00:11:52,200 --> 00:11:54,960
Speaker 1: need to make rules for myself, otherwise I'll do the

207
00:11:55,040 --> 00:11:58,439
Speaker 1: dumbest possible things you know out there, And but it's

208
00:11:58,440 --> 00:12:01,280
Speaker 1: important finding a style that it resonates with you. I'm

209
00:12:01,320 --> 00:12:04,880
Speaker 1: Barry Ridhults. You're listening to Masters in Business on Bloomberg Radio.

210
00:12:05,240 --> 00:12:07,840
Speaker 1: My guest today is meb Faber. He is a quant.

211
00:12:07,920 --> 00:12:11,600
Speaker 1: He runs Cambrian Investments. You put out a kind of

212
00:12:11,600 --> 00:12:16,920
Speaker 1: fascinating commentary of blog post that was headlined there's never

213
00:12:17,000 --> 00:12:20,240
Speaker 1: been a better time to be an investor than today.

214
00:12:20,520 --> 00:12:24,720
Speaker 1: Explain what you've had over the past thirty years, really

215
00:12:24,880 --> 00:12:28,440
Speaker 1: since the forty years, actually since the first index funds

216
00:12:28,480 --> 00:12:33,960
Speaker 1: started coming out, is an opportunity where the fees of investing,

217
00:12:34,040 --> 00:12:36,480
Speaker 1: so even simple brokerage commissions. That was one of the

218
00:12:36,520 --> 00:12:40,560
Speaker 1: first right Charles Schwab, the discount brokerage, the whole run

219
00:12:40,600 --> 00:12:43,160
Speaker 1: of stuff in the seventies. They for people who aren't

220
00:12:43,160 --> 00:12:47,959
Speaker 1: old enough to remember this. The commissions were fixed by regulation,

221
00:12:48,480 --> 00:12:51,880
Speaker 1: and when that was deregulated, people could cut their rates

222
00:12:52,280 --> 00:12:56,600
Speaker 1: from fairly high to much much less expensive. And now

223
00:12:56,640 --> 00:13:00,000
Speaker 1: that that process has continued in the advent of mute

224
00:13:00,000 --> 00:13:02,400
Speaker 1: real funds and now e t f s, in this

225
00:13:02,920 --> 00:13:06,720
Speaker 1: competition between firms that have allowed fees. If you remember

226
00:13:06,760 --> 00:13:09,320
Speaker 1: back to the seventies and eighties, I mean, the fees

227
00:13:09,360 --> 00:13:12,680
Speaker 1: on these funds were just atrocious, right, five percent loads

228
00:13:12,720 --> 00:13:14,960
Speaker 1: on the front and back end, twelve B one fees,

229
00:13:15,240 --> 00:13:19,199
Speaker 1: annual management fees up north to three percent with standard right,

230
00:13:19,280 --> 00:13:22,760
Speaker 1: But you have now this this move towards and vanguards

231
00:13:22,760 --> 00:13:24,800
Speaker 1: certainly one of the pioneers, but a lot of following.

232
00:13:25,440 --> 00:13:28,080
Speaker 1: You can gain access to an investing portfolio for a

233
00:13:28,120 --> 00:13:31,559
Speaker 1: really cheap amount, right, And so you've had an advent,

234
00:13:31,600 --> 00:13:33,680
Speaker 1: I know, you've been working this space to a lot

235
00:13:33,720 --> 00:13:37,439
Speaker 1: of automated investment solutions for one, just things that can

236
00:13:37,480 --> 00:13:42,319
Speaker 1: give people access to a global, diversified portfolio for really

237
00:13:42,400 --> 00:13:44,679
Speaker 1: cheap and it's a wonderful thing. Now there's a lot

238
00:13:45,040 --> 00:13:46,840
Speaker 1: the flip side of that is a lot of the

239
00:13:46,880 --> 00:13:50,440
Speaker 1: access simply allows people to trade more, which isn't a

240
00:13:50,480 --> 00:13:54,000
Speaker 1: good thing, right because usually there are their own worst enemy. Um,

241
00:13:54,040 --> 00:13:56,200
Speaker 1: it's like giving a you know, a drug addict a

242
00:13:56,200 --> 00:14:00,520
Speaker 1: bigger needle. But but overall it's been a vastly uh

243
00:14:00,600 --> 00:14:03,360
Speaker 1: positive benefit to the to the individual in mester. So

244
00:14:03,440 --> 00:14:07,040
Speaker 1: let's talk a little bit about quantitative investing. Uh. Some

245
00:14:07,080 --> 00:14:10,800
Speaker 1: previous guests on the show of included Cliff Fastness of

246
00:14:10,880 --> 00:14:15,280
Speaker 1: a q R, Jim O'Shaughnessy of osam Um rob are

247
00:14:15,360 --> 00:14:20,600
Speaker 1: not of research affiliates. These are guys who are essentially

248
00:14:20,720 --> 00:14:25,320
Speaker 1: legends in the industry. And you describe yourself as a

249
00:14:25,400 --> 00:14:28,800
Speaker 1: quant for listeners who may not be familiar with what

250
00:14:28,960 --> 00:14:32,760
Speaker 1: quantitative investing is, give us a quick description. I like

251
00:14:32,840 --> 00:14:35,320
Speaker 1: to say I'm a quant light So I like to

252
00:14:35,360 --> 00:14:37,520
Speaker 1: come up with approaches that work where you take a

253
00:14:37,560 --> 00:14:40,680
Speaker 1: ten thousand foot view and say, look, here's some basic,

254
00:14:40,880 --> 00:14:45,160
Speaker 1: simple rules. There's rules to sort investments, so say stocks,

255
00:14:45,160 --> 00:14:47,040
Speaker 1: for example, to be able to say, look, we're gonna

256
00:14:47,080 --> 00:14:50,800
Speaker 1: pick these stocks based on these rules for buying, these

257
00:14:50,880 --> 00:14:53,800
Speaker 1: rules for selling. So that way you remove the emotions

258
00:14:53,800 --> 00:14:57,080
Speaker 1: of saying, man, I really love apple products, we should

259
00:14:57,120 --> 00:15:00,320
Speaker 1: be buying it, or I really hate the CEO and

260
00:15:00,360 --> 00:15:03,600
Speaker 1: it gives it a foundation of logic, right, so it

261
00:15:03,680 --> 00:15:07,400
Speaker 1: as opposed to emotion right, and it um it allows

262
00:15:07,440 --> 00:15:09,480
Speaker 1: you to come up with the rules based process for

263
00:15:09,760 --> 00:15:12,480
Speaker 1: any market environment or a style, and and and a

264
00:15:12,520 --> 00:15:16,200
Speaker 1: big thing that can also be dangerous if people abuse it.

265
00:15:16,200 --> 00:15:18,360
Speaker 1: It allows you to look back in history on how

266
00:15:18,440 --> 00:15:21,480
Speaker 1: such a system would have performed, how that logic would

267
00:15:21,480 --> 00:15:24,320
Speaker 1: have done in various market environments. So at least you

268
00:15:24,360 --> 00:15:27,960
Speaker 1: have an idea of what's possible. So is that what

269
00:15:28,040 --> 00:15:32,520
Speaker 1: attracted you to a client based investing being rules driven

270
00:15:32,720 --> 00:15:37,120
Speaker 1: and objective as opposed to more intuitive and depending on

271
00:15:37,200 --> 00:15:39,680
Speaker 1: whatever you had for for breakfast? I say, you remember,

272
00:15:39,840 --> 00:15:42,120
Speaker 1: coming right out of college, I was doing biotech and

273
00:15:42,160 --> 00:15:44,320
Speaker 1: it was long only, so it didn't matter if you

274
00:15:44,360 --> 00:15:47,160
Speaker 1: pick the four or ten best biotech stocks out of

275
00:15:47,160 --> 00:15:51,880
Speaker 1: the sector, they all went down sixty right, So wanting

276
00:15:51,920 --> 00:15:55,400
Speaker 1: to understand that process which automatic leads you to become

277
00:15:55,480 --> 00:15:57,320
Speaker 1: macro and the and the one of the fun and

278
00:15:57,400 --> 00:16:00,920
Speaker 1: challenging things in our world is that these these market

279
00:16:00,960 --> 00:16:04,440
Speaker 1: regimes can go on for years. Right there, there's how

280
00:16:04,520 --> 00:16:07,480
Speaker 1: my mother grew up investing is totally different than the

281
00:16:07,560 --> 00:16:09,960
Speaker 1: environment I grew up in, or a Japanese investor in

282
00:16:09,960 --> 00:16:12,400
Speaker 1: the nineties. But those can last for years and decades,

283
00:16:12,520 --> 00:16:17,280
Speaker 1: and it completely um excuse your your belief of what's happening.

284
00:16:17,480 --> 00:16:20,400
Speaker 1: You know, like people in the nineties to believe a

285
00:16:20,480 --> 00:16:23,320
Speaker 1: year it was reasonable for stocks, right, Whenever you have

286
00:16:23,400 --> 00:16:26,240
Speaker 1: a big rally and U ask people, what are you expecting?

287
00:16:26,280 --> 00:16:28,800
Speaker 1: We sort with house prices, we sort with equities, what

288
00:16:28,880 --> 00:16:31,280
Speaker 1: are you expecting from this asset class in the coming year.

289
00:16:31,760 --> 00:16:34,960
Speaker 1: It's always a reflection of of what just took place.

290
00:16:35,280 --> 00:16:39,480
Speaker 1: It's pure recency effect and no recognition of the underlying

291
00:16:39,600 --> 00:16:43,680
Speaker 1: long term averages. And you almost have to be a

292
00:16:43,720 --> 00:16:46,520
Speaker 1: comedian or at least appreciate a with a little humor

293
00:16:46,800 --> 00:16:50,440
Speaker 1: the possibilities of what can happen. Right, So it'll be

294
00:16:50,480 --> 00:16:53,120
Speaker 1: able to look back to a nineteen eight seven style event,

295
00:16:53,560 --> 00:16:56,120
Speaker 1: or be able to say, with two thoughts in your

296
00:16:56,160 --> 00:16:59,320
Speaker 1: head that stocks could easily double from here or decline

297
00:17:00,040 --> 00:17:02,840
Speaker 1: because both have happened in the past. But to be

298
00:17:02,880 --> 00:17:06,760
Speaker 1: able to believe in that possibility, however rare is really challenging.

299
00:17:06,760 --> 00:17:10,040
Speaker 1: But I think it's also important. So when you look

300
00:17:10,080 --> 00:17:14,040
Speaker 1: at markets mathematically, what is it that you're actually looking at?

301
00:17:14,320 --> 00:17:17,199
Speaker 1: So we believe there's two main sort of schools of

302
00:17:17,240 --> 00:17:22,120
Speaker 1: thought in what works historically and investing, and it's rare

303
00:17:22,160 --> 00:17:24,439
Speaker 1: to find someone that believes in both. It's kind of

304
00:17:24,440 --> 00:17:27,080
Speaker 1: like talking about religion or politics. There's not a lot

305
00:17:27,160 --> 00:17:30,119
Speaker 1: of people that are both Democrat and Republicans, right, So

306
00:17:30,320 --> 00:17:34,720
Speaker 1: so my value and momentum or trend right, And usually

307
00:17:34,760 --> 00:17:38,639
Speaker 1: those two styles and people that follow them don't believe

308
00:17:38,640 --> 00:17:40,760
Speaker 1: in that in in each other. But it's true they

309
00:17:40,880 --> 00:17:45,120
Speaker 1: both worked historically. Value buying stocks that are cheap, for example,

310
00:17:45,280 --> 00:17:48,480
Speaker 1: whether it's by dividends or some other earnings metric, but

311
00:17:48,560 --> 00:17:51,399
Speaker 1: also momentum and trend buying markets that are going up,

312
00:17:51,440 --> 00:17:53,919
Speaker 1: but also importantly avoiding the ones that are going down.

313
00:17:54,520 --> 00:17:57,760
Speaker 1: Both can work great. Our favorite setup is when they intersect,

314
00:17:58,160 --> 00:18:01,240
Speaker 1: you know, when something is cheap and going up. But

315
00:18:01,520 --> 00:18:03,720
Speaker 1: really those are the two main schools I thought we

316
00:18:03,840 --> 00:18:07,280
Speaker 1: use when when we're applying the quantitative logic. It's funny

317
00:18:07,280 --> 00:18:11,280
Speaker 1: you mentioned that because Cliff Astness talks about the advantage

318
00:18:11,320 --> 00:18:15,480
Speaker 1: of purchasing value and the impact of momentum. And then

319
00:18:15,560 --> 00:18:17,760
Speaker 1: somebody else who I really should get in here one

320
00:18:17,800 --> 00:18:20,119
Speaker 1: of these days, I think you know Wes Gray of

321
00:18:20,200 --> 00:18:24,600
Speaker 1: Alpha architect. His book Quantitative Value looks at the combination

322
00:18:24,920 --> 00:18:30,080
Speaker 1: of less expensive stocks that are doing well or are

323
00:18:30,119 --> 00:18:33,920
Speaker 1: trending upwards but are cheap to begin with. It's it's

324
00:18:33,960 --> 00:18:37,560
Speaker 1: a fascinating combination. How a lot of different quants. You know,

325
00:18:37,680 --> 00:18:40,399
Speaker 1: you have a parable of the six blind men um

326
00:18:40,880 --> 00:18:45,440
Speaker 1: describing the elephant from John Goffrey Sachs's poem. I've used

327
00:18:45,440 --> 00:18:49,120
Speaker 1: that metaphor many times, but it looks like a lot

328
00:18:49,160 --> 00:18:52,960
Speaker 1: of quants are describing the same elephant. Yeah, and they

329
00:18:52,960 --> 00:18:55,439
Speaker 1: apply different ways, of course, right, Some are doing it

330
00:18:55,480 --> 00:18:58,320
Speaker 1: in the stock world, some are doing it sector rotation.

331
00:18:58,520 --> 00:19:01,800
Speaker 1: Some you're doing it a cross countries or even across

332
00:19:01,840 --> 00:19:05,280
Speaker 1: commodities and bonds in a in a multi asset class portfolio.

333
00:19:05,640 --> 00:19:08,320
Speaker 1: There's a lot of different ways to attack the problem.

334
00:19:08,560 --> 00:19:10,960
Speaker 1: Um in different ones work, you know, better and worse.

335
00:19:11,040 --> 00:19:14,919
Speaker 1: But we are were firm believers there. I'm Barry rid Helt. She'

336
00:19:15,000 --> 00:19:18,639
Speaker 1: listening to Master's Business on Bloomberg Radio. My guest today

337
00:19:18,880 --> 00:19:22,200
Speaker 1: is me being Fabor. He's a quant and chief investment

338
00:19:22,240 --> 00:19:25,960
Speaker 1: officer of Cambria Investments. He's also the author of a

339
00:19:26,040 --> 00:19:29,400
Speaker 1: number of books. Will share some of the other ones later.

340
00:19:29,440 --> 00:19:33,080
Speaker 1: What I want to talk about now, is the IVY portfolio,

341
00:19:33,320 --> 00:19:38,840
Speaker 1: your analysis of some of the strategies the big uh

342
00:19:38,960 --> 00:19:42,000
Speaker 1: endowments like Harvard and Yale put to work. If you

343
00:19:42,040 --> 00:19:45,280
Speaker 1: look at back at the biggest endowments, so it's particularly

344
00:19:45,280 --> 00:19:48,080
Speaker 1: Harvard Yale. They allocate their portfolio in a certain way

345
00:19:48,359 --> 00:19:51,520
Speaker 1: and historically it's had a number of features. One, they

346
00:19:51,520 --> 00:19:54,160
Speaker 1: have a true global focus, so they're not just investing

347
00:19:54,200 --> 00:19:56,879
Speaker 1: in the US. A lot of American investors and this

348
00:19:56,960 --> 00:20:00,520
Speaker 1: actually happens in every country the home country book to bias.

349
00:20:00,560 --> 00:20:04,560
Speaker 1: In the US, they invest se of their equity exposure

350
00:20:04,600 --> 00:20:07,880
Speaker 1: to US stocks. It's huge beat a minimum or maximum

351
00:20:07,880 --> 00:20:10,320
Speaker 1: it should be fifty as as a percent. So they

352
00:20:10,359 --> 00:20:14,159
Speaker 1: have a global focus. They allocate to real assets, so

353
00:20:14,760 --> 00:20:18,480
Speaker 1: think about real estate and or commodity type of projects. Um.

354
00:20:18,520 --> 00:20:21,760
Speaker 1: But but most of it is equity like assets, low

355
00:20:21,800 --> 00:20:24,840
Speaker 1: amount of bonds with the long term time horizon, and

356
00:20:24,840 --> 00:20:27,040
Speaker 1: so they do some weirder stuff to a lot of

357
00:20:27,400 --> 00:20:30,600
Speaker 1: private vehicles like hedge funds and private equity, and so

358
00:20:30,640 --> 00:20:33,080
Speaker 1: there's some benefits to that allocation over time. It's a

359
00:20:33,080 --> 00:20:35,280
Speaker 1: great allocation, but it can run into a lot of

360
00:20:35,320 --> 00:20:38,879
Speaker 1: trouble as markets Gyrade in the short term, which we

361
00:20:38,920 --> 00:20:41,680
Speaker 1: saw in two thousand and eight, two thousand nine, many

362
00:20:41,680 --> 00:20:44,880
Speaker 1: of these endowments on paper at least lost half at

363
00:20:44,880 --> 00:20:47,120
Speaker 1: some point brush they really got shut. So let's talk

364
00:20:47,119 --> 00:20:50,560
Speaker 1: a little bit about numbers. As of the most recent

365
00:20:50,640 --> 00:20:55,520
Speaker 1: data we accessed. Harvard thirty six point four billion dollar endowment.

366
00:20:55,840 --> 00:20:58,959
Speaker 1: Makes you wonder why anyone there even pays tuition, Yale

367
00:20:59,000 --> 00:21:04,400
Speaker 1: twenty three point nine, Stanford one point four billion billion

368
00:21:04,440 --> 00:21:08,720
Speaker 1: with a bat. These are enormous sums of money. What

369
00:21:08,800 --> 00:21:11,600
Speaker 1: are these guys? You mentioned what they do? Right? Why

370
00:21:11,640 --> 00:21:14,360
Speaker 1: did they run into so much trouble in O eight

371
00:21:14,400 --> 00:21:17,679
Speaker 1: oh nine? It doesn't look like they've fully recovered. And

372
00:21:17,720 --> 00:21:21,480
Speaker 1: here we are, jeez, it's seven years after that and

373
00:21:21,560 --> 00:21:25,560
Speaker 1: they are whereas the US markets have gotten back to

374
00:21:25,640 --> 00:21:28,800
Speaker 1: their pre O eight highs, and then some these guys

375
00:21:28,840 --> 00:21:31,960
Speaker 1: are still pretty much under water from that. Two problems.

376
00:21:32,040 --> 00:21:34,760
Speaker 1: One is that we talk a lot about looking at history.

377
00:21:34,800 --> 00:21:37,240
Speaker 1: Oh eight O nine was not really an environment we've

378
00:21:37,280 --> 00:21:40,600
Speaker 1: seen in the US since really the thirties, right where

379
00:21:41,080 --> 00:21:43,760
Speaker 1: everything kind of went down and a lot of people

380
00:21:44,240 --> 00:21:48,040
Speaker 1: that had been investing. It's almost like a deflationary shock

381
00:21:48,080 --> 00:21:51,080
Speaker 1: where the real assets went down, All the equities went down.

382
00:21:51,160 --> 00:21:53,000
Speaker 1: The only thing that did well was bonds, which they

383
00:21:53,000 --> 00:21:56,640
Speaker 1: don't have much of. So that's one problem. Four kind

384
00:21:56,640 --> 00:22:00,439
Speaker 1: of similar but more inflation area is opposed to right

385
00:22:00,560 --> 00:22:03,800
Speaker 1: inflationary equity wise, almost the same fall over a long

386
00:22:03,920 --> 00:22:07,000
Speaker 1: period of time. And the problem with having it's not problem,

387
00:22:07,000 --> 00:22:10,720
Speaker 1: it's just a feature of having an equity heavy portfolio

388
00:22:11,000 --> 00:22:13,639
Speaker 1: is that it's gonna get creamed. Right. So you go

389
00:22:13,720 --> 00:22:16,240
Speaker 1: through these huge bearer markets and they say they have

390
00:22:16,760 --> 00:22:19,919
Speaker 1: a time frame of you know, a hundred years or

391
00:22:20,040 --> 00:22:23,399
Speaker 1: just forever, but they had a mismatch with their cash

392
00:22:23,400 --> 00:22:26,440
Speaker 1: and liquidity needs. Right, So they're supposed to be paying

393
00:22:26,440 --> 00:22:29,520
Speaker 1: for these buildings and a lot of these endowments are

394
00:22:29,520 --> 00:22:31,880
Speaker 1: generating something like a third or half of the budget

395
00:22:31,920 --> 00:22:34,160
Speaker 1: for the school, right, so they run into these huge

396
00:22:34,200 --> 00:22:37,359
Speaker 1: liquidity crunch. So it's a mismatch. And in the private

397
00:22:37,400 --> 00:22:40,800
Speaker 1: equity and hedge funds aren't liquid for the most part, right,

398
00:22:40,880 --> 00:22:43,199
Speaker 1: So it was kind of a perfect storm. You know.

399
00:22:43,240 --> 00:22:45,760
Speaker 1: We propose some ideas in the book of how people

400
00:22:46,200 --> 00:22:49,159
Speaker 1: can replicate the endowments but also use things such as

401
00:22:49,200 --> 00:22:52,000
Speaker 1: trend following to be able to move to cash during

402
00:22:52,000 --> 00:22:54,119
Speaker 1: the long bear markets that we think we're great, but

403
00:22:54,359 --> 00:22:57,000
Speaker 1: probably something that an endowment for various reasons can't or

404
00:22:57,119 --> 00:23:00,600
Speaker 1: doesn't want to do um and they think you know

405
00:23:00,640 --> 00:23:04,040
Speaker 1: that the biggest problem in eight o nine was the illiquidity.

406
00:23:05,000 --> 00:23:08,280
Speaker 1: You had a paper that came out before the financial

407
00:23:08,320 --> 00:23:14,560
Speaker 1: crisis titled Quantitative Approach to Tactical Tactical Asset Allocation, which

408
00:23:14,640 --> 00:23:18,000
Speaker 1: essentially said, hey, this isn't rock and science science. Just

409
00:23:18,119 --> 00:23:21,520
Speaker 1: use a ten month ten month moving average and that's

410
00:23:21,560 --> 00:23:25,720
Speaker 1: your warning sign to get aggressively defensive. We could could

411
00:23:25,720 --> 00:23:30,239
Speaker 1: big endowments actually follow that with their liquid investments, They

412
00:23:30,280 --> 00:23:32,320
Speaker 1: could easy, and they could do it with futures. They

413
00:23:32,359 --> 00:23:36,920
Speaker 1: don't because it's a philosophical and mindset. But it's also

414
00:23:36,960 --> 00:23:39,520
Speaker 1: a big business career risk. Right. So if you're hedging

415
00:23:39,520 --> 00:23:41,560
Speaker 1: and the hedging doesn't work, if you look at say

416
00:23:41,640 --> 00:23:44,000
Speaker 1: since oh nine until about last year, a lot of

417
00:23:44,000 --> 00:23:46,920
Speaker 1: the trend following programs really struggled. They've done great in

418
00:23:46,960 --> 00:23:49,520
Speaker 1: the last year, right, But but it's it's a it

419
00:23:49,560 --> 00:23:52,639
Speaker 1: takes a philosophical mindset to be able to look at it.

420
00:23:52,680 --> 00:23:54,439
Speaker 1: I mean, the funny thing is, trendvolking is nothing new.

421
00:23:54,440 --> 00:23:56,960
Speaker 1: It's been around over a hundred twenty years. Dow theory

422
00:23:57,119 --> 00:23:59,520
Speaker 1: right was was people were talking about it in early

423
00:23:59,560 --> 00:24:02,639
Speaker 1: twenties entry. But it works, and it doesn't work for

424
00:24:02,760 --> 00:24:05,800
Speaker 1: usually the reasons people think, and that it's some massive

425
00:24:05,800 --> 00:24:09,600
Speaker 1: return generating engine. It usually it works by reducing volatility,

426
00:24:09,680 --> 00:24:12,960
Speaker 1: reducing draw down. But that's really the number one rule

427
00:24:13,000 --> 00:24:15,920
Speaker 1: of investing or trading. It's to live, to to trade

428
00:24:15,920 --> 00:24:20,159
Speaker 1: another day, to survive, right to not engage in behavior

429
00:24:20,240 --> 00:24:26,159
Speaker 1: that either a destroys your capital um. The Bill Gross

430
00:24:26,200 --> 00:24:30,439
Speaker 1: talked about, you know, the gamblers um risk that you

431
00:24:30,600 --> 00:24:35,040
Speaker 1: can't completely destroy your your seed capital, and then of

432
00:24:35,080 --> 00:24:38,679
Speaker 1: course you mentioned career risk and Paul Tutor Jones was

433
00:24:38,880 --> 00:24:41,399
Speaker 1: listening to an interview with him where he said, if

434
00:24:41,440 --> 00:24:43,000
Speaker 1: he had to use one indicator would be the two

435
00:24:43,080 --> 00:24:44,960
Speaker 1: hunter day moving average, if you just had to look

436
00:24:44,960 --> 00:24:47,439
Speaker 1: at one thing. And that's just a great example of

437
00:24:47,440 --> 00:24:50,439
Speaker 1: how you know. It's a very simple indicator, but it

438
00:24:50,440 --> 00:24:52,480
Speaker 1: can help you be on the right side of the

439
00:24:52,520 --> 00:24:55,280
Speaker 1: market and certainly to to survive. I'm Barry rich Helps.

440
00:24:55,320 --> 00:24:58,399
Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My

441
00:24:58,480 --> 00:25:01,199
Speaker 1: guest today is Meba Burke. He's the c i O

442
00:25:01,760 --> 00:25:05,720
Speaker 1: of Cambrian Investments. And before the break we talked a

443
00:25:05,720 --> 00:25:10,879
Speaker 1: little bit about how the financial services industry is being disrupted.

444
00:25:11,240 --> 00:25:13,119
Speaker 1: Let's let's discuss that a little bit. What do you

445
00:25:13,160 --> 00:25:17,399
Speaker 1: see as the big disruptors. So we started out managing

446
00:25:17,640 --> 00:25:20,240
Speaker 1: hedge funds at our firm back in oh seven and

447
00:25:20,320 --> 00:25:24,080
Speaker 1: individual accounts, and we eventually moved into launching our own

448
00:25:24,080 --> 00:25:26,320
Speaker 1: e t F s. And one of the reasons why

449
00:25:26,560 --> 00:25:30,240
Speaker 1: we think it's a great structure for the individual and look,

450
00:25:30,240 --> 00:25:33,399
Speaker 1: Wall Street's been selling various products forever, right, but this

451
00:25:33,480 --> 00:25:36,399
Speaker 1: is one of the best and cleanest that doesn't have

452
00:25:36,680 --> 00:25:40,399
Speaker 1: a lot of the baggage of old mutual funds that

453
00:25:40,440 --> 00:25:42,920
Speaker 1: were sold to people, right. So a lot of the fees,

454
00:25:42,960 --> 00:25:45,960
Speaker 1: the twelve B one fees, the various loads you know,

455
00:25:46,160 --> 00:25:48,720
Speaker 1: aren't a part of the e t F structure. It's easy.

456
00:25:49,400 --> 00:25:51,600
Speaker 1: Usually it's just a management fee. And so we started

457
00:25:51,640 --> 00:25:53,359
Speaker 1: we thought it was a great way for people to

458
00:25:53,400 --> 00:25:56,240
Speaker 1: be able to access the strategies, you know, we wanted

459
00:25:56,280 --> 00:25:58,560
Speaker 1: to launch. Um. There's a lot of other great stuff

460
00:25:58,600 --> 00:26:01,280
Speaker 1: going on. The automated investing solutions being put out by

461
00:26:01,640 --> 00:26:04,560
Speaker 1: Vanguard or Swab or firms like yours, you know, are

462
00:26:04,760 --> 00:26:07,960
Speaker 1: wonderful way is to be able for individuals to invest

463
00:26:08,160 --> 00:26:11,560
Speaker 1: with with having a rules based approach and not being

464
00:26:11,560 --> 00:26:14,280
Speaker 1: able to left to their own devices of being able

465
00:26:14,320 --> 00:26:17,119
Speaker 1: to do the really dumb stuff that costs them a

466
00:26:17,119 --> 00:26:19,479
Speaker 1: lot of money. So you're seeing a lot of different

467
00:26:19,520 --> 00:26:23,520
Speaker 1: great things going on, uh that we're pretty excited about.

468
00:26:23,880 --> 00:26:27,119
Speaker 1: We call that dumb stuff the behavior gap, and that

469
00:26:27,240 --> 00:26:30,840
Speaker 1: shows up in all of the annual return data that

470
00:26:31,000 --> 00:26:35,960
Speaker 1: shows how individuals radically under perform um even a simple

471
00:26:36,040 --> 00:26:40,080
Speaker 1: sixty forty portfolio. They're not capable of keeping up with it.

472
00:26:40,359 --> 00:26:43,639
Speaker 1: So you've cranked out a number of different ETFs. There

473
00:26:43,640 --> 00:26:46,400
Speaker 1: are a few that are really interesting. Before we talk

474
00:26:46,440 --> 00:26:50,560
Speaker 1: about the specific ETFs, let's talk about that process. What's

475
00:26:50,640 --> 00:26:54,320
Speaker 1: it like creating and then getting an e t F

476
00:26:54,880 --> 00:26:58,960
Speaker 1: approved in trading? So I have a couple of criteria

477
00:26:59,040 --> 00:27:01,359
Speaker 1: that we we use when we launch an e t F.

478
00:27:01,560 --> 00:27:03,840
Speaker 1: It has to be something I want to put my

479
00:27:03,880 --> 00:27:06,840
Speaker 1: own money into, so I have of my net worth

480
00:27:06,960 --> 00:27:10,119
Speaker 1: invested in these funds. That obviously has to be different

481
00:27:10,240 --> 00:27:13,840
Speaker 1: than what's out there already. So Vanguard State Street, these

482
00:27:13,880 --> 00:27:17,280
Speaker 1: guys can do and have launched hundreds of funds that

483
00:27:17,359 --> 00:27:20,280
Speaker 1: are great for a certain asset class just an exposure,

484
00:27:20,320 --> 00:27:23,320
Speaker 1: so we'll never copy cat that, right um. And it

485
00:27:23,400 --> 00:27:26,280
Speaker 1: has to be something that people also want, right so

486
00:27:26,359 --> 00:27:28,280
Speaker 1: there has to be a demand out there, and and

487
00:27:28,440 --> 00:27:30,359
Speaker 1: and the biggest is it has to be something that

488
00:27:30,520 --> 00:27:33,840
Speaker 1: we think works or is unique. So um, but the

489
00:27:33,960 --> 00:27:36,639
Speaker 1: process you got you have to get SEC approval to

490
00:27:36,720 --> 00:27:38,800
Speaker 1: be able to launch ETFs. I think this will change

491
00:27:38,840 --> 00:27:42,879
Speaker 1: the company or no, across the board. You need to

492
00:27:42,920 --> 00:27:45,720
Speaker 1: get an exemption to launch ETF and that tape. It

493
00:27:45,800 --> 00:27:49,800
Speaker 1: took us about fourteen months, and it's it's expensive. That's

494
00:27:49,840 --> 00:27:52,359
Speaker 1: just getting allowing you to play in the sandbox. Right.

495
00:27:52,720 --> 00:27:54,719
Speaker 1: That will change at some point. I don't care how

496
00:27:54,800 --> 00:27:56,639
Speaker 1: long it takes now because now that we have it,

497
00:27:56,720 --> 00:27:59,119
Speaker 1: it's more of a mote, right like SCC can just

498
00:27:59,200 --> 00:28:01,600
Speaker 1: continue to have a buck log. I don't care. But

499
00:28:02,040 --> 00:28:03,960
Speaker 1: it's a shame they'll they'll figure it out eventually so

500
00:28:04,040 --> 00:28:06,639
Speaker 1: that people can launch funds. It's more similar to to

501
00:28:07,400 --> 00:28:10,680
Speaker 1: mutual funds and so um. Once you have that permission,

502
00:28:10,720 --> 00:28:12,960
Speaker 1: then you can get a fund out if it's fairly

503
00:28:13,000 --> 00:28:16,520
Speaker 1: plain vanilla, it's nothing crazy, triple leverage derivatives. And about

504
00:28:16,600 --> 00:28:19,640
Speaker 1: three months so we've launched five. We have four more

505
00:28:19,760 --> 00:28:21,840
Speaker 1: queued up that we'd like to get out. But we

506
00:28:21,920 --> 00:28:23,520
Speaker 1: have a little bit different approach. You see, a lot

507
00:28:23,560 --> 00:28:25,880
Speaker 1: of the E t F shops will do the shotgun.

508
00:28:25,920 --> 00:28:28,400
Speaker 1: They'll throw everything against the wall, see what sticks, see

509
00:28:28,440 --> 00:28:31,840
Speaker 1: what the market likes, and hopefully the people will chase returns.

510
00:28:31,960 --> 00:28:34,760
Speaker 1: But but we like, I've watched the I've so let

511
00:28:34,800 --> 00:28:38,280
Speaker 1: me jump in here. I've watched you launch ETFs. They

512
00:28:38,400 --> 00:28:42,640
Speaker 1: invariably start with a white paper. Well, you describe philosophically

513
00:28:42,880 --> 00:28:47,480
Speaker 1: and quantitatively what you're hoping to accomplish. Then the fund

514
00:28:47,600 --> 00:28:52,040
Speaker 1: comes out, and then you uh do a follow up papers.

515
00:28:52,240 --> 00:28:54,760
Speaker 1: So let's talk about one as an example. And I

516
00:28:54,840 --> 00:28:58,040
Speaker 1: happen to have your book shareholder Yield here, so so

517
00:28:58,200 --> 00:29:02,240
Speaker 1: let's begin with that. Tell what shareholder yield is and

518
00:29:02,400 --> 00:29:04,600
Speaker 1: how that morphed into an E t F share Older

519
00:29:04,680 --> 00:29:06,920
Speaker 1: yields a concept that people have been writing about for

520
00:29:06,960 --> 00:29:11,840
Speaker 1: a long time, so it's it's nothing new. O'Shaughnessy mentioned

521
00:29:11,920 --> 00:29:14,080
Speaker 1: his book He's Been He took the theory back to

522
00:29:14,120 --> 00:29:17,520
Speaker 1: the twenties. But it basically says, look if companies can

523
00:29:17,600 --> 00:29:20,920
Speaker 1: distribute their cash flow, which investors love, it makes no

524
00:29:21,040 --> 00:29:24,480
Speaker 1: sense to just look at dividends or buy backs. Really,

525
00:29:24,560 --> 00:29:27,959
Speaker 1: it's the holistic cross between the two. The investors care

526
00:29:27,960 --> 00:29:30,080
Speaker 1: about is how much are you paying me? Because they're

527
00:29:30,120 --> 00:29:33,160
Speaker 1: exactly they're the exact same thing. If a company is

528
00:29:33,160 --> 00:29:36,520
Speaker 1: trading an intrinsic value, explain that how our dividends, which

529
00:29:36,600 --> 00:29:39,160
Speaker 1: is a check I get quarterly, the same as a

530
00:29:39,240 --> 00:29:43,000
Speaker 1: share by back, which I don't notice in my monthly portfolio. Right,

531
00:29:43,040 --> 00:29:45,360
Speaker 1: So you end up owning a larger percentage of the company.

532
00:29:45,400 --> 00:29:47,800
Speaker 1: It just it reduces the share account. You have a

533
00:29:47,880 --> 00:29:51,240
Speaker 1: higher percent equity ownership and earnings per share than then

534
00:29:51,320 --> 00:29:53,840
Speaker 1: go up. So the stock appears cheaper at that point.

535
00:29:53,960 --> 00:29:57,160
Speaker 1: And so all the research has shown and what you

536
00:29:57,360 --> 00:29:59,600
Speaker 1: what you find is there was a structural shift in

537
00:29:59,640 --> 00:30:03,000
Speaker 1: the early eighties. Uh, there there were some tax law changes,

538
00:30:03,240 --> 00:30:06,040
Speaker 1: there were some provisions that made it easier for companies

539
00:30:06,080 --> 00:30:08,480
Speaker 1: to have safe harbor to buy back their own stock.

540
00:30:08,800 --> 00:30:11,000
Speaker 1: So what you've seen since the eighties is each year

541
00:30:11,200 --> 00:30:13,200
Speaker 1: more and more and that the kink was right around

542
00:30:13,320 --> 00:30:17,280
Speaker 1: nineties seven where share buy backs constitute a higher percent

543
00:30:17,520 --> 00:30:20,360
Speaker 1: payout than than dividends do. And so you have to

544
00:30:20,400 --> 00:30:22,640
Speaker 1: look at it historical. We think looking at either dividends

545
00:30:22,640 --> 00:30:25,400
Speaker 1: alone or buy backs. It's the same mistake. You need

546
00:30:25,440 --> 00:30:27,640
Speaker 1: to look at both. Apple is a great example, right

547
00:30:27,720 --> 00:30:30,280
Speaker 1: where they have a two percent dividend yield, but hey,

548
00:30:30,360 --> 00:30:32,960
Speaker 1: they also have this buy back yield. And one of

549
00:30:33,000 --> 00:30:35,440
Speaker 1: the problems with dividend investing, and there's a lot is

550
00:30:35,560 --> 00:30:37,680
Speaker 1: that for for one example, you could have a company

551
00:30:37,720 --> 00:30:40,280
Speaker 1: paying a two or three percent dividend yield, but they're

552
00:30:40,320 --> 00:30:44,040
Speaker 1: also you know, picking your pocket by issuing three or

553
00:30:44,120 --> 00:30:46,240
Speaker 1: four percent a year in new stock. A lot of

554
00:30:46,280 --> 00:30:49,080
Speaker 1: tech companies do this, right, was notorious for this. The

555
00:30:49,160 --> 00:30:52,120
Speaker 1: share account just crept up over the years, so that

556
00:30:52,200 --> 00:30:54,840
Speaker 1: you're actually getting a negative yield if you think about correctly.

557
00:30:54,840 --> 00:30:56,760
Speaker 1: So if you go back and back test it, that

558
00:30:56,920 --> 00:31:00,800
Speaker 1: shows up the shareholder yield companies do much better, uh

559
00:31:00,960 --> 00:31:03,880
Speaker 1: than than either dividends or buy backs alone. So we

560
00:31:04,200 --> 00:31:07,040
Speaker 1: we've been writing about this since oh six, and it

561
00:31:07,120 --> 00:31:09,520
Speaker 1: was shocked that no one had launched a fund and said, look,

562
00:31:09,560 --> 00:31:11,240
Speaker 1: I really want to be able to invest in this.

563
00:31:11,480 --> 00:31:14,280
Speaker 1: It doesn't exist. There's some mutual funds, but they're twice

564
00:31:14,280 --> 00:31:16,760
Speaker 1: as expensive as what we do. She said, let's let's

565
00:31:16,800 --> 00:31:19,120
Speaker 1: launch a simple fund, and so we put that out

566
00:31:19,120 --> 00:31:21,480
Speaker 1: a couple of years ago. So let's let's mention it's

567
00:31:21,520 --> 00:31:24,800
Speaker 1: the shareholder yield dt F is s y l D

568
00:31:25,400 --> 00:31:27,960
Speaker 1: and then there's the foreign shareholder yield d t f

569
00:31:28,560 --> 00:31:31,440
Speaker 1: F y l D. Does the math work the same

570
00:31:31,600 --> 00:31:34,760
Speaker 1: for foreign companies as does for US? It works the same.

571
00:31:34,800 --> 00:31:36,920
Speaker 1: There's not as much of a culture of buy backs

572
00:31:37,000 --> 00:31:40,239
Speaker 1: yet in a lot of countries it's changing, right, more

573
00:31:40,280 --> 00:31:42,200
Speaker 1: of a dividend culture. So for example, if you're doing

574
00:31:42,200 --> 00:31:44,400
Speaker 1: a shareholder yield portfolio here in the US, you may

575
00:31:44,520 --> 00:31:46,360
Speaker 1: end up with on aggregate, let's call it a two

576
00:31:46,400 --> 00:31:49,880
Speaker 1: percent dividend yield, but maybe a six percent buy back yield.

577
00:31:49,920 --> 00:31:52,800
Speaker 1: So you're getting up around a high single digit yield, right,

578
00:31:52,920 --> 00:31:55,120
Speaker 1: that's great. If you look at the SMP right now,

579
00:31:55,320 --> 00:31:57,240
Speaker 1: you're you have maybe a two percent you a little

580
00:31:57,280 --> 00:32:01,080
Speaker 1: lower now, but no net buy back, so it's a

581
00:32:01,120 --> 00:32:03,800
Speaker 1: six percent delta. That's amazing because there have been so

582
00:32:03,880 --> 00:32:06,720
Speaker 1: many major you know, you see the big buybacks like

583
00:32:06,840 --> 00:32:10,600
Speaker 1: the Apples and the Microsoft's and the Intel's, but you

584
00:32:10,720 --> 00:32:14,240
Speaker 1: forget about everybody else's. And this is why the buy

585
00:32:14,320 --> 00:32:17,240
Speaker 1: back indusseries and the shareholder yield have been creaming the

586
00:32:17,320 --> 00:32:19,960
Speaker 1: dividend indusseries for the past couple of years is because

587
00:32:20,040 --> 00:32:22,280
Speaker 1: the buy back yield amount is much higher than the

588
00:32:22,360 --> 00:32:25,480
Speaker 1: dividend yield amount. And one really quick point is that

589
00:32:26,080 --> 00:32:29,160
Speaker 1: any factor, so it's called dividends or buy backs, goes

590
00:32:29,240 --> 00:32:31,000
Speaker 1: in and out of favor. So if you remember back

591
00:32:31,040 --> 00:32:34,120
Speaker 1: to late nineties, no one wanted dividend stocks, right, You

592
00:32:34,160 --> 00:32:37,560
Speaker 1: couldn't sell someone one that was the best fattest pitch

593
00:32:37,720 --> 00:32:40,920
Speaker 1: to invest in dividend stocks. Ever, so what's happened since then? Right,

594
00:32:41,320 --> 00:32:44,080
Speaker 1: people have flooded into dividend stocks in the search for yield,

595
00:32:44,120 --> 00:32:47,640
Speaker 1: and dividends work historically because they traded a discount of value,

596
00:32:47,680 --> 00:32:51,040
Speaker 1: discounted the overall market, but that varies. So in the

597
00:32:51,120 --> 00:32:53,480
Speaker 1: highest it's ever been fifty percent discount of the overall

598
00:32:53,560 --> 00:32:56,880
Speaker 1: market in two thousand seven, two thousand eight or its

599
00:32:57,200 --> 00:32:58,880
Speaker 1: so maybe it's even more recent two thousand ten, two

600
00:32:58,880 --> 00:33:02,160
Speaker 1: thousand eleven, dividends traded at a premium to the overall market,

601
00:33:02,240 --> 00:33:05,479
Speaker 1: so you're getting these junkier companies, but now that are

602
00:33:05,560 --> 00:33:08,360
Speaker 1: more expensive. And that's one of the reasons that if

603
00:33:08,400 --> 00:33:11,760
Speaker 1: you look at any factor, sometimes it's great, sometimes it's terrible,

604
00:33:11,800 --> 00:33:14,400
Speaker 1: and aggregate, it works out. But that's why dividends have

605
00:33:14,440 --> 00:33:16,840
Speaker 1: really struggled the past couple of years. They simply got

606
00:33:16,960 --> 00:33:19,200
Speaker 1: too expensive. If you look at the largest dividen in

607
00:33:19,240 --> 00:33:21,720
Speaker 1: e t F has a lower yield than the SMP.

608
00:33:22,080 --> 00:33:25,040
Speaker 1: We're speaking with Med favor of Cambrian Investments about some

609
00:33:25,160 --> 00:33:27,480
Speaker 1: of the e t f s. His firm has created

610
00:33:28,320 --> 00:33:31,280
Speaker 1: what's the typical number of holdings in these domestic and

611
00:33:31,560 --> 00:33:35,480
Speaker 1: overseas UH divon and yielding e t shareholder deal So

612
00:33:35,520 --> 00:33:38,080
Speaker 1: it's a hundred stocks in each. Yeah, And so like

613
00:33:38,160 --> 00:33:40,800
Speaker 1: Cliff talked about in one of your your earlier podcasts,

614
00:33:40,880 --> 00:33:44,920
Speaker 1: is that you know quantz love breadth diversification, right, but

615
00:33:45,160 --> 00:33:48,040
Speaker 1: but it's a fine line between wanting to be concentrated

616
00:33:48,200 --> 00:33:51,520
Speaker 1: enough to be different so to allow potential out performance

617
00:33:51,640 --> 00:33:55,400
Speaker 1: over the market cap benchmark, but also diversified enough that

618
00:33:55,520 --> 00:33:59,520
Speaker 1: you are getting um some diverstication across sectors and companies

619
00:33:59,600 --> 00:34:02,760
Speaker 1: in any one company doing poorly, and I would imagine

620
00:34:02,840 --> 00:34:05,840
Speaker 1: this sort of e t F has been doing well

621
00:34:05,880 --> 00:34:10,400
Speaker 1: and attracting assets that it's technically the largest active equity

622
00:34:10,480 --> 00:34:13,040
Speaker 1: e t F out there. It's an active fund. May

623
00:34:13,080 --> 00:34:14,960
Speaker 1: mean that's kind of like saying you're the best. You

624
00:34:15,040 --> 00:34:17,080
Speaker 1: have the home run record for trip you know, single

625
00:34:17,160 --> 00:34:20,359
Speaker 1: a baseball, right, But um, but it yeah, it's it's

626
00:34:20,440 --> 00:34:23,560
Speaker 1: it's a clean, basic strategy that we think has a

627
00:34:23,600 --> 00:34:26,680
Speaker 1: lot of appeals. Certainly certainly right now, how how often

628
00:34:26,760 --> 00:34:29,360
Speaker 1: do the constituents change within the e t F? You

629
00:34:29,360 --> 00:34:32,320
Speaker 1: don't want a quarter? Oh so it's it's active, but

630
00:34:32,480 --> 00:34:37,520
Speaker 1: not hyperactive. And let's talk about Um, you recently came

631
00:34:37,560 --> 00:34:40,040
Speaker 1: out with an e t F that has no internal

632
00:34:40,120 --> 00:34:43,200
Speaker 1: fee structure. But before we talk about that, what's the

633
00:34:43,239 --> 00:34:47,320
Speaker 1: internal expenses on the domestic and overseas e t s?

634
00:34:47,480 --> 00:34:49,360
Speaker 1: We we try to get most of them right around

635
00:34:49,400 --> 00:34:52,200
Speaker 1: the average et F expense ratio, which is around point

636
00:34:52,280 --> 00:34:55,040
Speaker 1: five nine the foreign or a little more for holding

637
00:34:55,120 --> 00:34:58,719
Speaker 1: fees point six nine. But that's that's the highest you'll

638
00:34:58,760 --> 00:35:01,160
Speaker 1: ever see out of us. But now, how the people

639
00:35:01,239 --> 00:35:04,240
Speaker 1: don't see that? It just comes out of the total return.

640
00:35:04,920 --> 00:35:08,800
Speaker 1: But you produced a new globally TF that has no

641
00:35:08,960 --> 00:35:12,120
Speaker 1: internal expense ratio. Tell us about that. You know, Look,

642
00:35:12,200 --> 00:35:14,960
Speaker 1: we said, and I've been writing about this since oh

643
00:35:15,000 --> 00:35:17,319
Speaker 1: six or seven, and said, look, I have no problem

644
00:35:17,360 --> 00:35:19,160
Speaker 1: with buy and hold investing. We talked about it in

645
00:35:19,200 --> 00:35:21,600
Speaker 1: the Ivy portfolio. It's a great way to invest if

646
00:35:21,719 --> 00:35:24,399
Speaker 1: that's how your emotional makeup is set. So we looked

647
00:35:24,440 --> 00:35:27,680
Speaker 1: at fifteen at the best guru portfolios around the world

648
00:35:28,239 --> 00:35:31,200
Speaker 1: and found that even though they're really different, shockingly the

649
00:35:31,360 --> 00:35:34,080
Speaker 1: performance over the last forty years is pretty close to

650
00:35:34,160 --> 00:35:36,480
Speaker 1: each other, mainly because they all had a little of

651
00:35:36,560 --> 00:35:38,919
Speaker 1: each and so we wanted to say, look, we'll offer

652
00:35:39,000 --> 00:35:42,440
Speaker 1: the global portfolio but for zero percent management fee. We

653
00:35:42,560 --> 00:35:44,279
Speaker 1: end up making a little because it owns some of

654
00:35:44,320 --> 00:35:46,719
Speaker 1: our own at F, but the total expense ratio is

655
00:35:46,800 --> 00:35:49,480
Speaker 1: it's the cheapest acid out case ETF out there is

656
00:35:49,560 --> 00:35:53,360
Speaker 1: zero point two. That's that's amazing. We've been speaking with

657
00:35:53,640 --> 00:35:58,279
Speaker 1: me being favor of Cambrian investments. If you enjoy this conversation,

658
00:35:58,440 --> 00:36:00,400
Speaker 1: be sure to check out the rest of it. You

659
00:36:00,520 --> 00:36:04,040
Speaker 1: can find that podcast on Bloomberg dot com or at

660
00:36:04,120 --> 00:36:08,200
Speaker 1: Apple iTunes. Be sure and check out my daily column

661
00:36:08,280 --> 00:36:11,120
Speaker 1: on Bloomberg View dot com or follow me on Twitter

662
00:36:11,719 --> 00:36:14,520
Speaker 1: at rid Halts. I'm Barry RIDH Halts. You're listening to

663
00:36:14,680 --> 00:36:18,960
Speaker 1: Masters in Business on Bloomberg Radio. Welcome back to the show.

664
00:36:19,239 --> 00:36:23,160
Speaker 1: This is the podcast portion of our interview where we

665
00:36:23,600 --> 00:36:25,759
Speaker 1: let our hair down a little bit and have some

666
00:36:25,920 --> 00:36:29,760
Speaker 1: fun with our guests before we continue on with our questions.

667
00:36:29,800 --> 00:36:32,520
Speaker 1: I really have to, you know, let people know MEB

668
00:36:32,560 --> 00:36:35,759
Speaker 1: and I know each other for um a good couple

669
00:36:35,800 --> 00:36:39,719
Speaker 1: of years. We've we've wreaked some havoc in some restaurants

670
00:36:39,760 --> 00:36:43,239
Speaker 1: and bars. Uh in l a As and and not

671
00:36:43,480 --> 00:36:47,800
Speaker 1: too long ago here in New York. Um. Somebody described

672
00:36:48,120 --> 00:36:51,960
Speaker 1: our last outing as the Justice League of Finance. Who

673
00:36:52,080 --> 00:36:56,680
Speaker 1: is you me? Um Patrick O'Shaughnessy of of oh Sam

674
00:36:57,360 --> 00:37:03,320
Speaker 1: Josh Brown reform broker, Um, Mike Batnick irrelevant investor J C.

675
00:37:03,640 --> 00:37:07,200
Speaker 1: Perette's of All Star Charts. That were about a dozen

676
00:37:07,320 --> 00:37:10,200
Speaker 1: people out. I'm drown a blank on the guy's name

677
00:37:10,280 --> 00:37:15,759
Speaker 1: from from Wisdom, Jeremy Schwartz, Jeremy really nice guy, really

678
00:37:15,880 --> 00:37:19,640
Speaker 1: interesting stuff. Morgan Houseel of Motley Fool and the Wall

679
00:37:19,640 --> 00:37:21,880
Speaker 1: Street General was at with us. It was really a

680
00:37:21,960 --> 00:37:24,239
Speaker 1: lot of fun and that ran h. I understand. People

681
00:37:24,280 --> 00:37:27,160
Speaker 1: went out after I went home. People went out to

682
00:37:27,239 --> 00:37:29,920
Speaker 1: dinner and stayed out pretty late, having a little bit

683
00:37:30,000 --> 00:37:33,640
Speaker 1: of ongoing financial debate. If if I had known you

684
00:37:33,719 --> 00:37:35,759
Speaker 1: were buying the Happy Hour, I probably would have had

685
00:37:35,760 --> 00:37:38,040
Speaker 1: a few more beers than than I did. But but

686
00:37:38,160 --> 00:37:41,200
Speaker 1: it's it's good that at least the comments weren't that

687
00:37:41,280 --> 00:37:43,600
Speaker 1: we were the supervillains of finance. That's right. And and

688
00:37:43,760 --> 00:37:46,000
Speaker 1: by the way, the secret to picking up the tab

689
00:37:46,360 --> 00:37:49,279
Speaker 1: at happy hour is just not to tell any then

690
00:37:49,320 --> 00:37:52,640
Speaker 1: when the check comes it's actually fairly h fairly reasonable.

691
00:37:52,719 --> 00:37:57,359
Speaker 1: So early on you described when you were doing um

692
00:37:57,520 --> 00:38:02,759
Speaker 1: bio and biotech work that you were slowly attracted to finance.

693
00:38:03,080 --> 00:38:06,360
Speaker 1: How did that transition happen? What What was it about

694
00:38:06,719 --> 00:38:10,200
Speaker 1: money and the management of money that made you say, well,

695
00:38:10,280 --> 00:38:15,640
Speaker 1: biotech is fascinating, but really the asset management side is intriguing,

696
00:38:15,880 --> 00:38:18,520
Speaker 1: you know. I mean, like many investors, I grew up

697
00:38:18,840 --> 00:38:22,719
Speaker 1: chatting with my father and my mom about investing, and

698
00:38:22,960 --> 00:38:25,880
Speaker 1: both had very different styles. Right you look at moms

699
00:38:25,920 --> 00:38:28,880
Speaker 1: she said meb you just buy and hold and hold forever.

700
00:38:29,320 --> 00:38:31,440
Speaker 1: And in retrospect, looking back now, I said, well, of

701
00:38:31,520 --> 00:38:34,880
Speaker 1: course that makes sense. You're investing career was mostly in

702
00:38:34,960 --> 00:38:37,640
Speaker 1: the eighties and nineties, right, it made sense to just

703
00:38:37,760 --> 00:38:40,040
Speaker 1: buy and hold and forget it. If she was a

704
00:38:40,200 --> 00:38:43,719
Speaker 1: housewife in Japan, and she probably wouldn't have had that

705
00:38:43,760 --> 00:38:46,360
Speaker 1: same philosophy, not at all. And so you know, so

706
00:38:46,719 --> 00:38:49,640
Speaker 1: she uh, and not to mention her father worked at R. J. Reynolds,

707
00:38:49,680 --> 00:38:53,120
Speaker 1: one of the best performing stocks of our generation. And

708
00:38:53,600 --> 00:38:55,960
Speaker 1: my father was an aerospace guy, so his was a

709
00:38:56,000 --> 00:38:59,400
Speaker 1: little more specific. He tried to do domain knowledge in

710
00:38:59,440 --> 00:39:02,080
Speaker 1: the areas he knew about. But but like I mentioned earlier,

711
00:39:02,200 --> 00:39:05,720
Speaker 1: had many of the same um but different behavioral biases.

712
00:39:05,800 --> 00:39:08,480
Speaker 1: He would never sell so often, for example, things would

713
00:39:08,520 --> 00:39:10,120
Speaker 1: you know, watch it go all the way? So had

714
00:39:10,120 --> 00:39:12,879
Speaker 1: a culture of learning about investing growing up and then

715
00:39:13,000 --> 00:39:15,160
Speaker 1: started to do it on your own. And the lesson

716
00:39:15,239 --> 00:39:19,480
Speaker 1: that many traders learn at some point and hopefully early

717
00:39:19,560 --> 00:39:21,960
Speaker 1: when they don't have much money is blowing up at

718
00:39:22,000 --> 00:39:23,920
Speaker 1: some point, you know, losing all your money. And that's

719
00:39:23,920 --> 00:39:27,359
Speaker 1: a very painful but beneficial process. And as we see

720
00:39:27,480 --> 00:39:30,920
Speaker 1: this year six seven bullmarket coming and there's so many

721
00:39:30,960 --> 00:39:33,719
Speaker 1: people out there who have never lived through one. You know,

722
00:39:33,800 --> 00:39:36,560
Speaker 1: the pain of losing money is very real. It's it's

723
00:39:36,600 --> 00:39:40,360
Speaker 1: a very physical pain, especially um when you have a

724
00:39:40,400 --> 00:39:45,080
Speaker 1: big loss thirty fifty um. But until you live through it,

725
00:39:45,160 --> 00:39:47,680
Speaker 1: it's hard to describe that as someone the line I

726
00:39:47,760 --> 00:39:49,840
Speaker 1: began on a trading desk, and the thing that I

727
00:39:49,960 --> 00:39:53,080
Speaker 1: used to hear all the time was about new traders. Oh,

728
00:39:53,160 --> 00:39:54,800
Speaker 1: the worst thing that can happen to him as he

729
00:39:54,880 --> 00:39:57,840
Speaker 1: makes money, Suddenly you think it's easy. And I started

730
00:39:57,880 --> 00:40:00,480
Speaker 1: in the mid nineties, and if you want putting up

731
00:40:00,520 --> 00:40:03,680
Speaker 1: fifty year numbers, you were a bump and people thought

732
00:40:03,760 --> 00:40:05,680
Speaker 1: that was normal. When you ask people what are you

733
00:40:05,760 --> 00:40:09,279
Speaker 1: looking for next year? I'm looking to double my money. Really,

734
00:40:09,360 --> 00:40:11,440
Speaker 1: what are the odds that you're going to do that well?

735
00:40:11,520 --> 00:40:14,400
Speaker 1: And people we talked about this in one of our

736
00:40:14,400 --> 00:40:16,239
Speaker 1: first papers. They use a different part of the brain

737
00:40:16,280 --> 00:40:18,439
Speaker 1: when they're making money and losing money. You're making money,

738
00:40:18,480 --> 00:40:21,479
Speaker 1: you're thinking about your vacations, how smart you are, can't

739
00:40:21,520 --> 00:40:23,600
Speaker 1: wait to tell your friends you're checking your balance ten

740
00:40:23,640 --> 00:40:27,000
Speaker 1: times a day on online. When you're losing money, you

741
00:40:27,440 --> 00:40:29,920
Speaker 1: don't open your account statements in the mail, You're so

742
00:40:30,120 --> 00:40:34,000
Speaker 1: angry at your neighbor broker for recommending that app company.

743
00:40:34,160 --> 00:40:37,279
Speaker 1: You know you It's it's the flight response, right, So

744
00:40:37,400 --> 00:40:42,360
Speaker 1: it's a totally different It's emotional, so so is the

745
00:40:42,480 --> 00:40:45,440
Speaker 1: making money, but it's more of the neo cortex. The

746
00:40:45,600 --> 00:40:50,160
Speaker 1: limbic system is the law system, which is I think

747
00:40:50,200 --> 00:40:53,800
Speaker 1: you gave a speech to uh A Google Talk. Is

748
00:40:53,880 --> 00:40:55,840
Speaker 1: that right? And you talk about a lot of the

749
00:40:55,920 --> 00:41:00,439
Speaker 1: same um behavioral economics and neurofinance stuff I to talk

750
00:41:00,480 --> 00:41:04,960
Speaker 1: about what kept you alive on the savannah doesn't help

751
00:41:05,080 --> 00:41:09,120
Speaker 1: you in in identifying risk and managing losses at all.

752
00:41:09,200 --> 00:41:12,400
Speaker 1: If anything, it sends you running in the wrong direction.

753
00:41:12,800 --> 00:41:15,840
Speaker 1: And it creates opportunities. Of course, it makes markets that

754
00:41:16,280 --> 00:41:18,920
Speaker 1: you know, create bubbles, which I love from a from

755
00:41:18,960 --> 00:41:21,160
Speaker 1: a standpoint of an asset manager. You did a white

756
00:41:21,200 --> 00:41:23,719
Speaker 1: paper on bubbles. What was the title of that, Learning

757
00:41:23,800 --> 00:41:26,480
Speaker 1: to Love Investment Bubbles, which was which is actually a

758
00:41:26,560 --> 00:41:29,600
Speaker 1: fun white paper a phrase that's not spoken off and

759
00:41:29,680 --> 00:41:32,279
Speaker 1: the subtitle what if Sir Isaac Newton would was a

760
00:41:32,320 --> 00:41:35,320
Speaker 1: trend follower. But what you find in bubbles across history

761
00:41:35,640 --> 00:41:37,719
Speaker 1: is that they've been happening forever, and we go back

762
00:41:37,760 --> 00:41:40,360
Speaker 1: a couple hundred years and you find them in various places.

763
00:41:40,840 --> 00:41:44,720
Speaker 1: You know, the past decade has created the vernacular bubble.

764
00:41:44,760 --> 00:41:48,040
Speaker 1: Everyone talks about bubbles now, bubble bubbles. They're pretty rare, right,

765
00:41:48,160 --> 00:41:50,040
Speaker 1: you know, we had talked a lot about bitcoin, for

766
00:41:50,120 --> 00:41:53,920
Speaker 1: example recently being having a lot of bubble type of behavior,

767
00:41:54,040 --> 00:41:56,560
Speaker 1: specular behavior. But one of the things if you apply

768
00:41:56,719 --> 00:41:59,960
Speaker 1: trend following methodology and look at them historically. It's great

769
00:42:00,040 --> 00:42:02,480
Speaker 1: because it has an exit that allows you to hopefully

770
00:42:02,600 --> 00:42:06,600
Speaker 1: live to play another day, right, instead of the psychological

771
00:42:06,719 --> 00:42:11,239
Speaker 1: and real pain of losing in a in a draw

772
00:42:11,360 --> 00:42:13,440
Speaker 1: down in a bubble. But what you find is that

773
00:42:13,560 --> 00:42:16,759
Speaker 1: as people lose money when they're below the trend, volatility

774
00:42:16,840 --> 00:42:19,719
Speaker 1: is so much higher, right, So volatility explodes to the

775
00:42:19,760 --> 00:42:23,000
Speaker 1: both up and downside. So all of the best and

776
00:42:23,200 --> 00:42:27,000
Speaker 1: worst days occur, not all, but two thirds occur after

777
00:42:27,160 --> 00:42:30,160
Speaker 1: markets have already been declining. And that's simply because they're

778
00:42:30,200 --> 00:42:33,640
Speaker 1: more volatile. So if you can avoid those periods by

779
00:42:33,719 --> 00:42:36,520
Speaker 1: having a trend falling approach, it makes life a lot easier.

780
00:42:36,960 --> 00:42:39,359
Speaker 1: And and here's a little bit of an anecdotal data

781
00:42:39,480 --> 00:42:42,080
Speaker 1: point that I'd love to do some deep research on.

782
00:42:42,840 --> 00:42:47,320
Speaker 1: I can't help but notice that when entire sectors fall

783
00:42:47,400 --> 00:42:52,560
Speaker 1: about eight or so, that's a pretty attractive entry point.

784
00:42:52,960 --> 00:42:56,920
Speaker 1: You look at the NASDAC dot com bubble fell, you

785
00:42:57,040 --> 00:43:00,080
Speaker 1: look at the real estate bubble, the public trade it

786
00:43:00,160 --> 00:43:02,680
Speaker 1: stocks dropped about that much, and then you look at

787
00:43:02,719 --> 00:43:05,480
Speaker 1: the banks in that space. I'm not suggesting you try

788
00:43:05,520 --> 00:43:09,160
Speaker 1: and catch anyone falling knife. But buying a whole sector

789
00:43:09,719 --> 00:43:13,160
Speaker 1: that's down, just so long as it's not your leather

790
00:43:13,239 --> 00:43:17,200
Speaker 1: belt and steam sector um isn't a bad entry point.

791
00:43:17,520 --> 00:43:20,160
Speaker 1: So we've actually run some studies on that, and the

792
00:43:21,440 --> 00:43:24,560
Speaker 1: empirical data shows that an actual ad yes it usually

793
00:43:24,680 --> 00:43:27,360
Speaker 1: is a pretty great idea. The challenge, of course, you

794
00:43:27,400 --> 00:43:29,239
Speaker 1: can't do this with an individual stock because they can

795
00:43:29,239 --> 00:43:31,200
Speaker 1: go to zero, right, But because we've seen old too

796
00:43:31,239 --> 00:43:33,440
Speaker 1: many times, if you buy a big enough basket of

797
00:43:33,480 --> 00:43:36,960
Speaker 1: whether it's a sector or a country in general, yes,

798
00:43:37,080 --> 00:43:38,759
Speaker 1: it's a great time to be buying it, the further

799
00:43:38,840 --> 00:43:40,239
Speaker 1: it goes down. But there's you go back to the

800
00:43:40,320 --> 00:43:42,759
Speaker 1: old famous investing joke, what do you call something down?

801
00:43:43,920 --> 00:43:47,000
Speaker 1: That's something that was down then went down another fift

802
00:43:47,880 --> 00:43:49,799
Speaker 1: in half, So you can. And the reason we talk

803
00:43:49,800 --> 00:43:52,840
Speaker 1: a lot about this is because the drawdowns often correlate

804
00:43:53,000 --> 00:43:56,480
Speaker 1: very highly with value. Value is nothing more in most

805
00:43:56,560 --> 00:44:02,000
Speaker 1: cases than something that's just already gone down fIF So

806
00:44:02,120 --> 00:44:03,839
Speaker 1: if you look at the way the world exists today,

807
00:44:03,880 --> 00:44:06,040
Speaker 1: there's a lot of countries out there that are cheap,

808
00:44:06,640 --> 00:44:09,400
Speaker 1: but they're cheap like Greece or Russia or you know,

809
00:44:09,520 --> 00:44:11,640
Speaker 1: getting cheaper and get so one there's a lot of

810
00:44:11,760 --> 00:44:14,520
Speaker 1: risk because they can get cheaper. But to uh, they're

811
00:44:14,520 --> 00:44:17,399
Speaker 1: simply cheap because the P and the pe right, it's

812
00:44:17,440 --> 00:44:19,440
Speaker 1: not the earnings that's changing, it's the price, and so

813
00:44:19,520 --> 00:44:25,239
Speaker 1: they've already declined fifties. But that's what generates a lot

814
00:44:25,320 --> 00:44:30,480
Speaker 1: of opportunity. That's that's really interesting when you look around

815
00:44:30,600 --> 00:44:33,759
Speaker 1: the world. Let's talk a little bit about valuation um

816
00:44:33,920 --> 00:44:38,320
Speaker 1: because by many measures, stocks in the US if it

817
00:44:38,480 --> 00:44:40,480
Speaker 1: depending on what you want to use as a as

818
00:44:40,560 --> 00:44:45,319
Speaker 1: a valuation tool, you could cherry pick valuations that say

819
00:44:45,360 --> 00:44:48,680
Speaker 1: stocks are cheap. You can certainly charity pick valuations that

820
00:44:48,840 --> 00:44:52,800
Speaker 1: say stocks are expensive. Merrill Lynch puts out a whole

821
00:44:53,719 --> 00:44:57,480
Speaker 1: spectrum of valuation analysis, and it's hard to look at

822
00:44:57,520 --> 00:45:01,640
Speaker 1: that and not say stocks at best aren't fully valued

823
00:45:01,680 --> 00:45:04,600
Speaker 1: in the US. Here's the challenge with the Meryoral Report,

824
00:45:04,640 --> 00:45:07,000
Speaker 1: and I've seen that is that you have to have

825
00:45:07,239 --> 00:45:11,600
Speaker 1: a consistent start period that's long enough for enough history.

826
00:45:11,760 --> 00:45:13,759
Speaker 1: None of them are more than twenty years. And in

827
00:45:13,800 --> 00:45:16,919
Speaker 1: the Meryal Report compares many certain indicators which i haven't

828
00:45:16,920 --> 00:45:19,520
Speaker 1: existed for a long time, so it ticket for you know,

829
00:45:19,600 --> 00:45:22,120
Speaker 1: grain of salt, but some haven't have only existed since

830
00:45:22,520 --> 00:45:25,160
Speaker 1: two thousand or nineteen ninety, well, the majority of that

831
00:45:25,320 --> 00:45:28,640
Speaker 1: period has been been very bubblicious, right, So it's like

832
00:45:28,719 --> 00:45:31,400
Speaker 1: an example, if you're only looking at Japan from nineteen

833
00:45:31,440 --> 00:45:34,799
Speaker 1: seventy to nineteen ninety or two thousand, well, almost entire

834
00:45:34,880 --> 00:45:37,799
Speaker 1: period was the biggest bubble we've ever seen. So if

835
00:45:37,840 --> 00:45:42,040
Speaker 1: you take any value in and value indicators their blunt tools, right,

836
00:45:42,520 --> 00:45:44,320
Speaker 1: in general, you want them to line up on the

837
00:45:44,400 --> 00:45:46,920
Speaker 1: same side. So usually they say the same thing. It

838
00:45:47,000 --> 00:45:50,160
Speaker 1: doesn't matter if you use Schiller's ten year pe ratio

839
00:45:50,320 --> 00:45:53,120
Speaker 1: so CAPE, or whether you use you know, market cap

840
00:45:53,200 --> 00:45:56,600
Speaker 1: to GDP or Tobin's Q. We tweeted out a stat

841
00:45:56,680 --> 00:45:59,799
Speaker 1: the other day that the median stock and the SMP

842
00:46:00,040 --> 00:46:03,759
Speaker 1: five hundred back to nineteen sixty is the highest price

843
00:46:03,840 --> 00:46:06,520
Speaker 1: of sales ratio it's ever been. It's like two point one, right,

844
00:46:06,560 --> 00:46:08,600
Speaker 1: the average over time is point nine. So in my

845
00:46:08,760 --> 00:46:12,240
Speaker 1: belief is that I think U S docks are expensive.

846
00:46:12,360 --> 00:46:16,080
Speaker 1: I don't think it's a raging bubble. But being a

847
00:46:16,200 --> 00:46:18,600
Speaker 1: quant the boring thing to say is that, well, it

848
00:46:18,760 --> 00:46:21,640
Speaker 1: just means future returns are going to be lower. Expected

849
00:46:21,680 --> 00:46:24,320
Speaker 1: returns are going to be below average expect you we

850
00:46:24,400 --> 00:46:26,399
Speaker 1: look at it like low single digits. I don't think

851
00:46:26,400 --> 00:46:28,800
Speaker 1: they're negative yet. And with the point they go negative,

852
00:46:28,960 --> 00:46:31,080
Speaker 1: that's what I start to call bubble. But that's really

853
00:46:31,200 --> 00:46:33,759
Speaker 1: for Cape. For example, I love, I love, I have

854
00:46:33,840 --> 00:46:37,040
Speaker 1: to interrupt you. I love cliff Assness is definition of

855
00:46:37,120 --> 00:46:41,000
Speaker 1: a bubble, which I'm going to paraphrase, which is, there

856
00:46:41,160 --> 00:46:46,759
Speaker 1: is no reasonable or reasonably foreseeable course of events that

857
00:46:47,000 --> 00:46:50,960
Speaker 1: generate a positive return from these price levels. And the

858
00:46:51,080 --> 00:46:53,279
Speaker 1: key is reasonable. And that's great because if you look

859
00:46:53,280 --> 00:46:56,799
Speaker 1: at history, let's say historical CAPE ratio seventeen to twenty,

860
00:46:56,880 --> 00:46:58,760
Speaker 1: it's been as high as forty five. In the US,

861
00:46:59,040 --> 00:47:01,839
Speaker 1: it's been as low as five. So you can make

862
00:47:01,880 --> 00:47:04,440
Speaker 1: the case that, hey, look, stocks could easily double from here,

863
00:47:04,440 --> 00:47:06,520
Speaker 1: and the only reason is because that's what people are

864
00:47:06,560 --> 00:47:10,080
Speaker 1: willing to pay. Who knows Elon Musk could invent cold fusion?

865
00:47:10,160 --> 00:47:11,799
Speaker 1: You know, I make lots of things like what could happen?

866
00:47:11,840 --> 00:47:16,040
Speaker 1: Who knows? To be quiet? So you know, But in

867
00:47:16,120 --> 00:47:18,400
Speaker 1: Japan they hit a ratio of almost a hundred. But

868
00:47:18,520 --> 00:47:21,279
Speaker 1: that's it's simply one hundred. The CAPE ratio of the

869
00:47:21,320 --> 00:47:23,880
Speaker 1: highest we've ever seen. Rights amazing and there's a reason

870
00:47:23,960 --> 00:47:26,040
Speaker 1: that there's been lost decades. People are always saying, no,

871
00:47:26,120 --> 00:47:29,239
Speaker 1: it's because they're not competitive, or that you know, the

872
00:47:29,320 --> 00:47:31,480
Speaker 1: demographics were bad. Well, yes, it was all true, But

873
00:47:31,880 --> 00:47:34,200
Speaker 1: it's because they're working off the largest bubble we've ever seen,

874
00:47:34,280 --> 00:47:36,479
Speaker 1: which the bigger it is, the longer it takes takes

875
00:47:37,239 --> 00:47:39,759
Speaker 1: bubbles all. What all that bubbles do is they pull

876
00:47:39,920 --> 00:47:44,080
Speaker 1: forward future years and decades of returns. So after the

877
00:47:44,080 --> 00:47:47,120
Speaker 1: bubble collapses, hey, you've already gotten the past ten years

878
00:47:47,160 --> 00:47:49,560
Speaker 1: of games. You just have to get through that before

879
00:47:49,600 --> 00:47:51,759
Speaker 1: you're even starting to unline. So in the US it

880
00:47:51,840 --> 00:47:54,000
Speaker 1: took from the bubble, it took two o eight to

881
00:47:54,000 --> 00:47:55,919
Speaker 1: get back to even so eight years, but Japan took,

882
00:47:55,960 --> 00:47:58,560
Speaker 1: you know, decades, right, And the irony is they finally

883
00:47:58,600 --> 00:48:00,719
Speaker 1: got to a cheap valuation a couple of years ago.

884
00:48:00,760 --> 00:48:02,600
Speaker 1: And what happened they were the best performing at creating

885
00:48:02,640 --> 00:48:05,040
Speaker 1: market in the world. Right. So, but but here's my

886
00:48:05,120 --> 00:48:08,560
Speaker 1: whole takeaway. So that's the bad news. The US is expensive, um,

887
00:48:09,440 --> 00:48:12,399
Speaker 1: but the good news is most of the world is cheap,

888
00:48:12,560 --> 00:48:15,440
Speaker 1: and Europe fairly cheap, and much of the world is

889
00:48:15,480 --> 00:48:20,560
Speaker 1: incredibly cheap. So so even just buying emerging or developed markets.

890
00:48:20,600 --> 00:48:24,200
Speaker 1: You're getting evaluation ratio of around fifteen US is seven, right,

891
00:48:24,360 --> 00:48:28,320
Speaker 1: so and half the world by market caps foreign of

892
00:48:28,360 --> 00:48:30,520
Speaker 1: the world by GDP is foreign. So at a minimum

893
00:48:30,560 --> 00:48:32,319
Speaker 1: you should have fifty and form. But if you want

894
00:48:32,360 --> 00:48:35,000
Speaker 1: to get really interesting, you know, we go and buy

895
00:48:35,120 --> 00:48:38,200
Speaker 1: the cheapest eleven countries in the world, but you're buying

896
00:48:38,440 --> 00:48:42,080
Speaker 1: the junkiest of the junk. You're buying Russia, Brazil and

897
00:48:42,160 --> 00:48:47,640
Speaker 1: then almost all of Europe, right, you know, Poland, Czech Republic, Yeah, Greece, Italy, Spain,

898
00:48:48,000 --> 00:48:51,799
Speaker 1: and at some point with valuations, cheap gets too cheap.

899
00:48:51,880 --> 00:48:54,640
Speaker 1: But but here's the funny thing is that the geopolitics

900
00:48:54,800 --> 00:48:59,360
Speaker 1: and the news flow is always terrible. And but the

901
00:48:59,480 --> 00:49:01,440
Speaker 1: name's change. And if you go back a few years,

902
00:49:01,840 --> 00:49:06,080
Speaker 1: you know Norway was going through a banking crisis late nineties, yeah, right,

903
00:49:06,120 --> 00:49:09,080
Speaker 1: so late nineties it was um the Asian countries and

904
00:49:09,160 --> 00:49:11,799
Speaker 1: early eighties was the US. So the name has kind

905
00:49:11,800 --> 00:49:13,719
Speaker 1: of come in and out of favor. It's a tough

906
00:49:13,760 --> 00:49:17,600
Speaker 1: strategy for me Emotionally, I'm not built to be a

907
00:49:17,680 --> 00:49:20,759
Speaker 1: great deep value guy, so I allocate to it knowing

908
00:49:20,920 --> 00:49:24,680
Speaker 1: that hey, this only rebounce is once a year, right,

909
00:49:24,800 --> 00:49:27,040
Speaker 1: you could even rebalance it once every two years. Because

910
00:49:27,080 --> 00:49:29,600
Speaker 1: these deep value strategies like the one you mentioned earlier

911
00:49:29,880 --> 00:49:34,920
Speaker 1: about stuff that's down, those are usually great buying opportunities,

912
00:49:34,920 --> 00:49:36,520
Speaker 1: but you gotta give him time to work. You know,

913
00:49:36,560 --> 00:49:38,920
Speaker 1: it's funny you mentioned the rebalancing. We've done a lot

914
00:49:39,000 --> 00:49:43,520
Speaker 1: of work on that and shifted from a more frequent

915
00:49:43,600 --> 00:49:46,560
Speaker 1: rebalancing to a less frequent because we found that the

916
00:49:47,200 --> 00:49:52,880
Speaker 1: rebalancing clearly generates net positive returns over time, but the

917
00:49:53,040 --> 00:49:57,920
Speaker 1: tax implications and the costs of rebalancing aren't worth to

918
00:49:58,000 --> 00:50:00,800
Speaker 1: do it as as there are people rebalance flee quarterly.

919
00:50:01,320 --> 00:50:03,920
Speaker 1: We looked at a number of different things and pretty

920
00:50:04,000 --> 00:50:08,000
Speaker 1: much came up randomly rebalancing once a year based on

921
00:50:08,200 --> 00:50:09,960
Speaker 1: either a fixed time in the year or win a

922
00:50:10,040 --> 00:50:14,360
Speaker 1: specific account was opened and money was deployed. Seems to

923
00:50:14,400 --> 00:50:17,120
Speaker 1: be the most efficient effective way we We've always said,

924
00:50:17,120 --> 00:50:19,800
Speaker 1: and it matters even less the more assets you have

925
00:50:20,200 --> 00:50:23,560
Speaker 1: that that don't correlate, but say a great global portfolio,

926
00:50:24,280 --> 00:50:26,840
Speaker 1: we always say, look, you should rebalance. It's important. But

927
00:50:27,239 --> 00:50:29,680
Speaker 1: at some point you can even rebalance every three or

928
00:50:29,719 --> 00:50:31,320
Speaker 1: five years and it's not going to make much of

929
00:50:31,400 --> 00:50:33,719
Speaker 1: a difference. One year is great because it gives you

930
00:50:34,400 --> 00:50:36,480
Speaker 1: one of the better tax treatment for long term holdings.

931
00:50:36,640 --> 00:50:38,239
Speaker 1: But also it's nice to have sort of a one

932
00:50:38,320 --> 00:50:40,680
Speaker 1: year review. Right, So hey, we can go do this,

933
00:50:40,880 --> 00:50:42,880
Speaker 1: but you can do it based on tolerance bans. We

934
00:50:42,920 --> 00:50:45,200
Speaker 1: always tell people if it's in a taxable account, hey,

935
00:50:45,640 --> 00:50:48,800
Speaker 1: rebalance into you get some money or a bonus or salary,

936
00:50:48,880 --> 00:50:50,360
Speaker 1: put it into the stuff that's down the most. You

937
00:50:50,440 --> 00:50:52,480
Speaker 1: gotta take money out for a house, take it out

938
00:50:52,520 --> 00:50:54,919
Speaker 1: of what's appreciated the most. But yeah, it doesn't matter

939
00:50:55,000 --> 00:50:56,680
Speaker 1: that much as long as you do it at some

940
00:50:56,880 --> 00:50:59,480
Speaker 1: point makes a lot of sense. You know you mentioned

941
00:50:59,560 --> 00:51:03,560
Speaker 1: the news flow. Um, I'm pretty sure you know who

942
00:51:03,640 --> 00:51:07,800
Speaker 1: Las Law Borrini is. His firm puts together a book

943
00:51:08,600 --> 00:51:15,000
Speaker 1: every quarter of all the major media stories about markets, stocks,

944
00:51:15,800 --> 00:51:19,680
Speaker 1: major news items, the economy, and when you read them

945
00:51:19,760 --> 00:51:24,360
Speaker 1: with the benefit of hindsight, they're utterly hilarious. You go

946
00:51:24,560 --> 00:51:29,200
Speaker 1: through the screaming headlines, these front page stories, and you

947
00:51:29,320 --> 00:51:34,160
Speaker 1: could see in hindsight how people make bad emotional decisions.

948
00:51:34,200 --> 00:51:38,320
Speaker 1: They what looks like the most important thing ever turns

949
00:51:38,320 --> 00:51:41,319
Speaker 1: out to be an irrelevant blip three months later. Well,

950
00:51:41,640 --> 00:51:43,600
Speaker 1: it's hard because when you look back at some of

951
00:51:43,680 --> 00:51:46,960
Speaker 1: the academic studies where they sort countries into you know,

952
00:51:47,160 --> 00:51:51,120
Speaker 1: trailing GDP, and ironically, you want the countries that have

953
00:51:51,320 --> 00:51:54,680
Speaker 1: the worst GDP trailing. So you're investing in stuff that

954
00:51:54,840 --> 00:51:59,560
Speaker 1: looks the most miserable but has already become the most inexpensive.

955
00:52:00,239 --> 00:52:01,960
Speaker 1: So you know, same thing, you want the ones with

956
00:52:02,040 --> 00:52:05,120
Speaker 1: the worst currency returns, and and those are things you don't.

957
00:52:05,239 --> 00:52:07,839
Speaker 1: I mean, it's hard to invest in things that are

958
00:52:07,920 --> 00:52:11,160
Speaker 1: doing terrible. It's much easier to invest in the company

959
00:52:11,320 --> 00:52:13,759
Speaker 1: you know that's beating earnings and that's that's doing one

960
00:52:14,680 --> 00:52:17,360
Speaker 1: feels much better, right, But it's it's harder to do.

961
00:52:17,560 --> 00:52:19,759
Speaker 1: And you know, I give these talks where I say, look,

962
00:52:20,200 --> 00:52:22,520
Speaker 1: you know the biggest problem. You listen to this and

963
00:52:22,560 --> 00:52:25,720
Speaker 1: then want to go by Russia or Greece while Russia's

964
00:52:25,760 --> 00:52:28,759
Speaker 1: invading the Ukraine, while Greece is talking about leaving the

965
00:52:28,800 --> 00:52:31,759
Speaker 1: Euro everything that's going on, um, and then you go

966
00:52:31,920 --> 00:52:34,680
Speaker 1: tell your husband or wife or your client, Hey, I

967
00:52:34,719 --> 00:52:36,279
Speaker 1: got this great idea. This is what we're gonna do.

968
00:52:36,680 --> 00:52:39,640
Speaker 1: Massive career risk, right because if it goes down, you know,

969
00:52:39,800 --> 00:52:41,880
Speaker 1: and they do worse, you're gonna get fired. If they

970
00:52:41,920 --> 00:52:44,480
Speaker 1: do a little bit better, okay, great, but it's it's

971
00:52:44,560 --> 00:52:46,720
Speaker 1: it's a challenging and one of the reasons it works.

972
00:52:47,280 --> 00:52:49,080
Speaker 1: If you look at Russia, one of the best performing

973
00:52:49,120 --> 00:52:50,640
Speaker 1: equity markets in the world, that you're now that they

974
00:52:50,680 --> 00:52:54,440
Speaker 1: were probably the worst last year. But it's it's tough.

975
00:52:54,480 --> 00:52:56,279
Speaker 1: It's always tough to be you know. One of our

976
00:52:56,360 --> 00:52:59,759
Speaker 1: favorite Um Templeton quotes was always that he said, don't

977
00:52:59,800 --> 00:53:01,879
Speaker 1: tell me where things look the best. Tell me where

978
00:53:01,960 --> 00:53:04,759
Speaker 1: things that's the wrong question. Tell me where things look

979
00:53:04,800 --> 00:53:08,160
Speaker 1: the most miserable. Well that's I call that the earth factor.

980
00:53:08,719 --> 00:53:11,840
Speaker 1: And I tell stories about Apple. In the early two thousands,

981
00:53:12,360 --> 00:53:15,040
Speaker 1: I got my hands on one of the I apologized

982
00:53:15,080 --> 00:53:18,000
Speaker 1: to listeners. They've heard the story before. I was a

983
00:53:18,080 --> 00:53:20,440
Speaker 1: Mac fan boy for many years. I got invited to

984
00:53:20,520 --> 00:53:23,200
Speaker 1: an Apple event where they were rolling out This is

985
00:53:23,280 --> 00:53:26,719
Speaker 1: before Apple events were events. They're rolling out this new

986
00:53:26,800 --> 00:53:30,840
Speaker 1: fangled iPod and I missed it, and so I contact

987
00:53:30,920 --> 00:53:34,680
Speaker 1: somebody I knew it Apple, and I get an obnoxious

988
00:53:34,719 --> 00:53:37,640
Speaker 1: email back from the PR department. We're not giving any

989
00:53:37,760 --> 00:53:42,160
Speaker 1: press iPod reviews. A I'm not a member of the press,

990
00:53:42,320 --> 00:53:44,840
Speaker 1: or certainly wasn't at the time and be I just

991
00:53:44,960 --> 00:53:46,480
Speaker 1: want to know where I could go see this, and

992
00:53:46,560 --> 00:53:49,600
Speaker 1: they write me back, you could go to the Apple store.

993
00:53:49,680 --> 00:53:52,160
Speaker 1: There's one in Albany. That's how long ago. This was.

994
00:53:52,560 --> 00:53:55,279
Speaker 1: The closest Apple store was three hours away from New

995
00:53:55,360 --> 00:53:59,279
Speaker 1: York City. So I knew people there and I responded

996
00:53:59,320 --> 00:54:02,000
Speaker 1: to them and beat a bunch of people I knew. Hey, listen,

997
00:54:02,280 --> 00:54:05,480
Speaker 1: I want to review the product. I'll mail it back

998
00:54:05,560 --> 00:54:08,120
Speaker 1: to you. Just get me one. And the next day

999
00:54:08,160 --> 00:54:11,040
Speaker 1: of fed xbox arrived and I had it, and at

1000
00:54:11,080 --> 00:54:13,920
Speaker 1: the time pre not counting splits, and there have been

1001
00:54:14,480 --> 00:54:16,719
Speaker 1: two for one and seven for one. At the time

1002
00:54:16,800 --> 00:54:20,279
Speaker 1: it was fifteen dollars with thirteen cash. Hey, this is

1003
00:54:20,360 --> 00:54:23,440
Speaker 1: the new Sony Waffman for the next generation. I remember

1004
00:54:23,520 --> 00:54:26,560
Speaker 1: saying this to people, you're risking two dollars. They have

1005
00:54:26,640 --> 00:54:30,160
Speaker 1: thirteen cash. It's fifteen bucks or really about two dollars,

1006
00:54:30,360 --> 00:54:33,080
Speaker 1: you know, or dollar with after pre split. And the

1007
00:54:33,200 --> 00:54:37,960
Speaker 1: response universally was the same response you get about I

1008
00:54:38,000 --> 00:54:39,560
Speaker 1: want to put money into Russia. I want to put

1009
00:54:39,560 --> 00:54:42,719
Speaker 1: money into Greece. Uh, And I catch myself doing it.

1010
00:54:42,800 --> 00:54:45,160
Speaker 1: Someone said to me not too long ago, hey, you

1011
00:54:45,200 --> 00:54:47,400
Speaker 1: should buy some Dell down here it's cheap. And my

1012
00:54:47,520 --> 00:54:51,400
Speaker 1: response was, oh, wait, usually is a good thing. Let

1013
00:54:51,440 --> 00:54:54,680
Speaker 1: me take a look at it. And apples interesting because, um,

1014
00:54:55,280 --> 00:54:58,160
Speaker 1: you almost have the opposite scenario now, and it's maybe

1015
00:54:58,200 --> 00:55:00,440
Speaker 1: not the best example because it's still cheap, and it's

1016
00:55:00,560 --> 00:55:02,319
Speaker 1: because it's because it's cheap and a ton of cash

1017
00:55:02,360 --> 00:55:05,360
Speaker 1: and it's distributing it. So the full disclosure, you know,

1018
00:55:05,480 --> 00:55:08,560
Speaker 1: we own it. But however, you look at the historical studies.

1019
00:55:08,960 --> 00:55:11,160
Speaker 1: You had Rob on the show where his firm says, look,

1020
00:55:11,640 --> 00:55:15,759
Speaker 1: the biggest company in the SMP five hundred underperforms that

1021
00:55:15,840 --> 00:55:18,120
Speaker 1: index for the next ten years by about three percent

1022
00:55:18,120 --> 00:55:21,160
Speaker 1: a year. Same thing happens in sectors, and that's just capitalism, right,

1023
00:55:21,320 --> 00:55:23,759
Speaker 1: although that hasn't been true the past two years since

1024
00:55:23,800 --> 00:55:26,400
Speaker 1: it became the biggest, right. So you know, Apple is

1025
00:55:26,440 --> 00:55:29,040
Speaker 1: now up to four percent of the SMP five hundred,

1026
00:55:29,080 --> 00:55:32,080
Speaker 1: and usually that's been a graveyard for other companies once

1027
00:55:32,120 --> 00:55:34,440
Speaker 1: they hit that four percent mark, because what happens. You know,

1028
00:55:34,520 --> 00:55:36,799
Speaker 1: there's companies and ages that you know, what, we're gonna

1029
00:55:36,840 --> 00:55:39,080
Speaker 1: make phones too and come off, and that's what they're

1030
00:55:39,120 --> 00:55:43,719
Speaker 1: doing here and and so historically, but it's just creative destruction. Right,

1031
00:55:43,760 --> 00:55:45,840
Speaker 1: it's capitalism and that's the beauty of it. But but

1032
00:55:45,920 --> 00:55:48,400
Speaker 1: it's funny because if you look at Apple right now,

1033
00:55:48,520 --> 00:55:50,520
Speaker 1: it's the exact flip side of when you saw it.

1034
00:55:50,640 --> 00:55:53,600
Speaker 1: So right, it's it's there's no reasons almost not to

1035
00:55:53,680 --> 00:55:55,720
Speaker 1: invest in Apple, right. It's they're coming out the world

1036
00:55:55,800 --> 00:55:58,279
Speaker 1: changing products I own. I'm looking at my iPhone I own,

1037
00:55:58,400 --> 00:56:01,160
Speaker 1: you know, probably half a dozen different Apple things. Um,

1038
00:56:01,760 --> 00:56:08,040
Speaker 1: but it's it's much or you know, maybe probably you know.

1039
00:56:08,040 --> 00:56:10,800
Speaker 1: I'm a gadget NERD so I'm an early adopter, but

1040
00:56:11,080 --> 00:56:13,480
Speaker 1: I'm I'm not a huge watch guy. So the thought

1041
00:56:13,520 --> 00:56:16,160
Speaker 1: of having to charge it every day, um, I'll end

1042
00:56:16,239 --> 00:56:17,680
Speaker 1: up losing it. So if I do, I'll get the

1043
00:56:17,800 --> 00:56:20,320
Speaker 1: whatever the cheapest version is. See I I've learned to

1044
00:56:20,360 --> 00:56:24,040
Speaker 1: get the second generation everything. Um, to say the least.

1045
00:56:24,120 --> 00:56:28,080
Speaker 1: But I had worked with a technician many years ago

1046
00:56:28,120 --> 00:56:30,839
Speaker 1: who used to say to me, beware of three things.

1047
00:56:30,960 --> 00:56:33,080
Speaker 1: Be aware of a stock that's had an enormous run,

1048
00:56:33,640 --> 00:56:39,200
Speaker 1: that has huge institutional ownership, and has tremendous analysts strong

1049
00:56:39,320 --> 00:56:43,920
Speaker 1: by coverage, and that probably is described Apple for for

1050
00:56:44,120 --> 00:56:48,200
Speaker 1: quite some time. The question is they disrupted music, they

1051
00:56:48,320 --> 00:56:53,200
Speaker 1: disrupted the computer space with tablets, they disrupted the phone

1052
00:56:53,280 --> 00:56:56,480
Speaker 1: space with the iPhone, They've disrupted a number of industries.

1053
00:56:57,120 --> 00:57:01,080
Speaker 1: Will the watch be disruptive for where bulls and everything else?

1054
00:57:01,640 --> 00:57:04,080
Speaker 1: Or is it going to be really a peripheral product

1055
00:57:04,160 --> 00:57:07,360
Speaker 1: that isn't Look, you know, the phone itself is bigger

1056
00:57:07,440 --> 00:57:12,520
Speaker 1: than the SMPI companies, just the revenue for the iPhone,

1057
00:57:12,840 --> 00:57:16,520
Speaker 1: and people talk about the iPad as it's fading, it's

1058
00:57:16,560 --> 00:57:19,400
Speaker 1: not selling as strong as it's a twenty seven billion

1059
00:57:19,480 --> 00:57:23,080
Speaker 1: dollar product. How many companies generate twenty seven billion a

1060
00:57:23,160 --> 00:57:27,000
Speaker 1: year in sales even like their weakest product is a monster.

1061
00:57:27,320 --> 00:57:30,440
Speaker 1: Can they continue doing it? Is really the key question.

1062
00:57:30,680 --> 00:57:34,040
Speaker 1: And there's a great chart that shows that if you

1063
00:57:34,200 --> 00:57:36,960
Speaker 1: just buy the biggest company in the SMP versus the

1064
00:57:37,080 --> 00:57:39,760
Speaker 1: SMP you know, back to the seventies that Nett Davis

1065
00:57:39,840 --> 00:57:42,560
Speaker 1: puts it out and it's a massive underperformance. But you know,

1066
00:57:42,600 --> 00:57:47,520
Speaker 1: it's had all the names walmartsof Exon over time, and

1067
00:57:47,600 --> 00:57:49,640
Speaker 1: it's usually been a terrible thing to do, but but

1068
00:57:49,720 --> 00:57:53,200
Speaker 1: not always. Did Cisco ever make its biggest in I

1069
00:57:53,240 --> 00:57:55,320
Speaker 1: remember when we were talking about Cisco. This is in

1070
00:57:55,400 --> 00:57:58,520
Speaker 1: the late nineties, the first trillion dollar company. Well, It's

1071
00:57:58,560 --> 00:58:02,440
Speaker 1: funny because if you look at the composition of markets,

1072
00:58:02,560 --> 00:58:05,200
Speaker 1: you know, the late nineties bear market, or so early

1073
00:58:05,240 --> 00:58:07,840
Speaker 1: two thousands bearer market, it was a very different bear

1074
00:58:07,960 --> 00:58:10,080
Speaker 1: market than the two thousand and eight two thousand nine

1075
00:58:10,160 --> 00:58:14,320
Speaker 1: because it was a very concentrated market cap bubble in

1076
00:58:14,400 --> 00:58:16,880
Speaker 1: the most expensive tech names. Right, so if you had

1077
00:58:16,960 --> 00:58:20,320
Speaker 1: the average stock or even dividend stocks, many didn't even

1078
00:58:20,400 --> 00:58:22,520
Speaker 1: have a bear market two thousand, two thousand three, But

1079
00:58:23,360 --> 00:58:25,760
Speaker 1: market cap waited, so the SMP did because that had

1080
00:58:25,840 --> 00:58:27,200
Speaker 1: so much And this is one of the problems in

1081
00:58:27,280 --> 00:58:30,160
Speaker 1: market cap waiting. Why it's so, I mean, it's a

1082
00:58:30,200 --> 00:58:33,640
Speaker 1: great first you know, invention, but it's not the best

1083
00:58:33,720 --> 00:58:36,600
Speaker 1: way to wait an index, and so you could wait

1084
00:58:36,680 --> 00:58:38,440
Speaker 1: it by almost anything else and you end up with

1085
00:58:38,480 --> 00:58:43,040
Speaker 1: a better portfolio. So that that's really that's really robbed.

1086
00:58:43,120 --> 00:58:47,120
Speaker 1: Are not philosophy. I'm gonna do this by memory, so

1087
00:58:47,160 --> 00:58:50,200
Speaker 1: I'm sure these numbers are wrong. Two thousand, we saw

1088
00:58:50,240 --> 00:58:53,600
Speaker 1: the NASTAC full just under I want to say seven.

1089
00:58:55,280 --> 00:58:58,600
Speaker 1: The SMP five hundred, which had a lot in the

1090
00:58:58,680 --> 00:59:03,640
Speaker 1: Nastack stocks ended up dropping about thirty five, and I

1091
00:59:03,760 --> 00:59:07,320
Speaker 1: think the DOW was about But that's just by memory,

1092
00:59:07,720 --> 00:59:11,240
Speaker 1: there was a huge gap between the broad market and

1093
00:59:11,400 --> 00:59:16,400
Speaker 1: the sectors that was tech, telecom, um and and online.

1094
00:59:16,960 --> 00:59:18,600
Speaker 1: But let's talk a little bit about what you just

1095
00:59:18,720 --> 00:59:23,920
Speaker 1: mentioned in terms of waiting portfolios not by the size

1096
00:59:24,000 --> 00:59:28,040
Speaker 1: of the market cap, but by some other fundamental factor.

1097
00:59:28,640 --> 00:59:31,520
Speaker 1: What are not does it? Raffie is come up with

1098
00:59:31,600 --> 00:59:36,360
Speaker 1: a variety of different ways to wait a portfolio. And

1099
00:59:36,480 --> 00:59:38,280
Speaker 1: for those of you who haven't listened to the are

1100
00:59:38,400 --> 00:59:41,960
Speaker 1: Not podcast, take a look at four inches below this one.

1101
00:59:42,080 --> 00:59:45,440
Speaker 1: You should absolutely um download that and listen to it.

1102
00:59:45,920 --> 00:59:50,520
Speaker 1: He talks about using factors like earnings, like sales growth,

1103
00:59:51,040 --> 00:59:54,600
Speaker 1: like book value, and putting them into the context of

1104
00:59:55,480 --> 00:59:59,880
Speaker 1: what is the footprint of this company within the broad economy.

1105
01:00:00,520 --> 01:00:03,000
Speaker 1: And he had a great paper that not only said

1106
01:00:03,640 --> 01:00:08,800
Speaker 1: if you take these metrics that are not cap but

1107
01:00:09,040 --> 01:00:11,800
Speaker 1: sales divin and yield revenue growth go down the whole

1108
01:00:11,920 --> 01:00:15,880
Speaker 1: whole run of this profitability. Not only is that a

1109
01:00:15,960 --> 01:00:18,280
Speaker 1: better way to create an index than a than a

1110
01:00:18,360 --> 01:00:21,720
Speaker 1: market cap, but the inverse of those turn out to

1111
01:00:21,760 --> 01:00:23,520
Speaker 1: be better than market cap. Well, that's the thing, is

1112
01:00:23,680 --> 01:00:26,560
Speaker 1: almost anything other than market cap works fine? Right, So

1113
01:00:26,640 --> 01:00:28,400
Speaker 1: there was the joke someone made. It may be Robert

1114
01:00:28,400 --> 01:00:30,240
Speaker 1: can't remembers it like you could sort it by the

1115
01:00:30,360 --> 01:00:32,680
Speaker 1: CEOs that wear ties or bow ties, and that will

1116
01:00:32,720 --> 01:00:35,680
Speaker 1: I'll perform the SMP. So anything equal waiting. You know,

1117
01:00:35,760 --> 01:00:38,240
Speaker 1: obviously we like shareholder yield, But any way you wait,

1118
01:00:38,320 --> 01:00:40,000
Speaker 1: it will beat the SMP by let's call it one

1119
01:00:40,080 --> 01:00:44,360
Speaker 1: or two percent historically because you're not overweighting the expensive stuff.

1120
01:00:44,440 --> 01:00:46,000
Speaker 1: And so at the end of that cycle, at the

1121
01:00:46,120 --> 01:00:48,600
Speaker 1: end of the run. By the way Patrick O'Shaughnessy put

1122
01:00:48,640 --> 01:00:51,800
Speaker 1: a portfolio together, he said, only picked companies that begin

1123
01:00:51,880 --> 01:00:54,240
Speaker 1: with the letter C, and it beats market cap. And

1124
01:00:54,280 --> 01:00:57,680
Speaker 1: you can actually pick any letter and it still beats marketing.

1125
01:00:57,960 --> 01:01:00,160
Speaker 1: And this is a there's a great example of US

1126
01:01:00,240 --> 01:01:02,160
Speaker 1: right now, not in the US, because what's happened in

1127
01:01:02,200 --> 01:01:05,760
Speaker 1: the US is the spread evaluations have condensed. So small

1128
01:01:05,800 --> 01:01:08,200
Speaker 1: caps last year got to one of the most expensive

1129
01:01:08,240 --> 01:01:11,080
Speaker 1: they've ever been relative to large caps. But that's come

1130
01:01:11,120 --> 01:01:12,920
Speaker 1: in they had a terrible year last year relative to

1131
01:01:13,040 --> 01:01:15,440
Speaker 1: large cap, so that spread is narrowed. But you've had

1132
01:01:15,880 --> 01:01:19,000
Speaker 1: the all of the US market get more expensive, so

1133
01:01:19,080 --> 01:01:21,880
Speaker 1: it doesn't have the huge range like but what you

1134
01:01:21,960 --> 01:01:24,640
Speaker 1: do have you look at the global market cap portfolio,

1135
01:01:25,280 --> 01:01:27,640
Speaker 1: the largest chunk is the US at half. Well, what's

1136
01:01:27,680 --> 01:01:29,640
Speaker 1: one of the most expensive. It's the US. So it's

1137
01:01:29,680 --> 01:01:33,120
Speaker 1: the same sort of phenomenon, but now on a global stage.

1138
01:01:33,160 --> 01:01:36,240
Speaker 1: So art thesis is you could wait the global portfolio

1139
01:01:36,360 --> 01:01:39,800
Speaker 1: by anything as long as you're moving away from the US,

1140
01:01:39,920 --> 01:01:43,040
Speaker 1: and it will likely outperform in the coming years. Um.

1141
01:01:43,840 --> 01:01:45,920
Speaker 1: But it doesn't even matter how But so that's the

1142
01:01:46,000 --> 01:01:48,960
Speaker 1: problem with market cap by definition is what's getting more

1143
01:01:49,000 --> 01:01:51,720
Speaker 1: expensive because the price is going up, is going to

1144
01:01:51,760 --> 01:01:54,280
Speaker 1: be the biggest chunk of that of that portfolio you mentioned.

1145
01:01:54,840 --> 01:01:59,920
Speaker 1: UM career risk, we run a broad asset allocation that's

1146
01:02:00,040 --> 01:02:03,800
Speaker 1: global in nature. And every year for the past three years,

1147
01:02:03,920 --> 01:02:08,120
Speaker 1: the conversation goes something like like this, So here's our

1148
01:02:08,240 --> 01:02:10,520
Speaker 1: our portfolio, and here's how it's done. It's done pretty

1149
01:02:10,520 --> 01:02:15,280
Speaker 1: well versus its benchmark. It's a pretty typical seventy portfolio. Uh,

1150
01:02:15,480 --> 01:02:18,240
Speaker 1: what's done really well has been the U S stocks

1151
01:02:18,320 --> 01:02:20,320
Speaker 1: and oh, look at the bonds. They've done really well.

1152
01:02:20,720 --> 01:02:23,640
Speaker 1: Corporates have done well, Treasures have done well. Now let's

1153
01:02:23,680 --> 01:02:26,480
Speaker 1: talk a little bit about our emerging market holdings and

1154
01:02:26,600 --> 01:02:30,200
Speaker 1: our develop nation holdings. They continue to lag and it's

1155
01:02:30,240 --> 01:02:34,440
Speaker 1: an annual conversation, and it always ends with, Look, all

1156
01:02:34,480 --> 01:02:37,120
Speaker 1: we can do is rely on history, and history says

1157
01:02:37,240 --> 01:02:41,400
Speaker 1: over time they're gonna reverse. But how long can we

1158
01:02:41,520 --> 01:02:44,640
Speaker 1: continue to have this conversation with clients before they go

1159
01:02:44,840 --> 01:02:46,680
Speaker 1: that's in I'm all in on the SP five. I

1160
01:02:46,680 --> 01:02:50,160
Speaker 1: don't want to own anything else. That'll probably be right.

1161
01:02:50,480 --> 01:02:53,840
Speaker 1: And there's that classic chart where the periodic table and

1162
01:02:53,920 --> 01:02:56,840
Speaker 1: investing returns right where each year you show how everything

1163
01:02:56,920 --> 01:02:59,480
Speaker 1: bounces around. But right there in the middle is is

1164
01:02:59,520 --> 01:03:02,440
Speaker 1: the aust allocation portfolio. Never the best, never the worst,

1165
01:03:02,520 --> 01:03:04,640
Speaker 1: but kind of right there in the middle. And kind

1166
01:03:04,680 --> 01:03:06,880
Speaker 1: of like we mentioned before, it doesn't even matter how

1167
01:03:07,000 --> 01:03:09,800
Speaker 1: much of the dials. I mean, when we looked at

1168
01:03:09,840 --> 01:03:12,640
Speaker 1: these in our new book, fifteen different portfolio is based

1169
01:03:12,680 --> 01:03:15,560
Speaker 1: on the most famous investors. And if you exclude permanent

1170
01:03:15,600 --> 01:03:18,160
Speaker 1: portfolio because that's got a lot, it's got twenty percent

1171
01:03:18,280 --> 01:03:23,120
Speaker 1: cash allocation, so it's lower volatility, right. So but if

1172
01:03:23,160 --> 01:03:25,720
Speaker 1: you look at the other fifteen it's you know, portfolios

1173
01:03:25,760 --> 01:03:29,560
Speaker 1: by dahlio By are not all these recommendations over the years,

1174
01:03:29,640 --> 01:03:33,600
Speaker 1: Mark faber Um, they cluster, They're all within about a

1175
01:03:33,680 --> 01:03:36,360
Speaker 1: percent and a half of each other. Right. So they

1176
01:03:36,560 --> 01:03:40,120
Speaker 1: now some do much better in various mark environments. So

1177
01:03:40,520 --> 01:03:43,480
Speaker 1: the ones that had a huge allocation to inflationary type

1178
01:03:43,480 --> 01:03:45,640
Speaker 1: of assets real assets in the seventies, So like Mark

1179
01:03:45,680 --> 01:03:49,240
Speaker 1: Faber in gold, that's gonna do much better in the seventies,

1180
01:03:49,320 --> 01:03:51,920
Speaker 1: but much worse in the eighties and nineties. Right, So

1181
01:03:52,040 --> 01:03:55,280
Speaker 1: they typically balance the two thousands and terrible this decade.

1182
01:03:55,480 --> 01:03:58,960
Speaker 1: So they typically balance out over time. Because but that's

1183
01:03:59,000 --> 01:04:01,200
Speaker 1: the point of an asset ation is you want asset

1184
01:04:01,240 --> 01:04:04,520
Speaker 1: classes that balance each other out in any market environment.

1185
01:04:04,600 --> 01:04:10,000
Speaker 1: So whether we have deflation, inflation, disinflation, growth recessions going forward,

1186
01:04:10,440 --> 01:04:13,560
Speaker 1: you want something that that the mix will balance that out.

1187
01:04:13,600 --> 01:04:17,240
Speaker 1: And it shockingly doesn't matter that much what the percentages

1188
01:04:17,280 --> 01:04:21,160
Speaker 1: are um of the allocation, but rather that you stick

1189
01:04:21,240 --> 01:04:23,680
Speaker 1: to it, don't pay huge amounts of fees. Those are

1190
01:04:23,720 --> 01:04:26,560
Speaker 1: the two big ones you talk about that periodic table

1191
01:04:26,920 --> 01:04:32,920
Speaker 1: of asset classes. Howard Mark says something really fascinating about

1192
01:04:33,400 --> 01:04:35,560
Speaker 1: not trying to be in the top ten percent or

1193
01:04:35,680 --> 01:04:39,280
Speaker 1: even top two. He said his goal is to be

1194
01:04:39,400 --> 01:04:42,919
Speaker 1: in the top forty on paraphrasing, somewhere in the top

1195
01:04:44,320 --> 01:04:47,880
Speaker 1: and if you do that consistently over time, you end

1196
01:04:48,000 --> 01:04:50,920
Speaker 1: up in the top decile, because the guys who are

1197
01:04:51,040 --> 01:04:54,880
Speaker 1: top decile any given year are usually shooting the lights out,

1198
01:04:55,000 --> 01:04:57,120
Speaker 1: and that means the year before and the year after

1199
01:04:57,520 --> 01:05:00,400
Speaker 1: they're getting shell act because often they're exp opposed to

1200
01:05:00,480 --> 01:05:03,360
Speaker 1: either some sort of factor or some sort of style

1201
01:05:03,720 --> 01:05:06,800
Speaker 1: that will have those years of runs or or bad

1202
01:05:07,040 --> 01:05:09,160
Speaker 1: good performance and bad. I mean, if you look at

1203
01:05:09,240 --> 01:05:13,400
Speaker 1: the dollar weighted returns of mutual funds versus the time

1204
01:05:13,480 --> 01:05:16,800
Speaker 1: weighted by morning Star, and they show this every year

1205
01:05:17,000 --> 01:05:20,480
Speaker 1: where because people chase the performance of the good funds

1206
01:05:20,640 --> 01:05:23,640
Speaker 1: and then they get out after they do very poorly,

1207
01:05:24,040 --> 01:05:26,760
Speaker 1: they always lag the actual returns of the managers. I

1208
01:05:26,800 --> 01:05:30,000
Speaker 1: think the best performing manager in the nineties was maybe

1209
01:05:30,080 --> 01:05:33,280
Speaker 1: Ken Heabner's fund c GM, right, and so, but if

1210
01:05:33,320 --> 01:05:35,960
Speaker 1: you look at the dollar weighted returns when people came in,

1211
01:05:36,120 --> 01:05:38,480
Speaker 1: they came in after he had, you know, a sixty

1212
01:05:38,560 --> 01:05:42,120
Speaker 1: seventy percent year run. Then he has a sixty seventy

1213
01:05:42,520 --> 01:05:45,680
Speaker 1: draw down. Everyone pukes it back up, they get out

1214
01:05:45,720 --> 01:05:49,240
Speaker 1: of it, and the up is at a hundred million

1215
01:05:49,280 --> 01:05:51,360
Speaker 1: and the down is a two billion. And so if

1216
01:05:51,400 --> 01:05:53,560
Speaker 1: you look at over the whole period, yeah, he actually

1217
01:05:53,600 --> 01:05:55,880
Speaker 1: had great returns. One of the better managers. But if

1218
01:05:55,920 --> 01:05:58,920
Speaker 1: you look at the returns of the investors, it's horrific, right,

1219
01:05:59,000 --> 01:06:00,920
Speaker 1: because they came in at the wrong points. But but

1220
01:06:01,040 --> 01:06:03,640
Speaker 1: that's the challenge, right, One of the lessons will oft

1221
01:06:03,720 --> 01:06:06,480
Speaker 1: until investors say, look, all right, I want you to

1222
01:06:06,520 --> 01:06:08,760
Speaker 1: look back in the last three and five years pick

1223
01:06:08,880 --> 01:06:12,320
Speaker 1: the worst performing asset classes. That's probably where we want

1224
01:06:12,320 --> 01:06:15,440
Speaker 1: to be tilting. Think about how bad that feels, like,

1225
01:06:15,560 --> 01:06:16,800
Speaker 1: oh my god. The last thing I want to be

1226
01:06:16,840 --> 01:06:20,200
Speaker 1: investing in is commodities and emerging markets right now. But

1227
01:06:20,480 --> 01:06:22,800
Speaker 1: historically that's been one of the better places to be.

1228
01:06:22,880 --> 01:06:24,800
Speaker 1: But that's why it's so hard, right, No one wants

1229
01:06:24,840 --> 01:06:27,440
Speaker 1: to invest in the manager that's that's really or the

1230
01:06:27,520 --> 01:06:30,400
Speaker 1: style or the asset class that's really struggling. You much

1231
01:06:30,480 --> 01:06:32,360
Speaker 1: rather be investing in things that are hitting all new

1232
01:06:32,440 --> 01:06:35,520
Speaker 1: time highs. You know, I was at a conference at

1233
01:06:35,600 --> 01:06:39,520
Speaker 1: the Kennedy School. It was the Houser Institute for Responsible Investing,

1234
01:06:40,080 --> 01:06:45,080
Speaker 1: And I apologize to whoever I'm stealing this from, maybe

1235
01:06:45,160 --> 01:06:47,960
Speaker 1: with Simon lack Um who wrote a book called the

1236
01:06:48,040 --> 01:06:51,200
Speaker 1: Hedge Fund Mirage, but he talked about or whoever this

1237
01:06:51,280 --> 01:06:58,160
Speaker 1: person was talked about dollar weighted returns versus um the

1238
01:06:58,320 --> 01:07:01,760
Speaker 1: annual raided returns. And I think the person he used

1239
01:07:01,800 --> 01:07:05,120
Speaker 1: as an example was the John Paulson Fund. Now Paulson

1240
01:07:05,440 --> 01:07:09,560
Speaker 1: is famous for a phenomenal bet during the financial crisis

1241
01:07:09,600 --> 01:07:15,120
Speaker 1: against mortgages that netted him five billion dollars personally. But

1242
01:07:15,320 --> 01:07:18,920
Speaker 1: when he began that process, he was a relatively small firm.

1243
01:07:19,560 --> 01:07:22,280
Speaker 1: By the time he came out of the financial crisis,

1244
01:07:22,920 --> 01:07:25,560
Speaker 1: um he was a pretty decent sized firm, and a

1245
01:07:25,640 --> 01:07:28,520
Speaker 1: few years later he was like a thirty five or

1246
01:07:28,600 --> 01:07:31,480
Speaker 1: forty five billion dollar firm. And at that point, at

1247
01:07:31,560 --> 01:07:34,000
Speaker 1: forty five billion dollars, he loses one of his funds

1248
01:07:34,400 --> 01:07:40,040
Speaker 1: loses thirty percent, which is more than he made um previously.

1249
01:07:40,080 --> 01:07:42,520
Speaker 1: So when you look at it on a dollar weighted average,

1250
01:07:42,560 --> 01:07:44,640
Speaker 1: it's a debacle. When you look at it at a

1251
01:07:44,920 --> 01:07:47,640
Speaker 1: return weighted average, oh well, this was just a bad year.

1252
01:07:47,920 --> 01:07:50,880
Speaker 1: And this is you know, goes to show that institutions

1253
01:07:51,040 --> 01:07:53,880
Speaker 1: are no better than individuals when it comes to emotions

1254
01:07:54,080 --> 01:07:57,360
Speaker 1: and and who they allocate to often in their process

1255
01:07:57,440 --> 01:07:59,560
Speaker 1: for it. You know, hedge funds in general have the

1256
01:07:59,600 --> 01:08:02,200
Speaker 1: biggest problem being they charge a lot the two and

1257
01:08:02,280 --> 01:08:05,560
Speaker 1: twenty fees that that's a heavy, heavy bogey to overcome

1258
01:08:05,720 --> 01:08:08,120
Speaker 1: so many of the hedge fund what's beautiful about where

1259
01:08:08,120 --> 01:08:10,760
Speaker 1: we're investing now? Many of the hedge fund style strategies

1260
01:08:10,800 --> 01:08:13,160
Speaker 1: you can now allocate to an e t F form

1261
01:08:13,240 --> 01:08:16,040
Speaker 1: or mutual mutual fund form. You know, one of my

1262
01:08:16,200 --> 01:08:19,439
Speaker 1: all time favorite strategies, you know, managed futures trend following

1263
01:08:19,520 --> 01:08:22,720
Speaker 1: type of strategy. UH. I think if you were to

1264
01:08:22,760 --> 01:08:26,280
Speaker 1: put together for portfolio most people, that's the biggest part

1265
01:08:26,400 --> 01:08:30,800
Speaker 1: that's missing, is a trend following or managed future style allocation.

1266
01:08:30,920 --> 01:08:33,400
Speaker 1: But the problem is most of those guys charge so much, right,

1267
01:08:33,520 --> 01:08:35,960
Speaker 1: So if you can get that allocation at all, at

1268
01:08:36,000 --> 01:08:39,559
Speaker 1: all lower cost, I think it's a beautiful, beautiful UM

1269
01:08:40,040 --> 01:08:43,200
Speaker 1: active strategy that has worked great. His story. How does

1270
01:08:43,240 --> 01:08:46,080
Speaker 1: someone get exposure to that via an e t F? UM?

1271
01:08:46,280 --> 01:08:48,360
Speaker 1: When when is your ETF for that coming out? Well,

1272
01:08:48,479 --> 01:08:51,479
Speaker 1: we may file from one, not because I want to UM,

1273
01:08:51,880 --> 01:08:54,920
Speaker 1: because there's there's no better choices currently. UM. You know,

1274
01:08:55,160 --> 01:08:56,519
Speaker 1: there's a couple of e t f s out there.

1275
01:08:56,560 --> 01:08:59,439
Speaker 1: They're all based on the same index, and the index

1276
01:08:59,680 --> 01:09:04,160
Speaker 1: is really suboptimal. For example, it doesn't short energy. So

1277
01:09:04,280 --> 01:09:06,360
Speaker 1: let's think about that for a minute. It's long short

1278
01:09:06,439 --> 01:09:08,760
Speaker 1: everything but except for energy, because when they is that,

1279
01:09:08,880 --> 01:09:10,519
Speaker 1: that's kind of crazy. I'll tell you why. It's the

1280
01:09:10,640 --> 01:09:14,439
Speaker 1: number one classic mistake that quantum back testers should make,

1281
01:09:14,520 --> 01:09:16,280
Speaker 1: which is fitting it to the period. So when the

1282
01:09:16,360 --> 01:09:19,960
Speaker 1: index came out, oil is it what fifty right? So

1283
01:09:20,000 --> 01:09:22,360
Speaker 1: it's only gone one direction. So they said we're not

1284
01:09:22,439 --> 01:09:25,320
Speaker 1: going to short oil because of geopolitics, Well, of course,

1285
01:09:25,400 --> 01:09:30,479
Speaker 1: what happens Oil is now down to fifty right, you know,

1286
01:09:30,720 --> 01:09:33,840
Speaker 1: two thirds drop and so managed future is the whole

1287
01:09:33,920 --> 01:09:37,040
Speaker 1: point is that it's a strategy that will help protect

1288
01:09:37,160 --> 01:09:41,080
Speaker 1: you in various market environments, inflation or deflation. It's done

1289
01:09:41,120 --> 01:09:43,360
Speaker 1: great for the past year, now horrible three or four

1290
01:09:43,439 --> 01:09:46,640
Speaker 1: years before that. One of the few asset classes that

1291
01:09:46,880 --> 01:09:50,439
Speaker 1: really outperforms during big bear markets, like a OAIT. So

1292
01:09:50,520 --> 01:09:52,320
Speaker 1: the E t f s are not ideal. There's some

1293
01:09:52,400 --> 01:09:55,720
Speaker 1: mutual funds that do it. Um there's a couple of

1294
01:09:55,760 --> 01:09:58,120
Speaker 1: good options, but it's still they're on the expensive side.

1295
01:09:58,160 --> 01:10:00,439
Speaker 1: A q R and PIMCO both have fun out there

1296
01:10:00,560 --> 01:10:02,759
Speaker 1: that that we think are are probably pretty good ideas.

1297
01:10:02,800 --> 01:10:05,000
Speaker 1: But but in general, this trend following approach, we think

1298
01:10:05,040 --> 01:10:06,519
Speaker 1: there's a lot of merit either whether you do it

1299
01:10:06,560 --> 01:10:09,160
Speaker 1: on your own or allocate to a trend style fun.

1300
01:10:09,760 --> 01:10:11,720
Speaker 1: So let me ask you the last few couple of

1301
01:10:11,800 --> 01:10:14,519
Speaker 1: questions that I have before we uh have to send

1302
01:10:14,600 --> 01:10:17,160
Speaker 1: you back to California. UM, who are some of your

1303
01:10:17,200 --> 01:10:19,160
Speaker 1: favorite quants? Who do you who do you read? Who

1304
01:10:19,200 --> 01:10:23,000
Speaker 1: do you like? Who do you admire their approach to investing? UM?

1305
01:10:23,240 --> 01:10:24,840
Speaker 1: A lot of the ones we were probably a happy

1306
01:10:24,880 --> 01:10:26,760
Speaker 1: hour with last night or you've had on this show.

1307
01:10:27,160 --> 01:10:30,240
Speaker 1: One of my all time favorite quotes that I put

1308
01:10:30,360 --> 01:10:33,160
Speaker 1: I tweeted about this the other day was actually from

1309
01:10:33,400 --> 01:10:35,760
Speaker 1: a U one of the most famous quants of all time.

1310
01:10:35,840 --> 01:10:39,840
Speaker 1: You know, Jim Simons, professor Stony brook you know, mathematical

1311
01:10:39,920 --> 01:10:44,519
Speaker 1: genius runs Renaissance technologies, right breaker, and he's a he's

1312
01:10:44,560 --> 01:10:47,640
Speaker 1: an older fellow. Actually ran across him randomly on a

1313
01:10:47,760 --> 01:10:50,240
Speaker 1: hike in the woods in the island. I was at

1314
01:10:50,240 --> 01:10:56,479
Speaker 1: a wedding. UM it was near Stony Brooks, and you know,

1315
01:10:56,600 --> 01:10:59,760
Speaker 1: I I nudge my girlfriend, I said, I can't believe

1316
01:10:59,800 --> 01:11:02,280
Speaker 1: we saw She's who's that? You know, who's that older guy?

1317
01:11:02,600 --> 01:11:05,160
Speaker 1: And I said, you know, Jim Simon. She's like, who's that? Right?

1318
01:11:05,280 --> 01:11:06,760
Speaker 1: And I was like, She's like go talk to him

1319
01:11:06,800 --> 01:11:07,880
Speaker 1: like one of the world. Am I gonna talk to

1320
01:11:07,920 --> 01:11:09,720
Speaker 1: him about in the woods? But but he has a

1321
01:11:09,840 --> 01:11:12,760
Speaker 1: quote in this speech that has permeated a lot of

1322
01:11:12,840 --> 01:11:15,760
Speaker 1: my life and thinking about investing where at you know,

1323
01:11:15,880 --> 01:11:18,000
Speaker 1: near the end of the speech, someone says, hey, you know,

1324
01:11:18,520 --> 01:11:20,400
Speaker 1: I want some advice. Do you think and I think

1325
01:11:20,439 --> 01:11:22,519
Speaker 1: they were talking about mathematics, But do you think I

1326
01:11:22,520 --> 01:11:27,320
Speaker 1: should study math in a very specific niche so focus

1327
01:11:27,479 --> 01:11:30,160
Speaker 1: intensely laser like in this one area, or should I

1328
01:11:30,320 --> 01:11:32,880
Speaker 1: study a much broader perspective to be able to come

1329
01:11:33,000 --> 01:11:35,759
Speaker 1: up with, you know, a more of a ten thousand

1330
01:11:35,800 --> 01:11:37,920
Speaker 1: foot view and be able to apply to any sort

1331
01:11:37,960 --> 01:11:39,960
Speaker 1: of discipline? He says, you know what, I can make

1332
01:11:40,000 --> 01:11:44,400
Speaker 1: the cliche either way, so meaning like I could show

1333
01:11:44,479 --> 01:11:47,200
Speaker 1: that either case would work out, you know, good or bad.

1334
01:11:47,400 --> 01:11:49,680
Speaker 1: And so often when talking about people where people were

1335
01:11:49,720 --> 01:11:52,559
Speaker 1: giving advice or thinking about investing, you know, I often

1336
01:11:52,600 --> 01:11:54,840
Speaker 1: go back to this and say, hey, look, I can

1337
01:11:54,960 --> 01:11:58,599
Speaker 1: make this example work out almost either the way. It's

1338
01:11:58,680 --> 01:12:01,000
Speaker 1: neither are certain. All can do has come up with,

1339
01:12:01,600 --> 01:12:05,360
Speaker 1: you know, tilt towards expected realities and bets that are

1340
01:12:05,400 --> 01:12:08,280
Speaker 1: on your side. So in that same vein you know

1341
01:12:08,479 --> 01:12:12,240
Speaker 1: Ed Thorpe classic the Dealer, the dealer beat the market.

1342
01:12:12,400 --> 01:12:14,519
Speaker 1: You know, one of the true um one of the

1343
01:12:14,560 --> 01:12:19,320
Speaker 1: most amazing fun performances for many years. Princeton Newport his fund.

1344
01:12:19,720 --> 01:12:22,200
Speaker 1: And you know a true quant I mean it's convertible,

1345
01:12:22,360 --> 01:12:24,759
Speaker 1: are but I think so a lot of those classic

1346
01:12:24,840 --> 01:12:26,920
Speaker 1: old school guys. And then there's a lot of people

1347
01:12:27,040 --> 01:12:30,360
Speaker 1: that you know are quant like but you wouldn't necessarily

1348
01:12:30,479 --> 01:12:34,200
Speaker 1: think about as quants. So, um, those are those are

1349
01:12:34,520 --> 01:12:37,160
Speaker 1: a lot of good ones. So for people who don't

1350
01:12:37,200 --> 01:12:41,520
Speaker 1: know who Jim Simons is, um, he's now sort of retired.

1351
01:12:42,280 --> 01:12:44,880
Speaker 1: He was the code breaker in World War Two, sort

1352
01:12:44,920 --> 01:12:48,720
Speaker 1: of the American version of Alan turing Um. He was

1353
01:12:48,920 --> 01:12:53,000
Speaker 1: the chairman of the mathematics department at stony Brook And

1354
01:12:53,960 --> 01:12:57,679
Speaker 1: had you met him, I was applied mathematics and physics

1355
01:12:57,840 --> 01:13:01,280
Speaker 1: undergrad at stony Brook. He is the outgoing math chairman,

1356
01:13:01,320 --> 01:13:04,519
Speaker 1: as I was the incoming student. And if you met him,

1357
01:13:04,640 --> 01:13:06,479
Speaker 1: you wouldn't want to give him a dime. You would

1358
01:13:06,520 --> 01:13:10,559
Speaker 1: say scraggy bear, chain smoking, you would you would last

1359
01:13:10,600 --> 01:13:14,639
Speaker 1: personal world you would give money to. By most measures,

1360
01:13:14,960 --> 01:13:19,280
Speaker 1: the most successful hedge fund of all time was the

1361
01:13:19,320 --> 01:13:23,040
Speaker 1: Medallion Fund of renaissance so successful that after a number

1362
01:13:23,040 --> 01:13:25,960
Speaker 1: of years they said to their outside investors, here, take

1363
01:13:26,000 --> 01:13:27,960
Speaker 1: your money back. We don't have enough space for you.

1364
01:13:28,040 --> 01:13:30,240
Speaker 1: It's just gonna be our money. And and that was

1365
01:13:30,400 --> 01:13:34,320
Speaker 1: after a four and forty fee four percent a year

1366
01:13:34,360 --> 01:13:38,600
Speaker 1: management fee performance, right, and they still outperformed everybody. And

1367
01:13:38,880 --> 01:13:41,080
Speaker 1: he had actually a great quote early in his career

1368
01:13:41,200 --> 01:13:43,840
Speaker 1: where he said something to the effect of, you know,

1369
01:13:43,960 --> 01:13:46,519
Speaker 1: I started you hear some crazy quotes where people are like,

1370
01:13:46,520 --> 01:13:49,360
Speaker 1: I've never met a rich technician or essentially in my mind,

1371
01:13:49,400 --> 01:13:52,240
Speaker 1: a rich quant right, which is which is kind of insane.

1372
01:13:52,320 --> 01:13:54,880
Speaker 1: It's insane because he says, look, I used to trade

1373
01:13:55,080 --> 01:13:57,960
Speaker 1: on you know, fundamentals. It gave me ulcers and we

1374
01:13:58,040 --> 01:14:01,160
Speaker 1: eventually you know, quantified everything. And that was that. But

1375
01:14:01,520 --> 01:14:03,040
Speaker 1: but you know, it goes to show, look, if you

1376
01:14:03,120 --> 01:14:08,000
Speaker 1: have an edge, it's it's you can you know, print

1377
01:14:08,080 --> 01:14:10,880
Speaker 1: money and whatever that edge. Maybe go down the list

1378
01:14:10,960 --> 01:14:15,439
Speaker 1: of quants. John Henry rob are not cliff ass nous.

1379
01:14:15,760 --> 01:14:20,560
Speaker 1: These guys are all uber successful billionaires or near billionaires,

1380
01:14:20,960 --> 01:14:25,120
Speaker 1: and their funds and their investors have done exceedingly well.

1381
01:14:25,560 --> 01:14:28,479
Speaker 1: The hard part, it's easy to look back after forty

1382
01:14:28,560 --> 01:14:31,360
Speaker 1: years and say, hey, Renaissance was great, but you go

1383
01:14:31,479 --> 01:14:35,000
Speaker 1: back to who's going to give money to this guy?

1384
01:14:35,240 --> 01:14:39,760
Speaker 1: It is so much harder to pick the emerging managers

1385
01:14:39,840 --> 01:14:44,240
Speaker 1: than people realize. Hindsight is in the beginning. It's an

1386
01:14:44,280 --> 01:14:48,800
Speaker 1: emotional thing. And you know, quants aren't necessarily the most

1387
01:14:48,880 --> 01:14:52,560
Speaker 1: expressive articulate people. They tend to be math people in

1388
01:14:52,600 --> 01:14:55,200
Speaker 1: that language. But I think both are not and as

1389
01:14:55,680 --> 01:15:00,200
Speaker 1: a really exceptions that they're both unusually arctic of lit

1390
01:15:00,680 --> 01:15:03,559
Speaker 1: and have a way with words. I'm both of them

1391
01:15:03,680 --> 01:15:07,200
Speaker 1: right fairly regularly, and they're both really really good writers.

1392
01:15:07,600 --> 01:15:09,840
Speaker 1: Most most of us are all just a bunch of nerds.

1393
01:15:09,880 --> 01:15:11,519
Speaker 1: And I can say that because I was an engineer.

1394
01:15:11,600 --> 01:15:13,200
Speaker 1: I can say that because I'm a quant But yeah,

1395
01:15:13,240 --> 01:15:16,759
Speaker 1: but I agree that the challenge by far the biggest

1396
01:15:16,800 --> 01:15:19,000
Speaker 1: in quant is is trying to get come up with

1397
01:15:19,080 --> 01:15:22,160
Speaker 1: something long term capital classic example, right like a bunch

1398
01:15:22,200 --> 01:15:26,680
Speaker 1: of Nobel Laurets, but overfitting their system, over starting to

1399
01:15:26,760 --> 01:15:30,360
Speaker 1: believe too much in their own um you know abilities,

1400
01:15:30,400 --> 01:15:32,960
Speaker 1: where the employees there were taking out loans to then

1401
01:15:33,040 --> 01:15:36,120
Speaker 1: invest in the company at whatever the leverage one one

1402
01:15:36,200 --> 01:15:38,200
Speaker 1: what what could really go wrong at a hundred to

1403
01:15:38,320 --> 01:15:43,560
Speaker 1: one investing in in obscure paper issued by Russian oligarch's

1404
01:15:43,600 --> 01:15:46,120
Speaker 1: it's almost did that possibly blow almost always if you

1405
01:15:46,200 --> 01:15:48,599
Speaker 1: look back at a lot of the and there they

1406
01:15:48,640 --> 01:15:51,320
Speaker 1: weren't frauds, they were just over leverage. But problems in

1407
01:15:51,560 --> 01:15:55,040
Speaker 1: financial and investing it it leveraged somehow and high fees

1408
01:15:55,080 --> 01:15:58,599
Speaker 1: that are almost always permeate permeate the problem. So yeah,

1409
01:15:58,680 --> 01:16:01,800
Speaker 1: it's stay away, stay away hundred one um to say

1410
01:16:01,840 --> 01:16:06,200
Speaker 1: the least. Next question, what don't people understand about bonds

1411
01:16:06,400 --> 01:16:10,720
Speaker 1: and fixed income that you think they need to know? Um,

1412
01:16:11,479 --> 01:16:15,080
Speaker 1: what you've heard over the last five years certainly is

1413
01:16:15,160 --> 01:16:17,479
Speaker 1: there's a lot of misinformation. People are always saying bonds

1414
01:16:17,479 --> 01:16:21,120
Speaker 1: are in a bubble. And one of your pals, Rosenberg,

1415
01:16:21,160 --> 01:16:23,640
Speaker 1: I remember hearing. I was at a breakfast and he's like,

1416
01:16:23,680 --> 01:16:26,439
Speaker 1: you know, it's David Rosenberg, former chief economist in Maryland.

1417
01:16:26,640 --> 01:16:28,280
Speaker 1: He Um. He had a great quote where he said

1418
01:16:28,320 --> 01:16:31,479
Speaker 1: something extent of Hey, it's really hard for me to

1419
01:16:31,680 --> 01:16:35,280
Speaker 1: believe in a bubble when every it's universally despised, when

1420
01:16:35,360 --> 01:16:39,200
Speaker 1: everyone hates this asset class. Right, bubble usually involves people

1421
01:16:39,280 --> 01:16:42,880
Speaker 1: clamoring hand over fist to invest in something so so

1422
01:16:43,160 --> 01:16:46,200
Speaker 1: so bonds. It's it's a challenging asset class. You know,

1423
01:16:46,360 --> 01:16:49,880
Speaker 1: we think it's a uh we look historical when we

1424
01:16:49,960 --> 01:16:52,000
Speaker 1: have what's called a five to one rule. So this

1425
01:16:52,240 --> 01:16:56,479
Speaker 1: is net of inflation ten dollusand foot view. That's how

1426
01:16:56,600 --> 01:17:00,320
Speaker 1: much stocks bonds in short term. You know, bills have

1427
01:17:00,520 --> 01:17:04,160
Speaker 1: earned over history across all the money five percent on

1428
01:17:04,240 --> 01:17:06,599
Speaker 1: global stocks. You know, the US was higher, of course,

1429
01:17:06,640 --> 01:17:08,200
Speaker 1: but it was one of the best performing markets of

1430
01:17:08,240 --> 01:17:11,320
Speaker 1: the twentieth century. Bonds, it's really like one and a half.

1431
01:17:11,400 --> 01:17:14,519
Speaker 1: But I'm rounding and then bills maybe you know you'll

1432
01:17:14,520 --> 01:17:18,599
Speaker 1: break even or get you know, half a percent term papers,

1433
01:17:18,760 --> 01:17:21,640
Speaker 1: but and and people so when they're thinking about currencies

1434
01:17:21,680 --> 01:17:24,320
Speaker 1: and bonds and what happens, I mean, one of the

1435
01:17:24,360 --> 01:17:26,720
Speaker 1: biggest misinformation is also on the other side, bonds have

1436
01:17:26,920 --> 01:17:30,160
Speaker 1: declined by fifty in the US on a real basis though,

1437
01:17:30,400 --> 01:17:33,560
Speaker 1: so their losses are more the slow bleed of inflation

1438
01:17:34,439 --> 01:17:37,639
Speaker 1: rather than the equities, which is usually a very sharp

1439
01:17:37,800 --> 01:17:40,479
Speaker 1: long price move of you know, one to three years. Bonds,

1440
01:17:40,560 --> 01:17:42,679
Speaker 1: you have to look at real returns, not nominal return

1441
01:17:42,840 --> 01:17:44,880
Speaker 1: and what we call that in our new book is

1442
01:17:44,960 --> 01:17:47,439
Speaker 1: returns you can eat. But that's really all that matters

1443
01:17:47,520 --> 01:17:51,479
Speaker 1: because it's it's inflation inflation adjusted, I mean inflation returns

1444
01:17:51,520 --> 01:17:55,760
Speaker 1: are are just it's meaningless, right, So, um, So looking

1445
01:17:55,800 --> 01:17:59,000
Speaker 1: at bonds from that standpoint, you know they've had is

1446
01:17:59,240 --> 01:18:02,160
Speaker 1: as big boss is almost as an equities UK bonds

1447
01:18:02,200 --> 01:18:06,920
Speaker 1: of declient on a real basis. However, usually they kind

1448
01:18:06,920 --> 01:18:10,040
Speaker 1: of zig and zag against a stock portfolio. It's not

1449
01:18:10,040 --> 01:18:13,040
Speaker 1: always the case. It's the correlation changes, you know, depending

1450
01:18:13,080 --> 01:18:16,160
Speaker 1: on where interest rates are. But um, it's a big

1451
01:18:16,400 --> 01:18:21,600
Speaker 1: part of a um of a good asset allocation portfolio,

1452
01:18:21,600 --> 01:18:24,000
Speaker 1: and not just US bonds. We think forn it's it's

1453
01:18:24,080 --> 01:18:26,639
Speaker 1: surprised a lot of people, but the world's largest asset

1454
01:18:26,720 --> 01:18:30,519
Speaker 1: class is non US bonds, right, so the biggest asset

1455
01:18:30,600 --> 01:18:34,040
Speaker 1: cause there's other foreign country bonds, and so we think

1456
01:18:34,080 --> 01:18:36,120
Speaker 1: it's it's an important part of an allocation. It's just

1457
01:18:36,560 --> 01:18:38,640
Speaker 1: it's hard to get really excited about them in a

1458
01:18:38,760 --> 01:18:41,479
Speaker 1: world where I mean, look at Europe, I mean half

1459
01:18:41,479 --> 01:18:44,800
Speaker 1: a percent and negative you have actually negative yields in

1460
01:18:44,840 --> 01:18:48,120
Speaker 1: a lot of the Swiss and German bonds over the

1461
01:18:48,200 --> 01:18:50,760
Speaker 1: past month. I've been here. I'll give you this money,

1462
01:18:50,880 --> 01:18:52,640
Speaker 1: give me most of it back. When you're done. And

1463
01:18:52,720 --> 01:18:55,640
Speaker 1: so we've looked at sovereign bonds going back historically, and

1464
01:18:55,680 --> 01:18:58,680
Speaker 1: if you actually sort them based on yield, so the

1465
01:18:58,800 --> 01:19:03,000
Speaker 1: top maybe twenty or actually do quite a bit better

1466
01:19:03,120 --> 01:19:05,280
Speaker 1: than the broad universe. Now it ends up being a

1467
01:19:05,360 --> 01:19:09,000
Speaker 1: little more volatile. Draw downs are comparable or even a

1468
01:19:09,080 --> 01:19:11,720
Speaker 1: little worse. But you end up adding some you know,

1469
01:19:12,080 --> 01:19:15,080
Speaker 1: two percent a year by investing in the high yield.

1470
01:19:15,439 --> 01:19:17,120
Speaker 1: The problem is, of course, it's the same thing with

1471
01:19:17,160 --> 01:19:20,479
Speaker 1: the problem the cheap country equity markets we're talking about earlier,

1472
01:19:20,760 --> 01:19:22,960
Speaker 1: is you end up in you know, really weird places

1473
01:19:23,120 --> 01:19:25,000
Speaker 1: that are. But you can end up with a seven

1474
01:19:25,040 --> 01:19:27,639
Speaker 1: percent yield, eight percent yield right now, but you're gonna

1475
01:19:27,680 --> 01:19:29,560
Speaker 1: have to close your eyes and hold your nose and

1476
01:19:29,680 --> 01:19:33,840
Speaker 1: go by you know, Brazilian Pakistani type of bonds that

1477
01:19:33,920 --> 01:19:35,880
Speaker 1: are that are yielding a little more. So let me

1478
01:19:35,920 --> 01:19:39,960
Speaker 1: ask you now come to my last question. Tell us

1479
01:19:40,000 --> 01:19:43,080
Speaker 1: what you know today that you wish you knew ten

1480
01:19:43,240 --> 01:19:45,559
Speaker 1: or twenty years ago, that you wish you knew when

1481
01:19:45,600 --> 01:19:49,599
Speaker 1: you started out in the business. Well, this is always

1482
01:19:49,640 --> 01:19:52,720
Speaker 1: an interesting question and it applies personally too, as you

1483
01:19:52,800 --> 01:19:55,840
Speaker 1: look back at the times of say hardship, right, So

1484
01:19:55,960 --> 01:19:58,040
Speaker 1: I said, man, I really would love to have not

1485
01:19:58,400 --> 01:20:02,240
Speaker 1: bought that option and straddle on a biotech stock, you know,

1486
01:20:02,360 --> 01:20:04,720
Speaker 1: waiting for phase to approval, and then lost all my

1487
01:20:04,800 --> 01:20:07,599
Speaker 1: money when it happened, but you know, then went right

1488
01:20:07,680 --> 01:20:09,240
Speaker 1: back to the strike price. Like I would love to

1489
01:20:09,280 --> 01:20:11,840
Speaker 1: have not lost all that money. But however, how much

1490
01:20:11,880 --> 01:20:15,719
Speaker 1: of the drive and interest and nights spent reading books

1491
01:20:16,080 --> 01:20:19,320
Speaker 1: to learn was driven by that pain, right, So part

1492
01:20:19,360 --> 01:20:21,080
Speaker 1: of the journey, part of the journey. And so I

1493
01:20:21,120 --> 01:20:25,280
Speaker 1: always look back and say, you know, I value the difficulties.

1494
01:20:25,360 --> 01:20:28,599
Speaker 1: I value the good and the bad times because they're

1495
01:20:28,680 --> 01:20:31,360
Speaker 1: learning expenses, and wouldn't want to you know, probably color

1496
01:20:31,400 --> 01:20:34,320
Speaker 1: it any other way. There's a lot of lessons that

1497
01:20:34,400 --> 01:20:36,840
Speaker 1: I'm glad to have learned. That's a big one, such

1498
01:20:36,920 --> 01:20:40,560
Speaker 1: as what what lessons other than avoiding butterfly straddle? The

1499
01:20:40,600 --> 01:20:43,200
Speaker 1: pain of the pain of losing is certainly one. Not

1500
01:20:43,360 --> 01:20:46,040
Speaker 1: putting all your eggs in one basket and risking everything.

1501
01:20:46,560 --> 01:20:49,040
Speaker 1: That's a huge one. To be able to play another day,

1502
01:20:49,760 --> 01:20:54,320
Speaker 1: uh not? You know, um, people often the overconfidence and

1503
01:20:54,479 --> 01:20:57,560
Speaker 1: understanding your own biases. You know, we every time I

1504
01:20:57,600 --> 01:21:00,280
Speaker 1: give a speech, now we'll talk about you know, around

1505
01:21:00,280 --> 01:21:01,560
Speaker 1: and sign a piece of paper. How much do you

1506
01:21:01,600 --> 01:21:03,800
Speaker 1: have in US stocks? Every single one in the past

1507
01:21:03,840 --> 01:21:08,040
Speaker 1: fifteen times it's around and that's home country by so,

1508
01:21:08,240 --> 01:21:09,920
Speaker 1: and you could go to any country in the world,

1509
01:21:10,720 --> 01:21:13,080
Speaker 1: even like the UK. Who's it's one thing where the

1510
01:21:13,200 --> 01:21:16,240
Speaker 1: US is fifty of global market gap, but the UK

1511
01:21:16,560 --> 01:21:19,400
Speaker 1: is something like six or five percent, and it's the

1512
01:21:19,479 --> 01:21:22,920
Speaker 1: same because it's what's comfortable. You know. I'm a Denver

1513
01:21:23,000 --> 01:21:25,560
Speaker 1: Broncos fan. I grew up Colorado, so I was in

1514
01:21:25,640 --> 01:21:27,840
Speaker 1: North Carolina, but I was always you know, you invest

1515
01:21:27,880 --> 01:21:29,400
Speaker 1: in your home team, your cheer for him. So that's

1516
01:21:29,439 --> 01:21:32,360
Speaker 1: the reason most Italians are investing in Italian stocks. Most

1517
01:21:32,640 --> 01:21:34,760
Speaker 1: AUSSI is the same thing. But that can be a

1518
01:21:34,880 --> 01:21:37,840
Speaker 1: very insidious problem when you have a massive bear market

1519
01:21:37,880 --> 01:21:40,280
Speaker 1: in that country. Look at Greece, right or look at

1520
01:21:42,080 --> 01:21:45,760
Speaker 1: Greece as a Greek investor. It's painful, right so, But

1521
01:21:45,920 --> 01:21:48,439
Speaker 1: but most important, and this is challenging for people because

1522
01:21:48,479 --> 01:21:50,600
Speaker 1: they don't always know ahead of time. They take the

1523
01:21:50,680 --> 01:21:53,160
Speaker 1: risk surveys, they say, this is what I think my

1524
01:21:53,320 --> 01:21:57,479
Speaker 1: risk tolerances, and then what's the famous quote the Mike Tyson, Right,

1525
01:21:57,600 --> 01:21:59,760
Speaker 1: you you have a plan until everybody has a plan.

1526
01:21:59,840 --> 01:22:01,560
Speaker 1: It's they get punched in the face, right and so

1527
01:22:01,720 --> 01:22:03,960
Speaker 1: but but that's a lesson. It's hard to teach someone

1528
01:22:04,080 --> 01:22:07,800
Speaker 1: and it's hard to give the expectations. So but that's

1529
01:22:07,840 --> 01:22:09,519
Speaker 1: when you learn and and and it's a part of

1530
01:22:09,680 --> 01:22:13,400
Speaker 1: the maturation process of becoming an investor is learning what's comfortable.

1531
01:22:13,439 --> 01:22:15,200
Speaker 1: I mean, I'm a trend fall at heart. Half of

1532
01:22:15,280 --> 01:22:18,680
Speaker 1: my portfolio is in tactical strategies, right because I know

1533
01:22:18,960 --> 01:22:21,200
Speaker 1: that that's the way that it's easier for me to

1534
01:22:21,240 --> 01:22:23,680
Speaker 1: sleep at night. And that's always the biggest takeaway. I

1535
01:22:23,720 --> 01:22:26,519
Speaker 1: sleep great. But it uh, it's saying, you know what,

1536
01:22:26,800 --> 01:22:29,120
Speaker 1: what can you go to bed with each night and

1537
01:22:29,520 --> 01:22:31,519
Speaker 1: not have to worry and not worry about it and

1538
01:22:31,640 --> 01:22:33,680
Speaker 1: move on to the you know, we talked so much

1539
01:22:33,760 --> 01:22:35,600
Speaker 1: on these you know, interviews and everything about how to

1540
01:22:35,680 --> 01:22:38,240
Speaker 1: make money, how to invest, But there's the flip side too,

1541
01:22:38,320 --> 01:22:40,760
Speaker 1: and it's what how do you use that money? You know,

1542
01:22:40,840 --> 01:22:42,720
Speaker 1: how do you spend it in such a way that

1543
01:22:43,000 --> 01:22:46,320
Speaker 1: you know drives your happiness and and um, you know

1544
01:22:46,439 --> 01:22:48,080
Speaker 1: your goals in life and what you do with it,

1545
01:22:48,160 --> 01:22:51,280
Speaker 1: and a lot of people that is as emotionally challenging

1546
01:22:51,320 --> 01:22:54,840
Speaker 1: as well. Mab thank you so much for spending so

1547
01:22:55,000 --> 01:22:58,000
Speaker 1: much time with us. Uh, give us a list of

1548
01:22:58,160 --> 01:23:01,760
Speaker 1: how people can find you, follow you on Twitter, see

1549
01:23:01,800 --> 01:23:06,000
Speaker 1: your research, give us your rundown of of websites and

1550
01:23:06,240 --> 01:23:08,439
Speaker 1: and Twitter handles. We'll tell you what. If there's listeners

1551
01:23:08,479 --> 01:23:11,040
Speaker 1: that have made it all the way through this entire podcast,

1552
01:23:11,120 --> 01:23:13,360
Speaker 1: email me, I'll shoot you a free book or to

1553
01:23:13,439 --> 01:23:15,720
Speaker 1: go to free book dot meb favorite dot com and

1554
01:23:15,800 --> 01:23:18,840
Speaker 1: I'll send you your choice. Uh, that's my blog web

1555
01:23:18,880 --> 01:23:22,920
Speaker 1: Favorite dot com over articles on their um plenty of

1556
01:23:23,000 --> 01:23:24,639
Speaker 1: plenty of work to put you to sleep at night.

1557
01:23:25,080 --> 01:23:27,559
Speaker 1: It lists are white papers. There's about a half dozen

1558
01:23:27,760 --> 01:23:31,040
Speaker 1: we got. Our fourth book just came out. And then

1559
01:23:32,000 --> 01:23:36,240
Speaker 1: book is Global Asset Allocation, a survey of the world's

1560
01:23:38,680 --> 01:23:40,599
Speaker 1: that's the third one. I know I got the third

1561
01:23:40,680 --> 01:23:42,599
Speaker 1: one in the second one, I don't have the fourth one.

1562
01:23:43,080 --> 01:23:45,800
Speaker 1: Give me the full title of that. Global Asset Allocation

1563
01:23:45,880 --> 01:23:49,360
Speaker 1: is Survey of the world's top investing strategies. And your

1564
01:23:49,360 --> 01:23:52,599
Speaker 1: Twitter handle meb favor And then for work you can

1565
01:23:52,640 --> 01:23:55,720
Speaker 1: go to Cambria Funds. That's got fact sheets on all

1566
01:23:55,800 --> 01:23:58,559
Speaker 1: the all the funds we run. And what about idea farm?

1567
01:23:58,680 --> 01:24:01,040
Speaker 1: Is that the idea farm. Yeah, that's that's geared towards

1568
01:24:01,080 --> 01:24:03,680
Speaker 1: the professionals. But we send out kind of curated the

1569
01:24:03,760 --> 01:24:07,040
Speaker 1: top two or three research pieces we come across each week,

1570
01:24:07,120 --> 01:24:08,920
Speaker 1: and it's it's geared a little more towards you know

1571
01:24:09,120 --> 01:24:12,080
Speaker 1: what I find interesting. But what's the u r L

1572
01:24:12,160 --> 01:24:14,360
Speaker 1: for that? The idea of farm dot com. The idea

1573
01:24:14,400 --> 01:24:17,200
Speaker 1: farm dot com. We have been speaking. Thank you so much.

1574
01:24:17,240 --> 01:24:19,559
Speaker 1: This was great. This was really a lot of fun. Um.

1575
01:24:19,600 --> 01:24:22,479
Speaker 1: We've been speaking with me Bane Favor, meb Favor of

1576
01:24:22,600 --> 01:24:28,040
Speaker 1: Cambrian Investments, author of Shareholder Yield and Global Value and

1577
01:24:28,320 --> 01:24:32,639
Speaker 1: the IVY Portfolio, and the new one is Global Asset

1578
01:24:32,880 --> 01:24:37,200
Speaker 1: Global Asset Allocation. If you enjoy these podcasts, and you

1579
01:24:37,520 --> 01:24:40,519
Speaker 1: at this point ninety minutes in you probably do, I

1580
01:24:40,560 --> 01:24:43,600
Speaker 1: would tell you look an incha above or below this

1581
01:24:43,760 --> 01:24:47,480
Speaker 1: and you'll see the other thirty nine or so podcasts

1582
01:24:47,520 --> 01:24:52,880
Speaker 1: that we've um done so far. They they're always with fascinating,

1583
01:24:52,960 --> 01:24:56,920
Speaker 1: interesting people like Meb. And if you're looking for an education, um,

1584
01:24:57,320 --> 01:24:59,080
Speaker 1: you could do a lot worse than listening to some

1585
01:24:59,200 --> 01:25:03,000
Speaker 1: of these. I have to give thanks to my producer

1586
01:25:03,120 --> 01:25:07,160
Speaker 1: Charlie Vohmer, to my engineer Matt Ryan, and to my

1587
01:25:07,240 --> 01:25:10,120
Speaker 1: head of research, Matt Baton Michael bat Nick for helping

1588
01:25:10,160 --> 01:25:12,960
Speaker 1: me put this together. I'm Barry rid Helts. You've been

1589
01:25:13,000 --> 01:25:15,960
Speaker 1: listening to Masters in Business on Bloomberg Radio.