1 00:00:02,240 --> 00:00:06,800 Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio. 2 00:00:07,120 --> 00:00:10,360 Speaker 1: This week, on the podcast what Can I Say, you 3 00:00:10,400 --> 00:00:13,960 Speaker 1: are in for a treat, Bill Miller spends an hour 4 00:00:14,280 --> 00:00:20,160 Speaker 1: waxing eloquent on everything from why value investing has underperformed 5 00:00:20,160 --> 00:00:23,279 Speaker 1: and what you should do about it, the impact of 6 00:00:23,280 --> 00:00:29,400 Speaker 1: the Federal Reserve, why bitcoin is a fascinating technology as 7 00:00:29,440 --> 00:00:33,560 Speaker 1: well as a potential currency substitute, maybe for the dollar, 8 00:00:33,640 --> 00:00:38,640 Speaker 1: maybe for something else. This was really an unbelievable conversation. 9 00:00:38,720 --> 00:00:41,840 Speaker 1: I don't want to gush too much, but Bill Miller 10 00:00:41,960 --> 00:00:45,240 Speaker 1: is just one of these people who understands the way 11 00:00:45,479 --> 00:00:50,440 Speaker 1: markets work, who understands how to express what's going on 12 00:00:50,840 --> 00:00:57,080 Speaker 1: in an investment posture. Their funds run a one active share, 13 00:00:57,240 --> 00:01:01,400 Speaker 1: meaning there is zero closet index in going on, and 14 00:01:01,440 --> 00:01:03,760 Speaker 1: they have been one of the top performers since the 15 00:01:03,800 --> 00:01:07,520 Speaker 1: market bottomed oh eight oh nine after the financial crisis. 16 00:01:08,160 --> 00:01:10,200 Speaker 1: What can I say? This is just a tour to 17 00:01:10,280 --> 00:01:15,959 Speaker 1: force exposition on investing theory and practice in the real world. 18 00:01:16,600 --> 00:01:20,880 Speaker 1: Just unbelievable. So, with no further ado, my conversation with 19 00:01:20,959 --> 00:01:26,440 Speaker 1: Bill Miller. This is Masters in Business with Barry Ridholts 20 00:01:26,440 --> 00:01:30,760 Speaker 1: On Bloomberg Radio. My extra special guest this week is 21 00:01:30,800 --> 00:01:35,520 Speaker 1: Bill Miller. He formed the Miller Value Partners in as 22 00:01:35,560 --> 00:01:38,560 Speaker 1: both an r I A and an investment manager for 23 00:01:38,600 --> 00:01:43,240 Speaker 1: the Miller Value family of funds running about two billion 24 00:01:43,280 --> 00:01:47,360 Speaker 1: dollars and assets under management. Previously, he ran the leg 25 00:01:47,480 --> 00:01:53,480 Speaker 1: Mason's Capital Management Value Trust. After fees, the funds beat 26 00:01:53,520 --> 00:01:58,120 Speaker 1: the S and P five for fifteen consecutive years from 27 00:01:59,160 --> 00:02:02,000 Speaker 1: through two thousand and five. That is a feat that 28 00:02:02,160 --> 00:02:06,720 Speaker 1: I don't think has ever been matched. Bill Miller, Welcome 29 00:02:06,840 --> 00:02:09,239 Speaker 1: to Masters in Business. Thanks Barry, and it's great to 30 00:02:09,240 --> 00:02:11,760 Speaker 1: be here. I should say, welcome back. Our last conversation 31 00:02:11,960 --> 00:02:16,040 Speaker 1: was in let's talk a little bit about what's going 32 00:02:16,080 --> 00:02:19,480 Speaker 1: on in the world today. Early March, you went on 33 00:02:19,520 --> 00:02:22,120 Speaker 1: TV and said you were looking at one of the 34 00:02:22,160 --> 00:02:26,560 Speaker 1: best buying opportunities of your lifetime. That turned out to 35 00:02:26,600 --> 00:02:30,000 Speaker 1: be quite a prescient call. Tell us what you were 36 00:02:30,080 --> 00:02:33,480 Speaker 1: looking at that led to that conclusion, what was behind 37 00:02:33,680 --> 00:02:36,640 Speaker 1: the thought process. So one of the things that that 38 00:02:37,040 --> 00:02:39,680 Speaker 1: I'm quite confident of having done this for just about 39 00:02:39,680 --> 00:02:42,600 Speaker 1: forty years, is that nobody can predict the market with 40 00:02:42,600 --> 00:02:45,160 Speaker 1: any maybe maybe Jim Simons and Renaissance, but certainly not 41 00:02:45,680 --> 00:02:48,960 Speaker 1: Certland me, and certainly not basically anybody else that I've 42 00:02:49,000 --> 00:02:52,160 Speaker 1: come in contact with any consistent basis. So given that, 43 00:02:52,240 --> 00:02:53,840 Speaker 1: I think, I think one of the things that I 44 00:02:53,880 --> 00:02:55,639 Speaker 1: want to look at is just how the market has 45 00:02:55,720 --> 00:02:59,360 Speaker 1: behaved relative to its history. And in this case, what 46 00:02:59,440 --> 00:03:02,359 Speaker 1: we saw is the fastest decline from all time highs 47 00:03:02,400 --> 00:03:05,959 Speaker 1: to a to a bear market in history. And when 48 00:03:06,000 --> 00:03:09,720 Speaker 1: things happen that have never happened before, that always gets 49 00:03:09,720 --> 00:03:11,680 Speaker 1: my attention. I tend to be in the Howard Marks 50 00:03:11,720 --> 00:03:16,560 Speaker 1: camp that you can probably if you're lucky, recognize extreme points, 51 00:03:16,560 --> 00:03:18,360 Speaker 1: but other than that, you probably have no better than 52 00:03:18,360 --> 00:03:21,000 Speaker 1: a coin toss of trying to uh trying to predict 53 00:03:21,000 --> 00:03:25,680 Speaker 1: your guests regular cyclical turning points. So in this case, 54 00:03:25,840 --> 00:03:28,320 Speaker 1: it just seemed to me that the prices had gotten 55 00:03:28,400 --> 00:03:32,680 Speaker 1: so out of whack with anything other than very very 56 00:03:32,720 --> 00:03:38,120 Speaker 1: short term UH fundamentals, that that the probabilities were great 57 00:03:38,160 --> 00:03:40,320 Speaker 1: that if you had a time horizon longer than a 58 00:03:40,320 --> 00:03:42,640 Speaker 1: few weeks or a few months, that you would do 59 00:03:42,760 --> 00:03:45,120 Speaker 1: very very well. And I think that, you know, it 60 00:03:45,160 --> 00:03:48,240 Speaker 1: reminds me of two thousand and two thousand and eight, 61 00:03:48,960 --> 00:03:52,600 Speaker 1: when Warren Buffett wrote that Op ed and and he said, 62 00:03:52,600 --> 00:03:55,720 Speaker 1: by American stocks, That's what I'm doing. And if I 63 00:03:55,760 --> 00:03:57,440 Speaker 1: was at a meeting with Warren a couple of years 64 00:03:57,480 --> 00:03:59,240 Speaker 1: later and somebody said, Warren, how did you know that 65 00:03:59,320 --> 00:04:02,520 Speaker 1: was the right time him to buy stocks? And he said, 66 00:04:02,520 --> 00:04:04,320 Speaker 1: I don't know time, I know price. He said that 67 00:04:04,360 --> 00:04:08,480 Speaker 1: those prices were completely dislocated from any type of long term, 68 00:04:08,760 --> 00:04:10,760 Speaker 1: long term reality unless you believe that the U. S 69 00:04:10,800 --> 00:04:13,320 Speaker 1: economy is going to be in a permanent depression. And 70 00:04:13,400 --> 00:04:15,160 Speaker 1: so I think that's the same thing that that. My 71 00:04:15,240 --> 00:04:17,640 Speaker 1: view was that those prices were very, very disconnected. And 72 00:04:17,640 --> 00:04:20,440 Speaker 1: if you look today, the markets had a big rally, 73 00:04:20,480 --> 00:04:23,159 Speaker 1: but look at those prices back on Marche and the 74 00:04:23,160 --> 00:04:25,839 Speaker 1: few days Africa. I mean, most things are up, you know, 75 00:04:27,160 --> 00:04:28,880 Speaker 1: from the lows, even if they're not back close to 76 00:04:28,920 --> 00:04:31,680 Speaker 1: their highs. So that was an extreme That was an 77 00:04:31,680 --> 00:04:34,480 Speaker 1: extreme point. So let's talk about both that moved down 78 00:04:34,520 --> 00:04:38,840 Speaker 1: and that move up. Not only fastest bear market, fastest 79 00:04:39,400 --> 00:04:43,720 Speaker 1: drop in history, but since those lows, markets are up 80 00:04:43,760 --> 00:04:48,960 Speaker 1: about in one of the fastest recoveries we've ever seen. 81 00:04:50,000 --> 00:04:53,800 Speaker 1: The common pushback I hear from people is the market 82 00:04:53,839 --> 00:04:56,520 Speaker 1: has gotten ahead of itself. We've gone too far, too fast. 83 00:04:56,800 --> 00:04:59,440 Speaker 1: What do you say to those folks, I'd say I'd 84 00:04:59,440 --> 00:05:02,800 Speaker 1: make one one comment and then one um observation. So 85 00:05:02,839 --> 00:05:05,279 Speaker 1: the comment is that if you go back and look 86 00:05:05,320 --> 00:05:08,200 Speaker 1: at bear markets and look at history, there tends to 87 00:05:08,200 --> 00:05:11,640 Speaker 1: be a rough symmetry between how long it took to 88 00:05:11,680 --> 00:05:14,640 Speaker 1: get to the lows and how long the recovery took. 89 00:05:15,200 --> 00:05:16,960 Speaker 1: So when you've had a very again this is the 90 00:05:16,960 --> 00:05:20,440 Speaker 1: sharpest in history, when you've had a very very dramatic drop, 91 00:05:20,480 --> 00:05:22,440 Speaker 1: you can go back to seven for example, in the 92 00:05:22,480 --> 00:05:25,120 Speaker 1: market crash. So the market, you know, after churning around 93 00:05:25,160 --> 00:05:26,599 Speaker 1: at the bottom for a while, it began a strong 94 00:05:26,680 --> 00:05:30,960 Speaker 1: recovery in nineteen and you know, made it back to 95 00:05:31,000 --> 00:05:33,120 Speaker 1: those highs in the not too in the not too 96 00:05:33,120 --> 00:05:36,080 Speaker 1: distant future. So this is not this is not unusual 97 00:05:36,640 --> 00:05:38,360 Speaker 1: compared to what we've seen before. Just so we don't 98 00:05:38,360 --> 00:05:40,760 Speaker 1: see these kinds of declines very often, and they tend 99 00:05:40,760 --> 00:05:42,480 Speaker 1: to be far enough apart that most people don't go 100 00:05:42,520 --> 00:05:44,320 Speaker 1: back and look at history. They just they just look 101 00:05:44,360 --> 00:05:47,800 Speaker 1: at their own their own reaction. So, um, you know, 102 00:05:48,320 --> 00:05:51,240 Speaker 1: with that said, I would say that, um that that 103 00:05:51,320 --> 00:05:53,720 Speaker 1: comment that which what you mentioned about people thinking the 104 00:05:53,720 --> 00:05:56,800 Speaker 1: market ahead of itself. The market disconnected from reality is 105 00:05:56,839 --> 00:05:59,839 Speaker 1: one of those things that I always puzzle at because 106 00:06:00,279 --> 00:06:04,159 Speaker 1: this is something that's actually pretty easy to analyze. And 107 00:06:04,240 --> 00:06:06,600 Speaker 1: the first part of it, the first part of it 108 00:06:06,680 --> 00:06:09,919 Speaker 1: is that if you before you can say the market 109 00:06:09,960 --> 00:06:14,919 Speaker 1: is disconnected from reality, you have to some belief or 110 00:06:14,960 --> 00:06:18,120 Speaker 1: evidence about what the connection is between the market and 111 00:06:18,279 --> 00:06:22,040 Speaker 1: economic reality. And the answer there is very clear, there 112 00:06:22,120 --> 00:06:24,640 Speaker 1: is no connection whatsoever. If you go back and look 113 00:06:24,680 --> 00:06:27,320 Speaker 1: at all the going back from thirty to like two 114 00:06:27,320 --> 00:06:30,360 Speaker 1: thousand and nineteen, and you look at the the annual 115 00:06:30,640 --> 00:06:35,839 Speaker 1: correlation between the market's return and the economic growth, the 116 00:06:35,880 --> 00:06:39,719 Speaker 1: answer there is I think that, uh that the correlation 117 00:06:39,760 --> 00:06:44,159 Speaker 1: coefficient is point zero nine, meaning it's random. There's zero 118 00:06:44,240 --> 00:06:46,360 Speaker 1: is exact random at there's point zero nine. So there's 119 00:06:46,400 --> 00:06:49,800 Speaker 1: basically no correlation whatsoever. If you look at rolling ten 120 00:06:49,880 --> 00:06:52,400 Speaker 1: year periods, so not just that you know, not just 121 00:06:52,440 --> 00:06:55,040 Speaker 1: that the annual periods, but rolling every rolling ten year 122 00:06:55,080 --> 00:06:58,480 Speaker 1: period from that same thing, the correlation is minus point four, 123 00:06:58,560 --> 00:07:02,800 Speaker 1: meaning there's a negative correlation between the economy and economic growth. 124 00:07:03,440 --> 00:07:06,640 Speaker 1: So the idea that this market is disconnected from reality 125 00:07:06,720 --> 00:07:09,640 Speaker 1: because it's actually gone up and economic growth is you 126 00:07:09,680 --> 00:07:11,680 Speaker 1: know was going down at the same time is very 127 00:07:11,680 --> 00:07:14,520 Speaker 1: consistent with history. And the second thing, and maybe may 128 00:07:14,520 --> 00:07:18,120 Speaker 1: be easier to understand, is that the market is a 129 00:07:18,120 --> 00:07:22,160 Speaker 1: as a forward looking indicator. It reflects people's expectations about 130 00:07:22,200 --> 00:07:24,280 Speaker 1: what's going to happen. It doesn't reflect what has happened 131 00:07:24,280 --> 00:07:26,840 Speaker 1: in the past. And so as I like to say 132 00:07:26,920 --> 00:07:29,840 Speaker 1: the market predicts the economy, the economy does not predict 133 00:07:29,880 --> 00:07:32,800 Speaker 1: the market. So the market bottom way before the economy. 134 00:07:32,840 --> 00:07:35,520 Speaker 1: The economy's bottoming, you know, in the in the second 135 00:07:35,560 --> 00:07:38,080 Speaker 1: quarter will be the you know, the economy's economy's bottom, 136 00:07:38,240 --> 00:07:41,040 Speaker 1: and the market bottom was in the first quarter, and 137 00:07:41,080 --> 00:07:42,920 Speaker 1: so I don't think there's anything out of whack with 138 00:07:42,920 --> 00:07:45,480 Speaker 1: what's going on. The market bought. If the market did 139 00:07:45,480 --> 00:07:48,280 Speaker 1: in fact bottom and the second quarter, as it appears 140 00:07:48,280 --> 00:07:51,200 Speaker 1: it did, then that means that it's getting better. And 141 00:07:51,240 --> 00:07:53,360 Speaker 1: so if it's getting better, then the market should be 142 00:07:53,400 --> 00:07:55,960 Speaker 1: reflecting that it's getting better. And if you look at 143 00:07:55,960 --> 00:07:58,640 Speaker 1: the current consensus, what you'd see is that that if 144 00:07:58,640 --> 00:08:01,400 Speaker 1: the market on an annual spasis in the second quarter 145 00:08:01,560 --> 00:08:04,840 Speaker 1: was down, maybe let's call it, and we don't know 146 00:08:04,880 --> 00:08:06,400 Speaker 1: what it is. Some of those numbers, like the housing 147 00:08:06,440 --> 00:08:10,040 Speaker 1: numbers yesterday, the consumer spending numbers were just way, way 148 00:08:10,040 --> 00:08:13,239 Speaker 1: better than people expected. But even if we're down thirty percent, 149 00:08:13,400 --> 00:08:15,760 Speaker 1: then what you would get would be normally speaking, and 150 00:08:15,800 --> 00:08:18,120 Speaker 1: I'm going out at Hymen's data here, which you have 151 00:08:19,120 --> 00:08:22,040 Speaker 1: third quarter and fourth quarter, and then if you just 152 00:08:22,040 --> 00:08:24,800 Speaker 1: get back to five nominal growth in the first quarter 153 00:08:24,840 --> 00:08:27,200 Speaker 1: of next year, you'd be back at all time highs 154 00:08:27,240 --> 00:08:30,080 Speaker 1: on GDP. So I don't think that the market is 155 00:08:30,160 --> 00:08:32,319 Speaker 1: ahead of itself. The only way the market ahead of 156 00:08:32,320 --> 00:08:35,760 Speaker 1: itself is if we have a very huge reversal in 157 00:08:35,880 --> 00:08:39,000 Speaker 1: what's going on. Namely, we have a we have a 158 00:08:39,040 --> 00:08:41,559 Speaker 1: so called second wave where they shut down the economy again. 159 00:08:42,040 --> 00:08:44,280 Speaker 1: But even though the cases, the case loads aren't looking 160 00:08:44,320 --> 00:08:47,640 Speaker 1: that great, um the death rates still falling, and I 161 00:08:47,679 --> 00:08:49,200 Speaker 1: think that we're not going to see a shutdown of 162 00:08:49,200 --> 00:08:52,079 Speaker 1: the economy. We may see you know, moderate changes in things, 163 00:08:52,080 --> 00:08:54,199 Speaker 1: but to shut down the old economy again the way 164 00:08:54,240 --> 00:08:56,319 Speaker 1: we did in you know, in March and April, I 165 00:08:56,320 --> 00:08:57,959 Speaker 1: don't think it's going to happen. So I would I 166 00:08:57,960 --> 00:09:00,880 Speaker 1: would be shocked if the if the mark retest those 167 00:09:00,920 --> 00:09:03,520 Speaker 1: old loaves. Let's talk a little bit about what's going 168 00:09:03,559 --> 00:09:07,400 Speaker 1: on today. In the world of investing, and you and 169 00:09:07,440 --> 00:09:10,000 Speaker 1: I were both around in the nineties. I have to 170 00:09:10,040 --> 00:09:14,760 Speaker 1: ask you about the rise of these robin Hood day traders. 171 00:09:14,840 --> 00:09:17,760 Speaker 1: What is this just a distraction or is this a 172 00:09:17,840 --> 00:09:21,680 Speaker 1: potential speculative frenzy. It's both. I mean I think that 173 00:09:21,760 --> 00:09:24,120 Speaker 1: there's it's it's a distraction in the sense of these 174 00:09:24,200 --> 00:09:26,520 Speaker 1: The number of people that are actually trading on robin 175 00:09:26,559 --> 00:09:29,599 Speaker 1: Hood is trivial in terms of numbers of people, of 176 00:09:29,679 --> 00:09:33,120 Speaker 1: the volume that they can do, uh, relative to the 177 00:09:33,120 --> 00:09:35,280 Speaker 1: overall market. Maybe they can have an impact on something 178 00:09:35,320 --> 00:09:38,160 Speaker 1: like Hurts and All or some of these smaller names. 179 00:09:38,240 --> 00:09:40,880 Speaker 1: But um, but I think the focus on that is 180 00:09:41,200 --> 00:09:45,080 Speaker 1: is misplaced unless it's just it's just years entered something 181 00:09:45,200 --> 00:09:48,760 Speaker 1: entertaining to entertaining to look at. As you remember, Barry 182 00:09:48,800 --> 00:09:51,440 Speaker 1: back in the back in the late ninety nineties, with 183 00:09:51,520 --> 00:09:55,600 Speaker 1: the you know, with dot com tech telecom bubble, the 184 00:09:55,720 --> 00:09:58,560 Speaker 1: day traders were everywhere, and they were there, weren't robin hoods, 185 00:09:58,600 --> 00:10:01,280 Speaker 1: and that was you know, ridge firms were raising their 186 00:10:01,360 --> 00:10:04,080 Speaker 1: raising their margin requirements, and so there was a there 187 00:10:04,120 --> 00:10:06,439 Speaker 1: was a lot more impact I think on the overall 188 00:10:06,520 --> 00:10:09,640 Speaker 1: markets behavior during that time than there is right now 189 00:10:09,679 --> 00:10:12,520 Speaker 1: the volumes were lower relative to the the number of 190 00:10:12,520 --> 00:10:14,400 Speaker 1: people that were trading and the way in which trading 191 00:10:14,480 --> 00:10:17,280 Speaker 1: was done. And uh, and now the volumes are huge 192 00:10:17,320 --> 00:10:19,760 Speaker 1: compared to what people in Robin Hood are day traders 193 00:10:20,520 --> 00:10:24,160 Speaker 1: are doing. I remember it as sort of a national pastime. 194 00:10:24,559 --> 00:10:27,520 Speaker 1: You couldn't walk into a restaurant a bar without seeing 195 00:10:27,920 --> 00:10:31,480 Speaker 1: the stock market on the TV. It's nothing remotely like 196 00:10:31,600 --> 00:10:35,160 Speaker 1: that today. Last we spoke you, you had a very 197 00:10:35,200 --> 00:10:38,200 Speaker 1: interesting quote that I have to ask your thoughts on. 198 00:10:38,840 --> 00:10:43,120 Speaker 1: Uh In you said, we are only halfway through the 199 00:10:43,200 --> 00:10:47,720 Speaker 1: shift from active to passive. Give us an update. Where 200 00:10:47,720 --> 00:10:51,400 Speaker 1: are we in that process? Do you still think lots 201 00:10:51,480 --> 00:10:56,880 Speaker 1: of fund managers or closet indexers and that this transition 202 00:10:56,960 --> 00:10:59,080 Speaker 1: is going to continue or or how is your thinking 203 00:10:59,400 --> 00:11:02,600 Speaker 1: on this? I think that you know, active management is 204 00:11:02,600 --> 00:11:06,599 Speaker 1: in secular decline. So just like newspapers have been in 205 00:11:06,679 --> 00:11:09,120 Speaker 1: secular decline for a long time, you know, once the 206 00:11:09,120 --> 00:11:11,480 Speaker 1: Internet got going, active management has been in a secular 207 00:11:11,520 --> 00:11:15,360 Speaker 1: decline and that's going to continue because most active managers 208 00:11:15,840 --> 00:11:19,720 Speaker 1: don't add value and most people, especially as the demographics 209 00:11:19,720 --> 00:11:23,600 Speaker 1: get older, people become more risk averse and so they're 210 00:11:23,600 --> 00:11:25,439 Speaker 1: they're happy to have tracking error if you're if you're 211 00:11:25,480 --> 00:11:28,440 Speaker 1: active managers way above the market, but if the managers 212 00:11:28,600 --> 00:11:30,560 Speaker 1: the market is a standard and you're below the market 213 00:11:30,559 --> 00:11:32,440 Speaker 1: for a couple of years and people take their money out. 214 00:11:32,480 --> 00:11:35,760 Speaker 1: In fact, there was a statistic which you probably saw 215 00:11:35,800 --> 00:11:39,920 Speaker 1: that I was surprised at, which was that a fidelity 216 00:11:40,200 --> 00:11:45,280 Speaker 1: UH that basically of failities clients who were sixty five 217 00:11:45,280 --> 00:11:47,960 Speaker 1: and older took one of their money out of equities 218 00:11:48,200 --> 00:11:50,840 Speaker 1: in the first quarter of this year. So that gives 219 00:11:50,840 --> 00:11:53,199 Speaker 1: you a sense of both the risk aversion and how 220 00:11:53,280 --> 00:11:56,200 Speaker 1: fear spreads in the market, and also the fact that 221 00:11:56,559 --> 00:12:00,440 Speaker 1: the passive money still gets still as getting the flows. 222 00:12:00,559 --> 00:12:02,240 Speaker 1: You know, equity e t f s are getting flows, 223 00:12:02,240 --> 00:12:05,760 Speaker 1: but the at the average active manager you know is 224 00:12:05,800 --> 00:12:08,160 Speaker 1: getting consistent outflows. And of course we've seen this year 225 00:12:08,200 --> 00:12:11,440 Speaker 1: that that equity managers broadly defined equity mutual funds have 226 00:12:11,480 --> 00:12:14,120 Speaker 1: that big outflows, and bond funds have continue to get inflows. 227 00:12:14,200 --> 00:12:16,439 Speaker 1: So I think I think we've still got a ways 228 00:12:16,480 --> 00:12:18,440 Speaker 1: to go in that and uh. And so there's going 229 00:12:18,480 --> 00:12:22,160 Speaker 1: to be an uphill climb or swimming against the tide 230 00:12:22,240 --> 00:12:24,640 Speaker 1: or whatever. If you're an active manager, I would say 231 00:12:24,679 --> 00:12:27,480 Speaker 1: it's also that the hedge funds have also dropped into 232 00:12:27,559 --> 00:12:30,680 Speaker 1: that category. They're much earlier in the thing. But you know, 233 00:12:30,720 --> 00:12:32,679 Speaker 1: in a low anomenal rate of return world, where the 234 00:12:33,080 --> 00:12:36,439 Speaker 1: tenure interest rate of sixty basis points, somebody's going to 235 00:12:36,559 --> 00:12:38,800 Speaker 1: charge you know, one or one and a half or 236 00:12:38,840 --> 00:12:43,480 Speaker 1: two and twenty to manage your money and fiftent of 237 00:12:43,520 --> 00:12:45,880 Speaker 1: the profits, no matter how meager those profits are. That's 238 00:12:45,880 --> 00:12:48,760 Speaker 1: a losing proposition. So I think that also is is 239 00:12:49,040 --> 00:12:51,840 Speaker 1: the hedge fund world is probably a net net liquidation 240 00:12:51,880 --> 00:12:54,960 Speaker 1: as well. So you mentioned sixty basis points on the 241 00:12:55,040 --> 00:12:58,000 Speaker 1: ten year what do you make of the bond market 242 00:12:58,400 --> 00:13:01,400 Speaker 1: where it is is a talent us anything about inflation? 243 00:13:02,000 --> 00:13:07,239 Speaker 1: And what sort of support does that provide for equities 244 00:13:07,280 --> 00:13:11,600 Speaker 1: if yield on treasuries is practically nothing? Yeah, it's it's 245 00:13:11,640 --> 00:13:14,240 Speaker 1: really interesting that the current yield on the s n 246 00:13:14,280 --> 00:13:17,360 Speaker 1: P five hundred is about three times the yield on 247 00:13:17,600 --> 00:13:20,400 Speaker 1: the ten year treasury. And so one of those so 248 00:13:20,480 --> 00:13:23,080 Speaker 1: called no brainer trades to me would be, you know, 249 00:13:23,080 --> 00:13:26,160 Speaker 1: if you've got a ten year horizon uh in the market, 250 00:13:26,240 --> 00:13:28,640 Speaker 1: or even a five year horizon for that matter, you know, 251 00:13:28,840 --> 00:13:31,280 Speaker 1: go along the you know, an equity index fund and 252 00:13:31,280 --> 00:13:33,520 Speaker 1: and go short to five year ten year treasury would 253 00:13:33,520 --> 00:13:36,200 Speaker 1: seem to me a you know a thing will be 254 00:13:36,320 --> 00:13:39,160 Speaker 1: very difficult to lose any substantial amount of money. And again, 255 00:13:39,200 --> 00:13:42,200 Speaker 1: if the if the people were worried about inflation or right, 256 00:13:42,240 --> 00:13:44,360 Speaker 1: inflation isn't a problem for the next couple of years 257 00:13:44,360 --> 00:13:47,400 Speaker 1: for sure, but if it becomes a problem in year three, four, five, 258 00:13:47,480 --> 00:13:50,760 Speaker 1: and the yield curve starts shifting up significantly, then that 259 00:13:50,800 --> 00:13:52,480 Speaker 1: would be that would be kind of a home run, 260 00:13:53,480 --> 00:13:56,400 Speaker 1: a home run trade. So I think I think right now, 261 00:13:56,440 --> 00:13:58,720 Speaker 1: I mean, you know, interest rates, as my center runs 262 00:13:58,720 --> 00:14:02,840 Speaker 1: our income fund says, the data shows that interest rates 263 00:14:02,840 --> 00:14:05,520 Speaker 1: have have been falling in real terms for eight hundred years, 264 00:14:06,040 --> 00:14:07,679 Speaker 1: and so you don't want to better interest rates are 265 00:14:07,679 --> 00:14:09,840 Speaker 1: gonna rise. And and my return to that as well, 266 00:14:09,880 --> 00:14:11,720 Speaker 1: if you if you lived a thousand years, that would 267 00:14:11,720 --> 00:14:14,240 Speaker 1: be relevant. But what we see in the bond market 268 00:14:14,280 --> 00:14:16,000 Speaker 1: is that goes to these long cycles where we had 269 00:14:16,000 --> 00:14:18,080 Speaker 1: a thirty five year bear market in bonds, you know, 270 00:14:18,080 --> 00:14:22,560 Speaker 1: almost a full working career from one, and now I've 271 00:14:22,560 --> 00:14:25,280 Speaker 1: got a thirty eight year bolt market in bonds, and 272 00:14:25,360 --> 00:14:27,680 Speaker 1: they rates can't go much lower than where they are 273 00:14:27,760 --> 00:14:29,440 Speaker 1: right now. Maybe they're not going to go up a lot, 274 00:14:29,480 --> 00:14:32,640 Speaker 1: but uh, you're they're negative in real terms, and certainly 275 00:14:32,680 --> 00:14:36,360 Speaker 1: real terms after tax. So I think bonds are as 276 00:14:36,400 --> 00:14:42,040 Speaker 1: unattractive now as stocks were in September of night seven, 277 00:14:42,080 --> 00:14:47,440 Speaker 1: when than thirty year yielded nine percent and the stock 278 00:14:47,480 --> 00:14:50,880 Speaker 1: market yielded up about two point eight percent, and the 279 00:14:50,880 --> 00:14:53,280 Speaker 1: stock market traded at the highest pe since in nineteen 280 00:14:53,320 --> 00:14:56,240 Speaker 1: twenty nine, and so there was no reason to own 281 00:14:56,280 --> 00:14:59,240 Speaker 1: stocks then because the dividend yield on the divident growth 282 00:14:59,280 --> 00:15:02,280 Speaker 1: rate and stocks abou six. So if everything went well, 283 00:15:02,360 --> 00:15:05,640 Speaker 1: you'd get close to nine percent in stocks if valuations 284 00:15:05,680 --> 00:15:07,560 Speaker 1: didn't drop and they stayed at the at the all 285 00:15:07,600 --> 00:15:10,280 Speaker 1: time high. But otherwise, why why did it buy a 286 00:15:10,320 --> 00:15:12,680 Speaker 1: thirty year bonds and go home? And that was the 287 00:15:12,760 --> 00:15:14,080 Speaker 1: right thing to do then, and I think the right 288 00:15:14,080 --> 00:15:17,040 Speaker 1: thing to do now is to forget about bonds, except, 289 00:15:17,160 --> 00:15:19,560 Speaker 1: you know, except in a very rare instance that you 290 00:15:19,640 --> 00:15:23,000 Speaker 1: might think we have a deflationary bust, in which case, okay, 291 00:15:23,000 --> 00:15:26,720 Speaker 1: Ben Graham talked about having no less than of your 292 00:15:26,800 --> 00:15:30,720 Speaker 1: money and bonds, so PU quality corporates or something like that. 293 00:15:30,800 --> 00:15:34,240 Speaker 1: But I don't find bonds at all attractive now. Quite interesting. 294 00:15:34,560 --> 00:15:37,320 Speaker 1: You mentioned earlier some of the tech stocks of the nineties. 295 00:15:37,920 --> 00:15:40,840 Speaker 1: What do you make of the big five big cap 296 00:15:40,880 --> 00:15:45,400 Speaker 1: tech stocks? Amazon, Apple, Facebook, Microsoft, Google? Have they gotten 297 00:15:45,680 --> 00:15:49,680 Speaker 1: too big? And if so, is their risk of government 298 00:15:50,640 --> 00:15:54,440 Speaker 1: reregulation or even any trust enforcement. Yeah, I thought you're 299 00:15:54,440 --> 00:15:57,040 Speaker 1: gonna ask a slightly different question, which is, you know, 300 00:15:58,120 --> 00:16:00,640 Speaker 1: not have they gotten too big, but are they too expensive? 301 00:16:00,640 --> 00:16:03,239 Speaker 1: And what kind of you know, what kind of opportunities 302 00:16:03,280 --> 00:16:06,400 Speaker 1: are there? Well, there's certainly there's certainly cheaper than they 303 00:16:06,440 --> 00:16:11,080 Speaker 1: were in the radically cheaper, radically cheaper, So I'm not 304 00:16:11,080 --> 00:16:12,920 Speaker 1: even I'm not worried about We We own all of 305 00:16:12,960 --> 00:16:17,560 Speaker 1: them except for um, Netflix right now, so at which 306 00:16:17,560 --> 00:16:19,960 Speaker 1: we've owned with a larger show older and Netflix a 307 00:16:19,960 --> 00:16:22,200 Speaker 1: couple of different times, and that's the only one that 308 00:16:22,240 --> 00:16:25,480 Speaker 1: I think is expensive. Although I think if you've got 309 00:16:25,520 --> 00:16:27,960 Speaker 1: a longer term time rise and that will do that 310 00:16:28,000 --> 00:16:30,000 Speaker 1: will do fine as well. But you get back to 311 00:16:30,000 --> 00:16:32,800 Speaker 1: the late I mean, ge traded fifty times earnings and 312 00:16:32,880 --> 00:16:36,040 Speaker 1: home Depot traded at fifty times earnings. So uh, you know, 313 00:16:36,040 --> 00:16:39,239 Speaker 1: these stocks at this level don't look to me particularly 314 00:16:39,240 --> 00:16:41,560 Speaker 1: extended at all, even though they've done very very well 315 00:16:41,600 --> 00:16:44,440 Speaker 1: that they should have done well. Now the different question though, 316 00:16:44,920 --> 00:16:47,240 Speaker 1: where's the risk in them? Well, there's there's always risk 317 00:16:47,280 --> 00:16:49,640 Speaker 1: and and everything, and I think you hit at the 318 00:16:49,720 --> 00:16:52,760 Speaker 1: risk is uh, and I trust a reinterpretation of an 319 00:16:52,840 --> 00:16:55,520 Speaker 1: I trust. I don't think unless there's a Democrats sweep 320 00:16:56,040 --> 00:16:58,280 Speaker 1: that you'll get any significant change in the anti trust 321 00:16:58,400 --> 00:17:00,640 Speaker 1: laws like the Clayton Act of the Sherman Act, but 322 00:17:00,720 --> 00:17:05,240 Speaker 1: nothingtheless deftly changing the laws before courts can interpret things differently, 323 00:17:05,280 --> 00:17:08,240 Speaker 1: regulators can can come after the companies, and so I 324 00:17:08,240 --> 00:17:11,080 Speaker 1: do think the regulatory risk and the government risk is 325 00:17:11,160 --> 00:17:13,199 Speaker 1: high in these companies, but that's what you'd expect for 326 00:17:13,240 --> 00:17:16,639 Speaker 1: companies that are so dominant and so large, and you 327 00:17:16,680 --> 00:17:21,639 Speaker 1: know five of them, the S and P five. So yeah, Now, 328 00:17:21,640 --> 00:17:23,080 Speaker 1: I don't think the risk is so great that it 329 00:17:23,080 --> 00:17:26,879 Speaker 1: will significantly inhibit what you can earn from them. But 330 00:17:26,920 --> 00:17:29,199 Speaker 1: maybe they traded a multiple point or two lower, and 331 00:17:29,240 --> 00:17:32,240 Speaker 1: there'd be headline risk more I think than real risk. Now, 332 00:17:32,320 --> 00:17:34,840 Speaker 1: let's talk a little bit about some of the changes 333 00:17:34,920 --> 00:17:40,360 Speaker 1: we've seen in the industry, including what some people are 334 00:17:40,400 --> 00:17:43,359 Speaker 1: calling the death of value investing, which I have to 335 00:17:43,440 --> 00:17:47,040 Speaker 1: imagine you're gonna snicker at. What Why has value been 336 00:17:47,080 --> 00:17:50,480 Speaker 1: having such a difficult time and what does this mean 337 00:17:50,640 --> 00:17:54,520 Speaker 1: for people's portfolios. Yeah, it's a fascinating question, and there's 338 00:17:54,520 --> 00:17:57,320 Speaker 1: a lot of there's a lot of i'd say different 339 00:17:57,400 --> 00:18:00,040 Speaker 1: views on this. We've got a guy named Dan Is 340 00:18:00,040 --> 00:18:03,439 Speaker 1: said who runs i'll call it a pure value or 341 00:18:03,440 --> 00:18:06,400 Speaker 1: a classical value portfolio, which which is basically a low 342 00:18:06,480 --> 00:18:09,359 Speaker 1: price to tangible book, low pe low price to cash flow. 343 00:18:10,000 --> 00:18:11,879 Speaker 1: And as you might expect, he's been having a very 344 00:18:11,880 --> 00:18:14,840 Speaker 1: difficult time of it and and sends out a never 345 00:18:15,000 --> 00:18:18,359 Speaker 1: ending stream of emails about how extreme this is and 346 00:18:18,400 --> 00:18:20,240 Speaker 1: how it's never happened before and it's got to be 347 00:18:20,280 --> 00:18:22,639 Speaker 1: a snap back at all. And then you might have 348 00:18:22,680 --> 00:18:25,679 Speaker 1: seen Cliff Asness his work on the same thing about 349 00:18:25,680 --> 00:18:27,760 Speaker 1: how extreme this is, and he believes that you're going 350 00:18:27,800 --> 00:18:29,840 Speaker 1: to get a snap back. So where I come out 351 00:18:29,840 --> 00:18:32,800 Speaker 1: on this is I think that the odds are overwhelming 352 00:18:33,600 --> 00:18:38,239 Speaker 1: that that i'd say, value as traditionally understood will do 353 00:18:38,440 --> 00:18:42,439 Speaker 1: very well from roughly now until maybe a year or 354 00:18:42,440 --> 00:18:45,640 Speaker 1: two years from now. It could be longer. But why 355 00:18:45,680 --> 00:18:48,000 Speaker 1: I say that is that the value has led out 356 00:18:48,000 --> 00:18:50,680 Speaker 1: of every recession as far back as the data goes, 357 00:18:51,600 --> 00:18:54,520 Speaker 1: and the reason for that is that when companies, when 358 00:18:54,520 --> 00:18:57,840 Speaker 1: the economy peaks and goes down, value name just tend 359 00:18:57,880 --> 00:19:00,639 Speaker 1: to be more cyclical. They return on cap little drops, 360 00:19:01,119 --> 00:19:04,800 Speaker 1: and so their theoretical valuation just viavation drops and the 361 00:19:04,840 --> 00:19:08,160 Speaker 1: stocks underperform. And then we come out of a recession, 362 00:19:08,359 --> 00:19:12,160 Speaker 1: they're they're returning capital rises because they're more cyclical than 363 00:19:12,160 --> 00:19:16,639 Speaker 1: a Coca Cola or Amazon, and so therefore they outperformed. 364 00:19:17,240 --> 00:19:19,239 Speaker 1: And we've seen that right now. If you look at 365 00:19:19,240 --> 00:19:21,119 Speaker 1: the the over going to repeat that right now, if 366 00:19:21,160 --> 00:19:23,600 Speaker 1: you look at what happened, you know, going to March, 367 00:19:25,320 --> 00:19:29,600 Speaker 1: the tech names, the stay at home names, the secular winners, 368 00:19:30,160 --> 00:19:32,560 Speaker 1: you know, service now and Shopify, those kinds of things, 369 00:19:33,000 --> 00:19:35,840 Speaker 1: they killed the market. And uh, I mean, I'm some 370 00:19:35,880 --> 00:19:37,320 Speaker 1: of the guys that are really good at this, like 371 00:19:37,359 --> 00:19:41,200 Speaker 1: Dennis Lynch at Morgan Stanley or James Anderson at Bailey Gifford. 372 00:19:41,359 --> 00:19:43,240 Speaker 1: You know, the high high growth guys. I mean, they're 373 00:19:43,320 --> 00:19:46,720 Speaker 1: up in the for the year and you know, traditional 374 00:19:46,760 --> 00:19:48,639 Speaker 1: value guys are at the at the bottom of the page. 375 00:19:48,680 --> 00:19:51,760 Speaker 1: But since March, the value people have beaten the growth 376 00:19:51,840 --> 00:19:54,520 Speaker 1: people pretty handily. And uh, and I think that that's 377 00:19:54,600 --> 00:19:57,880 Speaker 1: because the economy, you know has been bottoming and then 378 00:19:58,000 --> 00:20:00,400 Speaker 1: the economy is going to start up. And so what 379 00:20:00,440 --> 00:20:02,040 Speaker 1: you what you see? I mean a day like yesterday, 380 00:20:02,080 --> 00:20:04,360 Speaker 1: the markets up one and a half percent, and most 381 00:20:04,400 --> 00:20:07,960 Speaker 1: of those growth all those growth names underperformed dramatically. So 382 00:20:08,240 --> 00:20:11,080 Speaker 1: I think in the in the relatively short run, meaning 383 00:20:11,119 --> 00:20:14,800 Speaker 1: now until the next year or two, the odds are 384 00:20:15,160 --> 00:20:19,679 Speaker 1: strong that value will outperform growth. But a little more, 385 00:20:19,720 --> 00:20:22,879 Speaker 1: a little more UH nuance here. The reason that value 386 00:20:22,880 --> 00:20:26,680 Speaker 1: has done so badly for ten years is that value 387 00:20:26,800 --> 00:20:31,359 Speaker 1: thrives in a in an environment of reversion to the means. 388 00:20:31,400 --> 00:20:33,840 Speaker 1: So the economy speeds up and then it peaks, then 389 00:20:33,880 --> 00:20:35,679 Speaker 1: it goes down at bottom. So you have this kind 390 00:20:35,720 --> 00:20:38,760 Speaker 1: of cyclicality. And if you look since the since the 391 00:20:38,760 --> 00:20:41,919 Speaker 1: financial crisis, since March of o nine, the economy for 392 00:20:42,000 --> 00:20:44,240 Speaker 1: ten years grew basically between one and a half and 393 00:20:44,240 --> 00:20:46,960 Speaker 1: two and a half percent, averaged about two percent with 394 00:20:47,080 --> 00:20:51,120 Speaker 1: low inflation, with UH, with the low interest rates, and 395 00:20:51,160 --> 00:20:54,480 Speaker 1: not a lot of cyclicality. And therefore that's an environment 396 00:20:54,480 --> 00:20:58,119 Speaker 1: where growth is going to thrive because low nominal growth 397 00:20:58,560 --> 00:21:00,720 Speaker 1: such as we're low real one and a half to 398 00:21:00,760 --> 00:21:04,880 Speaker 1: two basically, then if you grow fast like an Amazon 399 00:21:05,080 --> 00:21:09,440 Speaker 1: or a Google alphabet. Your your theoretical valuation is much 400 00:21:09,560 --> 00:21:11,720 Speaker 1: much greater than it is otherwise. I saw a thing 401 00:21:11,720 --> 00:21:13,480 Speaker 1: in the journey. You might have seen it last week 402 00:21:13,480 --> 00:21:17,200 Speaker 1: where somebody was looking at the academic literature and said 403 00:21:17,200 --> 00:21:19,399 Speaker 1: that if you if you run nest Lye through a 404 00:21:19,480 --> 00:21:22,639 Speaker 1: model of what the what the you know, the market 405 00:21:22,680 --> 00:21:24,680 Speaker 1: kind of looks like now with interest rates at six 406 00:21:24,760 --> 00:21:28,440 Speaker 1: year seventy basis points and low nominal growth from here, 407 00:21:28,440 --> 00:21:31,800 Speaker 1: then Nestle's worth fifty times earnings. And so I think 408 00:21:31,840 --> 00:21:34,600 Speaker 1: that's the that's the thing that would put value, you know, 409 00:21:34,760 --> 00:21:37,359 Speaker 1: back behind the eight ball, which is if growth in 410 00:21:37,359 --> 00:21:39,600 Speaker 1: the future is like growth in the last ten years, 411 00:21:40,119 --> 00:21:41,920 Speaker 1: so call it one and a half to two percent. 412 00:21:42,040 --> 00:21:44,800 Speaker 1: After we actually go to this high growth period, rebounding 413 00:21:45,280 --> 00:21:47,240 Speaker 1: and interest rates stay low. And by that I mean, 414 00:21:47,480 --> 00:21:49,399 Speaker 1: you know, the ten years, I don't know one and 415 00:21:49,440 --> 00:21:51,800 Speaker 1: a half or two and a half or then value 416 00:21:51,840 --> 00:21:54,000 Speaker 1: is going to have trouble again. So I think that's 417 00:21:54,000 --> 00:21:57,120 Speaker 1: the It's maybe a long winded answer, so it depends 418 00:21:57,119 --> 00:22:00,040 Speaker 1: a lot. It's context dependent. So if the world with 419 00:22:00,200 --> 00:22:02,800 Speaker 1: somewhat different, if the curve shifts upward, if inflation starts 420 00:22:02,800 --> 00:22:05,680 Speaker 1: to come back, then value will kill growth, and if 421 00:22:05,720 --> 00:22:08,600 Speaker 1: it doesn't, then growth will probably beat value again. So 422 00:22:08,640 --> 00:22:11,639 Speaker 1: you mentioned the stay at home stocks are doing well. 423 00:22:12,200 --> 00:22:17,439 Speaker 1: What industries and companies have been permanently impaired by the virus, 424 00:22:17,720 --> 00:22:24,280 Speaker 1: and where are the opportunities arising from this whole lockdown experience? 425 00:22:24,480 --> 00:22:26,880 Speaker 1: Is this going to change us or is this just 426 00:22:27,400 --> 00:22:32,240 Speaker 1: a temporary experience? So permanent is a long time, and 427 00:22:32,400 --> 00:22:35,000 Speaker 1: I would say that I'd said to that that nobody 428 00:22:35,200 --> 00:22:37,760 Speaker 1: has any idea because nobody knows what the future is 429 00:22:37,760 --> 00:22:40,760 Speaker 1: going to bring. I mean, people have talked about Bill Gates, 430 00:22:40,760 --> 00:22:43,280 Speaker 1: others have talked about going back years that we're going 431 00:22:43,320 --> 00:22:45,560 Speaker 1: to have another pandemic at some point. The problem is 432 00:22:45,680 --> 00:22:48,320 Speaker 1: you can't predict what that point is. And so at 433 00:22:48,320 --> 00:22:50,199 Speaker 1: the beginning of this year, no one was predicting a 434 00:22:50,240 --> 00:22:54,000 Speaker 1: pandemic this year, which has now radically upended all kinds 435 00:22:54,000 --> 00:22:57,800 Speaker 1: of things from the economy to growth rates too, you know, 436 00:22:58,040 --> 00:23:01,560 Speaker 1: access death rates, to change aging, industry norms, and all 437 00:23:01,600 --> 00:23:04,040 Speaker 1: of that kind of stuff. So if you look forward 438 00:23:04,080 --> 00:23:07,240 Speaker 1: and you say, what's what's permanently different, well, uh, there's 439 00:23:07,280 --> 00:23:09,240 Speaker 1: going to be nothing permanently different. If we have a 440 00:23:09,280 --> 00:23:11,800 Speaker 1: vaccine and the next and the relatively short term. By that, 441 00:23:11,840 --> 00:23:14,320 Speaker 1: I mean over the next six months to a year. 442 00:23:14,760 --> 00:23:17,639 Speaker 1: That's effective because if that happens and all of a sudden, 443 00:23:17,680 --> 00:23:20,280 Speaker 1: you can fly safely, you can travel on cruise ships safely, 444 00:23:20,560 --> 00:23:23,000 Speaker 1: you can gather, you can get sports, going sports, and 445 00:23:23,320 --> 00:23:26,040 Speaker 1: you can go in movie theaters and so the kind 446 00:23:26,080 --> 00:23:29,320 Speaker 1: of environment that we saw in January and February would 447 00:23:29,359 --> 00:23:32,080 Speaker 1: be right back on the table. Hip. On the other hand, 448 00:23:32,080 --> 00:23:35,080 Speaker 1: there is no vaccine, uh, And I'll also say it's 449 00:23:35,119 --> 00:23:38,480 Speaker 1: not just a vaccine. No vaccine and no effective treatment. 450 00:23:38,560 --> 00:23:40,119 Speaker 1: So maybe there won't be a vaccine. But if the 451 00:23:40,160 --> 00:23:43,840 Speaker 1: death rate for the COVID nineteen drops down or turns 452 00:23:43,840 --> 00:23:46,240 Speaker 1: out to be about the same as flu, then I 453 00:23:46,240 --> 00:23:49,880 Speaker 1: think there'll be a longer term uh, return to normalcy. 454 00:23:49,960 --> 00:23:52,120 Speaker 1: But well, we'll get back to that same normal thing. 455 00:23:52,920 --> 00:23:54,520 Speaker 1: That sort of point one and point two, which is 456 00:23:54,760 --> 00:23:58,159 Speaker 1: which I'll summarize shortly, is that the effect of this 457 00:23:58,560 --> 00:24:00,680 Speaker 1: is going has been to and I think it would 458 00:24:00,680 --> 00:24:03,439 Speaker 1: be permanent to accelerate trends that are already in place, 459 00:24:04,000 --> 00:24:08,679 Speaker 1: which means trends towards online shopping, for example. And also 460 00:24:09,080 --> 00:24:11,679 Speaker 1: it uncovered some things that we didn't know, namely that 461 00:24:12,240 --> 00:24:14,439 Speaker 1: a large number of people don't have to be in 462 00:24:14,480 --> 00:24:19,280 Speaker 1: an office building and in certain industries to be very productive. 463 00:24:19,400 --> 00:24:22,720 Speaker 1: And so I think James Gorman at at Morgan Stanley 464 00:24:22,720 --> 00:24:25,879 Speaker 1: and others have been fairly vocal about the fact that 465 00:24:25,920 --> 00:24:29,280 Speaker 1: the real estate footprint for you know, for financial services 466 00:24:29,280 --> 00:24:33,760 Speaker 1: companies is going to be significantly significantly different going forward. 467 00:24:33,800 --> 00:24:36,440 Speaker 1: So that I think that commercial real estate is potentially 468 00:24:36,480 --> 00:24:38,400 Speaker 1: exposed not in the near term, but over the over 469 00:24:38,400 --> 00:24:40,600 Speaker 1: the longer term. And again, a lot of stuff is 470 00:24:40,720 --> 00:24:42,240 Speaker 1: just just in the middle. We just don't know what 471 00:24:42,280 --> 00:24:44,560 Speaker 1: the answer is in I was on a Zoom call 472 00:24:44,680 --> 00:24:50,119 Speaker 1: when one of the participants were marveling over the new technologies, 473 00:24:50,160 --> 00:24:52,960 Speaker 1: and I had to point out, Hey, we've had FaceTime 474 00:24:53,080 --> 00:24:56,400 Speaker 1: and screen share and Google hangouts for years and years 475 00:24:56,400 --> 00:24:58,880 Speaker 1: and years. People just didn't have to use them. So 476 00:24:59,359 --> 00:25:04,080 Speaker 1: your point about the pre existing trends is very well made. Yeah, 477 00:25:04,080 --> 00:25:05,600 Speaker 1: I mean, I think it's I mean, I think that's 478 00:25:05,600 --> 00:25:07,639 Speaker 1: the That's about all I can say in confidence is 479 00:25:07,760 --> 00:25:12,040 Speaker 1: any trends that were in effect, we're probably accelerated because 480 00:25:12,040 --> 00:25:15,639 Speaker 1: of this. I couldn't agree more. Let's talk a little 481 00:25:15,640 --> 00:25:19,480 Speaker 1: bit about some of the things that you've seen change 482 00:25:20,119 --> 00:25:22,760 Speaker 1: over the course of your career. And I want to 483 00:25:22,800 --> 00:25:27,080 Speaker 1: start with something that is a little surprising. Let's talk 484 00:25:27,080 --> 00:25:32,240 Speaker 1: about cryptocurrency. How actively involved in the crypto world are 485 00:25:32,320 --> 00:25:35,200 Speaker 1: you and where do you see this going as either 486 00:25:35,240 --> 00:25:39,879 Speaker 1: a speculation or a potential asset class. It's interesting the 487 00:25:39,920 --> 00:25:42,040 Speaker 1: way you framed that, Barry, because if you if you 488 00:25:42,119 --> 00:25:45,719 Speaker 1: ask how actively I am and it are actively involved, 489 00:25:46,200 --> 00:25:48,440 Speaker 1: I'm not active at all. I have a very large 490 00:25:48,480 --> 00:25:53,240 Speaker 1: position personally in bitcoin. I think UH Financial Time set 491 00:25:53,280 --> 00:25:55,520 Speaker 1: Up did an analysis and as at least a couple 492 00:25:55,520 --> 00:25:58,119 Speaker 1: of years ago, if I've got their data right, they 493 00:25:58,119 --> 00:25:59,640 Speaker 1: weren't naming names, but I think it was a top 494 00:25:59,640 --> 00:26:03,040 Speaker 1: one holder of bitcoin UH in the world. And I haven't, 495 00:26:03,040 --> 00:26:05,760 Speaker 1: but I haven't. I haven't bought or sold a bitcoins 496 00:26:05,880 --> 00:26:08,840 Speaker 1: in years, so but I am I am holding it. 497 00:26:08,920 --> 00:26:10,520 Speaker 1: I haven't. I'm not trying to trade in my trend 498 00:26:10,560 --> 00:26:13,879 Speaker 1: a thing like that. And my view on cryptocurrencies was 499 00:26:13,960 --> 00:26:18,040 Speaker 1: and is that they are and I'm talking mainly about 500 00:26:18,080 --> 00:26:22,679 Speaker 1: bitcoin here. The other the other cryptocurrencies I think I 501 00:26:22,720 --> 00:26:25,879 Speaker 1: think are mostly mostly uninteresting. There are some that are interesting, 502 00:26:25,960 --> 00:26:28,879 Speaker 1: but mostly uninteresting. But I think it's a very interesting 503 00:26:28,920 --> 00:26:32,280 Speaker 1: technological experiment. We haven't seen any kind of thing like 504 00:26:32,359 --> 00:26:35,479 Speaker 1: this is kind of an innovation in in finance and 505 00:26:35,520 --> 00:26:39,040 Speaker 1: in money, really really in history. And and so I 506 00:26:39,080 --> 00:26:41,640 Speaker 1: think to bash it as many of the very prominent 507 00:26:41,760 --> 00:26:43,720 Speaker 1: people whose names I won't mention them, but I think 508 00:26:43,760 --> 00:26:46,399 Speaker 1: we all know who they are. What to bash it 509 00:26:46,600 --> 00:26:50,000 Speaker 1: is to is to I think without without Also I 510 00:26:50,000 --> 00:26:52,240 Speaker 1: think analyzing it in any kind of any kind of 511 00:26:52,280 --> 00:26:57,760 Speaker 1: care is is probably premature. And I do believe the 512 00:26:57,800 --> 00:26:59,800 Speaker 1: one I've changed my mind all one thing, which is 513 00:27:00,560 --> 00:27:02,400 Speaker 1: when I first got involved in bitcoin, and I think 514 00:27:02,440 --> 00:27:05,960 Speaker 1: my average cost on my bitcoins is around my initial 515 00:27:06,000 --> 00:27:08,359 Speaker 1: costs is around two hundred my average cost free three 516 00:27:08,400 --> 00:27:11,680 Speaker 1: hunds a bitcoin. And my view then was that it 517 00:27:11,880 --> 00:27:14,880 Speaker 1: was it was very, very risky. It had a non 518 00:27:15,000 --> 00:27:18,560 Speaker 1: trivial UH chance of going to zero, and my non 519 00:27:18,600 --> 00:27:22,359 Speaker 1: trivial alignment that you know, probably at least well so 520 00:27:22,920 --> 00:27:27,280 Speaker 1: unlike many investments UH with bitcoin, the higher it goes, 521 00:27:27,600 --> 00:27:31,000 Speaker 1: the less risky it is longer term. With other investments 522 00:27:31,040 --> 00:27:33,719 Speaker 1: with the stock, the higher it goes, unless that's being 523 00:27:33,800 --> 00:27:36,520 Speaker 1: driven totally by fundamentals, the risk here it gets, the 524 00:27:36,600 --> 00:27:39,159 Speaker 1: more expensive it gets. The risk here it gets whereas 525 00:27:39,200 --> 00:27:42,000 Speaker 1: here what's what's leading to the bitcoins price and you 526 00:27:42,040 --> 00:27:44,800 Speaker 1: know around nine thousand dollars right now is greater and 527 00:27:44,880 --> 00:27:48,400 Speaker 1: greater adoption. So we're seeing more and more institutions get involved. 528 00:27:48,920 --> 00:27:52,080 Speaker 1: What you're seeing is uh, you know, exchanges getting more 529 00:27:52,200 --> 00:27:55,480 Speaker 1: i'd say professionalized and not being quite the wild West. 530 00:27:55,520 --> 00:27:58,200 Speaker 1: So it's still pretty much the wild West, but we're 531 00:27:58,240 --> 00:28:00,800 Speaker 1: still early in that game. And the thing that encourages 532 00:28:00,880 --> 00:28:03,919 Speaker 1: me probably the most is that the venture capital firms, 533 00:28:03,960 --> 00:28:05,879 Speaker 1: the people who who you know, who make their living 534 00:28:06,320 --> 00:28:09,800 Speaker 1: trying to sort out which technologies are worthy of investing 535 00:28:09,840 --> 00:28:13,080 Speaker 1: in which aren't. Have Not every venture capital firm is 536 00:28:13,119 --> 00:28:15,840 Speaker 1: big in bitcoin, but many of the most prominent ones are, 537 00:28:16,400 --> 00:28:18,680 Speaker 1: And I think that's probably the thing that gives me 538 00:28:18,720 --> 00:28:22,040 Speaker 1: the greatest confidence is they're still putting new money into 539 00:28:22,119 --> 00:28:24,680 Speaker 1: this and raising new funds for this, and that increases 540 00:28:24,720 --> 00:28:28,040 Speaker 1: the probability that it works. And then secondarily to the 541 00:28:28,119 --> 00:28:31,159 Speaker 1: point is I think it's it's right now just just 542 00:28:31,320 --> 00:28:35,080 Speaker 1: a you know, a speculative vehicle. I think it could 543 00:28:35,160 --> 00:28:39,239 Speaker 1: become an asset class. I think it's most likely to be, uh, 544 00:28:39,600 --> 00:28:42,560 Speaker 1: you know what. One of the books, the titled Digital gold. 545 00:28:42,600 --> 00:28:45,600 Speaker 1: I think that's probably the most likely venue for it 546 00:28:45,680 --> 00:28:48,800 Speaker 1: to succeed at. And I think also that one of 547 00:28:48,840 --> 00:28:51,000 Speaker 1: the things that's gotten some attention, as you probably know, 548 00:28:51,200 --> 00:28:53,360 Speaker 1: is that Paul Tutor Jones is put close to I 549 00:28:53,400 --> 00:28:56,600 Speaker 1: think now he's close to two of his funds in bitcoin, 550 00:28:57,240 --> 00:28:59,760 Speaker 1: and other people like Stan Dructon Miller. I don't believe 551 00:28:59,760 --> 00:29:03,560 Speaker 1: on owns bitcoin or great value. I don't believe owns bitcoin. 552 00:29:04,200 --> 00:29:07,480 Speaker 1: I'm not sure. But but they they are bullish on 553 00:29:07,560 --> 00:29:11,160 Speaker 1: gold because of the massive stimulus, the massive money printing, 554 00:29:11,360 --> 00:29:13,479 Speaker 1: printing a nut that their bullets, because they think going 555 00:29:13,520 --> 00:29:16,600 Speaker 1: to runaway inflation. They just believe the probabilities of gold 556 00:29:16,680 --> 00:29:19,480 Speaker 1: doing well, and gold has done well, are increasing. And 557 00:29:19,800 --> 00:29:22,240 Speaker 1: my my view is that if gold does well in 558 00:29:22,240 --> 00:29:24,400 Speaker 1: the next five to ten years, bitcoin will do a 559 00:29:24,480 --> 00:29:26,920 Speaker 1: lot better because it has many advantages that gold doesn't have. 560 00:29:27,720 --> 00:29:30,200 Speaker 1: So I would I would say that, you know, if 561 00:29:30,240 --> 00:29:32,800 Speaker 1: I were to advise people, which I don't do that 562 00:29:33,000 --> 00:29:35,520 Speaker 1: kind of thing, but what I did was I put 563 00:29:35,560 --> 00:29:37,840 Speaker 1: about one percent of my liquid net worth and bitcoin, 564 00:29:38,000 --> 00:29:40,040 Speaker 1: and I would say for people who are interested in it, 565 00:29:40,840 --> 00:29:43,840 Speaker 1: that's an interesting way to go because anybody can afford 566 00:29:43,880 --> 00:29:46,640 Speaker 1: to lose one percent of their liquid net worth and 567 00:29:46,960 --> 00:29:48,360 Speaker 1: uh and if you can't, then you ought to be 568 00:29:48,440 --> 00:29:51,960 Speaker 1: in cash or in short term short term government bonds, 569 00:29:52,320 --> 00:29:54,240 Speaker 1: any of anybody that own stocks and afford to lose 570 00:29:54,280 --> 00:29:57,360 Speaker 1: one percent. So, but the right hand tail of the distribution, 571 00:29:57,480 --> 00:30:01,680 Speaker 1: if it works, is many many times at the current price. 572 00:30:02,120 --> 00:30:06,680 Speaker 1: Quite fascinating. So you mentioned it's a technology digital gold 573 00:30:06,760 --> 00:30:12,120 Speaker 1: as well. Is this a potential currency and a potential 574 00:30:12,360 --> 00:30:17,480 Speaker 1: alternative to the dollar, And regardless of bitcoin, is the 575 00:30:17,560 --> 00:30:20,720 Speaker 1: almighty dollar going to continue to be the almighty dollar 576 00:30:20,760 --> 00:30:25,880 Speaker 1: into the foreseeable future? What potentially could dethrone the dollar 577 00:30:26,000 --> 00:30:29,160 Speaker 1: as as the world's reserve currency. Yeah, that's a really 578 00:30:29,240 --> 00:30:34,120 Speaker 1: interesting and important question because a guy wrote a book 579 00:30:34,160 --> 00:30:36,680 Speaker 1: on the dollar called, you know, Exorbitant Privilege, you know, 580 00:30:36,800 --> 00:30:39,960 Speaker 1: some years ago. And the dollar has been a huge, 581 00:30:40,120 --> 00:30:42,520 Speaker 1: huge benefit as the reserve currency for the U S. 582 00:30:42,600 --> 00:30:45,760 Speaker 1: It's why we don't, you know, suffer the problems of 583 00:30:46,240 --> 00:30:49,080 Speaker 1: countries that you have to use dollars and and and 584 00:30:49,240 --> 00:30:52,800 Speaker 1: so we'll we'll be vulnerable to runs on their own 585 00:30:52,840 --> 00:30:55,840 Speaker 1: currency and in favor of the in favor of the dollar. 586 00:30:55,880 --> 00:31:00,120 Speaker 1: You might remember back in nineteen uh two seven two 587 00:31:00,160 --> 00:31:03,800 Speaker 1: thousand seven and eight that Warren Buffet and Paul Krugman, 588 00:31:03,880 --> 00:31:05,920 Speaker 1: when asked what they thought the risk was to the 589 00:31:06,000 --> 00:31:09,080 Speaker 1: overall market, they both mentioned the current account deficit and 590 00:31:09,160 --> 00:31:11,960 Speaker 1: said they were concerned about a dollar collapse and people 591 00:31:11,960 --> 00:31:14,200 Speaker 1: would lose confidence in the dollar because of our massive 592 00:31:14,240 --> 00:31:18,560 Speaker 1: current account and growing current account deficits and and so uh. 593 00:31:18,840 --> 00:31:20,560 Speaker 1: It turned out the current account deficit, it wasn't a 594 00:31:20,600 --> 00:31:23,360 Speaker 1: problem at all. The housing market was a problem. But 595 00:31:23,640 --> 00:31:26,760 Speaker 1: and when the when the global financial crisis came, people 596 00:31:26,840 --> 00:31:30,080 Speaker 1: didn't sell dollars, they bought dollars. So I think that 597 00:31:30,240 --> 00:31:32,800 Speaker 1: that gives you a sense of of of how powerful 598 00:31:32,840 --> 00:31:36,200 Speaker 1: the dollar is right now. The issue though, is that, 599 00:31:36,640 --> 00:31:40,400 Speaker 1: um that we're in competition with the Chinese globally, and 600 00:31:40,520 --> 00:31:42,920 Speaker 1: the Chinese economy will be bigger than ours at some point, 601 00:31:43,680 --> 00:31:47,120 Speaker 1: and the Chinese are experimenting and I think going to 602 00:31:47,240 --> 00:31:50,520 Speaker 1: come up with a with a cryptocurrency that will be 603 00:31:50,760 --> 00:31:53,920 Speaker 1: you know, that the Chinese government will back, and part 604 00:31:53,960 --> 00:31:55,160 Speaker 1: of the reason they want to do that is to 605 00:31:55,240 --> 00:31:58,720 Speaker 1: try and undermine the dollar. So I would guess also 606 00:31:58,840 --> 00:32:00,880 Speaker 1: that the US will all so at some point have 607 00:32:01,000 --> 00:32:03,320 Speaker 1: a you know, have a fedbacked cryptocurrency. And maybe some 608 00:32:03,400 --> 00:32:06,800 Speaker 1: other the other reserve currencies as well. So I think 609 00:32:06,840 --> 00:32:11,520 Speaker 1: that's a potential significant change that as it evolves, that 610 00:32:11,600 --> 00:32:14,240 Speaker 1: would also put a lot more attention on bitcoin. And 611 00:32:14,360 --> 00:32:17,840 Speaker 1: of course, the big advantage of bitcoin is that it's permissionless, 612 00:32:18,360 --> 00:32:22,680 Speaker 1: it's decentralized, it can't be hacked, and it can't be debased, 613 00:32:23,480 --> 00:32:26,080 Speaker 1: and and so I think that difference between a government 614 00:32:26,200 --> 00:32:30,560 Speaker 1: backed currency, even if it's a cryptocurrency, and one that 615 00:32:31,520 --> 00:32:34,880 Speaker 1: is basically independent its whole, its whole way of operation, 616 00:32:35,040 --> 00:32:38,760 Speaker 1: is independent of any government, would would be beneficial to bitcoin. 617 00:32:39,280 --> 00:32:42,320 Speaker 1: So it doesn't happen a collapse is just the Bitcoin 618 00:32:42,400 --> 00:32:45,680 Speaker 1: would benefit from the differentiated aspect of it to whatever 619 00:32:46,080 --> 00:32:49,040 Speaker 1: other sorts of cryptocurrencies or payment systems come around. You 620 00:32:49,240 --> 00:32:54,200 Speaker 1: call bitcoin digital gold, I've been calling it libertarian gold. 621 00:32:54,480 --> 00:32:59,640 Speaker 1: And I can't see that crowd getting behind certainly not 622 00:32:59,760 --> 00:33:05,640 Speaker 1: be on a federal reserve that crypto and essentially planned 623 00:33:06,400 --> 00:33:10,880 Speaker 1: um regime like China. I can't imagine the libertarians buying 624 00:33:10,960 --> 00:33:16,000 Speaker 1: into that. Do you really think a Chinese cryptocurrency has 625 00:33:16,320 --> 00:33:20,600 Speaker 1: a chance to capture the imagination of at least the 626 00:33:20,680 --> 00:33:24,040 Speaker 1: early adopters in that space. Um Let me let me 627 00:33:24,400 --> 00:33:26,200 Speaker 1: resort this out. You know, if you look back at 628 00:33:26,240 --> 00:33:29,520 Speaker 1: bitcoin when it got started in who it's initial enthusiasts were, 629 00:33:30,040 --> 00:33:34,480 Speaker 1: it was basically libertarians, people that hate to fed, inflationists, 630 00:33:34,640 --> 00:33:37,000 Speaker 1: hard money people, all that kind of stuff that they 631 00:33:37,120 --> 00:33:41,840 Speaker 1: provided the early impetus and the emotion, uh to get 632 00:33:41,920 --> 00:33:44,360 Speaker 1: behind it because it checked a lot of their boxes. 633 00:33:45,080 --> 00:33:48,080 Speaker 1: So if you think of bitcoin as as a favorite 634 00:33:48,120 --> 00:33:51,640 Speaker 1: of the libertarians, you know, as as a politicized thing, 635 00:33:52,320 --> 00:33:54,760 Speaker 1: which I think it is to a minor extent, much 636 00:33:54,800 --> 00:33:57,280 Speaker 1: miner than it used to be before. No, the libertarians 637 00:33:57,280 --> 00:34:02,560 Speaker 1: are never going to get behind a sponsored cryptocurrency, much 638 00:34:02,640 --> 00:34:06,280 Speaker 1: less a Chinese sponsored cryptocurrency. But they're a relatively small 639 00:34:06,440 --> 00:34:09,680 Speaker 1: part of what, you know, what drives the global economic system. 640 00:34:10,320 --> 00:34:11,640 Speaker 1: And I think the rest of it is going to 641 00:34:11,680 --> 00:34:15,000 Speaker 1: be just based on practicality and it doesn't work and 642 00:34:15,320 --> 00:34:17,920 Speaker 1: uh and doesn't solve some kind of financial need, and 643 00:34:18,000 --> 00:34:20,160 Speaker 1: we'll just have to see that again. It's early, it's 644 00:34:20,200 --> 00:34:23,200 Speaker 1: early days in this, you know. Friedrich Hyak wrote a 645 00:34:23,239 --> 00:34:26,520 Speaker 1: wrote a monograph called the de Nationalization of Money where 646 00:34:26,760 --> 00:34:30,320 Speaker 1: he argued that there should be you know, the basically 647 00:34:30,560 --> 00:34:33,600 Speaker 1: money's money is plural, should compete with each other, and 648 00:34:33,800 --> 00:34:35,520 Speaker 1: any banks should be able to issue its own money. 649 00:34:35,560 --> 00:34:38,200 Speaker 1: Any company should issue its own money, and then the 650 00:34:38,440 --> 00:34:40,480 Speaker 1: market will sort out which ones are valuable in which 651 00:34:40,520 --> 00:34:42,000 Speaker 1: ones aren't. We had that in the United States for 652 00:34:42,000 --> 00:34:44,440 Speaker 1: about thirty years. Didn't work out too well enough in 653 00:34:44,480 --> 00:34:46,479 Speaker 1: the nineteenth century, but it doesn't mean that it can't 654 00:34:46,560 --> 00:34:48,200 Speaker 1: work some version of it in the future. And I 655 00:34:48,280 --> 00:34:50,480 Speaker 1: think that's part of what part of the direction that 656 00:34:50,560 --> 00:34:52,880 Speaker 1: this is going right now. So let me shift gears 657 00:34:52,920 --> 00:34:55,239 Speaker 1: on you a little bit. I have to bring up 658 00:34:55,320 --> 00:35:00,280 Speaker 1: something I'm fascinated by. You made a seventy five million 659 00:35:00,320 --> 00:35:05,120 Speaker 1: dollar donation to Johns Hopkins University, your alma mater, to 660 00:35:05,280 --> 00:35:08,080 Speaker 1: the philosophy department, turned out to be the largest ever 661 00:35:08,200 --> 00:35:13,960 Speaker 1: gift to a philosophy department. Explain what motivated that. Tell 662 00:35:14,080 --> 00:35:19,120 Speaker 1: us about your thinking behind that gift. Sure, So I 663 00:35:19,160 --> 00:35:23,520 Speaker 1: went to grad school at Hopkins, got a chef in 664 00:35:23,520 --> 00:35:27,200 Speaker 1: of the PhD program there in the mid nineteen seventies, 665 00:35:27,800 --> 00:35:30,040 Speaker 1: and after I get out of the Army, and and 666 00:35:30,320 --> 00:35:35,000 Speaker 1: I was at my mindset on I'm becoming a college professor, 667 00:35:35,920 --> 00:35:38,279 Speaker 1: and that was a very bad time, just like his 668 00:35:38,560 --> 00:35:40,120 Speaker 1: right now, it's just been a bad time. For like 669 00:35:40,239 --> 00:35:42,759 Speaker 1: four years to get a pH d in a in 670 00:35:43,600 --> 00:35:46,239 Speaker 1: the humanities, whether it be English or philosophy or French 671 00:35:46,320 --> 00:35:48,960 Speaker 1: or whatever the case may be. And so when it 672 00:35:49,000 --> 00:35:51,040 Speaker 1: finally became clear to me that that was not going 673 00:35:51,120 --> 00:35:53,279 Speaker 1: to be uh, something that made a lot of sense, 674 00:35:53,520 --> 00:35:56,640 Speaker 1: I would probably a vagabond bouncing from college to college. 675 00:35:57,560 --> 00:35:59,920 Speaker 1: I then shifted gears. I've always been interested in markets, 676 00:36:00,000 --> 00:36:03,040 Speaker 1: and so I was fortunate to get a job initially 677 00:36:03,360 --> 00:36:05,720 Speaker 1: at a private company and then moved into their treasury 678 00:36:05,800 --> 00:36:07,440 Speaker 1: function and manage some money for them, and then went 679 00:36:07,480 --> 00:36:12,040 Speaker 1: to like Mason. And the thing is I look back 680 00:36:12,400 --> 00:36:15,800 Speaker 1: on was the thing that probably was the most useful, 681 00:36:15,880 --> 00:36:19,399 Speaker 1: practically useful thing to me, much more useful than being 682 00:36:19,400 --> 00:36:22,680 Speaker 1: an economics major undergrad and you know, learn money and 683 00:36:22,760 --> 00:36:25,000 Speaker 1: banking and all that kind of stuff, and the you know, 684 00:36:25,080 --> 00:36:28,279 Speaker 1: the equation of exchange on vv equals p Q, where 685 00:36:28,320 --> 00:36:33,160 Speaker 1: the the analytical habits of thought and the critical analytical 686 00:36:33,280 --> 00:36:36,440 Speaker 1: skills that you learn uh in philosophy, which is very 687 00:36:36,520 --> 00:36:40,640 Speaker 1: rigorous and UH and in some cases highly quantitative. Although 688 00:36:40,640 --> 00:36:43,560 Speaker 1: I would I wasn't particularly attracted to that part. But 689 00:36:43,719 --> 00:36:45,839 Speaker 1: I my view is that I would not have had 690 00:36:45,880 --> 00:36:49,360 Speaker 1: anything like the success that I've had in capital markets 691 00:36:50,040 --> 00:36:52,920 Speaker 1: had I not had that philosophical training, because part of 692 00:36:52,960 --> 00:36:56,200 Speaker 1: it is that that you're always trying to figure out 693 00:36:56,280 --> 00:36:58,920 Speaker 1: what's wrong with your view and not trying to press 694 00:36:58,920 --> 00:37:01,720 Speaker 1: your view about what's right. A lot of people in markets, 695 00:37:01,800 --> 00:37:05,719 Speaker 1: as you're undoubtedly aware, have very strong views about lots 696 00:37:05,760 --> 00:37:08,040 Speaker 1: of things. You know, I mean, lots of very smart 697 00:37:08,080 --> 00:37:10,040 Speaker 1: people were short Tesla and thought it was a fraud. 698 00:37:10,480 --> 00:37:12,600 Speaker 1: Lots of very smart people thought that Amazon was going 699 00:37:12,640 --> 00:37:15,440 Speaker 1: to go bust Baron's caught it Amazon dot Com. But 700 00:37:15,560 --> 00:37:17,200 Speaker 1: when you get you know, when you get kind of 701 00:37:17,239 --> 00:37:18,879 Speaker 1: the bit in your teeth and have a strong view 702 00:37:18,920 --> 00:37:22,120 Speaker 1: on that, you tend to ignore countervailing information and look 703 00:37:22,200 --> 00:37:25,920 Speaker 1: for confirmation, and all kinds of psychological things come to play. 704 00:37:26,160 --> 00:37:28,879 Speaker 1: And one of the things that going through the drill 705 00:37:28,960 --> 00:37:32,680 Speaker 1: and grad school philosophy UH, at least at Hopkins UH 706 00:37:33,560 --> 00:37:35,279 Speaker 1: was imparted to me that you've got to hold all 707 00:37:35,320 --> 00:37:37,320 Speaker 1: that stuff back because you're what you're really trying to 708 00:37:37,400 --> 00:37:39,719 Speaker 1: do is get at what's called the argument to the 709 00:37:39,800 --> 00:37:42,560 Speaker 1: best explanation. So what what's what's going on here? Not 710 00:37:42,719 --> 00:37:43,920 Speaker 1: what do I want to go on or what do 711 00:37:44,040 --> 00:37:46,480 Speaker 1: my beliefs tell me. But you know, you've got to 712 00:37:46,520 --> 00:37:48,759 Speaker 1: consider all evidence from every angle. So it's like a 713 00:37:49,200 --> 00:37:53,280 Speaker 1: Rubik's cube look at things. And that was enormously helpful 714 00:37:53,320 --> 00:37:54,560 Speaker 1: to me, and I would say that it was it 715 00:37:54,680 --> 00:37:57,120 Speaker 1: was part of why you know, we bought Google, and 716 00:37:57,160 --> 00:37:58,920 Speaker 1: the second by the biggest buyer Google on the I 717 00:37:59,040 --> 00:38:01,160 Speaker 1: p OH, the big buyer of Amazon on the I 718 00:38:01,320 --> 00:38:03,200 Speaker 1: p O. And so a lot of those names that 719 00:38:03,239 --> 00:38:05,759 Speaker 1: have been among our biggest winners have been due to 720 00:38:05,880 --> 00:38:09,520 Speaker 1: I think the analytical skills that I developed in grad school. 721 00:38:09,520 --> 00:38:11,960 Speaker 1: And I thought it was a useful way to to 722 00:38:12,520 --> 00:38:14,200 Speaker 1: you know, to pay that back because I think the 723 00:38:14,239 --> 00:38:17,560 Speaker 1: more people that are exposed to philosophy, so Hopkins Department 724 00:38:17,600 --> 00:38:19,480 Speaker 1: were more than double as as a result of the 725 00:38:19,480 --> 00:38:22,120 Speaker 1: size of this, and they've already hired, you know, last 726 00:38:22,120 --> 00:38:24,960 Speaker 1: few years there several distinguished philosophers. So I think I 727 00:38:25,000 --> 00:38:30,080 Speaker 1: think it'll be good as more students at Hopkins take philosophy. 728 00:38:30,120 --> 00:38:31,919 Speaker 1: And also I just thought it was good to shine 729 00:38:31,920 --> 00:38:34,560 Speaker 1: a light on the value of philosophy, and especially when 730 00:38:34,600 --> 00:38:37,560 Speaker 1: people are thinking about stems so much, uh, you know, 731 00:38:37,640 --> 00:38:40,520 Speaker 1: and and and using your education to get a job. 732 00:38:41,239 --> 00:38:44,279 Speaker 1: I think that's fine but I think that actually that 733 00:38:44,360 --> 00:38:47,520 Speaker 1: the humanities have a practical value as well as you know, 734 00:38:47,640 --> 00:38:49,839 Speaker 1: as an intellectual value to people as well. So one 735 00:38:49,880 --> 00:38:53,640 Speaker 1: of the things that's kind of intriguing watching people who 736 00:38:53,680 --> 00:38:59,080 Speaker 1: are not epidemiologists tracked all the data is that we're 737 00:38:59,120 --> 00:39:03,400 Speaker 1: testing so many more people today that we're finding lots 738 00:39:03,440 --> 00:39:08,879 Speaker 1: of asymptomatic um people who are infected or asymptomatic um 739 00:39:09,280 --> 00:39:12,439 Speaker 1: people who are currently infected. So that's driving the death 740 00:39:12,560 --> 00:39:16,000 Speaker 1: rate down, and then the number of people under fifty 741 00:39:16,080 --> 00:39:18,759 Speaker 1: and under forty who seem to be getting it, who 742 00:39:18,840 --> 00:39:23,400 Speaker 1: have a much better prognosis um for surviving. Those are 743 00:39:23,480 --> 00:39:29,480 Speaker 1: really making the mortality rates looked better than they did 744 00:39:29,560 --> 00:39:32,720 Speaker 1: in the beginning, when we really only fact out about 745 00:39:32,800 --> 00:39:35,239 Speaker 1: who had it based on whether they went to the 746 00:39:35,280 --> 00:39:38,879 Speaker 1: hospital or died, right right, Yeah, I mean, it's it's 747 00:39:39,640 --> 00:39:41,320 Speaker 1: it's interesting. I'm on the I'm on the board of 748 00:39:41,400 --> 00:39:44,279 Speaker 1: Johns Hopkins, which is kind of, um, you know, ground 749 00:39:44,400 --> 00:39:46,600 Speaker 1: zero for all the data on this kind of stuff. 750 00:39:46,600 --> 00:39:50,000 Speaker 1: And we have a call on COVID every Easter every 751 00:39:50,040 --> 00:39:52,239 Speaker 1: week now it's now it's every other week. But yeah, 752 00:39:52,320 --> 00:39:54,200 Speaker 1: that was that was one of the things that came 753 00:39:54,280 --> 00:39:56,440 Speaker 1: up in the call this morning, which is, if you 754 00:39:56,440 --> 00:39:58,480 Speaker 1: look at like Florida, for example, you're getting a huge 755 00:39:58,520 --> 00:40:04,200 Speaker 1: increase in in case aces um. Before Florida reopened, the 756 00:40:04,320 --> 00:40:09,120 Speaker 1: average age of somebody with COVID was sixty two. And 757 00:40:09,320 --> 00:40:12,160 Speaker 1: since it's reopened, with all that jump in cases, the 758 00:40:12,239 --> 00:40:16,279 Speaker 1: average age of cases since then is thirty five. And 759 00:40:16,480 --> 00:40:19,040 Speaker 1: if you look at them the data on mortality of 760 00:40:19,160 --> 00:40:23,279 Speaker 1: people who are thirty five, then their mortality, their chance 761 00:40:23,360 --> 00:40:26,640 Speaker 1: of dying is point zero zero zero five. So basically 762 00:40:26,960 --> 00:40:30,439 Speaker 1: it's basically almost nothing. So I think that's what that's 763 00:40:30,480 --> 00:40:32,400 Speaker 1: what you're seeing, and that the press doesn't do a 764 00:40:32,520 --> 00:40:35,320 Speaker 1: very good job of sorting out the various you know, 765 00:40:35,560 --> 00:40:37,879 Speaker 1: ways in which you can you can carve up these 766 00:40:38,600 --> 00:40:41,279 Speaker 1: carve up these statistics. So it's and as you said, 767 00:40:41,360 --> 00:40:44,120 Speaker 1: the more talent that the number of people that apparently 768 00:40:44,600 --> 00:40:47,040 Speaker 1: are asymptomatic in this I think the CDC said the 769 00:40:47,080 --> 00:40:49,480 Speaker 1: other day that it's probably ten times a number of 770 00:40:49,520 --> 00:40:51,600 Speaker 1: people that actually have had the you know, I have 771 00:40:51,719 --> 00:40:54,760 Speaker 1: to have tested positives that would be, you know, instead 772 00:40:54,760 --> 00:40:57,120 Speaker 1: of two million people that have had it, it's twenty 773 00:40:57,160 --> 00:40:59,759 Speaker 1: seven million people. And the CDC said it could be 774 00:40:59,800 --> 00:41:02,880 Speaker 1: as any fifty times that, which means that mortality is 775 00:41:03,040 --> 00:41:06,520 Speaker 1: very very low, and the aggregate and if you look 776 00:41:06,560 --> 00:41:09,279 Speaker 1: at them and carving it by age, I think it's 777 00:41:09,320 --> 00:41:13,120 Speaker 1: only six percent of the people who have died from COVID. 778 00:41:13,360 --> 00:41:16,080 Speaker 1: We're actually in the labor force. So people that are 779 00:41:16,080 --> 00:41:18,279 Speaker 1: in the labor force the very little, you know, very 780 00:41:18,320 --> 00:41:21,440 Speaker 1: little problem, which again makes that makes the cost of 781 00:41:21,480 --> 00:41:24,400 Speaker 1: shutting down the economy to try and protect people who are, 782 00:41:24,520 --> 00:41:27,520 Speaker 1: you know, in their seventies or eighties, instead of isolating 783 00:41:27,560 --> 00:41:29,880 Speaker 1: those people and trying to have them make sure that 784 00:41:30,000 --> 00:41:33,520 Speaker 1: they don't you know, they're they're not mixing like people 785 00:41:33,600 --> 00:41:36,279 Speaker 1: my age over seventy years old. That makes perfect sense, 786 00:41:36,320 --> 00:41:38,400 Speaker 1: But keeping everybody out of the labor force who has 787 00:41:38,440 --> 00:41:40,440 Speaker 1: very little risk doesn't make much sense at all. So 788 00:41:40,920 --> 00:41:43,560 Speaker 1: I won't spoil the surprise for Johns Hopkins, but I 789 00:41:43,640 --> 00:41:46,399 Speaker 1: suspect there's a big pile of bitcoin coming their way 790 00:41:47,200 --> 00:41:50,239 Speaker 1: sometime over the next few decades. Um, But let's just 791 00:41:50,360 --> 00:41:53,879 Speaker 1: keep that between us. So, so if you mentioned, um, 792 00:41:54,320 --> 00:41:59,560 Speaker 1: how philosophy has impacted the way you approach investing, how 793 00:42:00,200 --> 00:42:05,480 Speaker 1: has your philosophy about investing changed over the past few decades. 794 00:42:05,560 --> 00:42:08,960 Speaker 1: It's hard to imagine the Bill Miller of leg Mason 795 00:42:09,360 --> 00:42:13,280 Speaker 1: as a buyer of bitcoin. I suspect your thinking seems 796 00:42:13,360 --> 00:42:19,000 Speaker 1: to have evolved over that time period. Yeah, i'd say, uh, actually, 797 00:42:19,080 --> 00:42:20,640 Speaker 1: I was still an employee of like Mason when I 798 00:42:20,719 --> 00:42:23,920 Speaker 1: made the when I made the bitcoin, the first bitcoin purchase. 799 00:42:24,960 --> 00:42:29,600 Speaker 1: But yeah, I guess my my thinking changed mostly around 800 00:42:30,760 --> 00:42:34,800 Speaker 1: and then it's I'd say, it hasn't changed much since 801 00:42:34,880 --> 00:42:37,880 Speaker 1: that point in time. So what happened was that we 802 00:42:38,000 --> 00:42:43,000 Speaker 1: started the Value Trust in two and by six it 803 00:42:43,160 --> 00:42:45,200 Speaker 1: was the single best performing fund in the country of 804 00:42:45,280 --> 00:42:48,440 Speaker 1: the last you know, five five years. So we were 805 00:42:48,520 --> 00:42:51,960 Speaker 1: number one in fidelity. Mitchellan Fund were number two. And 806 00:42:52,080 --> 00:42:55,000 Speaker 1: then when the economy peaked, and so we got wet 807 00:42:55,080 --> 00:42:57,759 Speaker 1: hit in the crash, not not terribly, but because we 808 00:42:57,800 --> 00:42:59,880 Speaker 1: had a lot of cash going into the crash, the 809 00:43:00,120 --> 00:43:05,719 Speaker 1: two thousand crashes that we back. Yeah yeah, yeah. So 810 00:43:06,480 --> 00:43:10,279 Speaker 1: but when we had that recession, we then had a 811 00:43:11,600 --> 00:43:16,000 Speaker 1: terrible year in nine and we lost half our assets 812 00:43:16,040 --> 00:43:19,279 Speaker 1: in the funds. And so I went back to look 813 00:43:19,360 --> 00:43:23,440 Speaker 1: at the history of value investing as traditionally conceived and 814 00:43:23,640 --> 00:43:25,839 Speaker 1: concluded that what people thought about it and the way 815 00:43:25,880 --> 00:43:28,840 Speaker 1: it was portrayed in the press and and you know 816 00:43:29,000 --> 00:43:31,880 Speaker 1: popularly was wrong and that the academic research did not 817 00:43:32,719 --> 00:43:36,800 Speaker 1: did not support that view. And namely, the value investing 818 00:43:36,960 --> 00:43:39,480 Speaker 1: was in some way or other superior to growth investing 819 00:43:40,000 --> 00:43:43,160 Speaker 1: on on some on some fundamental basis, which probably psychological. 820 00:43:43,800 --> 00:43:45,560 Speaker 1: And it was the case that just because stocks had 821 00:43:45,560 --> 00:43:46,960 Speaker 1: a low key year, low price to book or low 822 00:43:47,000 --> 00:43:49,640 Speaker 1: prast cash flow, that just that typically meant that they 823 00:43:49,680 --> 00:43:51,839 Speaker 1: had a low return on capital, or or were highly 824 00:43:51,880 --> 00:43:54,800 Speaker 1: capital intensive, or they had a lot of debt. And 825 00:43:55,160 --> 00:43:57,239 Speaker 1: unless one of those things are many of the things changed, 826 00:43:57,239 --> 00:43:59,520 Speaker 1: they did now perform. They just were just statistically cheap. 827 00:44:00,440 --> 00:44:02,719 Speaker 1: So we began to put a lot more effort on 828 00:44:03,400 --> 00:44:07,000 Speaker 1: integrating what the academic research showed about investing with what 829 00:44:07,280 --> 00:44:10,360 Speaker 1: the practicalities of investing were. And the key thing was 830 00:44:10,480 --> 00:44:13,600 Speaker 1: to focus on return on capital through a cycle. So 831 00:44:13,880 --> 00:44:16,279 Speaker 1: what we went from doing was was getting away from 832 00:44:16,680 --> 00:44:21,080 Speaker 1: uh generally accepted accounting principles gap measures and looked at 833 00:44:21,200 --> 00:44:25,719 Speaker 1: measures of economic value. And so we focused on h 834 00:44:26,040 --> 00:44:29,759 Speaker 1: free cash flow, yield, return uninvested capital, and companies that 835 00:44:29,840 --> 00:44:31,880 Speaker 1: could earn that through recycle. That was that was the 836 00:44:31,960 --> 00:44:35,799 Speaker 1: big change, and that hasn't really changed very much since then. 837 00:44:35,840 --> 00:44:38,560 Speaker 1: I'd say the only thing which is changed since then 838 00:44:38,760 --> 00:44:41,880 Speaker 1: is an understanding which I've talked about earlier in the interview, 839 00:44:41,960 --> 00:44:46,319 Speaker 1: about when value does well and when growth does well, 840 00:44:47,080 --> 00:44:49,719 Speaker 1: so that you know, the so called value can underperform 841 00:44:49,800 --> 00:44:52,520 Speaker 1: for long periods of time if the economy has very 842 00:44:52,560 --> 00:44:55,520 Speaker 1: low volatility and low nominal growth rates. So I think 843 00:44:55,600 --> 00:44:57,600 Speaker 1: that's the that's the other change which would cause us, 844 00:44:58,160 --> 00:45:01,160 Speaker 1: which has caused us to to un til differently. So 845 00:45:01,440 --> 00:45:03,560 Speaker 1: in the in the Opportunity Fund that I run with 846 00:45:03,640 --> 00:45:06,880 Speaker 1: my colleague Samantha maclamore, you know, since the March o 847 00:45:07,040 --> 00:45:09,000 Speaker 1: nine bottom through two thousand nineteen, we're in the top 848 00:45:09,040 --> 00:45:11,480 Speaker 1: one percent of all funds. And that's partly due to 849 00:45:11,520 --> 00:45:13,960 Speaker 1: the stuff that I just I covered in some some 850 00:45:14,120 --> 00:45:19,080 Speaker 1: psychological things that we believed about people's first conversion and 851 00:45:19,280 --> 00:45:22,239 Speaker 1: misperception of risk, which I think will repeat again in 852 00:45:22,360 --> 00:45:26,960 Speaker 1: this in this current post pandemic environment. So it's funny 853 00:45:26,960 --> 00:45:31,919 Speaker 1: because when we had our last interview in I think 854 00:45:32,239 --> 00:45:38,120 Speaker 1: a large segment of the fund following world had figured well, 855 00:45:38,239 --> 00:45:41,120 Speaker 1: Bill Millers washed up and left for dead, and I 856 00:45:41,320 --> 00:45:45,759 Speaker 1: saw some data that had you as the top performing 857 00:45:45,880 --> 00:45:49,800 Speaker 1: fund for one three five years. This is all post 858 00:45:49,920 --> 00:45:53,920 Speaker 1: o nine UM. So clearly whatever you learned in ninety 859 00:45:54,080 --> 00:45:59,600 Speaker 1: and applied after the financial crisis UM seems to be working. 860 00:46:00,480 --> 00:46:04,400 Speaker 1: It raises a couple of interesting questions. Let me ask 861 00:46:04,520 --> 00:46:09,839 Speaker 1: about oh eight oh nine. Why did value um underperform 862 00:46:10,000 --> 00:46:14,080 Speaker 1: heading into the financial crisis? And what was it that 863 00:46:14,440 --> 00:46:18,640 Speaker 1: so many people missed in the spreadsheet that was evident 864 00:46:18,960 --> 00:46:21,960 Speaker 1: if you look at books like The Big Short or 865 00:46:22,000 --> 00:46:25,960 Speaker 1: the movie you are just how crazy the home flipping 866 00:46:26,120 --> 00:46:30,160 Speaker 1: epidemic had become. Why was it so challenging to see 867 00:46:30,239 --> 00:46:33,000 Speaker 1: that if you were looking at at balance sheets as 868 00:46:33,040 --> 00:46:36,799 Speaker 1: opposed to the real estate listings. Yeah, I'd say that. Um, 869 00:46:37,640 --> 00:46:40,480 Speaker 1: there's a there's a line that Charlie Munder Warren Bucket's 870 00:46:40,520 --> 00:46:43,920 Speaker 1: partner said, and I think it's two thousand nine, because 871 00:46:43,960 --> 00:46:47,879 Speaker 1: you know, he had just hired uh, Todd and Ted 872 00:46:48,320 --> 00:46:52,000 Speaker 1: to come start managing money for Berkshire maybe a year 873 00:46:52,040 --> 00:46:56,840 Speaker 1: or two earlier. And and they were asked at the 874 00:46:56,880 --> 00:46:59,320 Speaker 1: annual meeting, you know, did the guys that you hire 875 00:47:00,000 --> 00:47:04,200 Speaker 1: did they outperform in this in this bear market? And 876 00:47:04,520 --> 00:47:07,759 Speaker 1: uh and Buffett said no, they you know, they underperformed 877 00:47:07,840 --> 00:47:10,920 Speaker 1: and and uh and somebody said, well, what you know, 878 00:47:11,320 --> 00:47:12,960 Speaker 1: what do you think you know they did wrong? And 879 00:47:13,360 --> 00:47:15,600 Speaker 1: the implication that you know where they where they messed 880 00:47:15,640 --> 00:47:20,680 Speaker 1: things up, and and Charlitan Winker said, he said, he said, well, 881 00:47:20,760 --> 00:47:22,359 Speaker 1: he says the way that I look at this, he says, 882 00:47:22,400 --> 00:47:23,920 Speaker 1: I think the market estim he was down thirty eight 883 00:47:23,960 --> 00:47:26,759 Speaker 1: percent or something got in two thousand and eight. Charlie said, 884 00:47:27,200 --> 00:47:28,960 Speaker 1: in my view, he said, if you weren't down at least, 885 00:47:29,840 --> 00:47:32,359 Speaker 1: then you didn't know what you were doing. I thought 886 00:47:32,400 --> 00:47:34,880 Speaker 1: was it was a clever line. And I think that 887 00:47:34,960 --> 00:47:38,479 Speaker 1: the issue that you know, in retrospect that I looked 888 00:47:38,480 --> 00:47:41,680 Speaker 1: at was that there were there were structural things that 889 00:47:41,800 --> 00:47:44,560 Speaker 1: I missed. The stock market never got really expensive in 890 00:47:44,640 --> 00:47:48,120 Speaker 1: the sense of you know, times earning is an expensive 891 00:47:48,120 --> 00:47:51,279 Speaker 1: relative to to UH two rates. And part of the 892 00:47:51,320 --> 00:47:52,960 Speaker 1: reason was that the market had kind of picked up 893 00:47:53,000 --> 00:47:55,640 Speaker 1: that there was a risk there and it was, you know, 894 00:47:55,719 --> 00:47:58,319 Speaker 1: it was an asset based risk. And most almost all 895 00:47:58,400 --> 00:48:03,800 Speaker 1: recessions are due to liquidity UH implosion, so you know, 896 00:48:03,920 --> 00:48:07,040 Speaker 1: fet titans, that discount rate goes up, the economy goes 897 00:48:07,080 --> 00:48:09,600 Speaker 1: into recession, that kind of thing. But it's basically the 898 00:48:10,480 --> 00:48:13,640 Speaker 1: raising interest rates, and there they typically weren't you know, 899 00:48:14,640 --> 00:48:17,400 Speaker 1: debt financed assets that were such a large part of 900 00:48:17,440 --> 00:48:19,640 Speaker 1: the economy that it could it could be a risk 901 00:48:19,680 --> 00:48:22,399 Speaker 1: of the financial system. And I think that's what that's 902 00:48:22,440 --> 00:48:24,640 Speaker 1: what I missed then. So there were in fact, the 903 00:48:24,680 --> 00:48:30,880 Speaker 1: academic research didn't even uh distinguish between balance sheet based 904 00:48:31,120 --> 00:48:35,120 Speaker 1: recessions and income statement recessions, and it does now, And 905 00:48:35,200 --> 00:48:36,960 Speaker 1: I think that's that's one of the one of the 906 00:48:37,000 --> 00:48:39,759 Speaker 1: things you've got to be careful looking at and the 907 00:48:39,960 --> 00:48:41,920 Speaker 1: overall economy is what what kind of problem are we 908 00:48:42,080 --> 00:48:44,360 Speaker 1: seeing in the in the financial system, And there the 909 00:48:44,400 --> 00:48:47,960 Speaker 1: financial system wasn't was at risk of complete collapse. If 910 00:48:47,960 --> 00:48:50,760 Speaker 1: the FETE hadn't hadn't put PARP in there, the banking 911 00:48:50,840 --> 00:48:53,480 Speaker 1: system could easily have collapsed. And that's just not the 912 00:48:53,680 --> 00:48:55,959 Speaker 1: not the case now that the FET has acted much faster, 913 00:48:56,120 --> 00:48:58,719 Speaker 1: and it's a very different sort of problem that we're 914 00:48:58,719 --> 00:49:01,400 Speaker 1: facing from what we what we've before that problem was 915 00:49:01,480 --> 00:49:04,719 Speaker 1: a banking system based problem, and the banking system is 916 00:49:04,719 --> 00:49:07,360 Speaker 1: actually probably one of the strongest parts of the economy 917 00:49:07,440 --> 00:49:09,440 Speaker 1: right now, so very very different now from from that. 918 00:49:09,800 --> 00:49:11,640 Speaker 1: So since you brought up the FED, I have to 919 00:49:11,760 --> 00:49:17,560 Speaker 1: ask I've heard people complain about FED interventions FED support 920 00:49:17,640 --> 00:49:20,520 Speaker 1: of the stock market. Not only is the FED buying 921 00:49:21,040 --> 00:49:24,600 Speaker 1: e t F the buying specific bonds. What do you 922 00:49:24,719 --> 00:49:27,480 Speaker 1: make of the FED action? How does it influence your 923 00:49:27,560 --> 00:49:30,759 Speaker 1: views of the market, and do you do anything to 924 00:49:31,040 --> 00:49:35,719 Speaker 1: position your portfolio to either withstand or take advantage of 925 00:49:35,840 --> 00:49:39,360 Speaker 1: whatever the FED is doing. Yes, so I think that 926 00:49:40,280 --> 00:49:43,640 Speaker 1: I'm puzzled a little bit at people's views, you know, 927 00:49:43,719 --> 00:49:46,200 Speaker 1: who have again a strong view about the FED ought 928 00:49:46,239 --> 00:49:48,840 Speaker 1: to do this, the FED ought to do that, you know, 929 00:49:48,960 --> 00:49:50,360 Speaker 1: and this is the right thing, doing the wrong thing 930 00:49:50,440 --> 00:49:53,200 Speaker 1: to do. I mean, my main issue is I don't 931 00:49:53,239 --> 00:49:56,000 Speaker 1: really care what my personal view is about what the 932 00:49:56,200 --> 00:49:58,759 Speaker 1: what the FED ought to do or whatnot or will do. 933 00:49:59,440 --> 00:50:00,920 Speaker 1: My view is I need to figure out what it 934 00:50:01,000 --> 00:50:03,759 Speaker 1: is they are doing and what the impact of that's 935 00:50:03,800 --> 00:50:05,440 Speaker 1: likely to be, quit apart in what I think that 936 00:50:05,520 --> 00:50:08,080 Speaker 1: they ought to do. And I think that also people 937 00:50:08,120 --> 00:50:09,640 Speaker 1: kind of forget about why we have a FED in 938 00:50:09,719 --> 00:50:11,719 Speaker 1: the first place, and why we have a FED in 939 00:50:11,760 --> 00:50:14,360 Speaker 1: the first place was we had recurrent banking prices and 940 00:50:14,480 --> 00:50:18,320 Speaker 1: collapses and severe recessions or short depressions back throughout the 941 00:50:18,400 --> 00:50:21,400 Speaker 1: nineteenth century and we needed it. We needed instead of 942 00:50:21,440 --> 00:50:23,800 Speaker 1: a central clearing house, which is the way banking system 943 00:50:23,840 --> 00:50:28,120 Speaker 1: worked is having actually a a lender of last resort 944 00:50:28,200 --> 00:50:30,279 Speaker 1: similar to what the you know, the Bank of England was, 945 00:50:31,000 --> 00:50:34,160 Speaker 1: and that you know that worked out. Okay, I'd say, 946 00:50:34,239 --> 00:50:36,160 Speaker 1: I think it's working so much better now because we 947 00:50:36,239 --> 00:50:38,319 Speaker 1: know a lot more now about how that stuff works. 948 00:50:39,040 --> 00:50:43,200 Speaker 1: And I still think that people fundamentally misunderstand what the 949 00:50:43,239 --> 00:50:45,600 Speaker 1: power of the FED, even though there's a famous line, 950 00:50:45,600 --> 00:50:48,239 Speaker 1: don't fight the FED, but underestimate the power of it 951 00:50:48,280 --> 00:50:50,400 Speaker 1: and how it fits into the overall economies. This one 952 00:50:50,560 --> 00:50:53,680 Speaker 1: one's brief thing. Well you'll remember this very well, and 953 00:50:53,760 --> 00:50:56,440 Speaker 1: I'm surprised that, you know, people still don't pay the 954 00:50:56,480 --> 00:50:59,600 Speaker 1: attention to this. When the FED finally got its self 955 00:50:59,640 --> 00:51:02,840 Speaker 1: and gear in two thousand and eight, uh and really 956 00:51:02,960 --> 00:51:06,319 Speaker 1: began acting as a lender of last sort of backstopping 957 00:51:06,480 --> 00:51:10,280 Speaker 1: facilities and swap lines with the overseas banks and central banks. 958 00:51:11,040 --> 00:51:13,640 Speaker 1: I mean, that was that was what ended along with 959 00:51:13,719 --> 00:51:16,600 Speaker 1: the TARP, that's what ended the financial crisis and saved 960 00:51:16,640 --> 00:51:19,880 Speaker 1: the banking you know, save the banking system. But people, 961 00:51:20,080 --> 00:51:22,560 Speaker 1: you know, lots and lots of people said that we 962 00:51:22,640 --> 00:51:24,880 Speaker 1: were going to have inflation, and look at all this 963 00:51:25,000 --> 00:51:27,520 Speaker 1: money printing, and that was completely wrong. And but I 964 00:51:27,600 --> 00:51:31,480 Speaker 1: think that same basic group that was wrong says the 965 00:51:31,520 --> 00:51:33,880 Speaker 1: same thing again without having any idea about why they 966 00:51:33,920 --> 00:51:36,800 Speaker 1: were wrong. Then, so uh, again, I don't have a 967 00:51:36,920 --> 00:51:39,239 Speaker 1: I don't have a view, certainly not a dogmatic view, 968 00:51:39,239 --> 00:51:41,440 Speaker 1: but I don't have a view about what whether we're 969 00:51:41,440 --> 00:51:43,120 Speaker 1: gonna have inflation or not. All I know is we 970 00:51:43,160 --> 00:51:46,120 Speaker 1: don't have inflation now and uh, and we're not gonna 971 00:51:46,120 --> 00:51:48,680 Speaker 1: have inflation probably the next year or two after that, 972 00:51:49,360 --> 00:51:51,680 Speaker 1: who knows. But I do think that the Fed did 973 00:51:51,760 --> 00:51:53,600 Speaker 1: exactly the right thing, which is why the why the 974 00:51:53,640 --> 00:51:56,920 Speaker 1: stock market bottom as quickly as it did, and it 975 00:51:57,040 --> 00:52:00,600 Speaker 1: moved much much faster than this time than it did before. 976 00:52:00,880 --> 00:52:03,800 Speaker 1: But it moved so fast now because it understood before 977 00:52:04,800 --> 00:52:09,120 Speaker 1: what the consequences were of moving slowly. So I think 978 00:52:09,160 --> 00:52:11,640 Speaker 1: that the interesting thing now is that Chairman Powell has 979 00:52:11,680 --> 00:52:16,600 Speaker 1: said that they will not um increase rates until they 980 00:52:16,640 --> 00:52:21,160 Speaker 1: are convinced that that we're on a sustainable growth path, 981 00:52:22,160 --> 00:52:27,719 Speaker 1: and that they won't increase rates until the realized inflation rate, 982 00:52:27,800 --> 00:52:32,800 Speaker 1: not their forecast, but the realized inflation rate is above 983 00:52:32,840 --> 00:52:36,640 Speaker 1: two on a symmetrical basis, And since it's only been 984 00:52:36,640 --> 00:52:39,480 Speaker 1: above two two quarters in the last ten years. We 985 00:52:39,520 --> 00:52:41,319 Speaker 1: don't know when they're going to start the symmetry, maybe 986 00:52:41,480 --> 00:52:43,839 Speaker 1: as of you know what two eighteen, when they change 987 00:52:43,880 --> 00:52:47,319 Speaker 1: there what's called their reaction function. But you're gonna they're 988 00:52:47,320 --> 00:52:49,400 Speaker 1: gonna let inflation run in my opinion, based on what 989 00:52:49,480 --> 00:52:51,279 Speaker 1: they said, must they change their mind at three to 990 00:52:51,360 --> 00:52:53,960 Speaker 1: four percent for a while. So you're looking at the 991 00:52:54,000 --> 00:52:56,399 Speaker 1: case where interest rates are going to be very very 992 00:52:56,480 --> 00:52:59,840 Speaker 1: low and no problem at all, um, no competition at 993 00:52:59,880 --> 00:53:02,759 Speaker 1: all for equities for several years. And I think that 994 00:53:03,080 --> 00:53:05,760 Speaker 1: that leads you to the view that if the economy 995 00:53:05,800 --> 00:53:08,000 Speaker 1: is then going to grow, um, you need to be 996 00:53:08,120 --> 00:53:11,839 Speaker 1: long equities again sat a strate line. But I think 997 00:53:11,880 --> 00:53:15,000 Speaker 1: that that even now where are we now, it's what 998 00:53:15,080 --> 00:53:17,840 Speaker 1: we're doing right now. It's actually interesting enough to me 999 00:53:17,920 --> 00:53:21,719 Speaker 1: following the two thousand nine playbook. So if you think 1000 00:53:21,719 --> 00:53:25,439 Speaker 1: about it, the the market bottomed in two thousand nine 1001 00:53:25,640 --> 00:53:29,040 Speaker 1: in March, in early March. This market bottomed in late March. 1002 00:53:29,840 --> 00:53:31,879 Speaker 1: The market had a big rally in two thousand nine 1003 00:53:32,000 --> 00:53:36,200 Speaker 1: into June. That's what this market did. The market had 1004 00:53:36,239 --> 00:53:38,799 Speaker 1: a ten percent correction. Then that's what this market did, 1005 00:53:39,640 --> 00:53:41,960 Speaker 1: and then it continued to rally throughout the rest of 1006 00:53:42,040 --> 00:53:44,560 Speaker 1: the year. And again I don't I don't prect the market. 1007 00:53:44,600 --> 00:53:47,400 Speaker 1: I can't predict the market, but certainly that's the that 1008 00:53:47,560 --> 00:53:50,239 Speaker 1: appears to be the direction that things are going right now. 1009 00:53:51,080 --> 00:53:54,719 Speaker 1: And uh, and so I think that it wouldn't It 1010 00:53:54,800 --> 00:53:58,960 Speaker 1: wouldn't surprise me if the overall if the overall market 1011 00:53:59,200 --> 00:54:02,960 Speaker 1: hit new highs some time, you know, late this year 1012 00:54:03,200 --> 00:54:05,560 Speaker 1: or early next year, which I think would probably a 1013 00:54:05,600 --> 00:54:08,480 Speaker 1: surprise to most people. But if the economy is coming 1014 00:54:08,520 --> 00:54:10,960 Speaker 1: back faster and there's not gonna be any inflation, and 1015 00:54:11,040 --> 00:54:13,200 Speaker 1: I said, it's not going to raise rates and we 1016 00:54:13,239 --> 00:54:15,080 Speaker 1: can have a new HID and GDP by the first 1017 00:54:15,160 --> 00:54:17,080 Speaker 1: quarter of next year, I can't see a reason why 1018 00:54:17,120 --> 00:54:19,560 Speaker 1: the market wouldn't be an all time high. Then quite interesting. 1019 00:54:20,120 --> 00:54:24,040 Speaker 1: I have to circle back and ask you another valuation question, 1020 00:54:24,560 --> 00:54:27,960 Speaker 1: because this has been an internal debate in my firm 1021 00:54:28,280 --> 00:54:31,719 Speaker 1: and there is no resolution of it. But I'm fascinated 1022 00:54:31,800 --> 00:54:35,920 Speaker 1: by your perspective. If we look back over the past 1023 00:54:36,719 --> 00:54:40,759 Speaker 1: call a century of of equity valuations, there has been 1024 00:54:40,880 --> 00:54:46,080 Speaker 1: a gradual increase in what investors are willing to pay 1025 00:54:46,719 --> 00:54:48,880 Speaker 1: for a dollar of earnings and I don't mean just 1026 00:54:49,000 --> 00:54:53,279 Speaker 1: like a cyclical move during a bullmarket. I mean over 1027 00:54:53,400 --> 00:54:58,240 Speaker 1: the past many decades um, going back to the twenty 1028 00:54:58,360 --> 00:55:01,759 Speaker 1: nine crash. And some people have argued that it is 1029 00:55:01,880 --> 00:55:07,680 Speaker 1: a function of how much less capital intensive companies are today. 1030 00:55:07,760 --> 00:55:12,360 Speaker 1: You think about railroads or auto manufacturers versus you know, 1031 00:55:12,400 --> 00:55:16,040 Speaker 1: a couple of guys a laptop and a Amazon web services. 1032 00:55:16,880 --> 00:55:22,759 Speaker 1: Are companies today more deserving of higher valuations than the material, 1033 00:55:22,920 --> 00:55:27,080 Speaker 1: labor and capital intensive companies of last century or is 1034 00:55:27,120 --> 00:55:30,840 Speaker 1: that just an excuse for higher pe ratios. Oh, I 1035 00:55:30,880 --> 00:55:33,680 Speaker 1: would think that you know that absolutely. I mean not 1036 00:55:33,760 --> 00:55:37,239 Speaker 1: every company is deserving of that. But if you look 1037 00:55:37,280 --> 00:55:40,000 Speaker 1: at the valuations of I would say, the companies that 1038 00:55:40,680 --> 00:55:43,920 Speaker 1: dominated the top the largest companies in the US and 1039 00:55:44,000 --> 00:55:47,120 Speaker 1: the you know, the forties of the fifties or even 1040 00:55:47,160 --> 00:55:50,799 Speaker 1: in the early nineteen sixties, and look at their financial characteristics, 1041 00:55:50,840 --> 00:55:53,880 Speaker 1: you know, their return on capital, their free cash flow generation, 1042 00:55:53,960 --> 00:55:56,759 Speaker 1: their debt levels, um. And then look at companies that 1043 00:55:56,880 --> 00:55:59,560 Speaker 1: those same characteristics today. They are not any more expensive 1044 00:55:59,640 --> 00:56:02,000 Speaker 1: today than they were back in the you know, fifties 1045 00:56:02,120 --> 00:56:06,239 Speaker 1: or sixties, and accept the interest rates are lower, uh, 1046 00:56:06,600 --> 00:56:09,520 Speaker 1: which would make them moderately more expensive. But what's really 1047 00:56:09,560 --> 00:56:11,279 Speaker 1: different is that you know, the top the companies are 1048 00:56:11,320 --> 00:56:14,000 Speaker 1: the biggest companies in the US right now. They're radically 1049 00:56:14,080 --> 00:56:18,680 Speaker 1: different financial characteristics and growth rates. And also I would say, um, 1050 00:56:19,719 --> 00:56:22,080 Speaker 1: you know, moats around them. I mean, no one's gonna 1051 00:56:22,080 --> 00:56:25,640 Speaker 1: catch up with with Amazon, or with or with Google 1052 00:56:26,440 --> 00:56:28,920 Speaker 1: or with Facebook. In my opinion, no one's gonna be 1053 00:56:29,120 --> 00:56:34,640 Speaker 1: big bigger than in global uh streaming than Netflix. So 1054 00:56:34,960 --> 00:56:40,960 Speaker 1: those companies competitive advantage period is much longer than you 1055 00:56:41,000 --> 00:56:44,000 Speaker 1: know than a company like General Motors and which faced 1056 00:56:44,560 --> 00:56:47,839 Speaker 1: foreign competition and now faces other kinds of competition from 1057 00:56:48,080 --> 00:56:50,719 Speaker 1: from electric cars and stuff like that. So yeah, I 1058 00:56:50,840 --> 00:56:54,160 Speaker 1: think it's I don't think it's a hard to explain 1059 00:56:54,160 --> 00:56:56,400 Speaker 1: at all. I think it fits righting with with financial 1060 00:56:56,440 --> 00:56:59,799 Speaker 1: theory would tell you quite fascinating. I've covered a ton 1061 00:56:59,880 --> 00:57:04,360 Speaker 1: of stuff Before we go to our speed round questions. 1062 00:57:04,440 --> 00:57:08,719 Speaker 1: I have one last question for you, and it's about 1063 00:57:08,800 --> 00:57:12,360 Speaker 1: the cost of active management. Last we had a conversation 1064 00:57:12,440 --> 00:57:15,440 Speaker 1: about this. You had said it's it's too high and 1065 00:57:15,560 --> 00:57:18,960 Speaker 1: doesn't deliver enough value for what it costs. What are 1066 00:57:19,000 --> 00:57:22,400 Speaker 1: your thoughts today? The prices have come down fairly dramatically, 1067 00:57:22,960 --> 00:57:25,800 Speaker 1: both for management and for trading, which is more or 1068 00:57:25,880 --> 00:57:29,280 Speaker 1: less cost less. What are your thoughts on on the 1069 00:57:29,400 --> 00:57:33,240 Speaker 1: state of the industry and what it costs to be 1070 00:57:34,000 --> 00:57:37,040 Speaker 1: an investor if you're working with a professional manager. Yeah, 1071 00:57:37,080 --> 00:57:39,960 Speaker 1: I mean, I think I stand by what I said before. 1072 00:57:40,800 --> 00:57:44,760 Speaker 1: Is that, um, that the issue isn't that The issue 1073 00:57:44,880 --> 00:57:47,480 Speaker 1: is the cost relative to the value that you're getting. 1074 00:57:48,360 --> 00:57:50,560 Speaker 1: And I think that that issue is not so much 1075 00:57:50,880 --> 00:57:54,400 Speaker 1: a question of the skills of active management as it 1076 00:57:54,640 --> 00:57:59,360 Speaker 1: is the the risk controls or the structural impediments that 1077 00:57:59,480 --> 00:58:04,120 Speaker 1: they have what are partly institutional and partly legal. So 1078 00:58:04,600 --> 00:58:06,560 Speaker 1: you know, if you the investment comp in the act 1079 00:58:06,560 --> 00:58:10,400 Speaker 1: of all kinds of restrictions about how you can construct portfolios, 1080 00:58:10,920 --> 00:58:13,280 Speaker 1: which which don't exist in the hedge fund world for sure, 1081 00:58:13,960 --> 00:58:18,120 Speaker 1: And then the business side of investment management is such 1082 00:58:18,240 --> 00:58:22,680 Speaker 1: that the reality of client behavior is that you know, 1083 00:58:22,760 --> 00:58:24,960 Speaker 1: they tend to be, especially in the current environment, risk 1084 00:58:25,040 --> 00:58:28,480 Speaker 1: and volatility phobic, and if you have tracking error on 1085 00:58:28,560 --> 00:58:32,400 Speaker 1: the downside, that that represents a business risk, which kind 1086 00:58:32,440 --> 00:58:36,160 Speaker 1: of leads you then to more of a closet indexing approach. 1087 00:58:36,200 --> 00:58:37,840 Speaker 1: And the only way that approach can work is with 1088 00:58:38,320 --> 00:58:41,360 Speaker 1: lower cost than it currently has and an ability to 1089 00:58:41,440 --> 00:58:43,720 Speaker 1: kind of serve the market just ahead of the market, 1090 00:58:43,760 --> 00:58:46,520 Speaker 1: which I think is very difficult. So the challenge active 1091 00:58:46,560 --> 00:58:51,320 Speaker 1: management has is to actually have a portfolio construction dynamic 1092 00:58:52,200 --> 00:58:56,160 Speaker 1: which which has high active share with the professical actors share, 1093 00:58:56,200 --> 00:59:00,680 Speaker 1: meaning your portfolio can't look exactly like your benchmark. If 1094 00:59:00,720 --> 00:59:03,840 Speaker 1: your portfolio looks like your benchmark exactly, then you're gonna 1095 00:59:03,880 --> 00:59:06,040 Speaker 1: underform your benchmark. If your cost or higher, you can't 1096 00:59:06,280 --> 00:59:10,240 Speaker 1: do anything else. So that means just mathematically that your 1097 00:59:10,280 --> 00:59:15,480 Speaker 1: probabilities of increasing about performing grow as you diverge from 1098 00:59:15,520 --> 00:59:19,520 Speaker 1: your benchmark. But also the that tracking error can also 1099 00:59:19,600 --> 00:59:21,560 Speaker 1: go on the downside, and said, that's the big challenges 1100 00:59:21,600 --> 00:59:25,080 Speaker 1: to try and try and mitigate that downside tracking error 1101 00:59:25,120 --> 00:59:28,280 Speaker 1: relative to the upside tracking error as we'll call it. 1102 00:59:28,480 --> 00:59:30,680 Speaker 1: And then and that's the case, then that's how you 1103 00:59:30,760 --> 00:59:33,400 Speaker 1: can add value because you'll outperform over time. And of 1104 00:59:33,440 --> 00:59:35,880 Speaker 1: course lower costs are always helpful. Last we spoke, I 1105 00:59:35,960 --> 00:59:39,560 Speaker 1: recall your active share was amongst the highest in the industry. 1106 00:59:40,120 --> 00:59:42,400 Speaker 1: What are you running for an active share for for 1107 00:59:42,560 --> 00:59:45,680 Speaker 1: your funds at at Miller value? The way it's the 1108 00:59:45,760 --> 00:59:50,800 Speaker 1: way that it's captive, it's roughly around among the highest 1109 00:59:50,800 --> 00:59:52,480 Speaker 1: in the country. Still, that's what we've done for a 1110 00:59:52,560 --> 00:59:55,640 Speaker 1: long time. So and so it causes causes angst. It 1111 00:59:55,760 --> 00:59:59,320 Speaker 1: causes angst when we have a you know, a year 1112 00:59:59,360 --> 01:00:03,360 Speaker 1: where we're behind the market fairly dramatically, but we can 1113 01:00:03,400 --> 01:00:07,240 Speaker 1: always come back quickly. In two thousand eighteen, which is interesting, 1114 01:00:07,400 --> 01:00:10,240 Speaker 1: in August of two thousand and I'm sorry yet two 1115 01:00:10,280 --> 01:00:13,640 Speaker 1: thousand and eighteen, August two thousand eighteen, UM, I'm say 1116 01:00:13,680 --> 01:00:19,560 Speaker 1: two nine. Obviously two thousand nineteen, UM, we were I 1117 01:00:19,640 --> 01:00:24,800 Speaker 1: think I think eight hundred basis points or nine basis 1118 01:00:24,840 --> 01:00:29,480 Speaker 1: points behind the market, and we ended up two hundred 1119 01:00:29,600 --> 01:00:31,480 Speaker 1: three hundred ahead of the market. So we made up 1120 01:00:31,520 --> 01:00:34,200 Speaker 1: like eleven basis points in a quarter in a month. 1121 01:00:35,320 --> 01:00:37,360 Speaker 1: And I think that that's you. And the reason for 1122 01:00:37,440 --> 01:00:41,080 Speaker 1: that is that the FED changes reaction function. The market 1123 01:00:41,120 --> 01:00:43,520 Speaker 1: wasn't worried then about a recession, and so all of 1124 01:00:43,600 --> 01:00:46,400 Speaker 1: the fear that drove the two thousand eighteen fourth quarter 1125 01:00:46,560 --> 01:00:50,920 Speaker 1: decline dissipated. And I think that's the kind of thing 1126 01:00:51,040 --> 01:00:54,000 Speaker 1: that you're actually starting to see right now in the market. 1127 01:00:54,040 --> 01:00:56,920 Speaker 1: You look at the people that led I mentioned earlier 1128 01:00:57,000 --> 01:01:00,920 Speaker 1: in the first quarter and Uh, they just killed it. 1129 01:01:01,160 --> 01:01:03,480 Speaker 1: But now I think that, I mean we're we're now. 1130 01:01:03,640 --> 01:01:07,200 Speaker 1: I think, uh, we're less behind now, even though we 1131 01:01:07,240 --> 01:01:10,960 Speaker 1: had a stronger bear market decline uh this year than 1132 01:01:11,000 --> 01:01:13,680 Speaker 1: we did back in two thousand and nineteen and the 1133 01:01:13,880 --> 01:01:15,880 Speaker 1: early part of the year. So we're less behind now 1134 01:01:15,920 --> 01:01:19,960 Speaker 1: than we were August of two thousand and nineteen. So 1135 01:01:20,040 --> 01:01:22,520 Speaker 1: I feel pretty good about our about our our kansas 1136 01:01:22,560 --> 01:01:24,800 Speaker 1: of doing well again this year. So one of the 1137 01:01:24,880 --> 01:01:28,720 Speaker 1: things you've said before that relates directly to that is 1138 01:01:29,240 --> 01:01:33,560 Speaker 1: volatility is the price you pay for performance. I assume 1139 01:01:33,680 --> 01:01:37,040 Speaker 1: you're gonna expect volatility, You're gonna expect big draw downs 1140 01:01:37,520 --> 01:01:40,960 Speaker 1: like you saw in eighteen. How do you manage your 1141 01:01:41,040 --> 01:01:44,040 Speaker 1: client base? How do you manage the institutions you deal 1142 01:01:44,120 --> 01:01:47,960 Speaker 1: with when all of a sudden during a quarterly review, 1143 01:01:48,080 --> 01:01:51,800 Speaker 1: Hey we're down eight or nine percent behind our benchmark? 1144 01:01:52,240 --> 01:01:55,160 Speaker 1: Is that a challenge to juggle and or do people 1145 01:01:55,320 --> 01:01:58,880 Speaker 1: understand that you want the upside, you gotta deal with 1146 01:01:58,920 --> 01:02:01,880 Speaker 1: a little bit of down. So when things get well. 1147 01:02:01,960 --> 01:02:06,120 Speaker 1: When I when I bought the ownership and what was 1148 01:02:06,200 --> 01:02:12,800 Speaker 1: then called LMM from like Mason, I brought the mutual 1149 01:02:12,880 --> 01:02:16,800 Speaker 1: funds along, but I did not bring the institutional business along, 1150 01:02:17,560 --> 01:02:20,440 Speaker 1: and so we don't we don't really take we have 1151 01:02:20,560 --> 01:02:24,120 Speaker 1: some separate accounts, but we don't really take institutional business. 1152 01:02:24,160 --> 01:02:27,120 Speaker 1: We're not that we won't take it, but that we uh, 1153 01:02:27,440 --> 01:02:30,000 Speaker 1: we're not actively trying to grow it, and we're only 1154 01:02:30,080 --> 01:02:33,080 Speaker 1: interested in having clients that really understand that point that 1155 01:02:33,120 --> 01:02:36,480 Speaker 1: you just made that you're going to get volatility, and 1156 01:02:36,640 --> 01:02:38,920 Speaker 1: we're trying we try and monetize the volatility. So what 1157 01:02:39,040 --> 01:02:40,640 Speaker 1: we want to do is if the market goes down 1158 01:02:40,680 --> 01:02:43,360 Speaker 1: a lot, you know, as it did in in March 1159 01:02:43,480 --> 01:02:47,040 Speaker 1: of this year, we will we will reorient the portfolio 1160 01:02:47,400 --> 01:02:49,480 Speaker 1: around to try and take advantage of when it comes back, 1161 01:02:50,120 --> 01:02:52,360 Speaker 1: and as it goes higher, we want to trim the 1162 01:02:52,960 --> 01:02:55,800 Speaker 1: stuff that has done really well and then moved out 1163 01:02:55,840 --> 01:02:58,360 Speaker 1: into stuff that would tend to be more resilient on 1164 01:02:58,520 --> 01:03:01,120 Speaker 1: the on the down side. But we don't have that. 1165 01:03:01,360 --> 01:03:03,960 Speaker 1: Even though we obviously you know the papers every day 1166 01:03:04,000 --> 01:03:07,760 Speaker 1: what we're doing, and we have quarterly calls and meetings, 1167 01:03:08,280 --> 01:03:12,800 Speaker 1: we don't have those quarterly institutional meetings that we used 1168 01:03:12,840 --> 01:03:16,320 Speaker 1: to have, and those those were more challenging because um, 1169 01:03:16,800 --> 01:03:18,840 Speaker 1: every institution has got a different way of thinking about 1170 01:03:19,040 --> 01:03:20,760 Speaker 1: you know, risk and reward and what they're looking for. 1171 01:03:21,080 --> 01:03:23,080 Speaker 1: I think I think, you know, I've been doing this 1172 01:03:23,160 --> 01:03:26,800 Speaker 1: long enough that most of our clients understand that that's 1173 01:03:26,840 --> 01:03:30,120 Speaker 1: what comes with the territory, and so we really haven't, 1174 01:03:30,240 --> 01:03:33,040 Speaker 1: you know, uh, suffered much in the way of redemptions 1175 01:03:33,080 --> 01:03:35,480 Speaker 1: in the last several years. In fact, we have, you know, 1176 01:03:35,560 --> 01:03:37,040 Speaker 1: I don't know if we have net inflows now. Our 1177 01:03:37,040 --> 01:03:39,200 Speaker 1: income fund definitely has net inflows so far this year, 1178 01:03:39,240 --> 01:03:42,080 Speaker 1: and the other funds if we if we have outflows, 1179 01:03:42,120 --> 01:03:44,680 Speaker 1: it's it's not much, which is kind of unusual, you know, 1180 01:03:44,800 --> 01:03:47,560 Speaker 1: for for an active mutual fund. Quite interesting. I have 1181 01:03:47,640 --> 01:03:50,280 Speaker 1: a million other questions for you, but I've kept you 1182 01:03:50,360 --> 01:03:53,840 Speaker 1: for an hour so far, so rather than take up 1183 01:03:53,880 --> 01:03:55,920 Speaker 1: too much of your time, we'll have you back when 1184 01:03:56,000 --> 01:03:58,720 Speaker 1: we're finally done with lockdown, and let's jump to our 1185 01:03:59,360 --> 01:04:02,280 Speaker 1: speed round, our our favorite questions we ask all of 1186 01:04:02,360 --> 01:04:05,919 Speaker 1: our guests, and since you mentioned Netflix, let's start there. 1187 01:04:06,280 --> 01:04:08,280 Speaker 1: Tell us what you're streaming these days? What are you 1188 01:04:08,360 --> 01:04:11,920 Speaker 1: watching on either Netflix or Amazon Prime, or or what 1189 01:04:12,000 --> 01:04:15,080 Speaker 1: are you listening to in terms of podcasts or or 1190 01:04:15,160 --> 01:04:18,000 Speaker 1: anything like that. It's a really easy question because the 1191 01:04:18,040 --> 01:04:21,320 Speaker 1: answer is nothing, So I don't. Really, I don't. I don't. 1192 01:04:21,360 --> 01:04:24,959 Speaker 1: I don't listen to podcasts. Yeah, I don't. I don't 1193 01:04:25,040 --> 01:04:29,600 Speaker 1: stream anything. Uh, I don't watch television, especially since baseball 1194 01:04:29,640 --> 01:04:31,440 Speaker 1: season is on hold. That's about the only time I 1195 01:04:31,520 --> 01:04:35,040 Speaker 1: had the television television turned on. So I'm I'm I'm 1196 01:04:35,200 --> 01:04:38,680 Speaker 1: very out of touch with with all of that, you know, 1197 01:04:38,800 --> 01:04:42,720 Speaker 1: all of that stuff. So I'm much more focused on, um, 1198 01:04:43,480 --> 01:04:47,440 Speaker 1: you know, reading than I am on on listening. So 1199 01:04:47,560 --> 01:04:50,560 Speaker 1: let's jump to that question. Uh, tell us about what 1200 01:04:50,680 --> 01:04:53,439 Speaker 1: you're reading these days, and and mentioned some of your 1201 01:04:53,880 --> 01:04:59,320 Speaker 1: favorite books. Sure, so I just Um, I just finished 1202 01:05:00,640 --> 01:05:04,480 Speaker 1: Thomas Man's The Magic Mountain, great classic that I haven't uh, 1203 01:05:04,840 --> 01:05:09,400 Speaker 1: that I had not read before. Um. I'm currently reading, uh, 1204 01:05:10,560 --> 01:05:14,920 Speaker 1: the eight page biography of Frederick Douglas, the you know, 1205 01:05:15,000 --> 01:05:20,360 Speaker 1: the African American the nineteenth century. Um. I'm working my 1206 01:05:20,640 --> 01:05:24,800 Speaker 1: way through Ralph Waldo Emerson's selected works. I just finished Nature, 1207 01:05:24,840 --> 01:05:28,240 Speaker 1: the first book that he the first book that he published, 1208 01:05:29,080 --> 01:05:33,280 Speaker 1: and um, and then I read a biography of Frank Ramsey, 1209 01:05:33,400 --> 01:05:36,960 Speaker 1: the great polymatic genius philosopher who most people haven't heard 1210 01:05:36,960 --> 01:05:39,640 Speaker 1: of because he died at age. But that's about a 1211 01:05:39,640 --> 01:05:43,120 Speaker 1: six hundred page bio that I've that I've just you know, 1212 01:05:43,960 --> 01:05:46,760 Speaker 1: just finished. And in terms of um, was it one 1213 01:05:46,760 --> 01:05:48,480 Speaker 1: of the question favorite books? Is that the other question 1214 01:05:48,840 --> 01:05:54,400 Speaker 1: all time favorite? Sure? Yeah? So? Uh? In fiction, I 1215 01:05:54,440 --> 01:06:01,360 Speaker 1: would say Brothers, Karamazov, m Warren, Peace, Moby Dick. I 1216 01:06:01,480 --> 01:06:06,160 Speaker 1: mentioned Magic Mountain, which was great, Um Conrad's Heart of Darkness, 1217 01:06:06,400 --> 01:06:10,680 Speaker 1: and then Cormac McCarthy's Blood Meridian. And then in uh, 1218 01:06:11,240 --> 01:06:14,520 Speaker 1: since I have you know when to grad school and philosophy, uh, 1219 01:06:14,760 --> 01:06:17,920 Speaker 1: David Humes treat Us on Human Nature, William James Varieties 1220 01:06:18,080 --> 01:06:23,360 Speaker 1: of Religious Experience and Pragmatism. Uh, John Dewey's Essays and 1221 01:06:23,400 --> 01:06:28,440 Speaker 1: Experimental Logic. Uh, Schopenhauer's The World Has Will and Representation, 1222 01:06:28,560 --> 01:06:33,040 Speaker 1: and then anything by Wittgenstein and finance stuff. Reminiscence of 1223 01:06:33,080 --> 01:06:35,120 Speaker 1: the Stock Operator is something I used to read every year, 1224 01:06:35,160 --> 01:06:36,959 Speaker 1: but since I've got it about memorized, I can skip 1225 01:06:37,000 --> 01:06:41,200 Speaker 1: a year or two. And Robert Skidelsi's three volume biography 1226 01:06:41,240 --> 01:06:43,000 Speaker 1: or John Maynard Keynes is a you know is A 1227 01:06:43,240 --> 01:06:46,400 Speaker 1: is a masterpiece, I think quite fascinating. Tell us about 1228 01:06:46,400 --> 01:06:49,920 Speaker 1: your mentors, who influenced your career, who helped make you 1229 01:06:50,160 --> 01:06:52,840 Speaker 1: the Bill Miller you are today, um well, I mentioned 1230 01:06:52,880 --> 01:06:55,280 Speaker 1: earlier that I think that a large part of that 1231 01:06:55,720 --> 01:07:00,360 Speaker 1: has to do with the Hopkins Philosophy Department. And I 1232 01:07:00,400 --> 01:07:03,120 Speaker 1: actually had a chance when I when I gave that gift, 1233 01:07:04,360 --> 01:07:06,880 Speaker 1: one of the one of their their leading lights and 1234 01:07:06,920 --> 01:07:09,800 Speaker 1: philosophy as a philosopher's science, named Peter Atchinstein as Peters 1235 01:07:09,800 --> 01:07:12,120 Speaker 1: in his mid eighties right now, but he was president Press, 1236 01:07:12,160 --> 01:07:13,560 Speaker 1: he was he was chairman of the department when I 1237 01:07:13,600 --> 01:07:17,200 Speaker 1: got when I got admitted in nineteen seventy four, ninety 1238 01:07:18,280 --> 01:07:23,080 Speaker 1: and and I I said to Peter, I said, you know, 1239 01:07:23,800 --> 01:07:25,680 Speaker 1: I said, what was that? I said, Peter, I was 1240 01:07:25,840 --> 01:07:28,920 Speaker 1: certainly not qualified to be, you know, admitted to Hopkins. 1241 01:07:28,960 --> 01:07:31,160 Speaker 1: I wouldn't even I wouldn't need a philosophy undergraduate major. 1242 01:07:31,200 --> 01:07:35,080 Speaker 1: And Hopkins is one of the only schools of quality 1243 01:07:35,120 --> 01:07:37,560 Speaker 1: schools in the country that would take somebody that did 1244 01:07:37,640 --> 01:07:41,680 Speaker 1: not have, you know, a philosophy undergraduate background. What Hopkins 1245 01:07:41,720 --> 01:07:43,680 Speaker 1: did was they said, if you didn't have a philosophy background, 1246 01:07:43,720 --> 01:07:46,960 Speaker 1: you had to send in three examples of your philosophical work, 1247 01:07:48,000 --> 01:07:51,080 Speaker 1: so you know, without making a long story or making 1248 01:07:51,400 --> 01:07:54,040 Speaker 1: making a long actually making a long story short Peter 1249 01:07:54,200 --> 01:07:56,800 Speaker 1: just said, well, you know, we're a small department. Uh, 1250 01:07:57,280 --> 01:08:00,880 Speaker 1: we would only admit you know, h five or six 1251 01:08:01,440 --> 01:08:04,160 Speaker 1: people in the PhD program every year. And he said, 1252 01:08:04,200 --> 01:08:05,840 Speaker 1: and we always tried to have one of those people 1253 01:08:05,880 --> 01:08:08,440 Speaker 1: be what we considered a higher risk person, like they 1254 01:08:08,480 --> 01:08:10,360 Speaker 1: probably couldn't get anywhere else, but there was there was 1255 01:08:10,400 --> 01:08:12,800 Speaker 1: some promise there that we saw and if we got lucky, 1256 01:08:12,840 --> 01:08:16,840 Speaker 1: then uh, you know, they might they might uh shed 1257 01:08:16,920 --> 01:08:18,759 Speaker 1: some light or do some good for the philosophy department. 1258 01:08:19,400 --> 01:08:21,560 Speaker 1: So and he said, and we really got lucky with you. 1259 01:08:21,760 --> 01:08:23,880 Speaker 1: So I thought that was I thought that was a 1260 01:08:23,920 --> 01:08:28,479 Speaker 1: good one. But you were the Philosophy Department's volatility tread Yeah, 1261 01:08:28,560 --> 01:08:32,680 Speaker 1: exactly right, exactly right. Uh. And then you know, my uh, 1262 01:08:33,320 --> 01:08:36,439 Speaker 1: my initial partner at like Mason Ernie Kenney had died 1263 01:08:36,479 --> 01:08:41,000 Speaker 1: in two thousand ten adage ninety two, classic value investor, 1264 01:08:41,160 --> 01:08:44,360 Speaker 1: and so we we fit very well intellectually. But he 1265 01:08:44,479 --> 01:08:48,439 Speaker 1: was also open to new ways of of thinking and uh, 1266 01:08:48,560 --> 01:08:50,600 Speaker 1: and so we were also able. I think I was 1267 01:08:50,640 --> 01:08:52,840 Speaker 1: able to work with him on some of the things 1268 01:08:52,880 --> 01:08:54,479 Speaker 1: that we talked about earlier, in terms of return on 1269 01:08:54,560 --> 01:08:57,280 Speaker 1: capital and stuff like that. And I'd say, the thing 1270 01:08:57,320 --> 01:09:01,280 Speaker 1: that he that he taught me most was that he 1271 01:09:01,439 --> 01:09:03,760 Speaker 1: was he was like probably the most optimistic person in 1272 01:09:03,840 --> 01:09:05,559 Speaker 1: the world, and he had a very long time horizon 1273 01:09:06,400 --> 01:09:08,639 Speaker 1: and uh, and so what I learned from him over 1274 01:09:09,640 --> 01:09:12,080 Speaker 1: you know, how long we worked together, you know, twenty 1275 01:09:12,120 --> 01:09:15,720 Speaker 1: five years or something like that. Actually third over thirty years. Uh, 1276 01:09:16,479 --> 01:09:17,960 Speaker 1: what I learned from him is that you know that 1277 01:09:18,080 --> 01:09:21,160 Speaker 1: generally speaking, having an optimistic take on things in a 1278 01:09:21,240 --> 01:09:23,760 Speaker 1: long term time horizon there's a lot that's a lot 1279 01:09:23,840 --> 01:09:25,880 Speaker 1: more First, it's a lot more fun, and second, it 1280 01:09:26,080 --> 01:09:28,479 Speaker 1: gives you a lot better results than having a short 1281 01:09:28,560 --> 01:09:30,840 Speaker 1: term time horizon and getting all negative about all the 1282 01:09:30,840 --> 01:09:32,720 Speaker 1: stuff that's going wrong when the market are in the world. 1283 01:09:32,800 --> 01:09:35,040 Speaker 1: So that was that was very helpful to me as well. 1284 01:09:35,960 --> 01:09:37,800 Speaker 1: And then of course Chip Mason, who who's stuck with 1285 01:09:37,920 --> 01:09:41,880 Speaker 1: me when I had you know, had occasional bad bad 1286 01:09:42,000 --> 01:09:44,240 Speaker 1: year or two, that's you know, he he also had 1287 01:09:44,240 --> 01:09:47,360 Speaker 1: a long term time horizon and understood that underperformance comes 1288 01:09:47,400 --> 01:09:50,280 Speaker 1: with the territory. So instead of making a change after 1289 01:09:50,400 --> 01:09:52,280 Speaker 1: you after your three year record goes behind the market, 1290 01:09:52,360 --> 01:09:54,080 Speaker 1: he just said, you know, this is a long term 1291 01:09:54,439 --> 01:09:55,880 Speaker 1: this is a long term debt we're making and we're 1292 01:09:55,880 --> 01:09:57,680 Speaker 1: just gonna stay with it. So that that was very 1293 01:09:57,720 --> 01:09:59,360 Speaker 1: helpful to me, and I've worked out okay for leg 1294 01:09:59,400 --> 01:10:01,960 Speaker 1: to what sort of advice would you give a recent 1295 01:10:02,120 --> 01:10:06,920 Speaker 1: college graduate who is considering a career in asset management? Well, 1296 01:10:06,920 --> 01:10:09,320 Speaker 1: I would give the same advice to a well, first 1297 01:10:09,320 --> 01:10:13,000 Speaker 1: of all, the slightly different answer here. So if they're 1298 01:10:13,000 --> 01:10:17,920 Speaker 1: considering a career in asset management, then I would say, 1299 01:10:18,040 --> 01:10:21,479 Speaker 1: understand that a lot of asset management is in secular 1300 01:10:21,560 --> 01:10:26,479 Speaker 1: decline relative to quantitative strategies and and UH and passive strategy. 1301 01:10:26,560 --> 01:10:28,120 Speaker 1: So it's a lot harder than if you're in an 1302 01:10:28,200 --> 01:10:32,240 Speaker 1: industry which um is in secular advance, which it was 1303 01:10:32,320 --> 01:10:33,800 Speaker 1: when I when I get into it. So that's that's 1304 01:10:33,840 --> 01:10:35,360 Speaker 1: a big difference. It makes it a lot, makes it 1305 01:10:35,360 --> 01:10:38,880 Speaker 1: a lot harder. But but in general I would say 1306 01:10:39,000 --> 01:10:41,519 Speaker 1: that to him or her the same thing I would 1307 01:10:41,520 --> 01:10:44,240 Speaker 1: say to anybody that was, you know, getting a job, 1308 01:10:45,280 --> 01:10:48,320 Speaker 1: which is that I think the worst advice that people 1309 01:10:48,400 --> 01:10:50,360 Speaker 1: can get and getting a job is that you'll read about, oh, 1310 01:10:50,400 --> 01:10:53,120 Speaker 1: you didn't take control of your career. You need to 1311 01:10:53,160 --> 01:10:54,960 Speaker 1: make sure you get what's coming to you. You need 1312 01:10:55,040 --> 01:10:56,560 Speaker 1: to make sure that you know no one's going to 1313 01:10:56,600 --> 01:10:57,880 Speaker 1: care about you the way you do, so you need 1314 01:10:57,920 --> 01:10:59,280 Speaker 1: to make sure that you fight for all this stuff. 1315 01:10:59,280 --> 01:11:02,040 Speaker 1: And I think that's terrible advice because I think that 1316 01:11:02,240 --> 01:11:05,120 Speaker 1: you know, for me, generally speaking, what you would want 1317 01:11:05,320 --> 01:11:08,320 Speaker 1: and what you know. The way I tried to manage 1318 01:11:08,360 --> 01:11:11,320 Speaker 1: my career is that your job, no matter what your 1319 01:11:11,360 --> 01:11:14,599 Speaker 1: job is, your job is to add value to your employer. Uh. 1320 01:11:14,640 --> 01:11:17,000 Speaker 1: It's not to try and extract value from them and 1321 01:11:17,200 --> 01:11:19,080 Speaker 1: and and get into your pocket. Your job is to 1322 01:11:19,120 --> 01:11:21,280 Speaker 1: add value to them. And then you can get some 1323 01:11:21,360 --> 01:11:23,240 Speaker 1: of that value part of it if you're doing that. 1324 01:11:24,120 --> 01:11:27,880 Speaker 1: And and so maybe contrary to what people think, being 1325 01:11:28,000 --> 01:11:31,679 Speaker 1: underpaid is a very powerful position to be in because 1326 01:11:31,840 --> 01:11:34,080 Speaker 1: if you're if you're adding more value than you're costing, 1327 01:11:34,160 --> 01:11:36,240 Speaker 1: then you're a very valuable employee and you're you're going 1328 01:11:36,280 --> 01:11:39,040 Speaker 1: to be treated well if you're if your employers rational, 1329 01:11:39,760 --> 01:11:42,519 Speaker 1: and uh, I mean nobody nobody got fired for creating 1330 01:11:42,560 --> 01:11:45,800 Speaker 1: too much value for their employer, and nobody keeps a 1331 01:11:45,880 --> 01:11:47,960 Speaker 1: job very long if they're getting paid more than their worth. 1332 01:11:48,600 --> 01:11:51,080 Speaker 1: So being moderately underpaid is is a really good thing. 1333 01:11:51,200 --> 01:11:53,400 Speaker 1: And then other things I'd say, which are probably not 1334 01:11:54,600 --> 01:11:58,120 Speaker 1: terribly unusual, I think you want to basically, you know, 1335 01:11:58,200 --> 01:12:01,479 Speaker 1: have a good positive attitude all the time. You want 1336 01:12:01,520 --> 01:12:05,240 Speaker 1: to do what your job is with with uh, with 1337 01:12:05,560 --> 01:12:08,720 Speaker 1: alacrity and a sense of urgency, and you want to 1338 01:12:08,800 --> 01:12:11,479 Speaker 1: be you know, simultaneously, you know, a good subordinate to 1339 01:12:11,560 --> 01:12:13,640 Speaker 1: your boss, a good boss to your subordinates, and a 1340 01:12:13,680 --> 01:12:16,080 Speaker 1: good colleague to your colleagues. That would be the core 1341 01:12:16,160 --> 01:12:19,800 Speaker 1: of my advice. Fascinating stuff and our final question, what 1342 01:12:19,880 --> 01:12:23,880 Speaker 1: do you know about investing theory and practice today that 1343 01:12:24,080 --> 01:12:27,280 Speaker 1: you wish you knew forty years ago when you were 1344 01:12:27,400 --> 01:12:30,479 Speaker 1: first getting started. The thing that the thing that I 1345 01:12:30,600 --> 01:12:35,280 Speaker 1: am constantly um realizing and I think I've got it 1346 01:12:35,360 --> 01:12:38,080 Speaker 1: internalized now, but it's been after forty years. Is that, 1347 01:12:39,000 --> 01:12:42,960 Speaker 1: um that the that the markets and the world and 1348 01:12:43,040 --> 01:12:45,560 Speaker 1: the economy is so much more complicated than you have 1349 01:12:45,640 --> 01:12:50,600 Speaker 1: any idea, And it's and so having dogmatic views and 1350 01:12:50,760 --> 01:12:53,400 Speaker 1: pontificating about the world this way or this is going 1351 01:12:53,439 --> 01:12:55,760 Speaker 1: to happen, or the Hong Kong peg is going to 1352 01:12:55,840 --> 01:12:57,640 Speaker 1: do this, or the Chinese You're going to do that 1353 01:12:58,280 --> 01:13:00,200 Speaker 1: is a complete waste of time, because no, but he 1354 01:13:00,280 --> 01:13:03,040 Speaker 1: has any idea what's going to happen in the in 1355 01:13:03,120 --> 01:13:05,280 Speaker 1: the future. There are certain things that you know. And 1356 01:13:05,320 --> 01:13:08,240 Speaker 1: then psychologically, what what you find out is that you know, 1357 01:13:08,240 --> 01:13:10,840 Speaker 1: if you make five predictions and and you know two 1358 01:13:10,960 --> 01:13:13,080 Speaker 1: or right and three or wrong, you'll you'll remember the 1359 01:13:13,200 --> 01:13:14,920 Speaker 1: two or right, and the three that we're wrong, you'll 1360 01:13:14,920 --> 01:13:19,200 Speaker 1: blame on something else. So I think that I think 1361 01:13:19,240 --> 01:13:23,280 Speaker 1: that there's a lot of psychological barriers and problems that 1362 01:13:23,360 --> 01:13:25,360 Speaker 1: people need to overcome. And I would say just being 1363 01:13:26,120 --> 01:13:28,559 Speaker 1: you know, I'd say, being as skeptical and as humble 1364 01:13:28,600 --> 01:13:30,320 Speaker 1: as you can be with respect to what you think 1365 01:13:30,400 --> 01:13:32,920 Speaker 1: you know. And uh. And the other thing is that 1366 01:13:33,160 --> 01:13:35,439 Speaker 1: that again I've found helpful to me, I would say, 1367 01:13:35,520 --> 01:13:37,040 Speaker 1: other people be helpful. But I get to ask a lot, 1368 01:13:37,120 --> 01:13:38,800 Speaker 1: what do you worry about in the market? What do 1369 01:13:38,840 --> 01:13:42,559 Speaker 1: you worry about? And my answer, which might sound institution 1370 01:13:42,680 --> 01:13:45,639 Speaker 1: but it's true, is that I don't really worry about anything. 1371 01:13:46,400 --> 01:13:52,519 Speaker 1: Because the entire world of investors and commentators are always 1372 01:13:52,560 --> 01:13:54,760 Speaker 1: worried about everything. Every time you turn into television recently, 1373 01:13:55,000 --> 01:13:56,840 Speaker 1: this is gonna go wrong. That's gonna worry about this, 1374 01:13:56,880 --> 01:13:59,080 Speaker 1: and worried about that. The market's overvalue, there's too much. 1375 01:13:59,120 --> 01:14:01,320 Speaker 1: This is so with all those people worrying about it. 1376 01:14:01,360 --> 01:14:03,680 Speaker 1: There's lots of there's lots of there's no shorts of 1377 01:14:03,720 --> 01:14:06,080 Speaker 1: people worrying about things, and so what I try and 1378 01:14:06,120 --> 01:14:08,759 Speaker 1: do is focus on where are the opportunities in the market, 1379 01:14:09,320 --> 01:14:12,400 Speaker 1: given whatever the market appears to be, and not you know, 1380 01:14:12,760 --> 01:14:15,240 Speaker 1: doing a bunch of wailing and handering about how things 1381 01:14:15,280 --> 01:14:17,280 Speaker 1: are going to get worse or this is a terrible situation. 1382 01:14:18,000 --> 01:14:20,040 Speaker 1: So I'd say that probably goes back to my old, 1383 01:14:20,160 --> 01:14:22,559 Speaker 1: you know, late partner Ernie, who you would always say, well, 1384 01:14:22,600 --> 01:14:24,640 Speaker 1: let's let's let's see if there's anything positive in the 1385 01:14:24,680 --> 01:14:26,439 Speaker 1: stuff that we can figure out. We've got We've got 1386 01:14:26,479 --> 01:14:28,479 Speaker 1: plenty of negativism that we can we can always, we 1387 01:14:28,560 --> 01:14:31,840 Speaker 1: can always count on being around. Thank you, Bill for 1388 01:14:31,920 --> 01:14:34,560 Speaker 1: being so generous with your time. Man. That was just 1389 01:14:34,960 --> 01:14:39,560 Speaker 1: fascinating stuff, really really good stuff. If you enjoy this conversation, 1390 01:14:40,000 --> 01:14:42,719 Speaker 1: well be should check out all the other three hundred 1391 01:14:42,800 --> 01:14:45,840 Speaker 1: such podcasts we've done over the past six years. You 1392 01:14:45,920 --> 01:14:51,360 Speaker 1: can find that at iTunes, Spotify, Google, Overcast, Stitcher, wherever 1393 01:14:51,680 --> 01:14:55,280 Speaker 1: your finer podcasts are sold. We love your comments, feedback 1394 01:14:55,280 --> 01:14:58,559 Speaker 1: and suggestions right to us at m IB podcast at 1395 01:14:58,560 --> 01:15:02,280 Speaker 1: Bloomberg dot net. Check out my weekly column at Bloomberg 1396 01:15:02,360 --> 01:15:05,679 Speaker 1: dot com Slash Opinion. Sign up for our daily reads 1397 01:15:05,800 --> 01:15:08,320 Speaker 1: at Ridoltz dot com. Be sure to give us a 1398 01:15:08,400 --> 01:15:12,200 Speaker 1: review at Apple iTunes. Follow me on Twitter at rid Halts. 1399 01:15:12,960 --> 01:15:14,920 Speaker 1: I would be remiss if I did not thank the 1400 01:15:15,040 --> 01:15:19,160 Speaker 1: Cracks staff that helps put these conversations together each week. 1401 01:15:19,640 --> 01:15:24,080 Speaker 1: Maroufo is our audio engineer. Michael Boyle is my producer. 1402 01:15:24,439 --> 01:15:27,960 Speaker 1: A Tico val Brun is our project manager. Michael Batnick 1403 01:15:28,080 --> 01:15:31,439 Speaker 1: is my head of research. I'm Barry Ridholtz. You've been 1404 01:15:31,520 --> 01:15:34,719 Speaker 1: listening to pastors in business on Bloomberg Radio