WEBVTT - Jay Bowen Discusses Pension Fund Management 0:00:02.240 --> 0:00:06.840 This is Masters in Business with very Ridholts on Bloomberg Radio. 0:00:07.360 --> 0:00:10.200 This week on the podcast, I have an extra special guest. 0:00:10.560 --> 0:00:15.360 Jay Bowen is the manager of, amongst other things, the 0:00:15.400 --> 0:00:21.119 Tampa Firefighters and Police pension funds. His firm has been 0:00:21.160 --> 0:00:25.079 managing that for over forty five years. Their performance numbers 0:00:25.440 --> 0:00:29.960 are are quite spectacular. They approached this in an absolutely 0:00:30.200 --> 0:00:33.960 unique way, UH, in fact, so unique it's become known 0:00:34.040 --> 0:00:39.800 as the Tampa model. No consultants, no third parties, no alternatives, 0:00:39.840 --> 0:00:43.080 just stocks and bonds managed by a single firm at 0:00:43.080 --> 0:00:46.640 a very low cost. UH. They run about a dozen 0:00:46.720 --> 0:00:51.120 other UH pension farms UH in around in and around 0:00:51.440 --> 0:00:56.360 southern Florida as well as elsewhere. This is really a 0:00:56.440 --> 0:01:00.400 master class on how to manage a pension fund, how 0:01:00.440 --> 0:01:03.320 to keep your costs in line, how to avoid the 0:01:03.520 --> 0:01:08.720 usual expense of consultants and third party managers. UH. It's 0:01:08.720 --> 0:01:12.360 really quite fascinating. It's always interesting when you speak with 0:01:12.440 --> 0:01:16.560 someone who's a unique contrarian and approaches the world in 0:01:16.600 --> 0:01:21.520 a different way and has been very successful using that model. 0:01:22.280 --> 0:01:27.560 If you are remotely interested in long term investing, foundations 0:01:27.640 --> 0:01:32.480 and pensions, or just hearing someone who has a unique approach. 0:01:32.880 --> 0:01:36.040 I believe you're gonna find this conversation fascinating. So, with 0:01:36.080 --> 0:01:40.759 no further ado, my conversation with Bowen and Haynes. Jay Bowen, 0:01:43.080 --> 0:01:47.640 this is Masters in Business with Barry Ridholts on Boomberg Radio. 0:01:48.480 --> 0:01:52.080 My special guest today is Jake Bowen. He is the 0:01:52.160 --> 0:01:56.440 CEO and Chief Investment officer of Bowen, Haynes and Company. 0:01:57.000 --> 0:02:00.800 The firm has managed the Tampa fire Fighters and Police 0:02:00.800 --> 0:02:06.200 Officers pension funds for over forty five years, performing consistently 0:02:06.400 --> 0:02:10.000 in the top quartile versus piers. It is one of 0:02:10.000 --> 0:02:12.880 the few pension funds in the United States that is 0:02:12.919 --> 0:02:17.079 effectively fully funded. UH. The total return on the portfolio 0:02:17.200 --> 0:02:22.440 since its inception has been nearly fourteen thousand percent UH. 0:02:22.520 --> 0:02:26.600 The annual return is of the stock portion is fourteen 0:02:26.680 --> 0:02:32.160 point six percent, handily out performing the benchmark. The total 0:02:32.200 --> 0:02:37.000 return has been eleven point nine percent annualized. That beats 0:02:37.000 --> 0:02:41.320 the SMP five hundred UM. Quite impressive for a stock 0:02:41.360 --> 0:02:45.200 and bond portfolio. Jay Bowen, Welcome to Bloomberg. Thank you 0:02:45.240 --> 0:02:48.120 very much. Am I getting your name right? Bowen? Alright, 0:02:48.480 --> 0:02:51.520 so you have really this is a fascinating story that 0:02:51.560 --> 0:02:54.280 I don't know if many people are familiar with your 0:02:54.320 --> 0:02:58.400 father founded Bowen Haines in Company in nineteen seventy two, 0:02:59.160 --> 0:03:03.440 eventually be Humming the person running the Tampa Firefighters and 0:03:03.440 --> 0:03:06.680 and Police Officers pension fund. You took the fund over 0:03:06.760 --> 0:03:09.880 in the early two thousand's, Is that right? I assumed 0:03:09.919 --> 0:03:12.480 day to day responsibility in two thousands, right? Right? Were 0:03:12.520 --> 0:03:15.760 you working for the firm before that? Yes, I came 0:03:15.800 --> 0:03:19.360 on board and actually in nineteen seven. So what was 0:03:19.400 --> 0:03:21.680 your career path? First of all, did you know you 0:03:21.720 --> 0:03:24.360 always wanted to go into finance with the father running 0:03:24.360 --> 0:03:27.240 a pension funds? I did not, But I grew up 0:03:27.720 --> 0:03:31.079 with my father taking monthly trips to Tampa, and I 0:03:31.160 --> 0:03:35.320 knew he was going somewhere on business, and when he 0:03:35.320 --> 0:03:37.960 would come home, he would go down every month in 0:03:38.000 --> 0:03:40.720 the in the seventies and UM he would take me 0:03:40.800 --> 0:03:43.360 down when I had a vacation or had a few 0:03:43.440 --> 0:03:46.040 days off from grammar school, and I became kind of 0:03:46.120 --> 0:03:48.240 enamored with the with the Tampa Bay area. I did. 0:03:48.280 --> 0:03:53.480 I did not know that I was gonna eventually be 0:03:53.600 --> 0:03:55.440 involved in the business. I was very I was an 0:03:55.440 --> 0:04:00.000 English major, very liberal arts oriented. UM, but became fascinating 0:04:00.000 --> 0:04:03.560 it and drawn. Really I wasn't a numbers person, I 0:04:03.640 --> 0:04:07.320 wasn't a math person. I was fascinated and drawn to 0:04:07.440 --> 0:04:11.360 the policy debate UM, the economic policy debate. I really 0:04:11.400 --> 0:04:14.520 became focused on that, and with the top down approach 0:04:14.800 --> 0:04:17.479 that the firm took, I kind of entered it that way. 0:04:17.720 --> 0:04:19.480 What was your what was your first job right out 0:04:19.520 --> 0:04:23.760 of college? I was in sales marketing, oriented, very very 0:04:23.800 --> 0:04:26.559 You didn't jump right into the family business, so to speak. 0:04:26.640 --> 0:04:30.520 I didn't jump right in UM. But what happened was 0:04:30.839 --> 0:04:33.880 in nineteen eighties six I went up to a Washington 0:04:33.960 --> 0:04:39.520 conference policy conference, and I was just so drawn and 0:04:39.600 --> 0:04:44.200 so and I'd always been that way really throughout my life, 0:04:44.320 --> 0:04:48.839 very focused on UH policies and politics and what was 0:04:48.880 --> 0:04:50.720 going on and what it meant and what it might 0:04:50.760 --> 0:04:54.120 mean to the financial markets. And so I really after 0:04:54.200 --> 0:04:57.839 that conference, it just really became inevitable that I wanted 0:04:57.880 --> 0:05:01.760 to get involved. Was your father interested in the sort 0:05:01.800 --> 0:05:05.960 of macro economic analysis as applied to investing or was 0:05:06.000 --> 0:05:10.960 that something that he thought wasn't necessarily relevant. He was 0:05:11.120 --> 0:05:13.840 interested in it and thought, you know, as you know, 0:05:13.960 --> 0:05:16.760 they're all different ways to do this business. There's bottom up, 0:05:16.800 --> 0:05:21.440 there's top down, there's there's mob black boxes, computerized models, 0:05:21.440 --> 0:05:25.720 there are and and phenomenally successful ways. We've just always 0:05:25.720 --> 0:05:28.600 gone about it from a top down perspective, and he 0:05:28.680 --> 0:05:31.840 was top down primarily. I'll tell you why, because when 0:05:31.880 --> 0:05:35.560 he started the firm in the early seventies, I mean, sure, 0:05:35.560 --> 0:05:40.120 it's a great time to focus on inflationary expectations and 0:05:40.200 --> 0:05:43.320 what that might mean a financial market. So multiple recessions, 0:05:43.480 --> 0:05:47.120 big pullbacks in the market. Seventy seventy four was about 0:05:47.160 --> 0:05:51.840 a fifty seven percent drop UH real real bond yields 0:05:51.839 --> 0:05:56.320 were effectively zero with inflation at ten twelve. Yeah. Yeah, 0:05:56.360 --> 0:05:59.880 there's an amazing when you look at it over long periods. 0:06:00.040 --> 0:06:02.040 I mean, there was a period from nineteen sixty eight 0:06:02.080 --> 0:06:06.359 to nineteen eighty two when the market had a negative 0:06:06.360 --> 0:06:09.000 real return, stocks had a negative real return, and that 0:06:09.120 --> 0:06:11.000 was in my view the way we view the world. 0:06:11.000 --> 0:06:15.080 That was because of UM really anti growth policies and 0:06:15.160 --> 0:06:19.440 a very counterproductive Federals erve in terms of from UH 0:06:19.480 --> 0:06:26.160 and then the FED basically funding the the UH, ratifying 0:06:26.160 --> 0:06:29.000 the inflation during the seventies, in the sixties and seventies, 0:06:29.120 --> 0:06:31.640 what are your thoughts on someone like Paul Volker who 0:06:31.640 --> 0:06:35.480 comes in and says, oh, well, let's do this and 0:06:35.480 --> 0:06:39.600 and basically takes the FED funds rate up to double digits. Right. 0:06:39.640 --> 0:06:42.800 That was a really important turning point in terms of 0:06:43.240 --> 0:06:44.919 how we of course I wasn't on board then. This 0:06:45.000 --> 0:06:49.359 was eight actually vocal Candon in seventy nine. Um. But 0:06:50.160 --> 0:06:53.279 there was a triple triple threat that happened in the 0:06:53.320 --> 0:06:55.800 late seventies and early eighties, and it really set the 0:06:55.839 --> 0:07:00.680 stage for a arguably the biggest bullmarket ever UM. And 0:07:00.760 --> 0:07:02.800 that was Paul Voker coming in to break the back 0:07:02.839 --> 0:07:06.880 of inflation, which is so key to financial assets price 0:07:06.880 --> 0:07:12.480 stability um uh, but not inflationary expectations. And then there 0:07:12.520 --> 0:07:16.160 was a deregulation effort that started with Afridkahan at the 0:07:16.560 --> 0:07:20.560 at the airline and trucking deregulation, Airline deregulation seven. And 0:07:20.600 --> 0:07:24.280 then Reagan came in UM with the tax reform UM 0:07:24.360 --> 0:07:28.200 in terms of lower tax rates, higher after tax returns, 0:07:28.200 --> 0:07:30.920 increasing in centers for work, was taking investment capital format 0:07:30.920 --> 0:07:34.280 I mean all those three things together um. And of 0:07:34.320 --> 0:07:37.040 course the DAO was sitting at seven seven fifty eight 0:07:37.160 --> 0:07:40.560 hundred with no real return um going all the way 0:07:40.560 --> 0:07:44.520 back to nineteen and I remember, and uh this is 0:07:44.640 --> 0:07:47.440 I was still focused on policy even though I was 0:07:47.440 --> 0:07:50.680 in college. I remember in eight two the tax cuts 0:07:50.680 --> 0:07:53.520 didn't take effect and there was a they delayed the 0:07:53.560 --> 0:07:56.680 tax cuts. They passed the legislation eighty The tax cuts 0:07:56.760 --> 0:08:00.000 didn't take effect until August of eighty two. Guess when 0:08:00.000 --> 0:08:04.760 the bullmarket story. Let's talk a little bit about the 0:08:04.840 --> 0:08:09.680 Tampa model. Your firm has managed the Tampa firefighters and 0:08:09.680 --> 0:08:14.720 police officers pension funds for over forty five years. That's 0:08:14.720 --> 0:08:17.600 pretty unique in the world, isn't it. It's very unique. 0:08:18.080 --> 0:08:20.800 My father for is a relationship in nineteen seventy four. 0:08:20.920 --> 0:08:22.800 We're now in the midst of our forty five year 0:08:22.960 --> 0:08:26.160 as you as you noted, we've managed every penny the 0:08:26.360 --> 0:08:29.880 entire period. It's growing from twelve million to over two billion, 0:08:30.040 --> 0:08:32.680 and they've taken over a billion out so that's three 0:08:32.720 --> 0:08:36.160 billion total cap appreciation to come of over three billion 0:08:36.640 --> 0:08:39.040 from twelve million from twelve and obviously there's been some 0:08:39.080 --> 0:08:41.600 contributions along the way country. Yeah, but the net there's 0:08:41.600 --> 0:08:44.200 been net outflows, which is what you want. That's what 0:08:44.240 --> 0:08:50.080 it's for. That right retirements for these incredibly dedicated public 0:08:50.080 --> 0:08:52.920 safety employees. So it's do it's doing its job right. See, 0:08:52.960 --> 0:08:56.240 I would imagine that you're completely ticket proof in Florida, 0:08:56.320 --> 0:08:58.640 that anybody pulls you over. It's like I'm the guy 0:08:58.640 --> 0:09:02.679 who manages your retirement account and that, oh, of course, 0:09:02.880 --> 0:09:05.960 I have a nice day, Mr Bowen. Yeah, Tampa, Tampa. 0:09:06.040 --> 0:09:08.640 I think my father was pretty safe within the city limits, 0:09:08.640 --> 0:09:12.439 and I hope by him. So you go from twelve 0:09:12.520 --> 0:09:16.520 million to over three billion including outflows to what do 0:09:16.559 --> 0:09:20.200 you credit this? Uh performance? Yeah, it's a it's a 0:09:20.240 --> 0:09:23.320 confluence of events. And by the way, my father four's 0:09:23.640 --> 0:09:25.679 actually was involved with this fund in nineteen in the 0:09:25.760 --> 0:09:28.040 late sixties when he was with another institution when he 0:09:28.080 --> 0:09:31.160 started his firm, UM he helped kind of set the 0:09:31.160 --> 0:09:33.560 fund up and helped with the investent policy statement back then. 0:09:33.600 --> 0:09:35.160 And then when he started his own firm, they were 0:09:35.160 --> 0:09:37.800 dissatisfied and came to him in seventy four. So that's 0:09:37.960 --> 0:09:39.920 and hired him when it was at twelve million. And 0:09:39.920 --> 0:09:43.280 it's really um I tell you what um I think. 0:09:44.040 --> 0:09:46.640 And it's funny. The pension attorney down there coined this 0:09:46.760 --> 0:09:48.200 term and I love it. He said, you know what 0:09:48.280 --> 0:09:51.880 you've got here, and he he sees pension public pension 0:09:51.880 --> 0:09:54.880 funds all over the country. Um, he's involved almost in 0:09:54.920 --> 0:09:59.440 every state, very prominent pension public pension fund attorney. He said, 0:09:59.440 --> 0:10:01.400 you know you in Tampa. He told the board you 0:10:01.400 --> 0:10:04.880 all have a perfect rainbow. And he said perfect rainbow 0:10:04.920 --> 0:10:08.640 because you've got a great city, competent. You know, they're 0:10:08.640 --> 0:10:10.560 all kind of moving parts. That the true the health 0:10:10.559 --> 0:10:12.400 of a pension fund. We're just one component. We're an 0:10:12.440 --> 0:10:14.560 important one, but they're all kind of moving parts. I mean, 0:10:14.600 --> 0:10:18.160 you've got he said, you've got a really competent, strong 0:10:19.320 --> 0:10:23.480 municipal city government, well managed. Well, it's if Tampa were stock, 0:10:23.520 --> 0:10:25.880 I'd be buying it. Can I tell you I visited 0:10:25.920 --> 0:10:29.760 Tampa repeatedly over the past few decades. Tampa is a 0:10:29.800 --> 0:10:33.520 booming city. Twenty thirty years ago that it was kind 0:10:33.520 --> 0:10:35.160 of a mess. You know who else has seen that 0:10:35.200 --> 0:10:40.760 as Jeff Finnick, really Jeff Finnick is he is Misiality Fidelli. 0:10:40.840 --> 0:10:45.040 He is Mr Tampa. Now there he purchased the hockey 0:10:45.040 --> 0:10:49.440 team is involved in a massive development effort on the waterfront. 0:10:49.520 --> 0:10:52.040 So he saw the value there. A few years Ago, 0:10:52.280 --> 0:10:54.360 and he's very involved in Tampa. And as I say, 0:10:54.400 --> 0:10:56.240 if Tampa were a stock, I would be buying it. 0:10:56.320 --> 0:11:00.120 But a competent city government. And here's the important on 0:11:00.559 --> 0:11:03.920 that funds the pension fund. They fund it. They put 0:11:03.960 --> 0:11:06.959 the money in. A lot of these municipalities that are 0:11:06.960 --> 0:11:10.559 in such trouble don't um so Tampa. Actually it's a 0:11:10.679 --> 0:11:12.840 it's I think it's the best run major city in America. 0:11:14.480 --> 0:11:17.360 That's one component. Number Two, they have a board and 0:11:17.480 --> 0:11:20.120 my non member board that is extremely responsible on the 0:11:20.120 --> 0:11:22.760 benefit side. You know, they're not reckless in terms of 0:11:23.440 --> 0:11:26.120 allow the Dallas fire and police, in terms of uh 0:11:26.400 --> 0:11:31.040 promising all these these It's a very very responsible, dedicated board. 0:11:31.080 --> 0:11:33.959 And then number three, the third part of the perfect 0:11:34.080 --> 0:11:37.120 rainbow is that we've had good investment returns. It's so 0:11:37.200 --> 0:11:40.800 easy to make promises that come due decades in the 0:11:40.840 --> 0:11:43.720 future and not to fund it because by the time 0:11:44.800 --> 0:11:49.120 people are pointing fingers, the people responsible along gone. So 0:11:49.120 --> 0:11:53.160 so how to what do you attribute Tampa avoiding what 0:11:53.360 --> 0:11:58.160 is a typical fate of local governments and municipalities, which 0:11:58.240 --> 0:11:59.960 is to just kick the can down the road as 0:12:00.040 --> 0:12:02.000 far as they can. And we see it in the 0:12:02.000 --> 0:12:07.120 pension space with very high expected returns for expensive hedge funds, 0:12:07.880 --> 0:12:11.199 and that ends up being matched with very low actual returns. 0:12:11.720 --> 0:12:15.680 What what's the what's the secret to good city government? Yeah, 0:12:15.720 --> 0:12:18.080 I just think it's they have the board. Of course, 0:12:18.080 --> 0:12:20.880 it's run by the board. Their three firemen, three policemen, 0:12:20.880 --> 0:12:24.000 and three people appointed by the city UM and they've 0:12:24.040 --> 0:12:27.600 just been uh, it's it's it's an extraordinary situation over 0:12:27.600 --> 0:12:30.480 the last forty five years. It's an extremely dedicated board. 0:12:30.520 --> 0:12:32.920 And I think here's one thing that I think has 0:12:32.960 --> 0:12:36.000 missed in this whole debate. And pick your number four 0:12:36.040 --> 0:12:40.120 or five trillion dollar underfunded, underfunded crisis average municipal fund. 0:12:40.160 --> 0:12:43.560 I think the funding ratio is um and you're in 0:12:43.600 --> 0:12:47.160 the nineties. It's I don't know, it's fully it's fully funded. 0:12:47.200 --> 0:12:50.800 But I think what they've done down there is they've 0:12:50.800 --> 0:12:53.320 realized what the they've never lost sight of what the 0:12:53.400 --> 0:12:56.920 core mission of this fund is. It's not to generate 0:12:57.000 --> 0:13:01.520 fees for layers and layers and layers of people. It's 0:13:01.559 --> 0:13:05.960 not to allocate assets to every asset class under the 0:13:06.000 --> 0:13:12.120 sun UM. It's to provide a good, stable retirement for 0:13:12.160 --> 0:13:16.679 these public safety employees. And to do that, um, they've 0:13:17.360 --> 0:13:20.120 and with their focus firmly on that, they've avoided a 0:13:20.160 --> 0:13:22.040 lot of the conflicts of interest. When you look at 0:13:22.080 --> 0:13:24.960 a lot of these funds, there's just enormous conflicts. And 0:13:25.000 --> 0:13:27.040 just to I can give you one small antidote to 0:13:27.040 --> 0:13:28.760 give you an example of how they stayed out of 0:13:28.760 --> 0:13:32.319 trouble back And I wasn't on board, but my father 0:13:32.440 --> 0:13:35.079 used to love to tell the story of the mayor 0:13:35.360 --> 0:13:37.599 down there in the the mayor of Tampa in the 0:13:37.640 --> 0:13:40.000 mid seventies. After he was mayor, he became chairman of 0:13:40.040 --> 0:13:44.360 a major insurance company and he made a presentation to 0:13:44.400 --> 0:13:49.680 the board to put uh quite a large percentage of 0:13:49.679 --> 0:13:55.160 the fund in an insurance products, guaranteed investment contracts, annuities, 0:13:55.160 --> 0:13:57.920 that kind of thing. And he thought he had it 0:13:57.920 --> 0:14:00.160 in the bag. He was, he was the mayor, He 0:14:00.200 --> 0:14:04.960 knew some of the city trustees, and soft the sales 0:14:05.000 --> 0:14:07.120 crew from New York came down in their fancy suits 0:14:07.120 --> 0:14:09.720 and they gave the presentation, and the board vited him 0:14:09.760 --> 0:14:13.160 down and it was just a stunner. Nobody could believe 0:14:13.200 --> 0:14:15.560 that the board. But what I mean, this never happens. 0:14:15.600 --> 0:14:17.480 I mean it usually funds like that are riddled with 0:14:17.520 --> 0:14:20.960 these kind of conflicts. Um. And they have always I 0:14:20.960 --> 0:14:23.400 mean not their exceptions every now and then the board met, 0:14:23.480 --> 0:14:27.920 But for the most part, it's extremely dedicated board that 0:14:28.160 --> 0:14:31.320 they've they've avoided the pitfalls and the conflicts of entry. 0:14:31.920 --> 0:14:35.120 You know, earlier we were discussing some of the pushback 0:14:35.160 --> 0:14:39.600 to your model of not using consultants, not using third 0:14:39.640 --> 0:14:44.040 parties who might add fees, no alternatives like hedge funds 0:14:44.120 --> 0:14:48.680 or private equity. Um. How unusual is that set up 0:14:48.840 --> 0:14:54.920 in the world's defension funds. It's unprecedented, exceedingly unusual. In fact, 0:14:55.000 --> 0:14:57.200 when the trustees go to these conferences, I mean I 0:14:57.240 --> 0:14:59.760 cringe a little bit. They go to these investor conferences. 0:14:59.800 --> 0:15:05.160 They're sponsored by consultants and everybody else, and they they're 0:15:05.200 --> 0:15:09.400 all always at these conferences, national conferences, and they're swarmed, 0:15:09.760 --> 0:15:14.600 of course by various service providers and what you can't 0:15:14.600 --> 0:15:18.320 have one manager that's FIDUCIALI you can't do this, rack Ins. 0:15:18.600 --> 0:15:22.320 And then I'm the former chairman of the board policeman. 0:15:23.040 --> 0:15:24.920 I used to love it. He would carry around the 0:15:24.960 --> 0:15:27.040 compounding any return his back pocket and he would just 0:15:27.040 --> 0:15:29.640 show it because my returns how you do, and they 0:15:29.680 --> 0:15:33.240 were just going, okay, well we'll see learning. So hey, 0:15:33.280 --> 0:15:35.640 can you keep up with this if you can't always start? 0:15:36.080 --> 0:15:38.920 I recall some time ago there was an article in 0:15:38.960 --> 0:15:41.240 the Wolf Street Journal about I want to say it 0:15:41.280 --> 0:15:45.160 was in Nevada. Somebody is managing a small pension fund 0:15:45.600 --> 0:15:48.800 and effectively he comes into the office each day with 0:15:48.840 --> 0:15:53.280 his crossword puzzle. Everything is in indexes. He doesn't do anything, 0:15:53.960 --> 0:15:57.280 and their core structure is is That's the only other 0:15:57.360 --> 0:16:02.840 example I'm familiar with of somebody approaching single manager, no consultant, 0:16:02.880 --> 0:16:06.720 no third party. But so now that's too Are there 0:16:06.720 --> 0:16:11.400 anybody else who remotely, even at least is thinking or 0:16:11.520 --> 0:16:14.280 looking at this sort of model? You know, it's funny 0:16:14.400 --> 0:16:17.600 because you would think, I mean, we have received a 0:16:17.600 --> 0:16:21.400 lot of national acclaim over the years because of the 0:16:21.480 --> 0:16:27.120 uniqueness and the performance. But the industry, there's the model, 0:16:27.480 --> 0:16:30.200 the consultant driven multimanager model. They have got such a 0:16:30.280 --> 0:16:36.480 stranglehold on the industry that they're really there is they're 0:16:36.520 --> 0:16:41.040 they're going halfway towards indexing. But in terms of of course, 0:16:42.600 --> 0:16:44.520 here's a little bit of indexing, and now let's are 0:16:44.560 --> 0:16:47.240 seeing a move towards that within the municipal arena, but 0:16:47.560 --> 0:16:50.800 a move towards a core, one core, unconstrained manager for 0:16:50.840 --> 0:16:54.960 the Bulkley assets. No, um it's it doesn't matter. The 0:16:55.200 --> 0:16:57.400 evidence can be so overwhelming and so powerful in terms 0:16:57.400 --> 0:17:00.720 of the potential benefits from a return standpoint for with feastandpoint, 0:17:00.800 --> 0:17:05.800 but um it's it's never accepted within that arena. And 0:17:06.119 --> 0:17:08.439 one question I always have, not that we're in this league, 0:17:08.600 --> 0:17:12.119 is that everybody says it's it's reckless and irresponsible and 0:17:12.119 --> 0:17:14.320 how can you do it? And there's one man And 0:17:14.359 --> 0:17:16.879 I'm always thinking in the back of mind, well, you know, 0:17:16.920 --> 0:17:19.680 Warren Buffett and Charlie Munger. There have two of them, 0:17:19.760 --> 0:17:22.120 and they manage but fifties. Not that we're in that league, 0:17:22.119 --> 0:17:24.000 but they manage fifty or sixty billion, and they're just 0:17:24.040 --> 0:17:25.640 two of them. I think it's even more than that. 0:17:26.400 --> 0:17:28.720 And yet and you don't hear the you don't hear 0:17:28.760 --> 0:17:30.439 the you know, we gotta we gotta break it up. 0:17:30.720 --> 0:17:32.639 We've gotta break it up, we gotta put some of that, 0:17:32.720 --> 0:17:36.119 we gotta there. There have been people who have suggested 0:17:36.160 --> 0:17:38.840 that over times, you know, you'll unleash a lot of 0:17:38.920 --> 0:17:42.879 value if we break up Berkshire Hathaway. That that sort 0:17:42.920 --> 0:17:46.120 of anytime there's a big pool of money, people are 0:17:46.119 --> 0:17:49.480 gonna look at it as an opportunity to capture some 0:17:49.600 --> 0:17:53.080 of it. And if we break up Berkshire Hathaway, my 0:17:53.200 --> 0:17:56.200 firm is ready to stand to garner a whole bunch 0:17:56.240 --> 0:18:01.919 of investment banking fees from the process. It's never coming 0:18:01.960 --> 0:18:07.119 out of academia. Objectively speaking, here here's why Berkshire Hathaway 0:18:07.160 --> 0:18:10.679 should be broken up. Um So, but you bring up 0:18:10.680 --> 0:18:14.920 a really valid point, which is the pushback has been 0:18:15.200 --> 0:18:19.840 pretty outrageous. There were accusations about it. They wouldn't go 0:18:19.920 --> 0:18:23.280 so far as to say fraud, but accounting issues and 0:18:23.920 --> 0:18:26.919 why do they change accounting so often I read about this. 0:18:27.040 --> 0:18:31.199 It's you, you're I'll let you defend it. But some 0:18:31.359 --> 0:18:34.720 of the pushback to this has been pretty It's incredible. 0:18:34.760 --> 0:18:36.280 You know, in the in the in the we do 0:18:36.359 --> 0:18:38.880 have a First Amendment and I love it. And we've 0:18:38.920 --> 0:18:40.960 got in the digital age and the you know, the 0:18:41.240 --> 0:18:44.360 free flow of information, the flow of information anybody, particularly 0:18:44.400 --> 0:18:47.120 in the bloggosphere and online. You know, you can say anything. 0:18:47.560 --> 0:18:51.960 It's out there, and it's funny it there's just we 0:18:52.160 --> 0:18:57.240 are the enemy to the to the standard conventional model 0:18:57.400 --> 0:19:00.119 that I think we're a threat. I think we're a it. 0:19:00.480 --> 0:19:03.159 And some of these their fee structured to the overall 0:19:03.200 --> 0:19:05.720 model itself, the model or model I think is a 0:19:05.800 --> 0:19:10.120 threat to the multi manager consultant driven model. And so 0:19:10.200 --> 0:19:13.600 there's been a concerted effort and this listen, we've heard this. 0:19:13.760 --> 0:19:15.960 My dad heard it throughout the seventies and eighties. I 0:19:16.000 --> 0:19:18.600 mean he he listened, He laid the groundwork. I mean, 0:19:18.640 --> 0:19:21.240 I'm the beneficiary of what he did. He he's the 0:19:21.280 --> 0:19:23.720 one that had to get bloody back in the seventies 0:19:23.720 --> 0:19:26.000 and eighties when man, they were coming after that fund, 0:19:26.000 --> 0:19:28.080 even though it wasn't as big, they were coming after 0:19:28.080 --> 0:19:31.159 it like you wouldn't believe. But what happened was the 0:19:31.240 --> 0:19:34.520 results were so good that all of a sudden, the 0:19:34.560 --> 0:19:38.080 city started being on our side because the city. It's 0:19:38.119 --> 0:19:42.280 great for the city. When then they were they were 0:19:42.320 --> 0:19:47.200 able to cut taxes, so they became allies. Let's talk 0:19:47.240 --> 0:19:50.160 a little bit about your investing style and and where 0:19:50.160 --> 0:19:53.480 we are in the market cycle. You describe yourself as 0:19:53.520 --> 0:19:58.359 a top down thematic investor. What what does that mean? Yeah? 0:19:58.400 --> 0:20:01.480 And one important thing to know with this relationship, which 0:20:01.520 --> 0:20:04.720 is a pretty extraordinary being typed down in thematic were 0:20:04.720 --> 0:20:07.720 able to really in the board allows us to focus 0:20:07.760 --> 0:20:10.400 on the real long term and I mean real long term. 0:20:10.480 --> 0:20:13.320 They actually, and I can say this with a straight face, 0:20:13.359 --> 0:20:14.840 and they would tell you with a straight face, they 0:20:14.840 --> 0:20:18.120 take a twenty year investment. They really do, which makes 0:20:18.119 --> 0:20:21.480 sense for a pension fund. Just most don't. The actually yeah, 0:20:21.520 --> 0:20:23.960 and the actuaries love the twenty years because that's the 0:20:24.040 --> 0:20:26.040 kind of the average snapshot of a career of a 0:20:26.040 --> 0:20:28.800 public safety But the reason we take a twenty year 0:20:29.119 --> 0:20:31.160 is that we found that there hadn't been a twenty 0:20:31.240 --> 0:20:34.479 year period that has not included a bull market and 0:20:34.560 --> 0:20:37.879 a bear market, and a recession, and a speculative bubble 0:20:37.960 --> 0:20:41.640 and a war, I mean throughout the financial history. Um, 0:20:41.760 --> 0:20:44.560 we love. I think that's a great time frame to 0:20:44.640 --> 0:20:49.000 measure the competency of a manager in all time periods. 0:20:49.040 --> 0:20:51.639 And we can show now every every October when I 0:20:51.640 --> 0:20:53.400 go down there to the review of the fiscal year, 0:20:53.480 --> 0:20:56.320 which is there on a September physical, we show another 0:20:56.320 --> 0:20:59.240 twenty year rolling setup performance data. And right now we 0:20:59.280 --> 0:21:03.080 can show twenty five sets of twenty year rolling performance 0:21:03.080 --> 0:21:06.120 and you can show really good out performance for each 0:21:06.119 --> 0:21:08.960 of the twenty years segments. So they've allowed us to 0:21:08.960 --> 0:21:11.800 take a twenty year approach and it ties into the 0:21:11.800 --> 0:21:14.120 top down thematic. And just to give you a couple 0:21:14.119 --> 0:21:16.240 of examples, when I say thematic and top down, we're 0:21:16.240 --> 0:21:19.480 looking we're trying to look at a variety of particularly 0:21:19.480 --> 0:21:23.760 on the policy front, tax policy, trade policy, physical policy, 0:21:23.800 --> 0:21:28.159 regulatory policy, international policy, even foreign policy. What does that 0:21:28.200 --> 0:21:30.719 mean to financial assets, what does it mean to stocks, 0:21:30.760 --> 0:21:33.080 what does it mean to bonds? Um. It's funny, as 0:21:33.080 --> 0:21:34.879 I said earlier, they're all kind of different ways to 0:21:34.880 --> 0:21:36.960 do this. I remember Peter Lynch, who I just thought 0:21:37.080 --> 0:21:39.600 was great. I remember him saying, you know, if I 0:21:39.640 --> 0:21:42.800 spend five seconds on economics, it's five seconds too much. 0:21:43.200 --> 0:21:45.520 He was bottom up and he was thinking, you know, 0:21:45.520 --> 0:21:48.720 they're they're people all kind of successful ways to do this. 0:21:48.800 --> 0:21:51.760 We've just always focused on the on the top down. 0:21:51.800 --> 0:21:54.600 I mean, just to give you some examples. In the 0:21:54.640 --> 0:21:57.800 early eighties, Uh, it was really important to focus on 0:21:57.800 --> 0:22:00.760 the monetary and the tax in terms of what that 0:22:00.880 --> 0:22:05.000 might mean for inflationary expectations, for interest rates, um, for 0:22:05.200 --> 0:22:08.919 various industry of sector. In industry categories. For instance, my 0:22:09.040 --> 0:22:11.440 father determined after Valker came in that we were gonna 0:22:11.600 --> 0:22:13.440 that he was going to break the back of inflation. 0:22:14.000 --> 0:22:16.840 And I can remember him showing me some charts, Uh, 0:22:17.080 --> 0:22:24.240 Coca Cola, Campbell Suit flatline. They had flat lined for ten, fifteen, 0:22:24.400 --> 0:22:27.040 twenty years. That's because of the inflation. The ravages of 0:22:27.080 --> 0:22:33.520 inflation had really hurt heavily compend they had done nothing, 0:22:34.040 --> 0:22:37.520 and it was his view that this was the time 0:22:37.560 --> 0:22:41.920 to really start shifting our emphasis to the staples area, 0:22:42.000 --> 0:22:45.639 to household product companies into food companies like Coca Cola 0:22:45.760 --> 0:22:47.919 and Campbell Suit propctory game with those kind of companies. 0:22:47.960 --> 0:22:51.480 And so that flowed from the top down viewpoint on 0:22:51.720 --> 0:22:54.840 inflation and then the other side of it what we 0:22:54.880 --> 0:22:57.240 talked about the deregulation, but what was going on on 0:22:57.280 --> 0:22:59.960 the tax front in terms of you had taxed the 0:23:00.080 --> 0:23:02.080 Tax Form Act of nineteen eighty and then you had 0:23:02.080 --> 0:23:05.400 the second round in n six which brought the top 0:23:05.440 --> 0:23:08.959 marsin right down to believe it or not, and you know, 0:23:09.000 --> 0:23:11.080 brought in the base, did away with a lot of 0:23:11.119 --> 0:23:14.119 deductions and credit, made for a much more efficient productive 0:23:14.720 --> 0:23:18.960 um system that raised real growth. We thought with the 0:23:18.960 --> 0:23:21.000