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Speaker 1: This is Master's in Business with very Rid Holds on

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Speaker 1: Bloomberg Radio.

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Speaker 2: This week we have an additional extra special podcast live

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Speaker 2: from future Proof, I sit down with AQR's Cliff Astness.

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Speaker 2: He is the co founder and chief investment officer at AQR,

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Speaker 2: one hundred billion dollar plus hedge fund that specializes in

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Speaker 2: a run of strategies ranging from quantitative analytics to value investing,

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Speaker 2: and a whole run of different things in between. I

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Speaker 2: found this short discussion to be really quite intriguing. Cliff

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Speaker 2: talks about all the things he got wrong, which, to

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Speaker 2: be fair to him, is much less than all the

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Speaker 2: things he got right. AQR is in the middle of

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Speaker 2: an incredible performance run, having been positioned correctly for a

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Speaker 2: variety of things that took place, not just equities coming

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Speaker 2: out of the pandemic, but really approaching the rise and

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Speaker 2: interest rates and the increase in inflation in just a

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Speaker 2: way that took full advantage of it. He is always

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Speaker 2: one of my favorite people to talk to, not just

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Speaker 2: because he's so mathy and brilliant on that side, but

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Speaker 2: he's one of the few quants that is so articulate

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Speaker 2: and funny on the inless side, and so you get

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Speaker 2: the best of both words with Cliff, with no further

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Speaker 2: ado my future proof Master's in Business Live discussion with

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Speaker 2: Cliff astness. You threw away a promising career in academia

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Speaker 2: to go into finance. Tell us a little bit about

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Speaker 2: what led to AQR and why you thought, Hey, I

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Speaker 2: think I can do this better than everybody else.

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Speaker 3: Well, I never had. Maybe that feeling was implied, but

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Speaker 3: I wouldn't say that even I know not to say

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Speaker 3: that out loud. It's funny sitting here in Newport Beach.

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Speaker 1: We're in Newport Beach, right.

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Speaker 2: Huntington Beach, Newport Beach. Yeah, it's right up the road,

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Speaker 2: all right.

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Speaker 3: My hotel I think was in Newport Beach. Can I

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Speaker 3: say Newport Beach?

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Speaker 1: All right?

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Speaker 3: Because Newport Beach and Pimco actually features in my personal story.

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Speaker 3: I was at the University of Chicago studying for a

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Speaker 3: PhD in finance. I first went to Goldman Sachs for

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Speaker 3: a summer. I had a professor from undergrad who worked there.

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Speaker 3: One of my best friends worked there. Like you can

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Speaker 3: name drop, feel free to oh John Biner. He was

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Speaker 3: CEO of CIO of Fixed Income for about twenty years

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Speaker 3: at g SAM.

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Speaker 1: Then I went for a year. I was still writing

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Speaker 1: my dissertation.

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Speaker 3: I was writing my dissertation at night on value and

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Speaker 3: momentum to choose individual stocks while working at Goldman during

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Speaker 3: the day. It was It was the probably the second

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Speaker 3: hardest time in my life. The heart artist was when

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Speaker 3: my wife and I mainly her, but my wife and

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Speaker 3: I had two sets of twins eighteen months apart.

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Speaker 1: Four kids in eighteen months.

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Speaker 3: Is she gets mad at me when I refer to

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Speaker 3: our family planning as a gross failure of risk control.

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Speaker 1: But it was true.

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Speaker 3: So I was there about a year and I was

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Speaker 3: actually just trying to decide do I want to stay

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Speaker 3: at Goldman. I was having a good I was enjoying.

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Speaker 3: It didn't feel like what I was supposed to do.

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Speaker 3: I was a portfolio manager. I was trading. It was fun,

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Speaker 3: but you know, I was studying academic finance.

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Speaker 1: Dumb luck.

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Speaker 3: I had written one paper in the Journal of Portfolio Management.

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Speaker 3: It was called option adjusted Spreads and a Steep yield curve.

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Speaker 3: You've seen the movie Chart Least then is in it.

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Speaker 1: It's really very good.

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Speaker 3: They read it and being fellow geeks, they liked it,

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Speaker 3: asked to talk to me.

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Speaker 1: Ended up fly me out.

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Speaker 3: I met with with them. I remember one thing. I'm

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Speaker 3: telling you too many stories. This is the first time

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Speaker 3: I ever ate sushi. The guy from uh Pimpkoh I

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Speaker 3: didn't eat fish at that point. I like fish now.

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Speaker 3: But the guy from Pimco guy Nam, he's passed away now.

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Speaker 3: But a guy named Frank Furbinovich is a great guy.

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Speaker 3: Said to me, Hey, sushi okay for lunch? And this

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Speaker 3: is something if there are any twenty somethings in the

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Speaker 3: audience you think you're you gotta say fine to that.

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Speaker 1: You don't realize the person asking you will be totally.

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Speaker 3: Okay with you going. Actually, I don't love sushi. You

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Speaker 3: feel like you're gonna blow the whole thing. So I'm like, yeah, no,

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Speaker 3: sushi's wonderful. So on this interview, I chewed one piece

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Speaker 3: of sushi for about fifteen minutes, and I did spit

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Speaker 3: it into a napkin when he wasn't looking. And they

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Speaker 3: still offered me a job to go out there and

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Speaker 3: start a research group. It kind of light bulb went off.

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Speaker 3: I'm like, wait, doing academic research, but an applied way.

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Speaker 3: I get to study the same things. I get to

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Speaker 3: see if they work for real, and I think Pimpko

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Speaker 3: pays better academia, so good idea. So I told Goldman,

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Speaker 3: I think I'm doing this, and Goldman said, you know,

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Speaker 3: we're thinking of doing that. To this day, I don't

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Speaker 3: know if that's true, but I decided Manhattan is much

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Speaker 3: more attractive than Newport Beach.

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Speaker 2: And needs this weather look but cloudy overcast. Who wants

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Speaker 2: to be in California?

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Speaker 3: Anyone who's happy where they ended up, who doesn't admit

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Speaker 3: that there was a fair amount of luck. Now, you

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Speaker 3: can make your own luck, and effort counts ability accounts,

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Speaker 3: but luck counts too.

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Speaker 1: I got lucky at various stages.

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Speaker 2: In this I hear that on a regular basis from

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Speaker 2: guests on Masters in Business.

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Speaker 3: It's terrible advice to give. By the way, what first

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Speaker 3: get lucky? Well, not useful?

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Speaker 1: Well the table.

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Speaker 2: There are lots of people who are very smart and

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Speaker 2: very hard working who don't achieve outstanding, amazing success, a

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Speaker 2: top point one percent success.

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Speaker 4: What separates some of them? You've mentioned this repeatedly.

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Speaker 2: There's a little serendipity in everything. So, speaking of serendipity,

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Speaker 2: you're at Goldman, you meet some folks tell us how

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Speaker 2: AQR came about.

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Speaker 3: So I started this group. This was nineteen ninety four.

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Speaker 3: I know, I look around, I look for the people

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Speaker 3: who were born in ninety before nineteen ninety four, and

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Speaker 3: I want to say hi, shout out to them. So

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Speaker 3: we started this group was initially four people with a

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Speaker 3: very general, scary general mandate. They had no idea why

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Speaker 3: they wanted this group. They just knew other people were

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Speaker 3: starting quant groups on Wall Street. Ironically, the then success

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Speaker 3: of long term capital management.

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Speaker 1: Made get us.

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Speaker 3: Some of that made a lot of the firms think

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Speaker 3: we need applied academics here. I don't think we've ever

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Speaker 3: done anything particularly similar to long term capital management.

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Speaker 1: But they actually helped me out too. So we started

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Speaker 1: this group with no mandate, just see if you can help.

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Speaker 3: We kind of went around like door to door, quants

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Speaker 3: around g SAM saying does anyone need anything quantitative?

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Speaker 1: And the first job they asked us to do was

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Speaker 1: to help.

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Speaker 5: They had an active global equity product, you know, concentrated

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Speaker 5: stock picking, that had kind of a SOSO record, and

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Speaker 5: if you analyze their record, it was really strong within

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Speaker 5: each country, but they were always in the wrong countries.

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Speaker 3: So they'd have client meetings that would be well. The

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Speaker 3: good news is are Norwegian stocks crushed the Norwegian index.

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Speaker 1: The bad news is there was a kup in Norway.

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Speaker 3: That doesn't mean in a kup in Norway since nineteen forty,

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Speaker 3: but they approximated it. So they turned us and they said,

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Speaker 3: can you guys help pick countries? And here's where you know,

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Speaker 3: luck meets hutzba. At this point you don't go, well,

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Speaker 3: I don't know, I've never really tested picking countries.

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Speaker 1: You go, hell, yes, we can help pick countries.

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Speaker 3: We went into a very tiny room, four of us

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Speaker 3: and kind of it's embarrassing how simple it was. We

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Speaker 3: spent about three days before we hit on the obvious solution,

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Speaker 3: which was to pretend countries were individual stocks and treat

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Speaker 3: them like what we had studied in academia, the early

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Speaker 3: work on value, momentum, even size for predicting individual stocks.

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Speaker 3: We ended up writing a paper on and it held

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Speaker 3: up for countries, and we just kept growing it individual stocks, bonds, currencies,

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Speaker 3: applying the same philosophy over and over again. And then

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Speaker 3: after about four or five years of that, we had

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Speaker 3: one of my co founders, David Cabillar, started a full

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Speaker 3: year of working on me saying, you know, you could

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Speaker 3: do this on your own, and he was a little

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Speaker 3: bit of the Mephistopheles, so I was very.

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Speaker 1: Scared of doing that. It's scary to leave Goldman Sachs.

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Speaker 3: Goldman Sacks is really good at terrifying you too, by

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Speaker 3: the way, when you say you're thinking about leaving, if

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Speaker 3: you're honest, if you don't just give him a fade

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Speaker 3: a company and say I'm considering this, which I did.

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Speaker 3: You sit down with very senior people and they kind

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Speaker 3: of say, you know, you only get to leave Goldman

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Speaker 3: Sachs once.

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Speaker 1: Young man, and then you shrivel and you go, I'll stay.

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Speaker 3: So I did that a couple rounds till finally end

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Speaker 3: of ninety seven, early ninety eight took the plunge.

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Speaker 2: And to Goldman's credit, they're very good at keeping hooks

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Speaker 2: and people. They become your prime broker. They're selling you transactions, trades.

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Speaker 3: This is this is getting really into some nitty gritty details.

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Speaker 3: But when you leave Goldman, the part you left is

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Speaker 3: quite mad at you. The rest of Goldman is quite excited.

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Speaker 3: Because the money we were managing at Goldman, I did

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Speaker 3: not expect to get into this kind of stuff. But

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Speaker 3: the money we were managing at Goldman, we could not

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Speaker 3: trade with Goldman for rather obvious reasons.

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Speaker 1: Once we leave, suddenly we're.

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Speaker 3: A potential and that did help smooth the relationship over

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Speaker 3: and Goldman is still certainly one of the alternates.

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Speaker 1: It bounces around a bit and one of the top

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Speaker 1: two or three people we trade with these days.

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Speaker 2: So you leave Goldman, you set up your own own shop.

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Speaker 2: At what point do you get a sense, hey, this

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Speaker 2: can work. We're having clients come in. The numbers look

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Speaker 2: pretty good. A performance doesn't stink. When does it dawn

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Speaker 2: on you? This was a good decision to hang our

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Speaker 2: own shin.

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Speaker 1: I don't know. I'm hoping it kicks in soon, one

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Speaker 1: of these days. Soon. We had a very strong start

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Speaker 1: prior to trading. We left.

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Speaker 3: It took us about nine months to We didn't take

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Speaker 3: a thing out of Goldman. We were building and rebuilding.

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Speaker 3: We had a road show, we made it. What I

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Speaker 3: think is I've been saying for years was an era,

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Speaker 3: and it was an era. When we were at Goldman,

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Speaker 3: we ran all kinds of different mandates. We saw quantitative

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Speaker 3: tools is a very general thing, and you could run

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Speaker 3: an aggressive hedge fund style long and short market neutral

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Speaker 3: a lever to be to try to make a lot

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Speaker 3: of money, or you could be long only and try

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Speaker 3: to beat a benchmark by one and a half percent

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Speaker 3: a year. You could use the tools either way. When

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Speaker 3: we launched our own firm, we said we're only going

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Speaker 3: to start. We intend to do it all eventually, but

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Speaker 3: we're going to start with the very aggressive version of

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Speaker 3: our hedge fund product.

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Speaker 1: Partly, I think it was an era. Partly I think

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Speaker 1: we didn't have a tremendous amount of choice.

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Speaker 3: When you're thirty and starting your own firm and you

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Speaker 3: say you want to run traditional long only assets, people,

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Speaker 3: your potential clients kind of look and go come back

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Speaker 3: when you've been doing it for five years and you

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Speaker 3: look more like I look now than I looked. Then

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Speaker 3: when you say we're launching an aggressive hedge fund then

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Speaker 3: we're closing, they go, oh cool, we're in. So apparently

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Speaker 3: if you charge two and twenty it's a lot easier

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Speaker 3: to get new clients at that point in your career

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Speaker 3: than if youre and we don't charge two and twenty anymore.

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Speaker 3: But that's that's the old days. So we launched a

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Speaker 3: very aggressive version. We took it for the fellow geeks

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Speaker 3: in the audience. I assume there were a couple in

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Speaker 3: the load to mid twenties. In terms of targeted volatility,

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Speaker 3: that's north of a naked equity market exposure. We raised

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Speaker 3: a billion dollars I do believe was the largest standing

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Speaker 3: starret hedge fund launch to that point. So in that sense,

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Speaker 3: we were successful immediately. It is not.

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Speaker 1: It's been way bigger one since then. We've been eclipsed

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Speaker 1: by that.

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Speaker 3: The next eighteen months of actually running money were very,

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Speaker 3: very bad. We started running money in August of ninety eight.

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Speaker 3: I'm gonna mention them again again. I didn't mean to

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Speaker 3: mention them once, let alone twice. But August of ninety

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Speaker 3: eight is when the LTCM kind of death spiral began.

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Speaker 3: Russia defaulted, and it's always Russia and LTCM began a

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Speaker 3: few months our initial you know, the stock market was

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Speaker 3: down about twenty percent in August of ninety eight. I

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Speaker 3: always think of this as like the crash nobody remembers,

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Speaker 3: and I think no one remembers it for two reasons.

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Speaker 3: It wasn't one day. It was kind of fairly steady

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Speaker 3: all month, and it came back pretty quickly. After it,

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Speaker 3: so there's no scarring moment, and there was there's no

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Speaker 3: accompanying pandemic.

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Speaker 1: We did well during that crash.

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Speaker 3: Then something called the dot com bubble took off, and

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Speaker 3: I have written a lot about this.

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Speaker 1: I think in the last five.

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Speaker 3: Years people think of us maybe too much as value investors.

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Speaker 3: It's a big part of what we do, but it's

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Speaker 3: far from all. We go through decade long periods where

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Speaker 3: we hardly talk about it because many of the other

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Speaker 3: things are dominating. In giant bubbles, the value portion of

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Speaker 3: what we were doing suffers. And that happened in ninety nine,

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Speaker 3: two thousand, and it happened in nineteen and twenty. So

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Speaker 3: we were down in this account about thirty five percent

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Speaker 3: sole product. You won one product in your first eighteen months,

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Speaker 3: you're down thirty five percent.

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Speaker 1: Now, if the.

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Speaker 3: Fellow quants in the room are saying, well, you were

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Speaker 3: taking twenty three percent volatility, that's barely maybe two standard deviations.

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Speaker 3: Whoever's thinking that as a moron, I was thinking it

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Speaker 3: at the time because I'm thinking the world thinks about

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Speaker 3: risk adjusted returns. Right we were We had up three

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Speaker 3: triple digit years in this.

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Speaker 1: Kind of account at Goldman not a good way to

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Speaker 1: start a business.

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Speaker 2: So let's talk about you mentioned you started with a

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Speaker 2: long short. You've become known as value guys, but really

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Speaker 2: you'll run a variety of different strategies and different different silos.

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Speaker 2: Let's talk a little bit about how that developed. How

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Speaker 2: did you go from hey, we're going to run and

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Speaker 2: gun a long short and take an occasional thirty percent

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Speaker 2: hit to adding diversified approaches to not just risk management,

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Speaker 2: but where are you going to generate your alpha from?

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Speaker 3: Partly, that's just been always what we've been done, even

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Speaker 3: in our time at Goldman Sachs.

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Speaker 1: As I just told you guys, we started out.

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Speaker 3: First models we built were about what equity countries looked

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Speaker 3: more attractive. We quickly poured those two bond markets.

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Speaker 1: At that time.

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Speaker 3: The world has gotten deeper, the factor world has gotten deeper,

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Speaker 3: but value and momentum were the two main factors.

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Speaker 1: When you go to a bond market, you go what's value.

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Speaker 3: Everybody who does this will claim, and I will too,

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Speaker 3: that their models are much better and more subtleness. But

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Speaker 3: if you just looked at prospective real bond yield across

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Speaker 3: twenty countries, the ones would higher yields tend to be

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Speaker 3: scarier like value things often are and tend to on

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Speaker 3: average do better. Momentum is ridiculously easy. Everywhere you go,

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Speaker 3: things tend to keep trending in the same direction. So

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Speaker 3: by the time we left Goldman, we already traded countries,

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Speaker 3: stock markets, bond markets, currencies, and individual stocks, which is

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Speaker 3: really what a few of us had written our dissertations

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Speaker 3: on Globally. At AQR we've expanded that. Again, this is

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Speaker 3: twenty five years, so it's not like we just walked

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Speaker 3: in and did this into many different factors, not one hundreds.

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Speaker 3: Sometimes people people refer to the factor zoo.

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Speaker 1: I get annoyed.

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Speaker 3: They're about five to ten major things that most and

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Speaker 3: I'm speaking in general of the exceptions that most quants

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Speaker 3: probably believe in. Cheap tends to be expensive, good momentum

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Speaker 3: both priced and then later on importantly, fundamentals, things getting

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Speaker 3: better tend to keep getting better. Lower risk things measured

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Speaker 3: both fundamentally and in terms of the quant measures bita

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Speaker 3: volatility tend to do better than you would think. Higher

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Speaker 3: quality assets, more profitable, higher return on whatever you'd like to.

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Speaker 1: Measure it on.

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Speaker 3: Expanding the set of things beyond value and momentum, and

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Speaker 3: then expanding the places we do it. We didn't do

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Speaker 3: emerging markets at Goldman. When you add that, you get

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Speaker 3: two wonderful things at once. Actually you could fail utterly.

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Speaker 3: If it works, you get two wonderful things at once.

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Speaker 3: You get another strategy to add, which is correlated.

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Speaker 1: You shouldn't pretend it's not.

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Speaker 3: But it's not perfectly correlated, so it's somewhat diversifying, and

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Speaker 3: you get another little out of sample tests. Statisticians quants,

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Speaker 3: we have very strange dreams. We don't dream about cars

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Speaker 3: and houses and significant others. We dream about out of

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Speaker 3: sample tests. It's kind of the gold standard. You often

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Speaker 3: don't have enough. Sometimes you gotta wait thirty years to

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Speaker 3: get a good out of sample test or something. But

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Speaker 3: when you go to a new market you haven't looked

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Speaker 3: at yet, and it holds up, you go, maybe we're

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Speaker 3: actually onto something here. By the way, we think, if

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Speaker 3: we have good out of sample tests, we will get

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Speaker 3: nice cars and houses and significant others. We're not indifferent

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Speaker 3: to that, we just take a different path. So we've

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Speaker 3: been expanding both how we measure things and where we

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Speaker 3: do it.

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Speaker 2: I'm glad you reference that not geographically. But let's talk

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Speaker 2: a little bit about one of the issues that seems

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Speaker 2: to really have come into its own over the past decade,

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Speaker 2: which is tax aware investing.

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Speaker 4: It's people talk about.

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Speaker 2: Asset location, and hey, I'm going to put my highest turnover,

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Speaker 2: most active account into my tax deferred portfolio and the

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Speaker 2: long term boring index stuff I'll keep in my taxable account.

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Speaker 2: That seems to be the conventional wisdom. You seems to

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Speaker 2: have moved in a direction opposite that tell us about that.

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Speaker 3: Well, first, the conventional wisdom isn't wrong if you're owning

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Speaker 3: a traditional, say, actively managed long only stock portfolio with

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Speaker 3: some decent turnover that doesn't have very attractive tax properties.

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Speaker 3: Where we got into this starting the research about ten

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Speaker 3: years ago, writing our first paper, we've been fairly public

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Speaker 3: about this stuff. A first paper I think on this

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Speaker 3: was in twenty fifteen. Were a few different sets, and

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Speaker 3: here again we got lucky. We got lucky in that

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Speaker 3: we are ready were in both the traditional long only

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Speaker 3: world and the long short world. And it turns out

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Speaker 3: that first the very act imagine you have an active

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Speaker 3: beat the benchmark traditional stock portfolio. Now imagine you separate

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Speaker 3: that into an index fund and a long short portfolio.

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Speaker 3: And just for the sake of this argument, imagine if

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Speaker 3: you add those two together, you get back to the original.

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Speaker 1: The long short is the over and the underweights that

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Speaker 1: you had before.

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Speaker 3: Just that active separation makes something far more tax efficient.

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Speaker 3: The index fund a cruise, like all index funds are

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Speaker 3: fairly tax efficient, and the active part you only pay

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Speaker 3: tax if you make money.

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Speaker 1: You have a bad year, you don't pay a tax

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Speaker 1: on it.

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Speaker 3: In a traditional long only portfolio, imagine markets they do

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Speaker 3: go up on average over time, and you want to

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Speaker 3: sell something you actually haven't produced alfin you just don't

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Speaker 3: like the stock anymore. You get a tax hit from that.

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Speaker 3: So simply the separation gets far more efficient. Then you say, well,

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Speaker 3: can I do any better about this? And here it's

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Speaker 3: the last time I'll try to mention luck. Not again,

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Speaker 3: this will be the last time I'll mention luck. But

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Speaker 3: the average turnover of our stock selection models, and this

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Speaker 3: was not by design.

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Speaker 1: This is why it's luck. It's about a year. You know,

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Speaker 1: you know what averages means.

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Speaker 3: Some things are fairly quick, some things be old for

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Speaker 3: five years, but average is about a year.

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Speaker 1: A year is a magic number. In stock a year

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Speaker 1: and a day.

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Speaker 3: Right, you know you have a big winner at eleven

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Speaker 3: and a half months, you're kind of an idiot if

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Speaker 3: you sell it, right and lets unless you have illegal

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Speaker 3: inside information.

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Speaker 1: Wait two weeks in a day.

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Speaker 3: It turns out that in a long short portfolio with proxy,

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Speaker 3: with not tremendous turnover but decent turnover and an average

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Speaker 3: kind of one year holding period, there's a tremendous amount

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Speaker 3: of optimization around that you can do.

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Speaker 2: So, so the optimization on holding something beyond the to

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Speaker 2: get to the lower long term capital gains tax is

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Speaker 2: pretty obvious.

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Speaker 4: What about the flip side of that?

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Speaker 2: What about tax lost harvesting to offset those some of

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Speaker 2: those gains.

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Speaker 4: We're big fans of that. How do you approach this?

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Speaker 3: Yeah, essentially, what we do you can think of as

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Speaker 3: a I hope this sounds arrogant, a more advanced form

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Speaker 3: of tax loss harvesting.

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Speaker 1: We are certainly waiting to sell the winners.

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Speaker 3: By the way, if something's a winner in three months

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Speaker 3: and we think the price has just gotten stupid, the

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Speaker 3: alpha models will dominate the tax models. It's not a

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Speaker 3: pure tax product. This is a decision when it's at

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Speaker 3: the margin. But we also will rather savagely say, this

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Speaker 3: thing's on the edge of where we want to sell it,

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Speaker 3: and it's eleven and a half months, so let's take

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Speaker 3: the short term loss on that. So I think of

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Speaker 3: it as just a more entirely simple I mean, tax

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Speaker 3: strategies that are based only on tax are very dodgy.

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Speaker 3: Our friends at the Eternal Revenue Service don't particularly like

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Speaker 3: tax strategies that are being done for pure tax purposes.

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Speaker 3: But I hope we never live in a world where

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Speaker 3: someone can go you probably want to sell that, but

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Speaker 3: you have to wait two and a half weeks. So

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Speaker 3: we're fairly savage in those portfolios about bolt minimizing the

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Speaker 3: tax will gains and taking losses when we can. And

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Speaker 3: your original question of why you wouldn't hold this in

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Speaker 3: a tax free account, well, the simple answer is if

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Speaker 3: you do this, and again, this is not really magic,

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Speaker 3: This is not some esoteric These are not my friends

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Speaker 3: in private equity with the carried interest whatever.

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Speaker 1: This is the twelve month thing.

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Speaker 3: If you do that systematically, not even over aggressively, you

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Speaker 3: generate more tax benefit that you can use in the

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Speaker 3: standalone portfolio. The standalone portfolio is already turned into a

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Speaker 3: long term gain, and you can use those extra losses elsewhere.

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Speaker 3: And if you put that into a taxable account, you

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Speaker 3: can't take those losses out of taxable account and use

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Speaker 3: them elsewhere. So I do think the conventional wisdom. I

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Speaker 3: won't I won't be mean about it. It is for

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Speaker 3: most conventional portfolios. I think it is the right wisdom.

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Speaker 3: But I think you can do better.

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Speaker 4: So let's let's pivot a little bit and talk about value, which.

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Speaker 3: You tenn one from the irs is here are they were?

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Speaker 1: But they're very comfortable with what we're doing.

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Speaker 3: But I don't don't want to push it.

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Speaker 4: They do a nice job with guns. They let you

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Speaker 4: know what you can and can't get away. Just follow

441
00:23:36,520 --> 00:23:39,840
Speaker 4: the rules. It's easy, yes, not that difficult. You got

442
00:23:39,880 --> 00:23:41,840
Speaker 4: you have an accountant, right, No, I did it all myself.

443
00:23:41,840 --> 00:23:47,159
Speaker 2: All right, Well we'll talk afterwards. Return like this right manually?

444
00:23:47,200 --> 00:23:48,440
Speaker 2: You thought at with a pencil.

445
00:23:49,040 --> 00:23:49,200
Speaker 1: Right.

446
00:23:49,440 --> 00:23:51,480
Speaker 2: So let's talk a little bit about value, which is

447
00:23:51,520 --> 00:23:54,919
Speaker 2: how a lot of people traditionally think about you. Value

448
00:23:55,000 --> 00:23:59,000
Speaker 2: had a horrific decade in the twenty tens, and anybody

449
00:23:59,040 --> 00:24:02,320
Speaker 2: who was paying attention to mean reversion was waiting for

450
00:24:02,359 --> 00:24:05,000
Speaker 2: it to come waiting for it to come. What made

451
00:24:05,080 --> 00:24:09,920
Speaker 2: the twenty tens such an unusual period for value, and

452
00:24:10,359 --> 00:24:15,320
Speaker 2: how long can the current run of value playing catchup?

453
00:24:15,480 --> 00:24:15,960
Speaker 4: Last four?

454
00:24:16,760 --> 00:24:19,520
Speaker 3: Right, Barry just asked me a twenty seven minute answer question.

455
00:24:19,960 --> 00:24:21,800
Speaker 3: So I'll try not to I'll.

456
00:24:21,640 --> 00:24:22,440
Speaker 1: Try not to abuse it.

457
00:24:22,480 --> 00:24:23,760
Speaker 4: You got a let nine.

458
00:24:26,040 --> 00:24:26,879
Speaker 1: First, You are right.

459
00:24:26,960 --> 00:24:28,800
Speaker 3: I think we have been known to me in particular

460
00:24:29,000 --> 00:24:31,080
Speaker 3: for value only because I've been screaming about it since

461
00:24:31,080 --> 00:24:35,440
Speaker 3: about twenty nineteen. I also casally write things pointing out

462
00:24:35,480 --> 00:24:38,439
Speaker 3: that I go through decades where I never mentioned value

463
00:24:39,560 --> 00:24:42,280
Speaker 3: from about post GFC, he said twenty ten.

464
00:24:42,320 --> 00:24:43,119
Speaker 1: I think that's about right.

465
00:24:43,760 --> 00:24:48,960
Speaker 3: Through two thousand and maybe eighteen, most traditional forms of

466
00:24:49,040 --> 00:24:51,960
Speaker 3: value had a pretty bad run. You can always find

467
00:24:52,040 --> 00:24:54,520
Speaker 3: somebody with their own indicator that they won't tell you

468
00:24:54,640 --> 00:24:57,040
Speaker 3: what it is, and it's proprietary, and it would have

469
00:24:57,080 --> 00:25:01,040
Speaker 3: worked like a charm. But almost ubiquitous se value strategies

470
00:25:01,080 --> 00:25:06,280
Speaker 3: did poorly. We actually, I'm not going to hide from

471
00:25:06,320 --> 00:25:08,000
Speaker 3: a very bad period for us. I'm about to get

472
00:25:08,040 --> 00:25:10,400
Speaker 3: to it, but we actually had a really good run

473
00:25:10,920 --> 00:25:15,040
Speaker 3: from twenty ten through twenty seventeen while value was suffering.

474
00:25:15,640 --> 00:25:18,520
Speaker 3: Because it's not all we do it's not more than

475
00:25:18,560 --> 00:25:21,320
Speaker 3: half of what we do, and pretty much everything else

476
00:25:21,400 --> 00:25:26,360
Speaker 3: we do worked. Momentum work, fundamental momentum where quality investing work,

477
00:25:26,440 --> 00:25:27,720
Speaker 3: low risk investing worked.

478
00:25:28,680 --> 00:25:31,240
Speaker 1: I think a lot of the reason for this is

479
00:25:31,840 --> 00:25:33,880
Speaker 1: values loss over that period.

480
00:25:35,119 --> 00:25:37,640
Speaker 3: Was because and I don't mean I hope, I don't

481
00:25:37,640 --> 00:25:39,680
Speaker 3: mean this in a deep moral sense, but it deserved

482
00:25:39,720 --> 00:25:44,800
Speaker 3: to lose. The companies underperformed, they under executed. The fundamentals

483
00:25:44,840 --> 00:25:47,919
Speaker 3: were not good. And it turns out that if one

484
00:25:48,000 --> 00:25:51,640
Speaker 3: runs a pure quantitative you know, the Gram and Dodd

485
00:25:51,680 --> 00:25:54,600
Speaker 3: people think of value very differently, more holistically, but in

486
00:25:54,680 --> 00:25:57,600
Speaker 3: the quant world, values generally price compared to fundamentals.

487
00:25:57,680 --> 00:25:59,439
Speaker 1: It's a pure bargain searching.

488
00:26:00,160 --> 00:26:02,320
Speaker 4: You use the phrase cheap for a reason.

489
00:26:02,520 --> 00:26:06,119
Speaker 3: Cheap cheap for a reason is what the Graham and

490
00:26:06,200 --> 00:26:09,080
Speaker 3: Dodd people might say, and it's what our model as

491
00:26:09,160 --> 00:26:09,960
Speaker 3: a whole would say.

492
00:26:10,240 --> 00:26:11,600
Speaker 1: I'm going to segue for a second.

493
00:26:12,160 --> 00:26:15,280
Speaker 3: I think the quants and academics messed up this conversation

494
00:26:15,520 --> 00:26:19,320
Speaker 3: twenty five years ago by calling the famous farm and

495
00:26:19,400 --> 00:26:21,560
Speaker 3: French farm and French with my dissertation advisors.

496
00:26:21,600 --> 00:26:22,080
Speaker 1: I love them.

497
00:26:22,480 --> 00:26:24,520
Speaker 3: I don't even think they called it value early on,

498
00:26:25,119 --> 00:26:28,119
Speaker 3: but that became called the value factor price to a fundamental.

499
00:26:30,040 --> 00:26:32,880
Speaker 3: Nobody just really disagrees with the Graham and Dodd world

500
00:26:32,960 --> 00:26:36,560
Speaker 3: that that's not value. Value is what you're paying compared

501
00:26:36,600 --> 00:26:40,040
Speaker 3: to fundamentals in context of is it a good company,

502
00:26:40,160 --> 00:26:41,159
Speaker 3: is it executing well? What?

503
00:26:41,280 --> 00:26:45,000
Speaker 1: Or it's growth? How risky is it? In the quantitative

504
00:26:45,000 --> 00:26:46,840
Speaker 1: academic world, you get there.

505
00:26:47,720 --> 00:26:50,359
Speaker 3: By this thing they call the value factor, which I

506
00:26:50,480 --> 00:26:52,879
Speaker 3: think really should be called the low price or, if

507
00:26:52,880 --> 00:26:54,680
Speaker 3: you want to be more long winded, the low price

508
00:26:54,720 --> 00:26:56,320
Speaker 3: to fundamental factor.

509
00:26:56,840 --> 00:26:57,760
Speaker 1: I like that factor.

510
00:26:57,880 --> 00:27:01,120
Speaker 3: On average, it wins, it doesn't win nearly as much

511
00:27:01,119 --> 00:27:03,680
Speaker 3: as if you combine it with some measures of is

512
00:27:03,760 --> 00:27:06,800
Speaker 3: it does it deserve to be cheap? One simple way

513
00:27:06,840 --> 00:27:10,639
Speaker 3: to think of twenty ten through about eighteen is the

514
00:27:10,800 --> 00:27:12,000
Speaker 3: does it deserve to cheap?

515
00:27:12,080 --> 00:27:14,440
Speaker 1: Which is cheap which is more than half of what

516
00:27:14,560 --> 00:27:16,560
Speaker 1: we do work like a charm.

517
00:27:17,320 --> 00:27:21,200
Speaker 3: So value can lose, and somebody who's has that as

518
00:27:21,240 --> 00:27:24,439
Speaker 3: part of their process but doesn't dominate their process can

519
00:27:24,480 --> 00:27:28,920
Speaker 3: do fine. Now and as late as late twenty seventeen,

520
00:27:29,000 --> 00:27:32,760
Speaker 3: I was actually taking the opposite side of some famous

521
00:27:32,800 --> 00:27:35,480
Speaker 3: a handful not just one of famous value managers who

522
00:27:35,520 --> 00:27:38,680
Speaker 3: are saying, we've had eight terrible years. That's never happened before.

523
00:27:38,680 --> 00:27:42,040
Speaker 3: It has to reverse, and we measure this thing called

524
00:27:42,080 --> 00:27:44,240
Speaker 3: the value spread. How cheap does value look? If you

525
00:27:44,320 --> 00:27:46,600
Speaker 3: do the Fama French type world, and by the way,

526
00:27:46,640 --> 00:27:49,360
Speaker 3: we do a lot more complex things in price to book.

527
00:27:49,400 --> 00:27:52,680
Speaker 3: I'm using shorthand, But if you look at cheap versus expensive,

528
00:27:53,040 --> 00:27:57,480
Speaker 3: a blaring question is always how cheap and how expensive?

529
00:27:58,160 --> 00:28:01,199
Speaker 3: If their a smidge indifference, maybe not as interesting as

530
00:28:01,200 --> 00:28:04,760
Speaker 3: if they're a big difference. As late as twenty seventeen,

531
00:28:05,440 --> 00:28:08,959
Speaker 3: even a pure academic style of value strategy, which had

532
00:28:08,960 --> 00:28:13,240
Speaker 3: a terrible eight year run, didn't look cheap because the

533
00:28:13,320 --> 00:28:17,400
Speaker 3: fundamentals had driven its loss. When you lose because your

534
00:28:17,480 --> 00:28:21,400
Speaker 3: egoes down by half, if your p goes down by half,

535
00:28:21,480 --> 00:28:24,960
Speaker 3: two you didn't get any cheaper. You stayed the same.

536
00:28:25,400 --> 00:28:27,520
Speaker 3: And it turns out that's actually a pretty good environment

537
00:28:27,600 --> 00:28:31,840
Speaker 3: for people like us. What happened nineteen and twenty eighteen,

538
00:28:32,040 --> 00:28:35,639
Speaker 3: to some extent, but largely nineteen and twenty is that

539
00:28:35,880 --> 00:28:37,920
Speaker 3: I don't like to use the word bubble a lot.

540
00:28:38,080 --> 00:28:44,160
Speaker 3: I'm still scared of gene fauma enough that that saying

541
00:28:44,160 --> 00:28:46,680
Speaker 3: the word bubble, I feel like, you know, something's gonna

542
00:28:46,720 --> 00:28:50,360
Speaker 3: come down from the rafters. But I do think nineteen

543
00:28:50,400 --> 00:28:53,840
Speaker 3: and twenty, much like ninety nine in two thousand, was

544
00:28:53,960 --> 00:28:58,400
Speaker 3: a kind of crazy bubble. And in that world, and

545
00:28:58,440 --> 00:29:00,280
Speaker 3: I'm going to self servingly describe it, this is a

546
00:29:00,360 --> 00:29:04,280
Speaker 3: rational strategy, not good to be a rational strategy. Value

547
00:29:04,400 --> 00:29:07,880
Speaker 3: loss there because of a mania, not because the companies

548
00:29:07,920 --> 00:29:10,920
Speaker 3: were losing on the fundamentals. And I'll be brutally honest,

549
00:29:10,960 --> 00:29:12,240
Speaker 3: we don't have a lot to protect us.

550
00:29:12,200 --> 00:29:13,840
Speaker 1: From that kind of environment.

551
00:29:14,160 --> 00:29:17,800
Speaker 3: To win in that environment, you need to find a systematic,

552
00:29:17,920 --> 00:29:21,440
Speaker 3: long term factor that makes money on average, that does

553
00:29:21,560 --> 00:29:22,320
Speaker 3: really well.

554
00:29:22,360 --> 00:29:23,280
Speaker 1: In a crazy bubble.

555
00:29:24,480 --> 00:29:25,480
Speaker 4: Sounds like momentum.

556
00:29:25,920 --> 00:29:27,760
Speaker 3: Momentum is one of the few you have hopes on.

557
00:29:29,240 --> 00:29:31,640
Speaker 3: Momentum is a flighty thing to put all your eggs on.

558
00:29:32,160 --> 00:29:34,560
Speaker 3: For one thing, a momentum standalone has a horrific left

559
00:29:34,600 --> 00:29:39,040
Speaker 3: tail when momentum reverses if you get it wrong. Also momentum,

560
00:29:39,120 --> 00:29:42,200
Speaker 3: you can think you have a good environment on average.

561
00:29:42,240 --> 00:29:44,520
Speaker 3: It works in a bubble. It did add value in

562
00:29:44,600 --> 00:29:46,960
Speaker 3: this bubble, But if you get a few wiggles that

563
00:29:47,000 --> 00:29:47,760
Speaker 3: are crazy.

564
00:29:47,560 --> 00:29:48,680
Speaker 1: Momentum is more sensitive.

565
00:29:48,720 --> 00:29:50,880
Speaker 3: So momentum is one of the few you have hopes

566
00:29:50,920 --> 00:29:53,720
Speaker 3: on and it's interesting you raise it, because to find

567
00:29:53,760 --> 00:29:55,280
Speaker 3: one that will help it has to be something that.

568
00:29:55,400 --> 00:29:58,840
Speaker 1: Works in a bubble but works on average over the

569
00:29:58,920 --> 00:29:59,440
Speaker 1: long term.

570
00:30:01,360 --> 00:30:05,120
Speaker 3: I'm excluding massively perfect timing. I'm not obviously. If you

571
00:30:05,160 --> 00:30:08,480
Speaker 3: can say do value all the time except nineteen and twenty,

572
00:30:08,640 --> 00:30:09,120
Speaker 3: that's great.

573
00:30:09,400 --> 00:30:13,640
Speaker 4: So is it a coincidence that your dissertation was value

574
00:30:13,880 --> 00:30:16,320
Speaker 4: and momentum together? And is that useful?

575
00:30:16,480 --> 00:30:19,200
Speaker 3: If it is as a happy coincidence, So how useful

576
00:30:19,320 --> 00:30:22,320
Speaker 3: was that? It was certainly useful, though if I can

577
00:30:22,320 --> 00:30:23,960
Speaker 3: admit to this crowd, I think I should have listened

578
00:30:23,960 --> 00:30:28,000
Speaker 3: to it a little more in late twenty nineteen. We've

579
00:30:28,040 --> 00:30:31,880
Speaker 3: always described trying to time factors and the market as

580
00:30:31,880 --> 00:30:34,920
Speaker 3: an investing sin, and we have always said with a

581
00:30:34,960 --> 00:30:36,920
Speaker 3: little bit of a smile on our face, and we

582
00:30:37,080 --> 00:30:40,040
Speaker 3: recommend you sin a little, just a little, meaning when

583
00:30:40,080 --> 00:30:42,640
Speaker 3: you see things that you that you are fairly convinced

584
00:30:42,680 --> 00:30:45,800
Speaker 3: and you put the work in cannot hold long term,

585
00:30:47,120 --> 00:30:50,320
Speaker 3: that are just at epic levels. And by late twenty nineteen,

586
00:30:50,360 --> 00:30:53,400
Speaker 3: the spread between cheap and expensive was approaching the dot

587
00:30:53,480 --> 00:30:56,640
Speaker 3: com bubble wides. We think you can do a little

588
00:30:56,640 --> 00:30:58,520
Speaker 3: more of it and I wrote, and I was very

589
00:30:58,560 --> 00:31:00,320
Speaker 3: honest about this. I said, I'm not listening to the

590
00:31:00,400 --> 00:31:03,040
Speaker 3: momentum trend part of this because I don't know it

591
00:31:03,120 --> 00:31:06,040
Speaker 3: could this time. It momentum is flighty, Like I said,

592
00:31:06,280 --> 00:31:10,440
Speaker 3: he works on average, not always. It could come back

593
00:31:10,480 --> 00:31:12,640
Speaker 3: in the next three days, in which case momentum is

594
00:31:12,680 --> 00:31:14,840
Speaker 3: going to have kept you from the opportunity. If I

595
00:31:14,880 --> 00:31:17,760
Speaker 3: can go back in time, it still has worked out

596
00:31:17,800 --> 00:31:19,800
Speaker 3: for us, and I'm happy. But if I go back

597
00:31:19,840 --> 00:31:22,680
Speaker 3: in time and say, Cliff, why don't you, why don't

598
00:31:22,720 --> 00:31:25,400
Speaker 3: you listen to yourself and wait till it starts to work,

599
00:31:25,800 --> 00:31:26,680
Speaker 3: would have been even better.

600
00:31:27,120 --> 00:31:30,360
Speaker 2: So let's talk a little bit about this decade and

601
00:31:30,520 --> 00:31:35,360
Speaker 2: last decade. Value didn't do well when capital was cheap,

602
00:31:35,640 --> 00:31:40,600
Speaker 2: rates were low, inflation was practically non existent. Growth really dominated.

603
00:31:41,200 --> 00:31:45,640
Speaker 2: Now it's a new regime. The ten year is foreign changed,

604
00:31:45,760 --> 00:31:48,320
Speaker 2: the Fed funds rate is five and change. Even though

605
00:31:48,360 --> 00:31:52,320
Speaker 2: inflation has rolled over, everything is still elevated in price.

606
00:31:53,160 --> 00:31:56,760
Speaker 2: What does that mean looking at forward versus what we

607
00:31:56,960 --> 00:32:00,480
Speaker 2: just came out of. Is this possibly in an environment

608
00:32:00,600 --> 00:32:03,880
Speaker 2: where that spread is gonna narrow or reverse?

609
00:32:04,040 --> 00:32:06,200
Speaker 4: Or how do you look at this regime change?

610
00:32:06,560 --> 00:32:11,760
Speaker 3: I think the macro world influences this, but maybe a

611
00:32:11,800 --> 00:32:15,240
Speaker 3: little less than other people. I think the spread between

612
00:32:15,320 --> 00:32:20,640
Speaker 3: cheap and expensive historically is only mildly related to interest rates,

613
00:32:20,680 --> 00:32:22,120
Speaker 3: real or nominal.

614
00:32:22,480 --> 00:32:23,480
Speaker 1: The story is good.

615
00:32:23,920 --> 00:32:27,440
Speaker 3: When interest rates are really high, people prefer value because

616
00:32:27,480 --> 00:32:29,640
Speaker 3: the cash flows are short term, and when they're really low,

617
00:32:29,760 --> 00:32:32,760
Speaker 3: you prefer growth because cash flow is a very long term.

618
00:32:33,400 --> 00:32:35,560
Speaker 3: One of the problems is when you actually look at

619
00:32:35,680 --> 00:32:39,880
Speaker 3: expensive versus cheap companies, the realize growth differentials of broad

620
00:32:39,920 --> 00:32:43,360
Speaker 3: diversified portfolios I'm not talking about picking in video or

621
00:32:43,400 --> 00:32:47,600
Speaker 3: something are very small, so there really is not a

622
00:32:47,680 --> 00:32:52,040
Speaker 3: very strong theoretical reason. I think occasionally hit manias and

623
00:32:52,160 --> 00:32:55,920
Speaker 3: manias are very very hard to model. I don't trust

624
00:32:55,960 --> 00:32:58,400
Speaker 3: anyone to say what we know A bunch of the

625
00:32:58,440 --> 00:33:02,560
Speaker 3: conditions for a mania. Technology innovation and cheap money are

626
00:33:02,600 --> 00:33:07,680
Speaker 3: probably part of it. Technological innovation will certainly continue, but

627
00:33:07,800 --> 00:33:10,840
Speaker 3: as I love to point out, people who think value

628
00:33:10,920 --> 00:33:13,800
Speaker 3: can't do well in technological innovation are ignoring the fact

629
00:33:13,840 --> 00:33:15,400
Speaker 3: that it did well in the last one hundred and

630
00:33:15,440 --> 00:33:20,080
Speaker 3: fifty years. You know, we started out with steamships. The

631
00:33:20,160 --> 00:33:25,160
Speaker 3: strategy can survive that. I do think a extremely cheap

632
00:33:25,240 --> 00:33:28,760
Speaker 3: money is probably in a even if I can tell

633
00:33:28,760 --> 00:33:31,000
Speaker 3: you it should not be theoretically linked as much as

634
00:33:31,040 --> 00:33:34,640
Speaker 3: it is, it's probably in a looser, harder to prove way.

635
00:33:34,840 --> 00:33:38,160
Speaker 1: Correlated to people going nuts write that down.

636
00:33:38,240 --> 00:33:41,040
Speaker 3: This is very quantitative academic people going nuts.

637
00:33:42,560 --> 00:33:45,440
Speaker 1: And I do think that era.

638
00:33:46,440 --> 00:33:49,200
Speaker 3: You know us, we don't try to make massive macroeconomic forecasts.

639
00:33:49,600 --> 00:33:51,600
Speaker 3: But I think for ten years we lived in a

640
00:33:51,640 --> 00:33:54,880
Speaker 3: world where maybe the most significant macroeconomic thing to me

641
00:33:55,160 --> 00:33:58,000
Speaker 3: is the central banks around the world, and the FED

642
00:33:58,080 --> 00:34:02,680
Speaker 3: in particular, did not face trade offs. Inflation was non existent,

643
00:34:03,200 --> 00:34:05,640
Speaker 3: and they could cut rates when they wanted to stimulate growth.

644
00:34:05,760 --> 00:34:07,120
Speaker 1: They could raise rates if.

645
00:34:07,000 --> 00:34:10,680
Speaker 3: They felt like if they felt like it, I have

646
00:34:10,760 --> 00:34:14,359
Speaker 3: no other better reason for that. They clearly face even

647
00:34:14,400 --> 00:34:17,839
Speaker 3: with inflation abating. I think it's gonna be a long

648
00:34:17,880 --> 00:34:20,080
Speaker 3: time to the central banks of the world face the

649
00:34:20,120 --> 00:34:24,040
Speaker 3: world with no trade offs, and the spread between cheap

650
00:34:24,080 --> 00:34:28,040
Speaker 3: and expensive kind of my north star. I'm sad to

651
00:34:28,160 --> 00:34:31,399
Speaker 3: tell people it is no longer wider than the dot

652
00:34:31,480 --> 00:34:34,839
Speaker 3: com bubble, so it's about eighty five percent of it though,

653
00:34:35,200 --> 00:34:37,640
Speaker 3: so we've had a massive comeback book. This is the

654
00:34:37,719 --> 00:34:41,560
Speaker 3: saltiest thing I will tell this audience. I have laughed

655
00:34:41,600 --> 00:34:43,919
Speaker 3: at people on Wall Street since I was twenty six

656
00:34:44,400 --> 00:34:45,480
Speaker 3: for the following phrase.

657
00:34:46,000 --> 00:34:47,719
Speaker 1: But I think we're in the third ending of this thing.

658
00:34:49,280 --> 00:34:53,239
Speaker 4: So in the last minute, we have where do you

659
00:34:53,320 --> 00:34:54,520
Speaker 4: see people currently?

660
00:34:54,920 --> 00:34:59,920
Speaker 2: I'm asking you this as a quant not a psychologist quantitative.

661
00:35:00,760 --> 00:35:03,480
Speaker 2: Where are you looking out at the world and seeing

662
00:35:03,600 --> 00:35:05,920
Speaker 2: people still going crazy?

663
00:35:06,320 --> 00:35:06,480
Speaker 3: Is it?

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00:35:07,160 --> 00:35:07,480
Speaker 1: AI?

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00:35:07,960 --> 00:35:11,360
Speaker 4: Is it tell us what the next bubble to avoid is.

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00:35:11,800 --> 00:35:15,720
Speaker 3: I have been I'm a little if something bad happens

667
00:35:15,760 --> 00:35:18,200
Speaker 3: to me and it's fishy, I think it's going to

668
00:35:18,239 --> 00:35:22,080
Speaker 3: be the private equity industry that gets me. I've written

669
00:35:22,160 --> 00:35:25,640
Speaker 3: a lot, and I've talked about this for years. This

670
00:35:25,680 --> 00:35:27,600
Speaker 3: is a twenty eight year old argument. I've been having

671
00:35:28,920 --> 00:35:33,960
Speaker 3: nothing wrong with private investing at all, but I think

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00:35:34,080 --> 00:35:36,719
Speaker 3: more and more people do it today because they don't

673
00:35:36,719 --> 00:35:39,799
Speaker 3: have to show volatility, not for the opportunity. When David

674
00:35:39,840 --> 00:35:41,760
Speaker 3: Swinson was doing it in the eighties, it was about

675
00:35:41,840 --> 00:35:45,040
Speaker 3: the money making opportunity. It wasn't about the fact that

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00:35:45,120 --> 00:35:47,400
Speaker 3: he didn't have to report ups and downs. And I

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00:35:47,480 --> 00:35:51,000
Speaker 3: think it's become more like that. And I think long

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00:35:51,120 --> 00:35:53,719
Speaker 3: only markets are have kind of whistled past a bit

679
00:35:53,760 --> 00:35:56,040
Speaker 3: of a graveyard real interest rates have gone up two

680
00:35:56,080 --> 00:36:00,279
Speaker 3: hundred basis points on the thirty year, and stock markets

681
00:36:00,280 --> 00:36:02,120
Speaker 3: they've shrugged it off and typically those.

682
00:36:02,239 --> 00:36:03,320
Speaker 1: Have moved together.

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00:36:03,800 --> 00:36:07,000
Speaker 3: But the private world is even more extreme where the

684
00:36:07,960 --> 00:36:09,600
Speaker 3: I'm not sure if they tried to sell it what

685
00:36:09,680 --> 00:36:12,600
Speaker 3: they would get, but they're still marked pretty pretty crazy.

686
00:36:12,680 --> 00:36:14,279
Speaker 3: So I've been picking on them for a while, and

687
00:36:14,400 --> 00:36:16,360
Speaker 3: with zero time to go, I see no reason to

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00:36:16,440 --> 00:36:18,040
Speaker 3: pick a new victim.

689
00:36:18,200 --> 00:36:19,400
Speaker 1: I love private investing.

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00:36:19,520 --> 00:36:22,560
Speaker 3: I live in Granwich, Connecticut, and my kids don't get

691
00:36:22,600 --> 00:36:25,240
Speaker 3: picked for sports teams because I make fun of private investing.

692
00:36:27,360 --> 00:36:31,400
Speaker 3: But I do think that world is dominated investing for

693
00:36:31,440 --> 00:36:33,800
Speaker 3: a while, partly for good reasons because there are some

694
00:36:33,920 --> 00:36:37,480
Speaker 3: opportunities and great investors, but partly for some terrible reasons

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00:36:37,600 --> 00:36:40,560
Speaker 3: because they take volatility and they just cover it up.

696
00:36:40,680 --> 00:36:42,960
Speaker 3: And I think that those chickens may come home to

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00:36:43,040 --> 00:36:43,759
Speaker 3: roost at some point.

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00:36:44,360 --> 00:36:46,360
Speaker 2: Cliff, I could talk to you for hours, but the

699
00:36:46,400 --> 00:36:48,200
Speaker 2: clock says zero, so we have to wrap it up.

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00:36:48,360 --> 00:36:50,320
Speaker 2: Let's hear it for Cliff Assness of AQR.

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00:36:51,640 --> 00:36:52,399
Speaker 4: Thank you so much.

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00:36:54,600 --> 00:36:57,640
Speaker 2: We have been speaking with Cliff Asnes. He is the

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00:36:57,760 --> 00:37:02,400
Speaker 2: co founder and chief investment office of AQR AE hundred

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00:37:02,480 --> 00:37:11,040
Speaker 2: billion dollar hedge fund specializing in quantitative analytics, statistical arbitrage,

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00:37:11,239 --> 00:37:15,480
Speaker 2: value investing, etc. If you enjoy this conversation, hey be

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00:37:15,560 --> 00:37:19,239
Speaker 2: sure and check out any of our previous five hundred discussions.

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00:37:19,280 --> 00:37:20,400
Speaker 4: You can find those.

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00:37:20,600 --> 00:37:25,600
Speaker 2: At iTunes, Spotify, YouTube, wherever you get your favorite podcasts from.

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00:37:26,080 --> 00:37:28,440
Speaker 2: I want to thank the team at Advisor Circle for

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00:37:28,600 --> 00:37:33,240
Speaker 2: making the audio available from this extra special live event.

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00:37:33,920 --> 00:37:35,080
Speaker 4: I'm Barry Ritolts.

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00:37:35,400 --> 00:37:39,319
Speaker 2: You've been listening to Masters in Business Special Live Edition

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00:37:39,760 --> 00:37:40,799
Speaker 2: on Bloomberg Radio