WEBVTT - Andrew Slimmon on Quantitative Factors in Markets 0:00:02.040 --> 0:00:08.320 This is Master's in Business with Barry Ridholds on Bloomberg Radio. 0:00:09.720 --> 0:00:14.760 This week on the podcast, I have another extra special guest, ANDREWS. 0:00:14.800 --> 0:00:18.760 Lemons has pretty much done everything on the wealth management 0:00:18.840 --> 0:00:23.000 side of the business, starting at Brown Brothers Harriman before 0:00:23.040 --> 0:00:27.200 going on to Morgan Stanley where he started out as 0:00:27.240 --> 0:00:32.000 a client facing wealth manager, before moving into portfolio manager 0:00:32.080 --> 0:00:38.240 and eventually creating the Applied Equity Advisors team that uses 0:00:38.440 --> 0:00:46.159 a combination of quantitative and fundamental and behavioral thinking to 0:00:46.400 --> 0:00:53.480 create portfolios and funds that are sturdy and can survive 0:00:54.320 --> 0:00:59.840 any sort of change in investor sentiment. They look at geography, 0:01:00.120 --> 0:01:04.319 they look at capsize, they look at style, and they 0:01:04.319 --> 0:01:08.840 look at sector and try and keep a portfolio leaning 0:01:08.920 --> 0:01:14.600 towards what's working best. These tend to be concentrated portfolios. 0:01:14.640 --> 0:01:18.320 The US versions are thirty to sixty holdings, where the 0:01:18.880 --> 0:01:23.600 overseas versions are just twenty holdings. I found this conversation 0:01:23.640 --> 0:01:26.720 to be fascinating. There are a few people in asset 0:01:26.760 --> 0:01:31.559 management that have seen the world of investing from both 0:01:31.640 --> 0:01:35.880 the client's perspective and a client facing advisor side to 0:01:36.080 --> 0:01:40.760 a PM and then a broader asset manager than Andrew has. 0:01:41.040 --> 0:01:44.240 He really comes with a wealth of knowledge and he's 0:01:44.319 --> 0:01:48.040 been with Morganstantley since nineteen ninety one. That sort of 0:01:48.760 --> 0:01:51.840 tenure at a single firm is increasingly rare, rare these days. 0:01:52.400 --> 0:01:55.240 I found this discussion to be absolutely fascinating and I 0:01:55.280 --> 0:01:59.960 think you will also, with no further ado, Morgan Stanley 0:02:00.600 --> 0:02:01.720 Andrews Slimmon. 0:02:01.520 --> 0:02:02.760 Thank you. It's an ho to be here. 0:02:02.800 --> 0:02:05.240 Well, it's a pleasure to have you. So let's start 0:02:05.400 --> 0:02:08.400 at the beginning with your background. You get a BA 0:02:08.520 --> 0:02:12.200 from the University of Pennsylvania and an NBA from University 0:02:12.200 --> 0:02:15.160 of Chicago. Was finance always the plan. 0:02:15.400 --> 0:02:18.760 I think being in a competitive industry with all the plan. 0:02:18.840 --> 0:02:21.280 I played tennis competitively in juniors and went out and 0:02:21.280 --> 0:02:23.880 played in college, and I always liked the you know, 0:02:23.960 --> 0:02:26.040 you either won or loss. And what I always liked 0:02:26.040 --> 0:02:28.919 about this industry it was all about, you know, did 0:02:28.919 --> 0:02:32.040 you win or loose? There wasn't a lot of gray 0:02:32.160 --> 0:02:34.120 era and I think that's what I do love about 0:02:34.280 --> 0:02:38.000 the stock market and investing in general, because there's a 0:02:38.000 --> 0:02:40.600 scorecard and you can't there's no room in the scorecard 0:02:40.600 --> 0:02:42.440 for the editorials. 0:02:41.720 --> 0:02:44.519 No points for style or form. It's just did you 0:02:44.560 --> 0:02:47.440 win or lose? So where did you begin? What was 0:02:47.480 --> 0:02:49.040 your first role within the industry? 0:02:49.040 --> 0:02:51.920 Sure? So, well, my first role was opening the mail 0:02:52.000 --> 0:02:55.400 at a broker's firm in Hartford, Connecticut. But I started 0:02:55.440 --> 0:02:58.320 my career at Brown Brothers Harriman right here in New 0:02:58.400 --> 0:03:01.880 York in a training program, which was great because they 0:03:01.880 --> 0:03:05.200 had commercial banking, they had capital markets, and they had 0:03:05.200 --> 0:03:08.280 the investment management side of the business. And that's what 0:03:08.560 --> 0:03:11.560 getting exposure all those led me to believe, Gee, I 0:03:11.760 --> 0:03:14.320 really am interested in the stock market and how it 0:03:14.440 --> 0:03:16.280 works in investing in general. 0:03:16.639 --> 0:03:19.080 So what led you to Morgan Stanley? How'd you find 0:03:19.080 --> 0:03:20.639 your way to write? 0:03:20.760 --> 0:03:25.720 So? Yeah, I was a research analyst at Brown Brothers 0:03:25.760 --> 0:03:29.400 and I was covering, you know, in healthcare stocks. I 0:03:29.840 --> 0:03:34.600 realized that there must be something more to investing than 0:03:34.680 --> 0:03:36.880 just what was going on at the company level, because 0:03:36.920 --> 0:03:39.360 I noticed that the things that were moving my stocks 0:03:39.360 --> 0:03:41.360 on a day to day basis weren't just what was 0:03:41.400 --> 0:03:45.600 going on at the company level. And University's Chicago, where 0:03:45.600 --> 0:03:48.240 I got to my MBA, was obviously very focused on 0:03:48.400 --> 0:03:52.840 more the quantitative areas of investing, and I took FOMA 0:03:52.840 --> 0:03:56.000 and French and so forth. And Miller and all those 0:03:56.040 --> 0:04:01.160 that taught me that what drives a stock price is 0:04:01.240 --> 0:04:05.600 more than just the company level. And so that was 0:04:05.680 --> 0:04:09.640 really how it rounded my knowledge of kind of investing, 0:04:09.680 --> 0:04:15.000 the first steps. And then coming out of business school, 0:04:15.040 --> 0:04:19.240 it was ninety one, and it was a recession. And 0:04:19.320 --> 0:04:21.159 I had met my wife in business school and she 0:04:21.200 --> 0:04:23.240 got a job at kid r Peabody, if you remember that, 0:04:23.480 --> 0:04:27.200 invest in banking in Chicago, and I couldn't find kind 0:04:27.240 --> 0:04:31.880 of a buy side opportunity, and Morgan Stanley had a 0:04:31.920 --> 0:04:36.039 department called Prior Wealth Management that covered wealthy individuals and 0:04:36.080 --> 0:04:40.080 small institutions in Chicago. And I needed a job, and 0:04:40.120 --> 0:04:41.920 I had a lot of student debts, so I said, hey, 0:04:42.120 --> 0:04:44.840 as opposed to go in the traditional buy side route, 0:04:45.000 --> 0:04:48.680 I'll start in this area, covering clients and investing for them. 0:04:49.440 --> 0:04:54.039 So ninety one kind of a mild recession, mild and 0:04:54.240 --> 0:05:00.640 really halfway through what was a rampaging bull market. What 0:05:00.760 --> 0:05:03.680 was it like in the nineteen nineties in New York and. 0:05:03.720 --> 0:05:06.640 Finance, Well, I mean the thing that was amazing is 0:05:06.800 --> 0:05:09.240 we would have clients in the late nineties. It would 0:05:09.279 --> 0:05:13.000 come to us and they'd say, Andrew, I'm not greedy. 0:05:13.040 --> 0:05:15.080 I just want fifteen to twenty percent returns a year, 0:05:15.440 --> 0:05:20.640 right and no, with limited risks. And that is what 0:05:20.720 --> 0:05:24.679 was so fascinating about today is today people say to me, Andrew, 0:05:24.720 --> 0:05:26.800 why would I invest in equities when I can get 0:05:26.800 --> 0:05:30.720 five percent in the money market. And what a difference 0:05:30.800 --> 0:05:33.839 in a mindset, which tells you where we are. In 0:05:33.880 --> 0:05:36.480 the late nineties, we had just gone through a roaring 0:05:36.560 --> 0:05:40.560 bull market. Optimism was just so rampant in the worst 0:05:40.640 --> 0:05:43.839 year in the business I can remember was nineteen ninety 0:05:43.920 --> 0:05:47.360 nine because as an investor covering clients, I was caught 0:05:47.400 --> 0:05:51.000 between doing the right thing for them, which was avoid 0:05:51.080 --> 0:05:55.240 these ridiculously priced stocks or get on the train because 0:05:55.320 --> 0:05:58.120 the money is pouring through. And then it all came 0:05:58.160 --> 0:06:00.400 to an end in two thousand and two thousand and 0:06:00.440 --> 0:06:02.159 I took a step back and say, thank god, I 0:06:02.279 --> 0:06:05.120 never you know, I just didn't buy in the way 0:06:05.160 --> 0:06:08.360 some people did, and therefore save people a lot of money. 0:06:08.360 --> 0:06:12.000 It was a tremendously good learning experience for me to 0:06:12.040 --> 0:06:15.560 stay true to your values of investing. Ultimately, they work 0:06:15.560 --> 0:06:16.360 out you. 0:06:16.279 --> 0:06:21.160 Are identifying something that I'm so fascinated by. The problem 0:06:21.240 --> 0:06:26.279 we run into with surveys or even the risk tolerance questionnaires. 0:06:26.839 --> 0:06:28.800 Is all you find out is, hey, what has the 0:06:28.839 --> 0:06:31.560 market done for the past six months. If the market's 0:06:31.600 --> 0:06:34.440 been good, hey, I of course I want more risk. 0:06:34.880 --> 0:06:37.240 I'm more than comfortable with it. And if the market 0:06:37.279 --> 0:06:40.799 got shellacked, no, no, no, I can't so offer anymore 0:06:40.839 --> 0:06:42.599 draw downs. It's just pure psychology. 0:06:42.839 --> 0:06:45.599 And I would go one step further. You know this, 0:06:45.680 --> 0:06:47.960 you're in the business, but when you first meet someone, 0:06:48.240 --> 0:06:51.000 you never know the ones that are going to be 0:06:51.200 --> 0:06:55.159 truly risk averse or truly can withstand the vault to 0:06:55.200 --> 0:06:57.520 the and ones that can. Some people say, don't worry, 0:06:57.560 --> 0:06:59.520 I'm not worried about the draw downs, and the minute 0:06:59.560 --> 0:07:01.640 happens on the phone to you, and some people I 0:07:01.720 --> 0:07:03.520 told you I wasn't worried and I didn't call you. 0:07:03.800 --> 0:07:06.159 And you can never know just the first time you 0:07:06.200 --> 0:07:07.599 meet people who that's going to be. 0:07:08.160 --> 0:07:11.960 It's a challenge figuring out who people really are not easy. 0:07:12.000 --> 0:07:14.560 So you start at Morgan Stanley in nineteen ninety one, 0:07:14.640 --> 0:07:17.680 you're in. That's a long time ago. You start on 0:07:17.720 --> 0:07:20.920 the private wealth side. What led you to becoming a 0:07:21.000 --> 0:07:24.440 portfolio manager with Morgan Stanley Wealth Strategy. 0:07:24.120 --> 0:07:26.400 So if you think about my career, I learned to 0:07:26.440 --> 0:07:29.720 be a fundamental analyst. I went to Universe Chicago and 0:07:29.800 --> 0:07:33.480 learned that, oh, there's quantitative factors that drive a stock 0:07:33.520 --> 0:07:36.520 price beyond kind of what's going on at the company level. 0:07:36.720 --> 0:07:39.960 The third part of my experience was being in prior 0:07:40.040 --> 0:07:42.640 wealth management. Clients want to believe they all buy low 0:07:42.680 --> 0:07:45.160 and sell high, but bear you know that doesn't isn't 0:07:45.160 --> 0:07:45.520 the case. 0:07:45.640 --> 0:07:49.640 Somebody does accidentally, someone randomly top ticks and bottom ticks 0:07:49.640 --> 0:07:52.080 of market, but nobody does that conceive exactly. 0:07:52.120 --> 0:07:53.960 And here's a great example of what I mean. If 0:07:54.000 --> 0:07:57.520 you think about the years twenty twenty. In twenty twenty one, 0:07:58.120 --> 0:08:02.160 growth stocks took off right, but in twenty twenty two 0:08:02.160 --> 0:08:04.560 they got crushed. Do you think more money went into 0:08:04.720 --> 0:08:08.880 growth managers and funds in twenty twenty one or the 0:08:08.960 --> 0:08:10.880 end of twenty twenty two after they got crushed. 0:08:10.920 --> 0:08:14.960 The flows are always a year behind me exactly what 0:08:15.080 --> 0:08:16.200 people are backwards. 0:08:15.880 --> 0:08:19.200 Like well, and that's because there's something called the tear sheet. 0:08:19.320 --> 0:08:21.560 If you were my client, I went to you and said, Barry, 0:08:22.040 --> 0:08:24.840 I think you should invest in emerging markets because look 0:08:24.880 --> 0:08:27.680 how terribly it's done. The last five years and I can. 0:08:27.720 --> 0:08:30.920 You're the tear sheet everybody. Hey, I hate it. So 0:08:31.000 --> 0:08:34.680 the problem with this business is a stock price does 0:08:34.720 --> 0:08:37.280 not care what happened in the past. It only cares 0:08:37.320 --> 0:08:39.960 about what's happened in the future. But as humans, we 0:08:40.000 --> 0:08:42.920 all suffer from recency buyas. So what I observed in 0:08:42.960 --> 0:08:45.920 the nineties, it's a long winted answer. Your question is 0:08:45.960 --> 0:08:49.079 what I observed in the nineties. As a coverage offer, 0:08:49.120 --> 0:08:52.440 you can't get clients to actually buy what's out of favor. 0:08:52.920 --> 0:08:58.560 And the flaw in the whole growth value US international 0:08:59.200 --> 0:09:03.720 is people frame, Oh, maybe I should buy more growth 0:09:03.920 --> 0:09:07.280 because it's working well, except it gets too expensive. So 0:09:07.880 --> 0:09:10.880 the reason I left being in wealth management, I was 0:09:10.960 --> 0:09:16.240 convinced that I could start strategies using more quantitative but 0:09:16.520 --> 0:09:19.960 give us flexibility. So if we could start core strategies 0:09:20.320 --> 0:09:22.839 so that if growth got too expensive, we could tilt 0:09:22.840 --> 0:09:26.560 away from growth, or if Europe wasn't working, we could 0:09:26.600 --> 0:09:29.760 tilt away from Europe. That gave us more flexibility as 0:09:29.800 --> 0:09:32.400 an active manager, versus saying I'm only a growth manager, 0:09:32.480 --> 0:09:35.040 that I'm always trying to justify why you should buy growth, 0:09:35.200 --> 0:09:39.560 or if I'm a value manager always justifying why buy value. Remember, 0:09:39.880 --> 0:09:44.240 by nineteen ninety nine, a half of value managers had 0:09:44.240 --> 0:09:46.160 gone out of business in the last three years, that 0:09:46.520 --> 0:09:48.079 just before they took off. 0:09:48.120 --> 0:09:52.400 That's unbelievable. I know folks who run short hedge funds 0:09:52.880 --> 0:09:55.280 and they say they could always tell when we're due 0:09:55.320 --> 0:09:58.400 for a major correction because that's when all of their 0:09:58.400 --> 0:10:01.120 redemptions and outflows hit a crescendo. 0:10:01.320 --> 0:10:05.400 And so that's the problem with the dedicated style is 0:10:05.440 --> 0:10:09.320 you're always fighting human behavior just at the juncture with 0:10:09.360 --> 0:10:13.760 which you should be investing. They're selling, they're selling their stocks. 0:10:13.880 --> 0:10:16.600 So let me ask you the flip side of the question. 0:10:16.679 --> 0:10:19.760 If you can't get people or if it's really challenging 0:10:19.840 --> 0:10:24.920 to make people comfortable with buying out of favor styles 0:10:25.120 --> 0:10:29.880 or companies, can you get them to sell the companies 0:10:29.880 --> 0:10:32.400 that are in favor and have had, you know, an 0:10:32.400 --> 0:10:34.920 exorbitant run up and are really pricey or is that 0:10:35.040 --> 0:10:36.320 just the other side of the same coin. 0:10:36.400 --> 0:10:38.080 It's the other side of the same coin. But I 0:10:38.120 --> 0:10:42.280 think what complicates is is taxes, sure, because people don't 0:10:42.320 --> 0:10:46.800 want to sell for taxes and general Electric was a 0:10:46.920 --> 0:10:50.200 very important experience in my life in a you know 0:10:50.400 --> 0:10:52.440 back in the nineties, which was it became the number 0:10:52.520 --> 0:10:56.880 one stock. Everyone loved it, and then you know, it 0:10:56.960 --> 0:11:00.280 went through a can't grow as quickly anymore. So the 0:11:00.280 --> 0:11:03.880 issue that I see in the industry is stocks never 0:11:04.000 --> 0:11:10.520 survive as the number one company, and so eventually they 0:11:11.080 --> 0:11:14.079 decline and people don't want to take money off the 0:11:14.160 --> 0:11:17.120 table when they're the number one or tops because they 0:11:17.120 --> 0:11:19.560 have big gains. And then ultimately people sold a lot 0:11:19.600 --> 0:11:21.680 of General Electric with a lot less of a gain. 0:11:21.840 --> 0:11:26.160 So the trick is is to reduce the exposures over time. 0:11:26.240 --> 0:11:29.520 So if I'm a core manager and I know that 0:11:29.720 --> 0:11:35.040 growth is expensive relative to its history versus value, we'll 0:11:35.160 --> 0:11:38.400 tilt the portfolio, but we won't go all into value 0:11:38.600 --> 0:11:42.079 all in growth because timing these things is very, very tricky. 0:11:42.840 --> 0:11:46.320 So you've been with Morgan Stanley since nineteen ninety one, 0:11:46.880 --> 0:11:50.720 three decades with the same firm, pretty rare these days. 0:11:50.760 --> 0:11:53.160 What makes the firm so special? What's kept you there 0:11:53.360 --> 0:11:54.080 for all this time? 0:11:54.160 --> 0:11:55.839 Well, you have to remember that when I started in 0:11:56.280 --> 0:11:59.760 nineteen ninety one, wealth management was a relatively small part 0:11:59.840 --> 0:12:04.480 of of the firm, and I give James Gorman tremendous credit. 0:12:04.640 --> 0:12:08.360 He really grew that area because of the stability of 0:12:08.400 --> 0:12:11.640 the cash flow. You know, I'm a pretty stable cash flow. 0:12:11.679 --> 0:12:15.480 And then when I progressed to Morgan Stanley Investment Management, 0:12:15.720 --> 0:12:18.839 it was the same concept, which was we value the 0:12:18.960 --> 0:12:24.439 multiple on stable cash flows is higher than on capital 0:12:24.520 --> 0:12:27.840 markets flows. And so that's I've kind of followed the 0:12:27.880 --> 0:12:31.280 progression of how Morgan Stanley's changed, and that's been a 0:12:31.280 --> 0:12:33.679 great opportunity. And then I look and say, well, I 0:12:33.720 --> 0:12:37.120 was able to go from wealth management into the asset 0:12:37.200 --> 0:12:40.040 management because the firm grew in that era. So it's 0:12:40.160 --> 0:12:43.640 been a tremendously great firm to be with. But I've 0:12:43.760 --> 0:12:46.439 you know, my career has changed over time as the 0:12:46.480 --> 0:12:47.520 firm's changed over time. 0:12:47.640 --> 0:12:50.360 Sure, I had John mac on about a year ago 0:12:50.800 --> 0:12:54.480 and he described that exact same thing, the appeal of 0:12:54.840 --> 0:12:57.160 wealth management, and part of the reason what was a 0:12:57.200 --> 0:13:00.280 Dean winner. The big acquisition that was done was, hey, 0:13:00.320 --> 0:13:03.079 this allows us to suffer the ups and downs in 0:13:03.160 --> 0:13:06.000 the other side of the business, which has potential for 0:13:06.080 --> 0:13:11.920 great rewards but no stability versus ready steady, moderate gains 0:13:11.920 --> 0:13:13.120 from the funeral wealth management. 0:13:13.160 --> 0:13:16.720 We bought Smith Barney another thing. So then over the 0:13:16.720 --> 0:13:20.800 acid management side, there's eating Vance each trade wealth management, 0:13:20.840 --> 0:13:24.440 and with eat Advance came Parametric and Calvert. So the 0:13:24.480 --> 0:13:27.400 firm has grown in the areas that I've grown personally. 0:13:27.440 --> 0:13:29.800 So it's been a great, great marriage for a long time. 0:13:30.280 --> 0:13:33.000 So your experience with General Electric, I had a similar 0:13:33.040 --> 0:13:37.200 experience with EMC and with Cisco late nineties, trying to 0:13:37.200 --> 0:13:40.800 get people to recognize, hey, this has been a fantastic run, 0:13:41.320 --> 0:13:45.000 but the growth engine isn't there, the trend has been broken. 0:13:45.880 --> 0:13:48.800 Don't be afraid to ring the bell. And I'm not 0:13:48.880 --> 0:13:53.080 an active trader. I'm a long term holder. Getting people 0:13:53.120 --> 0:13:55.160 to sell their winners not easy to. 0:13:55.120 --> 0:13:58.560 Do, very hard. But also when stocks get very very big, 0:13:58.640 --> 0:14:02.320 companies get very very big, it just gets tougher to grow. 0:14:02.720 --> 0:14:05.640 In my experience, and this has nothing to ge just 0:14:05.800 --> 0:14:09.199 in general, is when companies get big, usually the government 0:14:09.280 --> 0:14:13.040 starts looking into their business because they might dominate too much. 0:14:13.080 --> 0:14:17.280 And so it's a combination of why over time, and 0:14:17.320 --> 0:14:19.000 I know this is hard to believe given the last 0:14:19.000 --> 0:14:22.760 couple of years, why the equal weighted SMP does actually 0:14:22.840 --> 0:14:26.920 outperform the cap weighted S and P because companies mid 0:14:26.960 --> 0:14:29.760 cap companies that are moving up it's easier to grow. 0:14:29.960 --> 0:14:32.560 Well, it hasn't been twenty five years since the Microsoft 0:14:32.880 --> 0:14:37.280 any trust. Uh boy, that's that's that's amazing. How often 0:14:37.400 --> 0:14:40.360 are equal weight SMP outperforming? 0:14:40.600 --> 0:14:43.840 It outperforms about half the time. It's certainly had. I mean, 0:14:43.880 --> 0:14:47.680 think about last year and through October, the cap weighted 0:14:47.840 --> 0:14:50.560 to perform the equated by eleven hundred base ports. Wow. 0:14:50.600 --> 0:14:53.280 That's But the thing that's fascinating about this verier and 0:14:53.320 --> 0:14:56.560 again you know this is that it's always the first 0:14:56.640 --> 0:15:00.280 year off of bear market low investors sell. So tail 0:15:00.400 --> 0:15:04.080 flows were negative from the low of October twenty two 0:15:04.480 --> 0:15:08.200 until for a year in that November twenty three exactly. 0:15:08.240 --> 0:15:10.880 But if you go back to twenty twenty March of 0:15:10.920 --> 0:15:15.040 twenty twenty, flows were negative until February of twenty one. 0:15:15.640 --> 0:15:17.400 So it always takes about. 0:15:17.200 --> 0:15:20.520 A February twenty. That's amazing because from the lows in 0:15:20.680 --> 0:15:22.680 March it was a huge set of game. 0:15:22.920 --> 0:15:27.080 Net flows from muta funds ets. They're always negative the 0:15:27.080 --> 0:15:30.400 first year because of that rear view mirror recency bias. 0:15:30.680 --> 0:15:34.040 The reason why that's relevant, Barry, is because when investors 0:15:34.080 --> 0:15:36.960 finally said I shouldn't sell anymore, I should buy. They're 0:15:37.000 --> 0:15:39.000 not going to buy what's already worked. They're looking for 0:15:39.080 --> 0:15:42.320 other things and that's when the equated really started out before. Huh. 0:15:42.360 --> 0:15:43.080 Really interesting. 0:15:43.360 --> 0:15:46.280 So let's talk a little bit about your concept of 0:15:47.000 --> 0:15:52.760 applied investing. What does that mean? What is applied investing involved? 0:15:53.120 --> 0:15:55.960 Okay, so there's the theoretical story about it, and then 0:15:56.000 --> 0:15:57.840 there's a practical story. I'm sure you'll get a kick 0:15:57.840 --> 0:16:01.000 out of the practical, But the theoretical is that I 0:16:01.120 --> 0:16:05.280 don't believe that a stock price return comes purely from 0:16:05.320 --> 0:16:07.840 what's going on. Fundamentally, you have to decide should I 0:16:07.880 --> 0:16:12.920 own growth, value, large cap, mid cap US versus non 0:16:13.040 --> 0:16:17.280 US any stocks return? About two thirds of return in 0:16:17.320 --> 0:16:20.040 any one year can be defined by those, So we 0:16:20.160 --> 0:16:23.520 have to get that right first, and that's the quantitative size. 0:16:23.560 --> 0:16:26.480 So we use factor models to say, hey, should we 0:16:26.480 --> 0:16:29.840 own growth stocks or value stocks? And so we tilt 0:16:29.920 --> 0:16:34.760 our portfolios quantitatively based on which of those factors are 0:16:34.800 --> 0:16:37.000 setting a signal that they'll work in the future. 0:16:37.080 --> 0:16:42.360 So let me just make sure I understand this geography, size, sector, 0:16:43.040 --> 0:16:46.680 and style, all the four metrics. If you're looking at 0:16:46.800 --> 0:16:49.600 and trying to tilt into what you expect to be 0:16:49.640 --> 0:16:50.880 working away from. 0:16:50.920 --> 0:16:54.040 Exactly, and the goal of that is to keep people 0:16:54.480 --> 0:16:57.400 in the game. Flip side is you know things are 0:16:57.440 --> 0:16:59.480 out of favor, they can stay out of favor. The 0:16:59.560 --> 0:17:03.960 problem in this business is styles and investing can stay 0:17:03.960 --> 0:17:06.560 out of favor longer than the client's patients duration. 0:17:07.119 --> 0:17:09.800 Just look at value in the twenty tens. I mean, 0:17:09.840 --> 0:17:13.200 if you were not leaning into growth, you were left 0:17:13.200 --> 0:17:14.240 way behind exactly. 0:17:14.280 --> 0:17:17.600 And what I observe from my time being advisor is 0:17:17.640 --> 0:17:19.600 at the end of the day, clients don't really care 0:17:19.640 --> 0:17:21.680 where they own growth or value. They don't care where 0:17:21.680 --> 0:17:25.159 they own European US. They want to make money and 0:17:25.200 --> 0:17:27.359 they don't want to go backwards. And if all you 0:17:27.440 --> 0:17:30.240 keep saying is yes, but you know, my value manager 0:17:30.240 --> 0:17:32.600 has outperformed the value index and they're like, yeah, but 0:17:32.640 --> 0:17:34.760 the S and P is going through the roof, right, 0:17:35.080 --> 0:17:38.080 So you have to have some flexibility in your approach. 0:17:38.520 --> 0:17:41.280 So I wanted to start a group that at the 0:17:41.320 --> 0:17:48.080 core would use those quantitative metrics. But pure quantitative takes 0:17:48.119 --> 0:17:51.919 out kind of the fundamentals of investing, because a certain 0:17:51.960 --> 0:17:54.240 portion of a stock's return comes from what's going out 0:17:54.280 --> 0:17:56.920 the company level. And the other thing is if all 0:17:56.960 --> 0:18:00.000 I did was focused on the quantitative. You'd end up 0:18:00.040 --> 0:18:03.119 owning three hundred securities. So let's talk tom and an 0:18:03.280 --> 0:18:07.440 SMA can't do that, or you don't drive enough active share. 0:18:07.640 --> 0:18:11.320 SMA is separately managed account. Let's talk about active share. 0:18:11.880 --> 0:18:17.720 Because your portfolios are fairly concentrated. The US core portfolio 0:18:18.080 --> 0:18:23.119 is thirty to sixty companies. That's considered a modest holding, 0:18:23.160 --> 0:18:27.840 a concentrated holding. Tell us about the thinking behind that concentration. 0:18:28.320 --> 0:18:30.879 So it's funny going back to that first job at 0:18:30.920 --> 0:18:33.680 Brown Brothers, you know, and the time in the eighties, 0:18:33.760 --> 0:18:36.199 no one knew about passive investing. But I observed that, 0:18:36.560 --> 0:18:39.280 you know, they'd have these portfolios and they'd have kind 0:18:39.280 --> 0:18:41.480 of two or three stocks in every sector, so you'd 0:18:41.560 --> 0:18:43.600 end up with you know, one hundred, one hundred and 0:18:43.600 --> 0:18:46.600 fifty stocks, and you know, they not that they did poorly, 0:18:46.640 --> 0:18:49.119 but they never really you know, it's really hard to 0:18:49.200 --> 0:18:50.680 drive a lot of active you know. 0:18:50.680 --> 0:18:52.720 Performance everything is one to two percent. 0:18:52.880 --> 0:18:55.080 And at the time it wasn't really there wasn't really 0:18:55.160 --> 0:18:58.920 passive investing. But then as as time progressed, all these 0:18:58.960 --> 0:19:02.760 studies came out and said, well, actually the most excess 0:19:02.920 --> 0:19:06.520 return in active management comes from managers that are very, 0:19:06.600 --> 0:19:09.480 very active. And if you own one hundred and fifty 0:19:09.480 --> 0:19:11.879 stocks and you're the benchmark is the S and P, 0:19:12.560 --> 0:19:15.119 you're not active. So it was clear to me that 0:19:15.160 --> 0:19:20.439 we needed very concentrated portfolios but control the risk. And 0:19:20.520 --> 0:19:24.520 so that's why we run these limited portfolios. The applied 0:19:24.840 --> 0:19:28.520 term is so it gave some quantitative approach to what 0:19:28.600 --> 0:19:31.480 we do. But here's the practical barrier, which is, when 0:19:31.480 --> 0:19:33.479 the firm came to me and said, okay, you're going 0:19:33.560 --> 0:19:36.359 to become an asset management arm, you got to come 0:19:36.440 --> 0:19:39.280 up with a name for your team. I knew that 0:19:39.320 --> 0:19:45.240 these firms show asset management companies alphabetically, so apply to this. 0:19:45.640 --> 0:19:49.480 I wasn't going to be ze applied, right. I wanted 0:19:49.520 --> 0:19:50.600 to be at the top of the list. 0:19:50.640 --> 0:19:56.119 That's very that's triple a exterminator. So let's talk about 0:19:56.240 --> 0:19:59.600 two things you just mentioned. One is active share. But 0:19:59.720 --> 0:20:03.240 really what you're implying are that a lot of these 0:20:03.280 --> 0:20:06.960 other funds with two hundred and three hundred or more holdings, 0:20:07.480 --> 0:20:11.160 they're all high fee closet indexers. What's the value there? 0:20:11.240 --> 0:20:13.800 Right? And that's why as an active manager, I have 0:20:13.960 --> 0:20:16.879 nothing against ETFs. I think it's done great for the 0:20:17.040 --> 0:20:21.440 industry because shame on funds that own lots and lots 0:20:21.480 --> 0:20:24.720 of securities. You're not doing a service to your investing. 0:20:24.760 --> 0:20:28.400 But at the end of the day, if I marginally underperform, 0:20:28.440 --> 0:20:30.600 not me, but in general, you know, it will take 0:20:30.680 --> 0:20:32.800 time to lose your assets. You know, what's right for 0:20:32.840 --> 0:20:35.520 the money management firm is not always what's right for 0:20:35.560 --> 0:20:39.480 the investors. So the right thing is choose passive strategies. 0:20:39.600 --> 0:20:41.720 But there's a place for activities, but it's got to 0:20:41.720 --> 0:20:42.560 be active. 0:20:42.400 --> 0:20:45.560 Core and satellite. You have a core of a passive index, 0:20:45.600 --> 0:20:47.920 but you're surrounding it, which something that gives you a 0:20:47.920 --> 0:20:51.600 little opportunity for more upside exactly. Huh really really interesting. 0:20:51.760 --> 0:20:54.760 So if the US holdings are thirty to sixty companies, 0:20:55.280 --> 0:20:59.800 the global portfolio is even more concentrated about twenty companies. 0:21:00.359 --> 0:21:04.480 Yeah, I mean, so taking a step back again, one 0:21:04.520 --> 0:21:07.280 of the you know, remember I run mutual funds, but 0:21:07.359 --> 0:21:11.080 I started in the separate managed account business. So what 0:21:11.240 --> 0:21:15.080 it what means is they would wealth manage would implement 0:21:15.359 --> 0:21:19.960 our portfolio for individuals by buying socks. And one of 0:21:20.000 --> 0:21:24.200 the things that I observed is that clients pull from 0:21:24.280 --> 0:21:29.239 the market faster than they pull from stocks. So in 0:21:29.240 --> 0:21:32.520 other words, when you're worried about the market, if it's 0:21:32.560 --> 0:21:36.560 about the market some macro story, Well do you want 0:21:36.600 --> 0:21:39.159 to sell your Microsoft? Oh? No, I like Microsoft, but 0:21:39.160 --> 0:21:43.280 I'm worried about the market. Okay, Well, owning individual securities 0:21:43.359 --> 0:21:46.600 is really powerful because it actually keeps people invested. 0:21:46.680 --> 0:21:48.800 There's a brand name, there's a brand. 0:21:49.240 --> 0:21:52.840 Exactly, so people are more likely to pull from the market. 0:21:52.880 --> 0:21:55.960 So I believe in owning stocks. But the problem is 0:21:56.000 --> 0:21:57.680 again it goes back to but if you own two 0:21:57.720 --> 0:22:00.159 hundred sucks, then they don't have any wedded So did 0:22:00.200 --> 0:22:02.440 we start a strategy? We started this so eight where 0:22:02.480 --> 0:22:05.120 all the securities would be on one page. That's amazing. 0:22:05.240 --> 0:22:10.960 So your global portfolio also has some international US companies. 0:22:11.240 --> 0:22:13.720 So in addition to things like LVMH and some other 0:22:14.119 --> 0:22:17.400 international stocks, you have Microsoft, you have Costco. Correct, what's 0:22:17.440 --> 0:22:20.920 the thinking of putting those because giant US companies in 0:22:21.000 --> 0:22:21.880 a global portfolio. 0:22:21.960 --> 0:22:25.160 It goes back to Barry that concept, which is clients 0:22:25.359 --> 0:22:29.040 don't care really where they make their money. And the 0:22:29.160 --> 0:22:33.880 problem with the benefit of global global strategies. I can 0:22:33.920 --> 0:22:37.200 own some US stocks and international only I can't own 0:22:37.520 --> 0:22:41.679 and what happens If the US just so happens to 0:22:41.760 --> 0:22:44.879 do better than the rest of the world, then international 0:22:44.960 --> 0:22:47.040 doesn't work as well. So it just gives us more 0:22:47.119 --> 0:22:51.360 flex It's that flexible flexibility to go where the opportunity 0:22:51.440 --> 0:22:51.760 set up. 0:22:51.840 --> 0:22:55.880 And to that point, your fund. The Morgan Stanley Institutional 0:22:55.920 --> 0:23:01.680 Global Concentrated Funds, which does have US stock trounce the 0:23:02.359 --> 0:23:07.800 MSCI X US because the US has been out performing international. 0:23:08.040 --> 0:23:11.879 That's another style for fifty since the financial crisis. The 0:23:11.960 --> 0:23:14.320 US has been crushing everyone else. 0:23:14.359 --> 0:23:16.360 But think about this way also, if I can own 0:23:16.440 --> 0:23:19.760 twenty stocks, okay, but they're not all correlated to each other, 0:23:19.880 --> 0:23:22.280 so they have a lot of different themes. Like I 0:23:22.440 --> 0:23:27.840 really like this the infrastructure stocks right now, but I 0:23:27.880 --> 0:23:31.159 also think they're a place as you said Microsoft, but 0:23:32.000 --> 0:23:35.879 luxury brands only a few stocks but have a different theme. 0:23:36.280 --> 0:23:39.040 Then I can control the risk in the portfolio. You 0:23:39.760 --> 0:23:42.639 act to share, good concentrate high act to share, but 0:23:42.920 --> 0:23:44.240 lower kind of risk. 0:23:44.520 --> 0:23:48.520 So when I look at the Morgan Stanley Institutional US Core, 0:23:49.440 --> 0:23:54.000 the description is we seek to outperform the benchmark, regardless 0:23:54.040 --> 0:23:58.080 of which investment style, value or growth, is currently in favor. 0:23:58.400 --> 0:24:01.359 So your style agnostic. You want to just stay with 0:24:01.400 --> 0:24:02.920 what's working exactly. 0:24:02.920 --> 0:24:05.360 And Philip Kim is the other portfolio manager. We've worked 0:24:05.359 --> 0:24:08.000 together fourteen years. I started these quantitative models and then 0:24:08.040 --> 0:24:09.800 he really took it to the next level, and this 0:24:10.040 --> 0:24:14.480 was what has the likelihood of outperforming for the next 0:24:14.600 --> 0:24:18.720 twelve to eighteen months. From a style standpoint, that's how 0:24:18.720 --> 0:24:22.159 we buy us the portfolio. Things could get just too expensive, 0:24:22.280 --> 0:24:24.280 things get too cheaps, but we need to see some 0:24:24.760 --> 0:24:28.400 migration in the opposite direction, and then we buy us accordingly. 0:24:28.440 --> 0:24:29.600 We want to stay in the game. 0:24:29.920 --> 0:24:34.240 What about the Russell three thousand strategy that's not It's 0:24:34.280 --> 0:24:37.399 obviously more concentrated than the Russell, but it's still a 0:24:37.400 --> 0:24:39.440 few hundred stocks. Tell us what goes into that thing. 0:24:39.520 --> 0:24:42.919 Well, we noticed that our just our quantitative factor model 0:24:43.000 --> 0:24:47.800 alone was doing well right beyond just adding the stock 0:24:47.880 --> 0:24:50.960 to buy. So we wanted to start a strategy that 0:24:51.000 --> 0:24:55.199 would add a little bit of excess return versus just 0:24:55.240 --> 0:24:58.600 buying an ETF that was just focused on that factor models, 0:24:58.800 --> 0:25:02.639 but we would diverse five away. The stock risk really intriguing. 0:25:02.760 --> 0:25:05.639 So let's talk a little bit about Slimmon's take, which 0:25:05.680 --> 0:25:09.080 is not only widely read at Morgan Stanley, it's also 0:25:09.160 --> 0:25:12.920 pretty widely distributed on the street itself. Towards the end 0:25:12.960 --> 0:25:15.600 of twenty twenty three, you put out a piece a 0:25:15.600 --> 0:25:18.520 few lessons from the year, and I thought some of 0:25:18.600 --> 0:25:21.960 these were really fascinating, Starting with the S and B 0:25:22.040 --> 0:25:26.040 five hundred has produced a positive return in sixty seven 0:25:26.119 --> 0:25:30.560 of the past ninety three years, the market produced two 0:25:30.600 --> 0:25:34.840 consecutive down years only eleven times. That's amazing. 0:25:34.880 --> 0:25:37.040 I had no idea. Well, I mean, think about it, 0:25:37.160 --> 0:25:40.480 the likelihood over time in any one year the market's 0:25:40.520 --> 0:25:44.000 going to go up, and if it doesn't go up, 0:25:44.280 --> 0:25:46.879 that's irregular, but then to have another year in a 0:25:46.920 --> 0:25:50.040 row is very very irregular. So that's why being in 0:25:50.040 --> 0:25:53.680 twenty twenty three saying hey, it's it's highly likely it's 0:25:53.720 --> 0:25:56.720 going to be a good year, just purely based on 0:25:56.760 --> 0:25:59.720 the odds, and then you layer in that whole recency 0:25:59.720 --> 0:26:02.840 by rear view mirror, and people were way too negative. 0:26:03.000 --> 0:26:05.560 Yeah, At the end of twenty twenty two, the SMP 0:26:06.119 --> 0:26:10.399 peak to troth was down about twenty five percent. You 0:26:10.440 --> 0:26:14.320 point out there were only eight instances since nineteen sixty 0:26:14.320 --> 0:26:17.679 where you had that level of draw down and the 0:26:17.840 --> 0:26:21.080 average one year return was twenty two percent following that. 0:26:21.280 --> 0:26:24.320 So I put out a piece in September of twenty 0:26:24.359 --> 0:26:28.320 twenty two saying market's down twenty percent, you should add 0:26:28.359 --> 0:26:30.560 money down twenty percent, And of course I felt like 0:26:30.600 --> 0:26:32.600 an idiot, you know, a month later, because and then 0:26:32.640 --> 0:26:34.720 the mark was down twenty five percent, and I produce 0:26:34.760 --> 0:26:38.040 a piece saying the average return is just over twenty 0:26:38.080 --> 0:26:40.960 percent if you buy into down twenty five percent, which 0:26:41.000 --> 0:26:43.720 doesn't necessarily mean it stops going down, right, But what's 0:26:43.760 --> 0:26:46.280 amazing about that is, you know what the return off 0:26:46.320 --> 0:26:49.720 that October twenty second low of twenty twenty two was 0:26:50.000 --> 0:26:53.560 thirty something twenty one percent. Oh really, dead right, dead 0:26:53.600 --> 0:26:56.440 on in line. It's uncanny how these things repeat itself. 0:26:56.480 --> 0:26:59.119 And that's Barry again. It goes back to, you know, 0:26:59.200 --> 0:27:05.120 your experience experiences the macro changes, but behaviors don't. That's 0:27:05.200 --> 0:27:08.679 the consistency of this business. And that's what I'm fascinated with. 0:27:08.800 --> 0:27:11.760 Human nature is what it is, no doubt about it. 0:27:11.880 --> 0:27:14.360 And that's what gave me confident that the fun flows 0:27:14.560 --> 0:27:17.520 would turn positive at some point in the fourth quarter, 0:27:17.560 --> 0:27:18.800 because it was a year off below. 0:27:19.040 --> 0:27:21.399 I really liked that be dubious when a stock is 0:27:21.440 --> 0:27:26.440 declared expensive or cheap based on a singular evaluation methodology 0:27:26.520 --> 0:27:29.959 like pe, this is a pet peeve of mine. The 0:27:30.080 --> 0:27:33.639 E is an estimate, it's someone's opinion. How can you 0:27:34.359 --> 0:27:38.000 rely on something, especially from someone who doesn't have a 0:27:38.040 --> 0:27:39.240 great track record of. 0:27:39.119 --> 0:27:43.120 Making it's the I think that's the biggest air investors 0:27:43.160 --> 0:27:46.480 make over time is well, this stock is you know, 0:27:46.520 --> 0:27:49.400 as you said, this stock is cheap or this market. 0:27:49.800 --> 0:27:53.640 Think about Europe mark. Europe has looked cheaper than the 0:27:53.800 --> 0:27:56.879 US for a number of years. The flaw on that 0:27:57.240 --> 0:28:00.359 is the E is a forward estimate, and it's turned 0:28:00.359 --> 0:28:02.840 out that the E for Europe hasn't been as good 0:28:02.840 --> 0:28:06.160 as what's expected, and the E for the US, especially 0:28:06.160 --> 0:28:10.240 the NASTAC has been a lot higher than was expected. 0:28:10.280 --> 0:28:13.800 So the denominator has come up in the US, which 0:28:13.800 --> 0:28:16.720 makes it Pe lower, and the denominator has come down US, 0:28:16.880 --> 0:28:18.360 which made it look more expensive. 0:28:18.440 --> 0:28:21.840 So that's always amazing is if the estimates are wrong 0:28:21.960 --> 0:28:26.240 to the downside, well then expensive stocks aren't that expensive, 0:28:26.280 --> 0:28:29.400 and vice versa. If the estimates are too high, cheap 0:28:29.440 --> 0:28:30.960 stocks really ain't cheap right. 0:28:31.119 --> 0:28:34.640 I watched that, but we also watch revisions, and I've 0:28:34.720 --> 0:28:37.440 learned also from being, you know, cynically in this business. 0:28:37.640 --> 0:28:40.080 Companies don't always come clean right away and say, oh, 0:28:40.280 --> 0:28:43.040 business really bad. It's that they drip out the news. 0:28:43.640 --> 0:28:46.520 Usually one bad quote as follows another bad quote. I mean, 0:28:46.560 --> 0:28:50.880 it's very rare, so be careful that. And analysts are 0:28:51.040 --> 0:28:56.280 slow to adjust their numbers. Anytime someone says, I'm cutting 0:28:56.320 --> 0:29:01.200 my estimates, cutting my price target, but I think it's bottomed. Yeah, 0:29:01.480 --> 0:29:02.080 be careful. 0:29:03.000 --> 0:29:06.640 That's always amusing. I thought this was really very perceptive. 0:29:06.920 --> 0:29:09.600 Over thirty seven years in the investment business, I have 0:29:09.760 --> 0:29:14.080 become convinced that the most money is made when perceptions 0:29:14.160 --> 0:29:17.840 move from very bad to less bad. I love that 0:29:17.960 --> 0:29:21.160 because if you've lived through the dot com implosion, or 0:29:21.160 --> 0:29:25.400 the financial crisis, or even the first quarter of twenty twenty, 0:29:25.800 --> 0:29:26.840 you know how true that is. 0:29:27.080 --> 0:29:29.840 Think about last year. You know it's the old saying 0:29:30.160 --> 0:29:33.719 by Sir John Templeton. Bull markets are born on pessimism, 0:29:33.800 --> 0:29:37.240 they grow in skepticism, they mature on optimism, and they 0:29:37.280 --> 0:29:39.840 die on you for it. Well, we had a bear 0:29:39.960 --> 0:29:44.680 market bottom in October of twenty twenty two. And so 0:29:44.760 --> 0:29:48.200 we came into last year twenty twenty three, with it's 0:29:48.200 --> 0:29:50.240 going to be a hard landing, it's going to be bad, 0:29:50.280 --> 0:29:53.880 and so there's high levels of pessimism. And now as 0:29:53.880 --> 0:29:58.000 you advance into the fourth quarter, fun flows turned positive 0:29:58.080 --> 0:30:01.400 as people realize, well, maybe it wasn't gonna be so bad. 0:30:01.800 --> 0:30:04.720 We've moved into the skepticism phase. So that's why the 0:30:04.760 --> 0:30:10.320 biggest return year is always the first year off the low, 0:30:10.800 --> 0:30:14.200 because that's the biggest pivot and has the least volatility. 0:30:14.360 --> 0:30:16.520 We didn't have a lot of volatility last year, and. 0:30:16.960 --> 0:30:20.040 We saw that in eight oh nine, and we saw 0:30:20.080 --> 0:30:23.240 that in twenty twenty twenty. It was really, it was 0:30:23.280 --> 0:30:26.960 really quite amazing. The flip side of this is also true, 0:30:27.120 --> 0:30:31.400 which is most money is lost when things moved from 0:30:31.520 --> 0:30:32.720 great to just good. 0:30:33.440 --> 0:30:37.640 Well again, if I go back to kind of growth investing, 0:30:37.880 --> 0:30:41.400 it got expensive and the growth rates of companies were 0:30:41.600 --> 0:30:44.400 quite as good. And you know, in twenty twenty two 0:30:44.520 --> 0:30:47.840 and the Fed started raising rates and that was problematic. 0:30:47.920 --> 0:30:49.959 It was no different. It reminded me a little bit 0:30:49.960 --> 0:30:52.560 of the dot com bubble. What brought down the dot 0:30:52.600 --> 0:30:55.480 com bubble is that companies just couldn't report the earnings 0:30:55.520 --> 0:30:58.040 that were expected, and you had plenty of time to 0:30:58.080 --> 0:31:00.240 get out. But the problem is what I said on 0:31:00.240 --> 0:31:02.560 the dot com bubble, people wanted to kept buying these 0:31:02.600 --> 0:31:05.360 stocks as they're going lower because they were you know, 0:31:05.520 --> 0:31:09.080 rear view mirror investing. They were their previous the loves. 0:31:09.120 --> 0:31:11.920 And what's amazing is think about I said before half 0:31:11.960 --> 0:31:14.600 the value managers allount of business ninety nine. By the 0:31:14.680 --> 0:31:16.520 year two thousand and eight, you know what the biggest 0:31:16.600 --> 0:31:20.440 sector of the SMP was financials. They grew from nothing 0:31:20.600 --> 0:31:24.200 to thirty percent of the sp So value worked all 0:31:24.240 --> 0:31:26.480 through the first period until we know what happened in 0:31:26.480 --> 0:31:27.560 Great Financial Crisis. 0:31:27.920 --> 0:31:31.120 It's amazing that muscle memory. When you're rewarded for buying 0:31:31.160 --> 0:31:34.880 the dip for a decade, it's a tough habit to break, exactly. 0:31:35.280 --> 0:31:39.640 So here's another really interesting observation of yours. Whatever the 0:31:39.640 --> 0:31:43.520 hot product is rarely works the next twelve months. 0:31:43.760 --> 0:31:50.480 It's because a hot product invariably pushes oftentimes valuations to 0:31:50.640 --> 0:31:52.800 extreme And one of the things that we got very 0:31:52.840 --> 0:31:56.280 right in twenty twenty three was in twenty twenty two 0:31:56.320 --> 0:31:58.600 bear market, what did people buy into the lows of 0:31:58.640 --> 0:32:04.440 bear market they bought defense stocks. Dividend oriented, low volatility 0:32:04.520 --> 0:32:09.640 type strategies became very popular in twenty twenty two during 0:32:09.680 --> 0:32:12.400 a bear market, and so we could see that the 0:32:12.480 --> 0:32:17.880 defensive factor safety became very expensive. So as we came 0:32:17.880 --> 0:32:23.800 out of this bear market, what lack consumer staples, healthcare utilities, 0:32:23.880 --> 0:32:28.680 all the safe things, so hot products pushes things to 0:32:29.120 --> 0:32:34.040 extreme and that usually, you know, unwinds itself badly. 0:32:34.520 --> 0:32:40.320 Historically, once the FED stops hiking rates, equity rallies last 0:32:40.480 --> 0:32:42.760 longer and go higher than anyone expects. 0:32:43.040 --> 0:32:45.520 Explain the thinking though, So I think it's good news 0:32:45.520 --> 0:32:47.720 for this year, but also worries me about this year 0:32:47.880 --> 0:32:50.280 is if you look at the history of the period 0:32:50.320 --> 0:32:53.000 of time when the FED said we're done hiking till 0:32:53.160 --> 0:32:57.800 we're going to cut, that period does very very well 0:32:57.840 --> 0:33:01.680 for equities, and we're kind of at a juncture where 0:33:02.000 --> 0:33:04.800 we've done pretty well. But if they're not going to 0:33:04.840 --> 0:33:08.120 cut rates until the summer, I think there's more room 0:33:08.200 --> 0:33:10.600 to run for stocks now. The flip side is I 0:33:10.600 --> 0:33:13.200 hear a lot of people talk about when the FED cuts, 0:33:13.520 --> 0:33:16.520 the perception that that's going to be good for equities. 0:33:17.120 --> 0:33:19.360 I'm not so sure about that because if you look 0:33:19.400 --> 0:33:23.120 back in history, when the FED cuts, markets tend to 0:33:23.160 --> 0:33:26.120 go down initially, not up. And you could argue yes, 0:33:26.160 --> 0:33:29.400 but Andrew, that's because usually when they're raising rates, it's 0:33:29.400 --> 0:33:33.640 an economic cycle, and therefore, if they're cutting, there's a 0:33:33.720 --> 0:33:37.840 problem and this time is all about inflation. But what 0:33:37.920 --> 0:33:40.600 worries me is when the Fed does announce the cut, well, 0:33:40.600 --> 0:33:45.040 people say, oh, they know something you don't know. There's 0:33:45.080 --> 0:33:47.560 a problem out there, And I think there's an that 0:33:47.640 --> 0:33:52.000 will increase the anxiety. And so I think that's we're 0:33:52.000 --> 0:33:54.080 in a good period right now. But it worries me 0:33:54.120 --> 0:33:56.920 when they do cut, will it be people start to 0:33:56.920 --> 0:33:59.360 worry about there's a problem in the economy. 0:33:59.440 --> 0:34:02.920 See, I'm a student of Federal Reserve history, and I 0:34:02.960 --> 0:34:06.200 could say with a high degree of confidence, they don't 0:34:06.280 --> 0:34:09.040 know anything that you don't know. They look at the 0:34:09.080 --> 0:34:12.880 same data. They're populated by humans. None of them have 0:34:13.000 --> 0:34:18.160 demonstrated any particular sort of prescience. And if we watched 0:34:18.320 --> 0:34:21.279 the past decade, they were late to get off their 0:34:21.280 --> 0:34:24.440 emergency footing. They were late to recognize inflation, they were 0:34:24.520 --> 0:34:27.880 late to recognize inflation peaked, and now it feels like 0:34:27.960 --> 0:34:30.920 they're late to recognize, Hey, you guys, won you begin 0:34:30.960 --> 0:34:34.319 inflation take a victory lap. They seem to always be 0:34:34.719 --> 0:34:37.560 talking about backwards looking. They always seem to be behind 0:34:37.600 --> 0:34:38.000 the right. 0:34:38.280 --> 0:34:41.120 But I just think the stock market is an emotional beast. Sure, 0:34:41.400 --> 0:34:44.000 And you know, and I looked last year and the 0:34:44.040 --> 0:34:47.040 bears people were too pessimistic. Every time they popped their 0:34:47.080 --> 0:34:49.360 head out of the den, they got stampeded. And so 0:34:49.400 --> 0:34:51.120 they'll have a better year this year. And I think 0:34:51.120 --> 0:34:54.919 it will scare investors, and cynically, I can't help but think, well, 0:34:55.000 --> 0:34:57.239 people missed. A lot of people missed last year, and 0:34:57.280 --> 0:34:59.680 the other started to get back in. And after a 0:35:00.080 --> 0:35:03.959 very low volatility year, there's always more volatile the next year, 0:35:04.000 --> 0:35:06.160 and so it's inevitable it's going to be more. It 0:35:06.160 --> 0:35:08.440 doesn't mean it'll be a bad year for equities, it 0:35:08.680 --> 0:35:10.760 just will have more gut wrenching periods. 0:35:10.880 --> 0:35:14.719 I love this data point. Since nineteen forty, markets have 0:35:15.080 --> 0:35:18.800 always gone up in the year when an incumbent president 0:35:19.160 --> 0:35:23.320 runs for reelection seventeen for seventeen. Now, if we break 0:35:23.360 --> 0:35:26.239 that down, what you're really saying is, hey, if an 0:35:26.280 --> 0:35:29.160 incumbent isn't running, the economy really has to be in 0:35:29.200 --> 0:35:33.240 the stinkaroo when the stock market is following. But anytime 0:35:33.280 --> 0:35:37.600 an incumbent is running typically means we're doing pretty okay well. 0:35:37.680 --> 0:35:42.640 And remember I said, didn't get reelected, just ran for reelection, right, 0:35:42.680 --> 0:35:45.640 And so what happens, and I see it this year, 0:35:45.840 --> 0:35:49.120 is when presidents run for reelection, they want to juice 0:35:49.120 --> 0:35:51.399 the economy. They want the economy going well. And we 0:35:51.480 --> 0:35:55.600 have Joe Biden has in his pocket the Infrastructure Act, 0:35:55.640 --> 0:35:58.840 the Chips Act, in the Inflation Reduction Act, we own. 0:35:59.320 --> 0:36:03.919 The reason why we own industrial stocks is because they 0:36:04.000 --> 0:36:07.960 are telling us that the money is just starting to 0:36:08.000 --> 0:36:10.840 come in from the government and these projects are getting 0:36:10.960 --> 0:36:12.840 just getting off the way. We've seen this with the 0:36:12.920 --> 0:36:15.399 Chips Act. That money has just started poor. That's why 0:36:15.440 --> 0:36:18.520 the market tends do well, because the economy stays afloat 0:36:18.600 --> 0:36:19.879 during a reelection year. 0:36:20.040 --> 0:36:22.359 And the really interesting thing about all this, you know, 0:36:22.360 --> 0:36:25.920 it's funny. The twenty twenties is the decade of fiscal stimulus, 0:36:25.960 --> 0:36:30.440 whereas the twenty tens were monetary stimulus. The first three 0:36:30.480 --> 0:36:33.640 Cares Acts, that was just a boatload of money that 0:36:33.719 --> 0:36:36.439 hit the market, hits the economy all at once. Each 0:36:36.520 --> 0:36:41.240 of the legislation packages you mentioned that's spending over a decade, 0:36:41.280 --> 0:36:43.439 that could be a pretty decent tail wind for a while. 0:36:43.640 --> 0:36:45.920 Very interesting between listening to Wall Street and what you 0:36:46.080 --> 0:36:48.239 listen to companies. And so I'm a company guy. I 0:36:48.320 --> 0:36:50.400 listen to companies, and I'll give you a great example. 0:36:50.480 --> 0:36:52.839 Right now, people think the consumer is getting tapped out, 0:36:52.840 --> 0:36:55.480 but on the costco call the other day, they say 0:36:55.520 --> 0:36:59.480 they see big ticket purchase items reaccelerating. Well, wait a minute, 0:36:59.719 --> 0:37:02.359 I thought, the considering which is it? Which is it? Right? 0:37:02.600 --> 0:37:04.879 And you know, and so the point of this is 0:37:04.880 --> 0:37:07.360 is that I go back to listen to what companies say, 0:37:07.480 --> 0:37:10.120 and I suspect as food inflation starts to come down 0:37:10.239 --> 0:37:13.200 and people have jobs, they actually could start to go buy, 0:37:13.400 --> 0:37:14.960 you know, higher ticket purchases. 0:37:15.200 --> 0:37:17.920 And we've seen some uptick in credit card use, but 0:37:18.200 --> 0:37:21.919 nothing problematic with the ability to service that debt still 0:37:22.000 --> 0:37:24.000 seems to be very much intact. 0:37:23.680 --> 0:37:25.680 Correct, And that goes back to last year. One of 0:37:25.719 --> 0:37:27.680 the reasons. The other reason I was optimistic is I 0:37:27.800 --> 0:37:30.479 kept hearing our companies say to me, I'm being told 0:37:30.520 --> 0:37:33.320 the recessions around the corner, but our business seems to 0:37:33.360 --> 0:37:35.120 be doing with it. We don't see it. 0:37:35.160 --> 0:37:38.280 That's really amazing. So let's talk a little bit about 0:37:38.440 --> 0:37:42.160 who your clients are. You obviously are working with all 0:37:42.160 --> 0:37:46.320 the advisors at Morgan Stanley, but you're managing mutual funds. 0:37:46.719 --> 0:37:50.080 Who are the buyers of those funds? Are they in house? 0:37:50.120 --> 0:37:53.440 Are they the rest of the investing community? Who are 0:37:53.480 --> 0:37:54.040 your clients? 0:37:54.120 --> 0:37:57.160 Yeah? I mean so that's when I left being advisor 0:37:57.560 --> 0:38:01.239 in two thousand and four, I started this group within 0:38:01.320 --> 0:38:03.879 more coan Stailing Wealth Management with the products were only 0:38:03.920 --> 0:38:07.040 available to financial advisors at Morgan Stailing. But when I 0:38:07.120 --> 0:38:09.920 left to go into more Cogan Saliing Investment Management in 0:38:10.000 --> 0:38:13.719 twenty fourteen, the purpose of that was to make my 0:38:13.880 --> 0:38:16.799 products available beyond more con Stailing Wealth Management because I 0:38:16.840 --> 0:38:21.960 was getting calls from consultants and institutional investors saying, how 0:38:21.960 --> 0:38:23.800 do we get access to these funds? And I'd have 0:38:23.840 --> 0:38:25.320 to think, well, you have to go through advisors, So 0:38:26.120 --> 0:38:29.080 that I wanted to broaden out the reach beyond. So 0:38:29.239 --> 0:38:32.480 I would say, we're on a number of platforms. You 0:38:32.480 --> 0:38:36.480 can buy our funds through the self directed route, and 0:38:36.520 --> 0:38:40.799 so we're broading out the distribution. And you mentioned the 0:38:40.840 --> 0:38:46.520 slim and take before that is a methodology that we 0:38:46.680 --> 0:38:50.239 use to reach out to our investor base. Obviously, I'd 0:38:50.239 --> 0:38:51.879 love to talk to each of every one of them, 0:38:51.880 --> 0:38:54.680 but I can't. But I've learned in this business, if 0:38:54.719 --> 0:39:00.040 you communicate in a way that they can understand. I 0:39:00.080 --> 0:39:03.480 don't mean understanding in a bad way, like but writing 0:39:03.520 --> 0:39:06.640 a six page di tribe about why my stocks are 0:39:06.680 --> 0:39:08.320 so great and why the rest of the market stinks, 0:39:08.320 --> 0:39:09.800 no one's going to read that. They put it aside 0:39:09.800 --> 0:39:11.360 and say I'll read it tonight, then they don't. But 0:39:11.400 --> 0:39:14.960 if you can provide short bullets of what's going on 0:39:15.200 --> 0:39:19.600 in the market, why people should be bullish or bearish, 0:39:19.719 --> 0:39:21.880 you provide them with talking points. And that's what we 0:39:21.920 --> 0:39:24.120 really try to do within the firm, but beyond the 0:39:24.120 --> 0:39:24.759 firm as well. 0:39:25.200 --> 0:39:27.960 Yeah, one of the reasons I like Slimmon's take is 0:39:28.560 --> 0:39:31.520 you really boil things down to brass tacks. You're not 0:39:31.560 --> 0:39:36.000 afraid to use third parties in some of your competitors research. 0:39:36.680 --> 0:39:39.960 You cite other people on the street when they have 0:39:40.040 --> 0:39:44.560 an interesting data point or and I very much appreciate 0:39:44.640 --> 0:39:47.600 that because a lot of people sort of take the 0:39:47.960 --> 0:39:51.239 if it wasn't invented here, it doesn't exist to us. 0:39:51.600 --> 0:39:54.400 Yeah, I mean, look, I want to grow the assets, 0:39:54.800 --> 0:39:59.880 I want to perform well, but I value the response 0:40:00.160 --> 0:40:02.800 is from those who sit on the front lines dealing 0:40:02.840 --> 0:40:06.720 with clients every day, because they're the ones that feel 0:40:06.840 --> 0:40:09.560 kind of the emotional side of the business. If you 0:40:09.719 --> 0:40:13.040 sit back in my office and all I'm looking at 0:40:13.080 --> 0:40:15.880 a company and just evaluating whether it's pe is appropriate 0:40:15.960 --> 0:40:18.760 and earnings, you're missing a huge part of this business. 0:40:18.800 --> 0:40:23.600 It's a behavioral business, and so having access to advisors 0:40:23.640 --> 0:40:26.600 and listening to their feedback is so important. 0:40:27.080 --> 0:40:31.640 So you serve on Morgan Stanley's Wealth Management's Global Investment Committee, 0:40:32.040 --> 0:40:34.440 what is that experience? Like, I would imagine that's a 0:40:34.640 --> 0:40:38.880 huge amount of capital and a tremendous responsibility. 0:40:38.960 --> 0:40:41.240 It is a huge amount of capital and it drives 0:40:41.440 --> 0:40:46.440 kind of suggested asset allocation for advisors. They don't necessarily 0:40:46.760 --> 0:40:50.080 have to pursue it that way. My input is obviously 0:40:50.160 --> 0:40:52.520 on the equity side, but they have people in the 0:40:53.080 --> 0:40:58.240 the fixed income, high yield alternatives and they all provide 0:40:58.239 --> 0:41:02.600 inputs into framing and overview. So I'm really I sit 0:41:02.680 --> 0:41:05.400 in more than Stanily Investment Management, but I do provide 0:41:05.440 --> 0:41:07.120 that context and I think they like to have me 0:41:07.160 --> 0:41:09.160 on because I actually have skin in the game and 0:41:09.239 --> 0:41:13.200 I run money for a living, and I'm not always 0:41:13.200 --> 0:41:15.239 there saying you gotta buy growth, you gotta buy value. 0:41:15.239 --> 0:41:18.600 So I'm an agnostic. I'm just trying to figure out 0:41:18.600 --> 0:41:19.960 where the kind of the ball is going. 0:41:20.520 --> 0:41:22.680 So in the old days, you used to speak with 0:41:22.760 --> 0:41:26.920 retail investors all the time as a PM. Do you 0:41:27.560 --> 0:41:31.160 miss that back and forth because there is some signal 0:41:31.520 --> 0:41:35.280 in all of that noise, whether it's fear or greed 0:41:35.400 --> 0:41:40.120 or emotion. How do you operate being arm's length away 0:41:40.120 --> 0:41:41.840 from that. 0:41:41.840 --> 0:41:45.640 That is a big concern I have is losing that access. 0:41:45.640 --> 0:41:48.120 So I still I'm going to I'm speaking an event 0:41:48.160 --> 0:41:52.160 tonight with you know, a room full of advisors, so 0:41:52.480 --> 0:41:55.359 and then you know, we'll get together afterwards and I'll 0:41:55.400 --> 0:41:57.880 listen to what they have to say. So I'm always 0:41:57.920 --> 0:42:01.400 interested in feedback that I get from advised. Obviously, I 0:42:01.400 --> 0:42:04.040 can't spend all day talking on the phone. That's the 0:42:04.040 --> 0:42:08.040 big reason why I left being an advisor was I recognize, hey, 0:42:08.320 --> 0:42:10.520 being advisor, you got to talk to your clients. So 0:42:10.600 --> 0:42:13.439 forth you can't manage money, and we're into you can't 0:42:13.480 --> 0:42:15.680 do both and anyone that things you can't you know, 0:42:15.760 --> 0:42:19.000 it's it's crazy and I really want to develop these models. 0:42:19.400 --> 0:42:23.759 But so so all these communication ways like slim and 0:42:23.840 --> 0:42:26.799 take is a way to be in touch with advisors, 0:42:26.920 --> 0:42:31.120 encourage them. Hey, you think you disagree, send me an email. 0:42:31.280 --> 0:42:33.160 You know, I'm happy to happy to hear from you 0:42:33.920 --> 0:42:38.360 because I think that's very important and really behavioral finance. 0:42:39.040 --> 0:42:41.120 You know, the longer I've been in this busin I've 0:42:41.160 --> 0:42:44.240 been in this business a long time, it's the behavioral 0:42:44.360 --> 0:42:49.680 finance that's the consistency of this business. Geopolitics changes, right, 0:42:49.880 --> 0:42:52.440 but how people react is it's not right. 0:42:52.960 --> 0:42:57.520 You can't control what country is invading what other country, but. 0:42:57.560 --> 0:43:00.319 You can manage your own behavior. And people a hard 0:43:00.360 --> 0:43:01.440 time with that exactly. 0:43:01.480 --> 0:43:04.319 It's really interesting. I know only have you for another 0:43:04.360 --> 0:43:07.000 five minutes, so let me jump to my favorite questions. 0:43:07.040 --> 0:43:09.719 I ask all of my guests starting with what have 0:43:09.760 --> 0:43:12.640 you been screaming these days? Tell us what's been either 0:43:12.680 --> 0:43:14.920 audio or video? What's been keeping you entertained? 0:43:15.560 --> 0:43:18.319 Yeah, so, if I think about my career, no one 0:43:18.440 --> 0:43:22.160 took me aside and said this is how you manage money, right, Like, 0:43:22.200 --> 0:43:24.319 think about it. I learned about fundamental research, I learned 0:43:24.320 --> 0:43:28.080 about quantitative I learn about the practicality of being in 0:43:28.120 --> 0:43:32.359 wealth management. And so I've always researched and watched. And 0:43:32.400 --> 0:43:34.239 what does that do to do with your question is 0:43:34.280 --> 0:43:38.600 I've learned my way to being successful portfolio managers. So 0:43:39.000 --> 0:43:42.839 I'm obsessed with kind of always learning along the way. 0:43:42.920 --> 0:43:45.840 So you know, when I watch podcasts, it's all about 0:43:45.840 --> 0:43:50.319 well or or listen to podcasts or watch you know things, 0:43:50.080 --> 0:43:53.840 it's all how to advance my knowledge base. Now, I 0:43:53.880 --> 0:43:55.960 did play tennis, you know, in college, and so I 0:43:56.000 --> 0:44:00.239 love all those you know, breakpoint first tea, know the 0:44:00.280 --> 0:44:03.560 formula one. I love all those things. But but you know, 0:44:03.600 --> 0:44:05.680 as my wife gets frustrated with me because I'm probably 0:44:05.960 --> 0:44:08.839 not gonna sit down and watch a three hour mindless 0:44:08.960 --> 0:44:13.359 movie because it's kind of like not not advancing, huh. 0:44:13.440 --> 0:44:17.040 Really really interesting to tell us about your mentors who 0:44:17.080 --> 0:44:17.640 helped to. 0:44:17.800 --> 0:44:21.200 Shape your career. So I mean, again, I look at 0:44:21.360 --> 0:44:24.640 points along the way we're in their valuable. When I 0:44:24.800 --> 0:44:29.759 got to Morgan Stanley Byron Ween, who you know, I 0:44:29.920 --> 0:44:33.120 barely knew, but he was the first person that I 0:44:33.160 --> 0:44:37.600 recognized had this very good touch of fundamentals. But also 0:44:37.680 --> 0:44:41.839 the psychology, and so he was a great mentor, even 0:44:41.880 --> 0:44:44.880 though he never really knew me, but listening and reading 0:44:44.960 --> 0:44:48.000 and understanding him was really important. But then I had 0:44:48.000 --> 0:44:51.160 a guy who ran our department named Glenn Reagan, who 0:44:51.160 --> 0:44:54.799 had come from studying money management organizations, and I didn't 0:44:54.800 --> 0:44:56.759 know how to start on money management organizing because it 0:44:56.800 --> 0:44:59.120 was a team within and how do you grow and diversify. 0:44:59.440 --> 0:45:03.560 So there's different people along the way that have really 0:45:03.600 --> 0:45:06.400 shaped me. I came out of Universe Chicago. Gene Fama 0:45:06.440 --> 0:45:10.080 told me buy cheap stocks. But then William O'Neill said, yeah, 0:45:10.080 --> 0:45:12.279 but that doesn't work, and you need to have some 0:45:12.400 --> 0:45:15.239 momentum to you, you know, like he didn't tell cancel. You 0:45:15.239 --> 0:45:17.319 need to know you had a little cancelor, so you 0:45:17.400 --> 0:45:21.120 need to cancel exactly. So there's been people along the 0:45:21.200 --> 0:45:24.279 way that have been great influences on me, that have 0:45:24.480 --> 0:45:26.879 mentioned me at the right time in my correct. 0:45:26.680 --> 0:45:28.680 What are some of your favorite books? And what are 0:45:28.719 --> 0:45:29.759 you reading right now? 0:45:29.840 --> 0:45:33.319 I just finished Same as Ever by Morgan House. Again, 0:45:33.440 --> 0:45:36.840 this concept of behavioral I will eat up at you 0:45:36.920 --> 0:45:39.400 put a behavioral anything about behaviors in front of me. 0:45:39.440 --> 0:45:42.080 I read it so like you know, Richard Thalor or 0:45:42.120 --> 0:45:45.959 misbehaving or you know, think fast and slow, all those 0:45:46.000 --> 0:45:49.040 boasts of books. Daniel Crosby is another one all those books. 0:45:49.120 --> 0:45:51.120 I just but I just finished that and I just 0:45:51.200 --> 0:45:53.840 love it because again, all he spends the whole book 0:45:53.880 --> 0:45:56.279 is about these things. They just don't change over to 0:45:56.320 --> 0:46:01.400 human nature, human human nature. I'll tell you the last story, 0:46:01.640 --> 0:46:03.560 so or I was tell you story I was. I 0:46:03.680 --> 0:46:06.359 was on the floor of the New York Stocks Change 0:46:06.360 --> 0:46:09.080 the day that Russian Vada Crimea and one of my 0:46:09.200 --> 0:46:12.600 stocks was down. My biggest position was down eight percent 0:46:12.680 --> 0:46:16.200 that day. And I said, they don't have any stores 0:46:16.239 --> 0:46:19.200 in Crimea. Why is a stock down? Well, because it 0:46:19.239 --> 0:46:21.239 was geopolitics, well you know. And within three days the 0:46:21.280 --> 0:46:24.080 stock came running back. So it's all it points to 0:46:24.239 --> 0:46:29.280 is sometimes fundamentals dislodge from you know, the stock prices, 0:46:29.280 --> 0:46:32.000 and you have to understand that there's a behavioral element. 0:46:32.480 --> 0:46:36.240 My favorite version of that story was are you familiar 0:46:36.280 --> 0:46:40.960 with Cuba? So Obama announces we're going to normalize or 0:46:41.000 --> 0:46:44.640 start the process of normalizing relationships with Cuba. There's a 0:46:44.680 --> 0:46:49.080 stock that trades under the symbol Cuba, having nothing whatsoever, 0:46:49.520 --> 0:46:52.440 and it runs up twenty percent just on the announcement 0:46:52.840 --> 0:46:55.960 because some algorithm picked up Cuba and bought it and 0:46:55.960 --> 0:46:59.320 off we go. Amazing. All right, our final two questions, 0:47:00.040 --> 0:47:02.120 what sort of advice would you give to a recent 0:47:02.200 --> 0:47:06.440 college grad interested in the career in either investment management 0:47:06.760 --> 0:47:07.400 or finance. 0:47:07.840 --> 0:47:10.000 Yeah, so it's interested to have for kids that are, 0:47:10.040 --> 0:47:12.359 you know, in the process of or have just come 0:47:12.360 --> 0:47:14.239 out of college, or in the process of it. And 0:47:14.440 --> 0:47:17.080 one of the dangers I see today is kids come 0:47:17.120 --> 0:47:18.840 out of school and they think they know exactly what 0:47:18.960 --> 0:47:21.759 they want to do, you know, and then and I'll say, 0:47:21.760 --> 0:47:25.320 you don't know what your capabilities are when you're twenty 0:47:25.480 --> 0:47:27.879 two years old. I mean I was an introvert where 0:47:27.880 --> 0:47:30.520 I was twenty two. I've I've realized in their early thirties, 0:47:30.520 --> 0:47:33.919 I knew how to communicate. So I all say, get 0:47:33.960 --> 0:47:36.279 into if you can get into a firm that has 0:47:36.400 --> 0:47:40.520 a lot of opportunities. You know, today there's less training programs, 0:47:40.520 --> 0:47:43.359 but those types of things with lots of opportunities. Because 0:47:43.400 --> 0:47:45.000 you don't know what you're going to be good at 0:47:45.239 --> 0:47:48.000 and what you're good at, always follow what you think 0:47:48.040 --> 0:47:51.040 you're interested in as long as it makes money, because 0:47:51.520 --> 0:47:54.720 that's ultimately, but you don't know initially. So I always 0:47:54.760 --> 0:47:57.640 encourage people initially, don't come out and say I want 0:47:57.680 --> 0:47:59.520 to do this the rest of my life. You don't know. 0:47:59.520 --> 0:48:03.040 That's too narrow. Try to go to something broad. That's 0:48:03.080 --> 0:48:06.160 the first advice. And I see today we're people too 0:48:06.920 --> 0:48:08.160 narrow in their focus. 0:48:08.560 --> 0:48:12.120 I think that's great advice. People. Most of the folks 0:48:12.160 --> 0:48:15.440 I work with who are very successful, they're not doing 0:48:15.440 --> 0:48:17.640 what they did right out of school. And to imagine 0:48:17.640 --> 0:48:21.200 that that's going to be your career very much misleading. 0:48:21.360 --> 0:48:23.920 And our final question, what do you know about the 0:48:23.960 --> 0:48:27.120 world of investing today that you wish you knew thirty 0:48:27.120 --> 0:48:29.400 plus years ago when you were first getting started. 0:48:29.480 --> 0:48:31.920 Well, I think, you know, thirty years ago, I thought 0:48:31.960 --> 0:48:34.839 it was all about just what's going at the company level, 0:48:34.960 --> 0:48:37.759 and then I realized, oh wait, that doesn't really you know, 0:48:37.880 --> 0:48:40.840 drive most of a stocks return, So you have to 0:48:40.960 --> 0:48:46.359 understand more about the broader implications of companies. I think 0:48:46.400 --> 0:48:51.360 thirty years ago there was less dissemination of fundamental news broadly. 0:48:51.520 --> 0:48:55.160 Today it's much you know, it's much broader, so having 0:48:55.280 --> 0:48:59.200 information access fundamentally is more more difficult. So I think 0:48:59.239 --> 0:49:03.560 the business has changed, but again I go back to 0:49:03.719 --> 0:49:07.000 I think the biggest change in how I think about 0:49:07.040 --> 0:49:09.680 it as behaviorally. I've come to the real estate that 0:49:10.160 --> 0:49:13.080 being an advisor, sitting on the front line. I view 0:49:13.160 --> 0:49:17.160 that as a very key part of what's shaped my career. 0:49:17.400 --> 0:49:20.400 Understanding that, you know, again, it doesn't matter that the 0:49:20.440 --> 0:49:23.120 company didn't have any stories in Crimea it went down 0:49:23.400 --> 0:49:26.080 for you know quite a bit, or your Cuba story. 0:49:26.120 --> 0:49:29.239 I mean that there's just a behavioral element to this 0:49:29.960 --> 0:49:33.120 investing investing business. And look, you know again, I go 0:49:33.719 --> 0:49:36.440 a great example which I've mentioned before, which is it 0:49:36.480 --> 0:49:38.680 didn't matter what gross stocks you're own. In twenty twenty two, 0:49:38.800 --> 0:49:41.560 they all went down right, and so was it. All 0:49:41.600 --> 0:49:45.160 the companies did poorly, no growth, got too overbought, and 0:49:45.239 --> 0:49:47.439 so it had a correction. They all came back last year, 0:49:47.800 --> 0:49:52.399 you know, so understanding kind of those behaviors. I love 0:49:52.480 --> 0:49:56.360 that Warren Buffett quote investors framed their view looking solidly 0:49:56.360 --> 0:49:59.320 in the rearview mirror. Understanding that and having the ability 0:49:59.360 --> 0:50:02.960 to attack against that. That's really what's worked for me 0:50:03.000 --> 0:50:03.480 over time. 0:50:04.680 --> 0:50:08.160 Really fascinating stuff. Thank you Andrew for being so generous 0:50:08.200 --> 0:50:11.160 with your time. We have been speaking with Andrew Slimon. 0:50:11.560 --> 0:50:15.879 He's Managing director at Morgan Stanley Investment Management, where he 0:50:16.000 --> 0:50:19.799 is also lead portfolio manager for the long equity Strategies 0:50:19.840 --> 0:50:24.960 for the Applied Equity Advisors team. If you enjoy this conversation, 0:50:25.160 --> 0:50:27.520 be sure and check out any of the five hundred 0:50:27.840 --> 0:50:31.719 previous discussions we've done over the past nine and a 0:50:31.800 --> 0:50:36.360 half years. You can find those at iTunes, Spotify, YouTube, 0:50:36.680 --> 0:50:40.400 wherever you find your favorite podcast. Sign up for my 0:50:40.520 --> 0:50:44.120 daily reading list at Ridhelts dot com. Follow me on 0:50:44.160 --> 0:50:48.040 Twitter at Rittholtz, follow all of the Bloomberg family of 0:50:48.120 --> 0:50:53.799 podcasts on Twitter at podcasts, and be sure to check 0:50:53.800 --> 0:50:58.520 out my new podcast, At the Money. Short ten minute 0:50:58.520 --> 0:51:03.480 conversations with experts about the most important topics affecting you 0:51:04.000 --> 0:51:06.879 and your money. At the Money can be found at 0:51:06.880 --> 0:51:10.280 the Masters in Business podcast feed. I would be remiss 0:51:10.280 --> 0:51:12.200 if I did not thank the Cracked team that helps 0:51:12.200 --> 0:51:15.880 put these conversations together each week. Meredith Frank is my 0:51:16.000 --> 0:51:20.000 audio engineer. Attika of Albron is my project manager. Shortan 0:51:20.080 --> 0:51:24.279 Russo is my head of research. Anna Luke is my producer. 0:51:25.000 --> 0:51:28.560 I'm Barry Ridolts. You've been listening to masters of business 0:51:29.160 --> 0:51:45.080 on Bloomberg Radio.