WEBVTT - AQR Capital Management's Cliff Asness Talks Markets

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<v Speaker 1>And joining us now for an exclusive conversation about these markets.

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<v Speaker 1>Cliff Assness AQR Capital Management, Founder, managing principal and chief

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<v Speaker 1>investment officer. We've been talking so much about these record

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<v Speaker 1>highs we've been experiencing, but within those record highs, there's

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<v Speaker 1>a tremendous amount of stock market concentration.

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<v Speaker 2>Here.

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<v Speaker 1>There's a few stocks that have benefited so disproportionately.

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<v Speaker 3>How do you invest through that?

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<v Speaker 2>Well, first, it's a lot easier to be a quant

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<v Speaker 2>at these times.

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<v Speaker 3>We do run some traditional portfolios, but a lot of

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<v Speaker 3>what we do are.

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<v Speaker 2>Long and short, and it's very common for us to

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<v Speaker 2>be long about seven hundred and fifty stocks around the

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<v Speaker 2>world and short about seven hundred and fifty balanced by industry.

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<v Speaker 3>So we do the courageous thing and run away from

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<v Speaker 3>this problem we've had.

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<v Speaker 2>We've had very good years with the mag seven soaring,

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<v Speaker 2>even though value strategies are part of what we're doing.

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<v Speaker 2>The opposite could hadn't happened in a while, the opposite

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<v Speaker 2>could happen. So concentration is a problem for typical active

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<v Speaker 2>manager and for us in some places, when you're only

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<v Speaker 2>allowed to go long against the benchmark because a lot

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<v Speaker 2>of your information, if you're a good active manager, is

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<v Speaker 2>about what not tone, and when some things are so

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<v Speaker 2>concentrated and big, it shrinks the size of everything else

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<v Speaker 2>and makes that information less relevant. When you're long short

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<v Speaker 2>or even a traditional portfolio that allows you to do

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<v Speaker 2>a little bit of shorting, that really goes away and

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<v Speaker 2>you don't have to think a lot about the mag seven.

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<v Speaker 2>You just have to think about what you like and

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<v Speaker 2>don't like. So I mainly run away from this problem.

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<v Speaker 3>You know.

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<v Speaker 1>Speaking of running away from the problem, you have one

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<v Speaker 1>fund in particular, we're taking a look out. My colleague

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<v Speaker 1>Justina lead pointed this out. You have an equity market

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<v Speaker 1>neutral fund that is up about twenty three percent this year.

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<v Speaker 3>You're beating the market. I'll take your word for.

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<v Speaker 1>It, and that fund, I'm interested in it because traditional

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<v Speaker 1>value factor is generic. Ones out there in the market

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<v Speaker 1>have not performed that well. What do you do differently

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<v Speaker 1>with value?

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<v Speaker 2>I have literally a piece on our website saying we

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<v Speaker 2>are not all about value, except occasionally when we are

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<v Speaker 2>when the world goes into absolute bubble mode. Anyone who

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<v Speaker 2>cares about price is affected by it. But value is

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<v Speaker 2>only a component of what we do. Some particularly strong

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<v Speaker 2>things over the last few years have been and this

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<v Speaker 2>year have been our quality strategies, profitable companies that are.

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<v Speaker 3>Stable, low volatility, low beta.

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<v Speaker 2>Some of the more proprietary things that people at my

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<v Speaker 2>firm will kill me if I try to talk to

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<v Speaker 2>you about, but more mL and alternative data kind of

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<v Speaker 2>things we have had you quoted it, they get mad

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<v Speaker 2>at me if I quoted. But we've had a very

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<v Speaker 2>strong year our versions of value.

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<v Speaker 3>When you go global and you don't.

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<v Speaker 2>Take big industry bets, probably about flat on the year,

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<v Speaker 2>It's not been a terrible year.

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<v Speaker 3>You get very distorted.

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<v Speaker 2>The value indices are cap weighted, and we all focus

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<v Speaker 2>on the US, so they really are mag seven against

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<v Speaker 2>everything else real world, particularly quants, but even non quants

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<v Speaker 2>are often much more subtle in in what they're in

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<v Speaker 2>what they're doing. So not a terrible year for value

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<v Speaker 2>as we define it. But that's not been the driver.

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<v Speaker 2>It's been the other stuff that's made it kind of

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<v Speaker 2>fun this year. So I don't want to still yeah,

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<v Speaker 2>a bunch of time.

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<v Speaker 3>No, No, I just mean the year is not over.

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<v Speaker 2>I hate year to date until December thirty, first four o'clock.

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<v Speaker 3>You really want the family do this thing. How you do.

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<v Speaker 3>I'm a superstitious quant. Okay, there you go.

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<v Speaker 4>I will say you can say anything on TV one,

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<v Speaker 4>so feel free to talk about your returns single stocks.

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<v Speaker 4>And I do want to get your thoughts on size,

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<v Speaker 4>because the phenomenon that we've been discussing is the fact

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<v Speaker 4>that you don't have a lot of small cap IPOs anymore.

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<v Speaker 4>That companies are waiting in the private markets until they're

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<v Speaker 4>a little bit bigger, so maybe they bypass the small

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<v Speaker 4>and the mid cap index. And that's spurred the idea

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<v Speaker 4>that maybe the small cap premium has disappeared as a factor.

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<v Speaker 4>I would love to hear your thoughts.

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<v Speaker 2>Yeah, well this one again. I'm going to turn the

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<v Speaker 2>question around on you, like a quant. Okay, we don't

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<v Speaker 2>think there's ever been a small cap premium.

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<v Speaker 3>What does that mean?

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<v Speaker 2>Well, certainly sometimes small caps win, but a premium means

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<v Speaker 2>they win on average, that on average, you make extra money.

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<v Speaker 2>The early tests of this were in the early nineteen eighties,

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<v Speaker 2>when the so called small firm.

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<v Speaker 3>Effect was discovered.

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<v Speaker 2>I arrived at the University of Chicago about five years

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<v Speaker 2>after this, but it was there, it was being done,

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<v Speaker 2>and it showed that after adjusting for their beta. Another

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<v Speaker 2>thing quants do and non quants. If you're making extra

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<v Speaker 2>money just because you're a one point five beta and

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<v Speaker 2>markets go up, you will make more money than a

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<v Speaker 2>one beta, and small cap does tend to be more

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<v Speaker 2>sensitive to the market. The early tests had to estimate

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<v Speaker 2>the listing returns the databases just say dlisted, so you

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<v Speaker 2>have to guess at how much you would have recovered

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<v Speaker 2>from that, and they overestimated how much you recover, and

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<v Speaker 2>they didn't adjust enough for the fact that the traditional

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<v Speaker 2>statistical methods. You know, I love statistics, but they grossly

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<v Speaker 2>underestimate the market sensitivities.

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<v Speaker 3>The beta is the volatilities of things.

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<v Speaker 2>That don't trade every day, and a lot of small

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<v Speaker 2>caps don't trade enough. When you adjust for both those things,

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<v Speaker 2>there's not been a historical small premium now today it's interesting.

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<v Speaker 2>I do think this effect of companies waiting longer, it's

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<v Speaker 2>probably more we don't trade on this. It's just an opinion,

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<v Speaker 2>but the small world is probably a more distressed value

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<v Speaker 2>world even than it normally interest is. So I don't

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<v Speaker 2>think that necessarily means if you believe in the premium,

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<v Speaker 2>I don't think it necessarily means it's gone. It could

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<v Speaker 2>just be suffering, and along with value strategies in general,

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<v Speaker 2>I know a fair amount of people who look at

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<v Speaker 2>this thing that's spread between cheap and expensive in small

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<v Speaker 2>is even wider than it is in large cap where

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<v Speaker 2>it is wide versus history. So it could be a

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<v Speaker 2>sea change, or it could just be bad things that

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<v Speaker 2>have happened that lead to good things.

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<v Speaker 3>I have a sea change question, please.

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<v Speaker 5>So I pay like half of my income to the

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<v Speaker 5>US government taxes here in the capitalists, you know, free

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<v Speaker 5>market Cliff wants.

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<v Speaker 3>To help you, Taxy of New York. No.

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<v Speaker 5>No, but I lived for like ten years in Germany,

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<v Speaker 5>right socialist Germany, where I paid less in taxes than

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<v Speaker 5>I do here, and I got free health.

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<v Speaker 3>Care and childcare there.

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<v Speaker 5>So when I see a story about reducing my tax liability,

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<v Speaker 5>I'm reading it. Justina Lee wrote a great story about you, guys.

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<v Speaker 5>Quand Giant AQR cuts income tax bills for wealthy clients.

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<v Speaker 3>Yeah.

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<v Speaker 2>I hated the title, but okay, well, how can I

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<v Speaker 2>get in on this?

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<v Speaker 5>Like what am I missing that I'm you know, losing

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<v Speaker 5>half of the money I earn and not getting anything

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<v Speaker 5>back for it.

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<v Speaker 2>I'm well getting even bigger picture, the difference in Germany

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<v Speaker 2>and the US.

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<v Speaker 3>You raise a fair general point.

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<v Speaker 2>People don't realize that, at least when it comes to

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<v Speaker 2>income tax, the US tax code is more far more

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<v Speaker 2>progressive than a lot of other countries that are thought

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<v Speaker 2>of as more progressive. So you're not imagining it. You

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<v Speaker 2>are paying very high rate for us. It probably started

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<v Speaker 2>about ten years ago.

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<v Speaker 3>We always co invested with our with our with.

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<v Speaker 2>Our clients, who are almost all tax non taxable institutions,

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<v Speaker 2>pension funds and Dowmonds foundations, sovereign wealth funds, and we

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<v Speaker 2>knew this was kind of stupid.

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<v Speaker 3>In some ways.

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<v Speaker 2>We believe in our strategies, but you shouldn't invest the

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<v Speaker 2>same for a taxable investor as a non taxable investor.

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<v Speaker 3>It always shocks me when people are like you do

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<v Speaker 3>that for them.

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<v Speaker 2>I'm like, yeah, you remember, we're fiduciaries. We have to

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<v Speaker 2>do what's best for the client. And classic example is

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<v Speaker 2>if this is stock you loved a year ago, you

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<v Speaker 2>made a lot of money on it's eleven and a

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<v Speaker 2>half months later, and your model or your process, or

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<v Speaker 2>even your active managers.

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<v Speaker 3>If you're not a quant, wants to sell it.

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<v Speaker 2>If you're a tax free institution, you just sell it.

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<v Speaker 2>If you're an individual, you're crazy not to wait two weeks. Right,

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<v Speaker 2>I don't know anything about the next two weeks. I

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<v Speaker 2>wish I did. I'd be Janet. You just talked about

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<v Speaker 2>them if I knew about the.

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<v Speaker 3>Next two weeks. So you wait two weeks and they're

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<v Speaker 3>gonna do.

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<v Speaker 2>They design some silly things in the tax code, like

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<v Speaker 2>the difference between selling something after three hundred and sixty

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<v Speaker 2>four days at again and three und sixty six days

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<v Speaker 2>is dramatically difference in your tax bill. So we don't

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<v Speaker 2>do a darn thing different in terms of gross alpha.

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<v Speaker 2>We are basically you have to do, except for making

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<v Speaker 2>holding in another.

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<v Speaker 3>Two weeks or something.

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<v Speaker 2>We are still running mostly about making money before taxes.

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<v Speaker 2>We're running our standard process. But the major things which

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<v Speaker 2>turn out to matter a lot if you do them

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<v Speaker 2>systematically are if we're running your money after tax, you're

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<v Speaker 2>and you're an institution, and we're running your money pre tax,

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<v Speaker 2>and we decide we hate a stock we used to love,

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<v Speaker 2>we'll sell it for you, and we'll wait fifteen days

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<v Speaker 2>to sell it for you. That doesn't sound so powerful,

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<v Speaker 2>but when you're long short and you have seven hundred

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<v Speaker 2>and fifty longs and seven hundred and fifty shorts. And

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<v Speaker 2>when you're us, which we got kind of lucky on this,

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<v Speaker 2>our average holding period is just.

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<v Speaker 3>Under a year anyway.

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<v Speaker 2>So we are making a ton of decisions naturally part

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<v Speaker 2>of the pre tax alpha process around that key decision point.

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<v Speaker 2>If you're a high frequency trader, you can't do very much.

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<v Speaker 2>You're realizing it all every day. If you're Warren Buffett,

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<v Speaker 2>you already have a good tax plan. It's eventually to

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<v Speaker 2>hopefully not for a long time, but to die and

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<v Speaker 2>to pass it on to your airs or charity tax free.

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<v Speaker 2>One year is a beautiful time because the tax code

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<v Speaker 2>is kind of silly about it. The tax code I

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<v Speaker 2>would write is not necessarily the tax code that I will,

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<v Speaker 2>as a fiduciary manage my clients too well.

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<v Speaker 4>I want to talk about the after tax return a

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<v Speaker 4>little bit more, because of course there's always been a

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<v Speaker 4>focus on after tax returns, but it feels like there's

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<v Speaker 4>more and more products that are coming to market that

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<v Speaker 4>are focused on the after tax return.

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<v Speaker 3>I think about what's going on in.

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<v Speaker 4>The ETF space where I live, and there's an a

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<v Speaker 4>tier to make exchange funds in the ETF wrapper and

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<v Speaker 4>to get a little dystopian. I wonder if that's like

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<v Speaker 4>the future of asset management after tax return products and

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<v Speaker 4>leverage single sock ETFs.

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<v Speaker 2>I mean, I have strong opinions on what's the best

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<v Speaker 2>way to do this. Exchange funds. I watched some of

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<v Speaker 2>them at Goldman Sachs thirty years ago. They always struck me.

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<v Speaker 2>You know, we like to do really natural things, like

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<v Speaker 2>we're doing our process anyway, but we're gonna wait two

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<v Speaker 2>and a half.

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<v Speaker 3>Weeks to do this. They you know, those always struck

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<v Speaker 3>me as a little like in alchemy.

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<v Speaker 2>Yeah, I'm not super comfortable with that kind of solution.

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<v Speaker 2>But what you said in general, a larger focus on

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<v Speaker 2>after tax I have been waiting for this for my

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<v Speaker 2>entire career as a as a little kid in this business.

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<v Speaker 3>This is not genius.

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<v Speaker 2>I think a lot of people did it. I was like,

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<v Speaker 2>why does everyone? Why do tax will people focus on

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<v Speaker 2>pre tax returns. I mean, they've been studies that look

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<v Speaker 2>at mutual funds and say the money flows to the

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<v Speaker 2>largest pre tax return, which is often for the obvious

0:10:59.200 --> 0:11:02.680
<v Speaker 2>canonical invest there not the best post tax return.

0:11:03.600 --> 0:11:04.040
<v Speaker 3>Rob are not.

0:11:04.240 --> 0:11:05.520
<v Speaker 2>Who has been a friend of me of mine for

0:11:05.559 --> 0:11:08.360
<v Speaker 2>a long time. We've written articles back and forth. He

0:11:08.400 --> 0:11:10.080
<v Speaker 2>wrote a brilliant piece on this, and I think in

0:11:10.120 --> 0:11:13.640
<v Speaker 2>the eighties it might be saying, but nobody cared for

0:11:13.679 --> 0:11:17.120
<v Speaker 2>a long long time. So I think it's a positive development.

0:11:17.720 --> 0:11:21.200
<v Speaker 2>I think you have to have pre tax alpha. You

0:11:21.200 --> 0:11:23.640
<v Speaker 2>can't do things that are just about taxes. But once

0:11:23.679 --> 0:11:27.560
<v Speaker 2>you're doing it, you should money different for your tax

0:11:27.600 --> 0:11:28.280
<v Speaker 2>will investors.

0:11:28.520 --> 0:11:32.360
<v Speaker 3>And that is shockingly new. It should have been a

0:11:32.400 --> 0:11:33.120
<v Speaker 3>long time ago.

0:11:33.400 --> 0:11:35.839
<v Speaker 1>Let's switch back to something you were talking about a

0:11:35.840 --> 0:11:39.680
<v Speaker 1>little earlier. We were talking about places. Let's talk about

0:11:39.679 --> 0:11:41.240
<v Speaker 1>it in terms of places to find alpha, because you

0:11:41.240 --> 0:11:45.520
<v Speaker 1>had went there. Where outside of the stock market are.

0:11:45.400 --> 0:11:45.960
<v Speaker 3>You finding it?

0:11:46.000 --> 0:11:48.400
<v Speaker 1>You've made a lot of money in recent years on commodities.

0:11:48.679 --> 0:11:50.400
<v Speaker 1>A lot of people have been talking about bonds. You

0:11:50.400 --> 0:11:54.199
<v Speaker 1>were weeks away from putting around new capital markets assumptions.

0:11:54.640 --> 0:11:58.160
<v Speaker 1>How do you think about diversification? What's the new sixty forty?

0:11:59.400 --> 0:12:03.280
<v Speaker 2>The new sixty forty still sixty forty. I don't know

0:12:03.440 --> 0:12:06.040
<v Speaker 2>who on earth has ever invested in sixty forty. Somehow

0:12:06.040 --> 0:12:08.720
<v Speaker 2>that became you have to do sixty forty if you

0:12:08.800 --> 0:12:11.960
<v Speaker 2>like write a piece like we do on the perspective

0:12:11.960 --> 0:12:14.680
<v Speaker 2>returns of fifty to fifty. The world goes I can't,

0:12:14.720 --> 0:12:16.520
<v Speaker 2>I can't deal with this. This is fifty to fifty.

0:12:18.200 --> 0:12:20.800
<v Speaker 2>We do think both stocks and bonds, and this will

0:12:20.800 --> 0:12:23.120
<v Speaker 2>be reflected in our piece that's coming out soon. We

0:12:23.160 --> 0:12:26.760
<v Speaker 2>do these capital market assumption pieces. They're really are client service.

0:12:26.840 --> 0:12:29.679
<v Speaker 2>We're interested. We don't trade on them. They're like ten

0:12:29.760 --> 0:12:33.480
<v Speaker 2>year signals. I've had a couple bad years in a

0:12:33.559 --> 0:12:36.800
<v Speaker 2>row that I can survive. Things that only work over

0:12:36.840 --> 0:12:40.000
<v Speaker 2>ten year horizons are not very practical.

0:12:40.160 --> 0:12:42.520
<v Speaker 3>And they often give you kind of weird indicators. They'll

0:12:42.520 --> 0:12:44.640
<v Speaker 3>say things like, we expect to this right now.

0:12:44.679 --> 0:12:47.840
<v Speaker 2>We expect to make less on the next ten years

0:12:47.880 --> 0:12:52.199
<v Speaker 2>on sixty forty, particularly on stocks, than the long term

0:12:52.240 --> 0:12:56.200
<v Speaker 2>average because they're expensive. You know how hard it is

0:12:56.240 --> 0:12:59.080
<v Speaker 2>to make money With the phrase make less? What if

0:12:59.080 --> 0:13:01.760
<v Speaker 2>you underweight or short them, if they go up but

0:13:01.880 --> 0:13:03.680
<v Speaker 2>less than normal. At the end of ten years, you

0:13:03.720 --> 0:13:06.680
<v Speaker 2>tell your client, we lost you money, but we lost

0:13:06.720 --> 0:13:08.880
<v Speaker 2>you less than we would have in the twentieth century.

0:13:08.960 --> 0:13:11.079
<v Speaker 2>We talk about this a lot, and people don't get

0:13:11.120 --> 0:13:13.640
<v Speaker 2>very excited about that. Having said that, everyone's got to

0:13:13.640 --> 0:13:16.240
<v Speaker 2>plan their life, from individuals to pension funds.

0:13:16.480 --> 0:13:18.760
<v Speaker 3>How much am I going to make on my assets

0:13:18.800 --> 0:13:21.360
<v Speaker 3>to cover what I have to cover? So these numbers

0:13:21.400 --> 0:13:22.160
<v Speaker 3>are very important.

0:13:22.200 --> 0:13:24.360
<v Speaker 2>If you're going to make less, it's important, But I

0:13:24.360 --> 0:13:27.400
<v Speaker 2>want to be clear, it's not a trading signal, but cost.

0:13:27.440 --> 0:13:31.000
<v Speaker 2>We think less of the markets. We think diversification away

0:13:31.000 --> 0:13:33.960
<v Speaker 2>from sixty forty, which, to be honest, we always believe in.

0:13:34.520 --> 0:13:36.320
<v Speaker 2>So I'm singing a song I would sing all the time,

0:13:36.320 --> 0:13:38.600
<v Speaker 2>but we do think it is somewhat more important when

0:13:38.640 --> 0:13:42.400
<v Speaker 2>markets are probably offering you less trend following strategies long

0:13:42.480 --> 0:13:48.200
<v Speaker 2>short equity strategies that are truly short, not long short,

0:13:48.520 --> 0:13:50.640
<v Speaker 2>because that's just window dressing.

0:13:50.720 --> 0:13:51.319
<v Speaker 3>Well, what's the.

0:13:51.240 --> 0:13:53.640
<v Speaker 1>Best advice you would give to somebody who is primarily

0:13:53.679 --> 0:13:55.839
<v Speaker 1>an equity investor. It's kind of like what David Cosson

0:13:55.920 --> 0:13:57.720
<v Speaker 1>was saying a couple of weeks ago, like Golden Sachs.

0:13:57.880 --> 0:14:00.840
<v Speaker 1>If you're standing at these valuations and you're worried about

0:14:00.880 --> 0:14:03.840
<v Speaker 1>long term returns and you're investing today, how do you

0:14:03.920 --> 0:14:05.760
<v Speaker 1>play just equities?

0:14:06.679 --> 0:14:09.400
<v Speaker 3>If you're playing just equities, it's in your question.

0:14:09.480 --> 0:14:12.480
<v Speaker 2>You are stuck with just equities, then it's about can

0:14:12.520 --> 0:14:16.719
<v Speaker 2>you add alpha to it? And we think some of

0:14:16.760 --> 0:14:19.800
<v Speaker 2>the more publicly known things buying high quality companies at

0:14:19.840 --> 0:14:22.400
<v Speaker 2>reasonable price, what Warren Buffett does, we think is still

0:14:22.400 --> 0:14:26.120
<v Speaker 2>going to work going forward. It doesn't fix the equity

0:14:26.200 --> 0:14:29.080
<v Speaker 2>risk premium. To fix that you have to go outside

0:14:29.120 --> 0:14:32.120
<v Speaker 2>of equities or be willing to short some equities. So

0:14:32.120 --> 0:14:34.600
<v Speaker 2>with in equities, we still think there's alpha for active

0:14:34.600 --> 0:14:37.960
<v Speaker 2>managers who have a discipline, rational process.

0:14:38.880 --> 0:14:41.680
<v Speaker 3>But to cheat the question, I think to.

0:14:41.680 --> 0:14:45.520
<v Speaker 2>Really move the dial on an all equity exposure, you know,

0:14:45.560 --> 0:14:49.640
<v Speaker 2>why are you all equities? You've lived through one of

0:14:49.720 --> 0:14:52.880
<v Speaker 2>several but a golden age for equities, and people tend

0:14:52.880 --> 0:14:55.920
<v Speaker 2>to look at ten years and extrapolate that forever, when

0:14:55.920 --> 0:14:59.360
<v Speaker 2>in real life at that horizon there's at least some

0:14:59.440 --> 0:15:02.040
<v Speaker 2>degree again and it's not a daily tradable strategy, but

0:15:02.040 --> 0:15:03.920
<v Speaker 2>there at least some degree of mean reversion. So the

0:15:03.920 --> 0:15:06.440
<v Speaker 2>world on average gets this little backwards. They get all

0:15:06.480 --> 0:15:09.160
<v Speaker 2>excited and are comfortable with one hundred percent whatever it is,

0:15:09.200 --> 0:15:11.320
<v Speaker 2>one hundred percent one thing, when that one thing has

0:15:11.400 --> 0:15:14.080
<v Speaker 2>won same thing for us versus non us.

0:15:14.520 --> 0:15:15.800
<v Speaker 3>US has crushed the world.

0:15:16.480 --> 0:15:18.800
<v Speaker 2>Most of that has been the US getting more expensive

0:15:18.840 --> 0:15:21.520
<v Speaker 2>than the world. The fundamentals have come in somewhat better

0:15:21.520 --> 0:15:24.080
<v Speaker 2>on the US, but as we measure, that's about ten

0:15:24.080 --> 0:15:27.480
<v Speaker 2>to fifteen percent of the US's victory. Eighty five percent

0:15:27.800 --> 0:15:31.120
<v Speaker 2>is people being willing to pay more for those multiples.

0:15:31.400 --> 0:15:34.920
<v Speaker 2>That's not something you want to extrapolate fundamental performance. You

0:15:34.960 --> 0:15:37.160
<v Speaker 2>can argue maybe there's something better in the US, maybe

0:15:37.160 --> 0:15:40.920
<v Speaker 2>this is not, but just price multiple moves. So I

0:15:40.920 --> 0:15:43.280
<v Speaker 2>think the number one thing is to cheat your question

0:15:43.720 --> 0:15:46.640
<v Speaker 2>and go You've lived through a tremendous period of richening,

0:15:46.640 --> 0:15:49.680
<v Speaker 2>particularly for a US investor. I'm not saying dump them,

0:15:50.000 --> 0:15:52.000
<v Speaker 2>but I'm saying to assume that's going to happen again

0:15:52.440 --> 0:15:55.400
<v Speaker 2>is a little crazy. And doing some other things, be

0:15:55.480 --> 0:15:58.520
<v Speaker 2>they the things we like or whatever you think can

0:15:58.560 --> 0:16:01.000
<v Speaker 2>add value. That's not just a great bed on equities.

0:16:01.080 --> 0:16:03.680
<v Speaker 2>Rising is always important. You always want to build the

0:16:03.680 --> 0:16:07.000
<v Speaker 2>best portfolio you can. Is more important now than it

0:16:07.040 --> 0:16:07.560
<v Speaker 2>normally is.

0:16:07.760 --> 0:16:09.960
<v Speaker 5>Yeah, this is what Oswa thamzar And was talking about

0:16:10.280 --> 0:16:12.040
<v Speaker 5>with has Linda, and the fact that we're in a

0:16:12.040 --> 0:16:14.920
<v Speaker 5>pricing market right now. It's about momentum and vibes more

0:16:14.960 --> 0:16:17.360
<v Speaker 5>than fundamentals. I want to ask about we have a

0:16:17.360 --> 0:16:20.000
<v Speaker 5>really cool function on the Bloomberg E can go Eca

0:16:20.160 --> 0:16:23.680
<v Speaker 5>and go and you can. We have AI now powering

0:16:23.720 --> 0:16:27.200
<v Speaker 5>a search through companies earnings reports, and I ran a

0:16:27.200 --> 0:16:30.320
<v Speaker 5>search here to see how often people mentioned machine learning

0:16:30.480 --> 0:16:34.080
<v Speaker 5>and AI itself, and obviously you know it's blown up

0:16:34.320 --> 0:16:38.360
<v Speaker 5>in twenty twenty three. And whenever I started thinking about this,

0:16:38.400 --> 0:16:41.520
<v Speaker 5>at first, I thought a lot about you and AQR.

0:16:41.160 --> 0:16:42.600
<v Speaker 3>Because how often do you think about me?

0:16:42.840 --> 0:16:47.160
<v Speaker 5>Well with shanology to me, No, I mean I love

0:16:47.240 --> 0:16:49.000
<v Speaker 5>to think about quants and how they can put this

0:16:49.160 --> 0:16:51.440
<v Speaker 5>kind of thing to use. And I remember a couple

0:16:51.400 --> 0:16:53.320
<v Speaker 5>of years ago reading a story about how you were

0:16:53.400 --> 0:16:56.440
<v Speaker 5>hiring all of these you know, computer science guys from

0:16:56.920 --> 0:17:00.080
<v Speaker 5>University of Chicago, and how much can you put a

0:17:00.680 --> 0:17:04.160
<v Speaker 5>use and gain an edge over other people who are

0:17:04.200 --> 0:17:05.640
<v Speaker 5>I hope, doing the same thing.

0:17:05.760 --> 0:17:08.760
<v Speaker 2>Sure, well that's a separate question, and I do think

0:17:08.840 --> 0:17:10.800
<v Speaker 2>i'll skip to the end on that. I do think

0:17:10.800 --> 0:17:13.439
<v Speaker 2>the AI world will be far more dynamic than what

0:17:13.480 --> 0:17:16.600
<v Speaker 2>you might call the quant factor investing world. You do

0:17:16.680 --> 0:17:19.040
<v Speaker 2>a very good version of Warren Buffett's doing. You'll have

0:17:19.119 --> 0:17:22.080
<v Speaker 2>bad times, but if you stick with it, I think

0:17:22.119 --> 0:17:23.679
<v Speaker 2>the whole world can know about it, and you can

0:17:23.720 --> 0:17:24.560
<v Speaker 2>still make money from.

0:17:24.480 --> 0:17:26.000
<v Speaker 3>It, but we don't have to throw away the Benjamin

0:17:25.960 --> 0:17:26.480
<v Speaker 3>Graham book.

0:17:26.480 --> 0:17:31.439
<v Speaker 2>Now AI big data, alternative data sets will be I

0:17:31.440 --> 0:17:33.680
<v Speaker 2>think a more constant arms race where you have to

0:17:33.760 --> 0:17:36.160
<v Speaker 2>keep reinventing what you do. I'm actually optimistic we can

0:17:36.200 --> 0:17:38.560
<v Speaker 2>do that, but it will have more of that element.

0:17:39.680 --> 0:17:42.800
<v Speaker 2>AI is a really complex topic to even discuss about

0:17:42.800 --> 0:17:45.280
<v Speaker 2>how a firm like ours is using it. If you

0:17:45.320 --> 0:17:46.840
<v Speaker 2>guys want to give me a three hour segment and

0:17:46.960 --> 0:17:50.600
<v Speaker 2>kill your ratings forever. I know it's hard to do

0:17:50.640 --> 0:17:53.360
<v Speaker 2>AI in three minutes, but at our firm we're using

0:17:53.520 --> 0:17:57.200
<v Speaker 2>at least three different ways. One is signal generation, literally,

0:17:57.320 --> 0:17:58.200
<v Speaker 2>you know quant signals.

0:17:58.240 --> 0:17:59.800
<v Speaker 3>We've always done that could be done better.

0:18:00.359 --> 0:18:04.320
<v Speaker 2>The classic example is using natural language processing to look

0:18:04.400 --> 0:18:09.080
<v Speaker 2>at written and verbal information and turn that into is

0:18:09.119 --> 0:18:10.320
<v Speaker 2>this good news or bad news?

0:18:10.560 --> 0:18:12.080
<v Speaker 3>Quants have done this forever. They've done it.

0:18:12.240 --> 0:18:13.960
<v Speaker 2>Word counts, you see the word increasing, You do a

0:18:14.000 --> 0:18:14.520
<v Speaker 2>plus one.

0:18:15.240 --> 0:18:16.119
<v Speaker 3>That was very course.

0:18:16.520 --> 0:18:19.919
<v Speaker 2>If the actual sentence was massive embezzlement is increasing, then

0:18:20.000 --> 0:18:23.400
<v Speaker 2>plus one was probably not your best call. Quants only

0:18:23.400 --> 0:18:25.200
<v Speaker 2>have to be right about fifty three percent of the time,

0:18:25.280 --> 0:18:29.520
<v Speaker 2>so that's okay. Turns out NLP machine learning is better

0:18:30.000 --> 0:18:32.600
<v Speaker 2>than our old methods at doing that. A second way

0:18:32.640 --> 0:18:35.560
<v Speaker 2>we're using AI is how to combine our factors, how

0:18:35.560 --> 0:18:37.960
<v Speaker 2>to weight them. This is a little annoying because you

0:18:37.960 --> 0:18:41.480
<v Speaker 2>know the old joke or recession is when your neighbor

0:18:41.520 --> 0:18:43.160
<v Speaker 2>loses your job, or depression.

0:18:42.760 --> 0:18:43.840
<v Speaker 3>Is when you lose your job.

0:18:45.520 --> 0:18:47.919
<v Speaker 2>AI is coming for me now because I've always been

0:18:48.000 --> 0:18:49.600
<v Speaker 2>one of the AQO and makes kind of the final

0:18:49.640 --> 0:18:52.680
<v Speaker 2>call on weights on how much you know, I don't

0:18:52.680 --> 0:18:55.040
<v Speaker 2>do this every day. We're not traders, but what should

0:18:55.040 --> 0:18:57.720
<v Speaker 2>be The final weights are not all model driven because

0:18:57.720 --> 0:18:59.520
<v Speaker 2>you can overfit that way.

0:19:00.280 --> 0:19:01.920
<v Speaker 3>AI is taking over some of that role.

0:19:01.960 --> 0:19:05.320
<v Speaker 2>It turns out it's annoyingly better than me, So that's

0:19:05.359 --> 0:19:08.119
<v Speaker 2>another way. Finally, just as a productivity tool, which is

0:19:08.160 --> 0:19:12.120
<v Speaker 2>the most mundane, but just to code, AI is making

0:19:12.160 --> 0:19:14.439
<v Speaker 2>everything faster and probably moving where you talked about that

0:19:14.480 --> 0:19:20.199
<v Speaker 2>innovation cycle itself AI for a to use AI is

0:19:20.240 --> 0:19:23.240
<v Speaker 2>there the other really kind of cool way to think

0:19:23.280 --> 0:19:26.040
<v Speaker 2>about AI. And I probably slowed our firm down by

0:19:26.040 --> 0:19:28.439
<v Speaker 2>a year or two on this. I think sometimes the

0:19:28.440 --> 0:19:30.800
<v Speaker 2>old man's job at the firm is to slow things

0:19:30.840 --> 0:19:34.320
<v Speaker 2>down when there's new stuff. But forever we've talked about

0:19:34.359 --> 0:19:39.240
<v Speaker 2>not overfitting that. A danger of quantitative processes is you

0:19:39.280 --> 0:19:41.920
<v Speaker 2>see things in the data that were random. You think

0:19:41.960 --> 0:19:45.920
<v Speaker 2>you can trade them, but they weren't real AI. And

0:19:46.359 --> 0:19:48.399
<v Speaker 2>the way you combat that, by the way, is to

0:19:48.520 --> 0:19:51.399
<v Speaker 2>combine data with theory and common sense.

0:19:52.440 --> 0:19:54.360
<v Speaker 3>AI, to be honest.

0:19:54.080 --> 0:19:57.159
<v Speaker 2>Pushes us a little on the spectrum away from some

0:19:57.240 --> 0:19:59.000
<v Speaker 2>of the traditional things we've talked about, and I was

0:19:59.040 --> 0:20:01.719
<v Speaker 2>uncomfortable from me. You are surrending yourself a little bit

0:20:01.760 --> 0:20:04.800
<v Speaker 2>more to the machine. If there's limited data, you still

0:20:04.800 --> 0:20:07.000
<v Speaker 2>need some economic priors. If there's a lot of data,

0:20:07.040 --> 0:20:10.479
<v Speaker 2>you sometimes don't. One of my partners, Brian Kelly, has

0:20:10.480 --> 0:20:12.320
<v Speaker 2>written a paper with a title I love called the

0:20:12.400 --> 0:20:15.560
<v Speaker 2>Virtue of Complexity, because everyone always talks about the virtue

0:20:15.560 --> 0:20:18.720
<v Speaker 2>of simplicity, even I've had to adjust to a world

0:20:18.960 --> 0:20:21.680
<v Speaker 2>where maybe simplicity isn't always the goal. Complexity can be

0:20:21.720 --> 0:20:22.040
<v Speaker 2>the goal.

0:20:22.160 --> 0:20:25.000
<v Speaker 3>You know, over and over and over, we.

0:20:25.040 --> 0:20:28.040
<v Speaker 1>Have one Wall Street executive after another saying AI is

0:20:28.080 --> 0:20:30.040
<v Speaker 1>not going to take your job. But you've come here

0:20:30.040 --> 0:20:32.480
<v Speaker 1>and said AI's even coming for me in some respects.

0:20:32.800 --> 0:20:35.480
<v Speaker 1>What does that mean about a job on Wall Street

0:20:35.480 --> 0:20:38.760
<v Speaker 1>over the next five, ten, twenty years that's.

0:20:38.560 --> 0:20:42.040
<v Speaker 2>The operative question is over what time horizon, Not to

0:20:42.040 --> 0:20:45.200
<v Speaker 2>get philosophical, but on significantly long enough time horizon.

0:20:45.280 --> 0:20:46.320
<v Speaker 3>It's coming after all our.

0:20:46.280 --> 0:20:50.760
<v Speaker 2>Jobs, right, which is not necessarily a bad thing depending

0:20:50.800 --> 0:20:52.720
<v Speaker 2>on the transition, you know, we get to a world

0:20:52.760 --> 0:20:54.520
<v Speaker 2>of Star Trek with where we have a replicator that

0:20:54.560 --> 0:20:58.119
<v Speaker 2>can make whatever we want. That's not necessarily terrible news,

0:20:58.240 --> 0:21:00.439
<v Speaker 2>but it could be a lot of upheaval on the

0:21:00.440 --> 0:21:05.359
<v Speaker 2>way to that. I think clearly so far at AQR

0:21:06.280 --> 0:21:10.520
<v Speaker 2>it is certainly we've not shrunk because of AI. It

0:21:10.560 --> 0:21:15.200
<v Speaker 2>has made our existing people more productive. Forecasting five or

0:21:15.280 --> 0:21:17.359
<v Speaker 2>ten years down the road is of course a lot harder,

0:21:17.400 --> 0:21:20.640
<v Speaker 2>and I'm not sure a quonkeeek who lives for diversification

0:21:20.760 --> 0:21:22.280
<v Speaker 2>is the guy you want doing this.

0:21:23.000 --> 0:21:25.080
<v Speaker 3>But increasingly.

0:21:25.800 --> 0:21:27.840
<v Speaker 2>You have a job like doing an RFP a client

0:21:27.880 --> 0:21:31.320
<v Speaker 2>wants questions answered. That's going to get much more AI

0:21:31.400 --> 0:21:33.960
<v Speaker 2>over time. I doubt even on a ten year horizon,

0:21:34.040 --> 0:21:35.720
<v Speaker 2>we'll get to a point where no human has to

0:21:35.720 --> 0:21:38.320
<v Speaker 2>look at it. Right now, we are not at that point.

0:21:38.400 --> 0:21:41.080
<v Speaker 2>I would not release something that was pure chat GPT

0:21:42.000 --> 0:21:45.359
<v Speaker 2>to a client, But it's all about time horizing all

0:21:45.440 --> 0:21:48.239
<v Speaker 2>this is coming, and I'm not the guy to do it,

0:21:48.280 --> 0:21:51.679
<v Speaker 2>but how society adjusts to it, that's the question. You

0:21:51.720 --> 0:21:54.680
<v Speaker 2>cannot stop technology. And I always laugh when I hear

0:21:54.680 --> 0:21:56.840
<v Speaker 2>about people like we're going to stop automation.

0:21:57.240 --> 0:21:58.560
<v Speaker 3>I'm like, good luck with that.

0:21:59.000 --> 0:22:00.640
<v Speaker 2>You can slow it down at little bit and maybe

0:22:00.720 --> 0:22:02.320
<v Speaker 2>let some other country beat us at it.

0:22:03.080 --> 0:22:04.560
<v Speaker 3>But it's common for all our jobs.

0:22:05.840 --> 0:22:08.080
<v Speaker 2>My wife went on a quest for our four children,

0:22:08.160 --> 0:22:10.560
<v Speaker 2>we're all in the early twenties right at one point

0:22:10.600 --> 0:22:13.560
<v Speaker 2>saying what jobs should they pursue that are most safe

0:22:13.600 --> 0:22:17.080
<v Speaker 2>from a from AI and she concluded at the end,

0:22:17.400 --> 0:22:18.480
<v Speaker 2>you just do what you're interested in.

0:22:18.600 --> 0:22:21.960
<v Speaker 3>I can't figure it out, since she's pretty smart. Yeah, yeah, So.

0:22:22.040 --> 0:22:24.359
<v Speaker 4>Cliff, we have less than two minutes left with you.

0:22:24.880 --> 0:22:26.520
<v Speaker 4>I want to talk about market mechanics here, and I

0:22:26.600 --> 0:22:29.399
<v Speaker 4>want to talk about leverage single stock ETFs. I was

0:22:29.400 --> 0:22:32.280
<v Speaker 4>speaking with your new friend Mike Green from Simplify on

0:22:32.400 --> 0:22:36.720
<v Speaker 4>Friday and we were talking about these leverage micro strategy ETFs.

0:22:36.760 --> 0:22:40.640
<v Speaker 4>His belief is that that's helping to fuel this record premium.

0:22:40.640 --> 0:22:44.679
<v Speaker 4>That micro strategy has to bitcoin itself, not specifically about

0:22:44.680 --> 0:22:48.000
<v Speaker 4>that product, but you think about the proliferation of these

0:22:48.040 --> 0:22:50.440
<v Speaker 4>types of products, what do you think that means for

0:22:50.680 --> 0:22:52.880
<v Speaker 4>the market structure and the motion of markets.

0:22:53.760 --> 0:22:55.800
<v Speaker 2>All right, I'm drifting from quant now. Whenever I give

0:22:55.920 --> 0:22:59.560
<v Speaker 2>like broad opinions about market psychology, ye, you should weigh

0:22:59.560 --> 0:23:01.920
<v Speaker 2>my opinion somewhat less than when I'm talking about AI

0:23:02.200 --> 0:23:05.000
<v Speaker 2>or diversification because I'm a little out of my wheelhouse.

0:23:05.920 --> 0:23:08.720
<v Speaker 2>But I do think if you look at valuation differences,

0:23:09.000 --> 0:23:11.840
<v Speaker 2>we're still at a time of extremes. And that's not

0:23:11.920 --> 0:23:13.560
<v Speaker 2>just the mag seven. You could do it within any

0:23:13.600 --> 0:23:17.239
<v Speaker 2>industry you want and add them up. I wouldn't call

0:23:17.280 --> 0:23:19.160
<v Speaker 2>it a bubble four years ago. I would have called

0:23:19.200 --> 0:23:21.280
<v Speaker 2>it a bubble. But we still are a time of extremes.

0:23:21.640 --> 0:23:25.800
<v Speaker 2>I think animal spirits are high. Keep hearing that it's

0:23:25.880 --> 0:23:29.600
<v Speaker 2>you know, that's I don't know how to judge this exactly,

0:23:30.160 --> 0:23:32.920
<v Speaker 2>but it's partly quantitative, looking at just the spread between

0:23:32.920 --> 0:23:35.960
<v Speaker 2>what we think are reasonable and unreasonable price stocks, and

0:23:36.200 --> 0:23:38.399
<v Speaker 2>part of it is qualitative, the part you shouldn't trust

0:23:38.400 --> 0:23:41.159
<v Speaker 2>me on. But the part you shouldn't trust me on

0:23:41.720 --> 0:23:48.920
<v Speaker 2>looks at the rise of say, aggressively levered ETFs and says, yeah,

0:23:48.960 --> 0:23:51.800
<v Speaker 2>nobody needs those, And then you combine it with twenty

0:23:51.800 --> 0:23:54.600
<v Speaker 2>four to seven trading. You know, if you're waking up

0:23:54.640 --> 0:23:57.399
<v Speaker 2>at two am and you need a levered bed on,

0:24:00.320 --> 0:24:04.080
<v Speaker 2>then you might want to reconsider not just your financial plans,

0:24:04.080 --> 0:24:09.080
<v Speaker 2>but many things in your life. Extremely lebretytfs if you

0:24:09.119 --> 0:24:11.800
<v Speaker 2>hold them long enough, are almost and I only say

0:24:11.840 --> 0:24:14.640
<v Speaker 2>almost for legal reasons, are almost certainly going to lose

0:24:14.640 --> 0:24:16.960
<v Speaker 2>their money. The volatility drag is very large if you

0:24:17.000 --> 0:24:19.520
<v Speaker 2>rebalance them religiously. It depends on the costs that are

0:24:19.560 --> 0:24:22.359
<v Speaker 2>embedded in them. If you use them for very short

0:24:22.400 --> 0:24:24.760
<v Speaker 2>term tactical views, they can make some sense.

0:24:25.560 --> 0:24:26.880
<v Speaker 3>And then I ask, why do.

0:24:26.800 --> 0:24:29.640
<v Speaker 2>You have very short term tactical views, because very few

0:24:29.640 --> 0:24:33.680
<v Speaker 2>of us, certainly including me, certainly in concentrated non quan

0:24:33.800 --> 0:24:36.800
<v Speaker 2>not Jane Street, but you know two stocks. I don't think.

0:24:36.840 --> 0:24:38.960
<v Speaker 2>I don't think these people have any information on it.

0:24:39.000 --> 0:24:41.159
<v Speaker 2>So I do think it is a speculative tool, a

0:24:41.240 --> 0:24:45.000
<v Speaker 2>symptom of some things that are still pretty extreme in markets.

0:24:45.280 --> 0:24:48.280
<v Speaker 2>And well, this is clearly not investment advice, but I

0:24:48.280 --> 0:24:50.480
<v Speaker 2>wouldn't use them. And I speaking of by the way,

0:24:50.520 --> 0:24:51.480
<v Speaker 2>that was investment of ice.

0:24:51.520 --> 0:24:54.920
<v Speaker 5>Speaking speaking of speculation outside of your wheelhouse.

0:24:57.280 --> 0:24:59.000
<v Speaker 3>My boss does want me to ask this question. I'm

0:24:59.000 --> 0:24:59.639
<v Speaker 3>like he's a quat.

0:24:59.640 --> 0:25:02.280
<v Speaker 5>But how are you investing in Asia with the backdrop

0:25:02.320 --> 0:25:03.240
<v Speaker 5>of Trump tariffs?

0:25:04.040 --> 0:25:06.520
<v Speaker 2>Your bosses are asking me a stupid question. I would

0:25:06.520 --> 0:25:08.639
<v Speaker 2>never insult you guys, but I'm very comfortable now.

0:25:08.680 --> 0:25:09.159
<v Speaker 3>I'm kidding.

0:25:09.800 --> 0:25:15.160
<v Speaker 2>We're investing like quant We are relatively actually really close

0:25:15.200 --> 0:25:18.879
<v Speaker 2>to balanced by country and industry around the world.

0:25:19.080 --> 0:25:20.600
<v Speaker 3>We don't. That doesn't make us ristless.

0:25:20.600 --> 0:25:24.160
<v Speaker 2>We have bad periods when the styles we like, reasonable

0:25:24.160 --> 0:25:26.520
<v Speaker 2>companies at good prices that are starting to turn around

0:25:26.800 --> 0:25:27.840
<v Speaker 2>are not being favored.

0:25:28.040 --> 0:25:29.960
<v Speaker 3>Not gonna be a fun time for us. But we

0:25:30.040 --> 0:25:30.920
<v Speaker 3>have been very.

0:25:30.760 --> 0:25:35.760
<v Speaker 2>Good over time at avoiding the big Thematic themes like

0:25:36.240 --> 0:25:40.200
<v Speaker 2>tariffs are a lot about specific countries and specific industries.

0:25:40.840 --> 0:25:42.840
<v Speaker 2>That's where they can play havoc. They can make real

0:25:42.880 --> 0:25:43.800
<v Speaker 2>winners and losers.

0:25:44.040 --> 0:25:46.080
<v Speaker 5>Can you use Trump one point zero as a blueprint

0:25:46.080 --> 0:25:47.080
<v Speaker 5>for Trump two point zero?

0:25:48.000 --> 0:25:50.439
<v Speaker 2>Oh? There are a lot of jokes that write themselves here.

0:25:51.119 --> 0:25:52.880
<v Speaker 2>I think we're at a time it could work out

0:25:52.960 --> 0:25:55.840
<v Speaker 2>very well. I'm not necessarily a pessimist, but I think

0:25:55.880 --> 0:25:59.240
<v Speaker 2>we are at a time of elevated uncertainty. We can

0:25:59.280 --> 0:26:02.120
<v Speaker 2>measure that. That's not just an opinion. You can look

0:26:02.119 --> 0:26:06.560
<v Speaker 2>at dispersion and forecasts of earnings. Of economic forecasts, you

0:26:06.560 --> 0:26:09.000
<v Speaker 2>can look at how bad they're missing when the numbers

0:26:09.040 --> 0:26:12.159
<v Speaker 2>come out up or down. Dispersion is just about the

0:26:12.200 --> 0:26:16.040
<v Speaker 2>size of the miss. It's elevated and as a soft sense,

0:26:16.480 --> 0:26:18.399
<v Speaker 2>whether you love it or hate it, the Trump world's

0:26:18.400 --> 0:26:20.439
<v Speaker 2>going to be very different than the prior world. So

0:26:20.480 --> 0:26:24.080
<v Speaker 2>I do think economic uncertainty is larger. I'll give a

0:26:24.080 --> 0:26:27.840
<v Speaker 2>blatant commercial I think things like trend following strategy strategies.

0:26:27.359 --> 0:26:28.920
<v Speaker 3>That what are called positively convex.

0:26:29.280 --> 0:26:31.159
<v Speaker 2>It's the geek term for they tend to do well

0:26:31.600 --> 0:26:36.000
<v Speaker 2>in tumult are probably a better time. But mostly when

0:26:36.040 --> 0:26:38.960
<v Speaker 2>it comes to picking individual stocks, we run away from

0:26:39.000 --> 0:26:39.480
<v Speaker 2>your question.

0:26:40.280 --> 0:26:41.920
<v Speaker 3>It wasn't a stupid question, it was just not the

0:26:42.000 --> 0:26:43.000
<v Speaker 3>right question for a while.

0:26:43.160 --> 0:26:45.040
<v Speaker 1>Another Trump question for you. We do have less than

0:26:45.080 --> 0:26:47.600
<v Speaker 1>a minute left here, but do you think that the

0:26:47.640 --> 0:26:51.159
<v Speaker 1>tax cuts, if achieved, will be fuel for the market

0:26:51.200 --> 0:26:52.760
<v Speaker 1>as certain investors believe.

0:26:52.720 --> 0:26:59.040
<v Speaker 2>They usually are in the short term? We do have

0:27:00.520 --> 0:27:02.240
<v Speaker 2>You don't need me here to tell you we have

0:27:02.280 --> 0:27:04.879
<v Speaker 2>a bit of a deficit problem that it doesn't appear

0:27:04.920 --> 0:27:07.639
<v Speaker 2>that either party wants to take. We could talk about

0:27:08.200 --> 0:27:09.480
<v Speaker 2>government getting more efficient.

0:27:09.560 --> 0:27:13.000
<v Speaker 3>We could talk about the DOGE. Do they still pronounce

0:27:13.040 --> 0:27:14.320
<v Speaker 3>it doze when it's a department?

0:27:14.480 --> 0:27:17.240
<v Speaker 2>Still those even when it's the Department of Government Efficiency?

0:27:17.320 --> 0:27:20.280
<v Speaker 3>I think, so let's doggy. I'm copying this from Twitter.

0:27:20.440 --> 0:27:21.960
<v Speaker 2>Someone else said it, but it cracks me up that

0:27:22.040 --> 0:27:24.880
<v Speaker 2>we have two guys heading the Department of Government Efficiency. Yes,

0:27:24.960 --> 0:27:27.280
<v Speaker 2>it's like first thing, fire one guy. That's what either

0:27:27.320 --> 0:27:28.880
<v Speaker 2>of them would do, and I'm not saying which one.

0:27:29.920 --> 0:27:34.119
<v Speaker 2>I'm not going there. I do think we are in

0:27:34.160 --> 0:27:38.000
<v Speaker 2>a world of more uncertainty. I think when it comes

0:27:38.160 --> 0:27:43.120
<v Speaker 2>to stimulative things, the budget deficits are going to matter

0:27:43.119 --> 0:27:44.760
<v Speaker 2>at some point. Many of us would have thought they'd

0:27:44.800 --> 0:27:45.879
<v Speaker 2>matter twenty years ago.

0:27:45.760 --> 0:27:47.240
<v Speaker 3>And have been dead wrong.

0:27:47.400 --> 0:27:49.000
<v Speaker 2>So I'm not going to do the suckers game of

0:27:49.040 --> 0:27:51.879
<v Speaker 2>trying to time when that matters. But at what point

0:27:52.560 --> 0:27:55.880
<v Speaker 2>we consider something stimulative versus oh my god, we've gone

0:27:55.920 --> 0:27:58.960
<v Speaker 2>too far is something I would be terrified to trade on.

0:27:59.000 --> 0:27:59.959
<v Speaker 3>So I'm not trading on that.

0:28:00.359 --> 0:28:03.360
<v Speaker 2>But that point does exist, so I won't make any

0:28:03.440 --> 0:28:06.159
<v Speaker 2>firm forecasts. I just think we're in for an interesting

0:28:06.240 --> 0:28:08.160
<v Speaker 2>ride in one direction or another coming up.

0:28:08.560 --> 0:28:09.960
<v Speaker 1>Cliff, we thank you so much for joining us.