Full Transcript: 41 Investors Share Their Most Controversial Belief

What Would Most of Your Peers Disagree With You About?

Jim Grant: I think that, gold has been, is now and will be money. I think that, I think that, here this is even more, this is even more so, even more people disagree with, I think that the, that the historical cycle beginning in say 1971 or 73 to the present. In which paper Money Reigned Supreme will be seen as a failed experiment and monetary invention, and that, gold will reclaim someplace.

I don’t think people will walk around with coins in their pockets, gold coins in their pocket. I think gold is coming. Gold is coming back. Not like the old South, not like the Brooklyn Dodgers. Not like a cutthroat razor, not like a sextant. but I think gold will. Have it stay again as a form of money that is acknowledged as such, and that, it’ll be good for the gold miners.

Yeah, that’s my story. My story. Matt, I’ll take that. Please

Andy Constan: It’s an easy one for me. I believe that, quantitative easing is always pro-growth and inflationary despite. The fact that everyone looks at the quantitative easing that occurred between 2008 and 2018 and sees that there was no inflation, and based on how I understand quantitative easing working, and by the way, they then see the high inflation that happened when both monetary and fiscal spending was done and say, it’s not Q qe, it’s just fiscal.

And I’m just, I, I don’t, I disagree. I think the, what happened in 2008 to 2018 was that there were so many other disinflationary, forces at play during that period of time that quantitative easing didn’t cause in, didn’t result in inflation because of the disinflationary forces that were happening. If it hadn’t occurred, if quantitative easing hadn’t occurred, I believe we would’ve had much, much lower inflation during that period.

And that is not, most people don’t agree with.

Liz Ann Sonders: Well, certainly my peers in traditional Wall Street feel that there’s some value in year end price targets. I think it’s such a dumb exercise and for our client base, which is all individual investors, we don’t do it because I, I don’t think it makes any sense. I mean, somebody at the, I use this as an example.

Somebody at the beginning of 1987 could put a price target for the end of the year about where the s and p was trading at the beginning of the year. If the commentary associated with that was, market’s not gonna do anything this year, nothing to see here. They might have said just at those two points in time, boy, I nailed it, but the ride along the way was anything.

But even and the, the exercise of the constant adjusting of year end price targets, and maybe that’s a way for institutions to judge one strategist versus another. For strategists themselves to get on the pages of AI or be able to pat themselves in the back for saying, I nailed the year end price target, but for individual investors, I, I, I just don’t understand the value.

So unless Schwab, the company all the way up to Chuck himself decides that, Hey, we, we do wanna do this, and that’s never been the case in the past. That’s the one thing I don’t do and I’m happy about, not.

Richard Bernstein: When I used to teach in the grad school at NYU, one of the questions I used to ask the MBA students was, what’s the difference between the stock market and a horse race? And, MBA students should actually be able to answer that question. They could not. They had a very tough time with it. And the reason why is because most investors, including professional investors, think of the stock market as a horse race.

In other words, people only use the vernacular. This say, I’m gonna make a bet on Amazon, or I’m gonna make a bet on something. No. And I, I alluded to this very briefly before that the stock market is an exchange of corporate ownership. And I don’t think people appreciate that, that it is not a horse race.

It’s not Sea Biscuit in the seven. It’s more like somebody owning Sea Biscuit and having, to buy the horse and then train the horse and groom the horse and stable the horse. Then there’s stud fees after the, after the races and are all done, the racing life is done and, and things like that.

And it’s a series of cash flows that come from this horse. And, and that’s actually what the stock market is. So what people do, including professional investors, they concentrate on the race and they don’t understand the bigger picture of, of ownership and, and what the point of the stock market is. we’ve, we, I, I, I think people have.

Taken on too much of a trader mentality, and have gotten away from the investor mentality. And I think I, I’m not sure that completely answers your question, but that’s the way I would, I would kinda look at it

David Giroux: I think that the, the thing I think many investors would disagree with us on is that macro not being a macro investor is something that can create a lot of value. I think that would be, again, that would be the thing that I think again, we, we, we. I have limited time. We’re gonna, we’re gonna spend time where we can have a competitive advantage, that long-term horizon, a one 20 companies I think my, my I’ve been around this, doing this for a long time.

I’ve heard a lot of people talk about the Fed. I don’t know if I’ve ever heard anybody say something about the Fed that actually ended up actually creating economic, creating value for shareholders, creating value that you are able to make that an actual insight. Right? every year someone calls a recession, right?

And they’re 90% of the time they’re wrong. hot. if you get I, I think I have a much higher odds of getting the earnings power right on Rty or Microsoft, getting that right and having an edge on that with a longer term horizon than trying to predict what the GDP is gonna be. there, there are economists who spend 50 hours a week. How am I gonna do that? Do a better job than some economist on predicting. Eurodollar relationship, GDP, that’s, that’s I’m just not, I’m not qualified to do that. And to be, become qualified, I, I’d have to turn away from all that microanalysis where we do have an edge.

So I just tell my team, let’s, let’s focus on where we have a competitive edge, where we can find differentiation. And, you create value for our shareholders.

Meb Faber: We wrote a book a decade ago called Shareholder Yield, A Better Approach to Dividend Investing, and that’s a pretty ballsy subtitle, right?

because Morningstar did a recent report where they outlined they were looking at dividend funds and there’s over 300 of them. I’m managing over a trillion dollars, right? So you’re kind of coming at one of the most beloved brands and narratives of the past a hundred years, right? And, so we’re updating this book listeners, so hopefully it’ll be out before year end, but you can download the, the last version free online.

but in the beginning we demonstrate, we say, Hey, look here’s your return. If you only had price return of US stocks for the past a hundred years. Here it is if you reinvested the dividends. Now, the key phrase in all of this is reinvested dividends. And I’ve been combing through a lot of the acade academic literature and, and the consensus seems to be that most people don’t reinvest their dividends, at least in the same proportion of what they invested in. and if, and the fantasy I think most people have is of the, the dream laying in bed. You’re like, oh, I just can’t wait till I get to Hawaii. Sitting on the beach, drinking pina coladas, letting that sweet, sweet, passive income roll in. Right? And so, there’s nothing wrong with dividends. They are very much a part of the investing stream.

But if you live in a high tax state like I do in California, the last thing in the world you want is dividends and high dividends. And so do dividends outperform historically, meaning high dividend yield? Yes, they do. Now that factor, as we all call them. Tends to put you in a little bit junkier companies, right?

But it gives you this value tilt, which in my opinion is really what you’re looking to get, right? You wanna be, have that value tilt, but if you’re gonna do value, my opinion is always just do value. Don’t do a cousin of value dividend yield. And so, there’s a million different ways you could do this offshoot where we wrote probably our least.

Downloaded or read paper, was one that was targeting no yielding stocks. And we said, Hey, if you did a value tilt and, and targeted no yielding or low yielding stocks, you ended up with a higher after tax return and a taxable count than if you invested in high dividend yield or the broad market. so there’s all sorts of different ways you can go this, but, the whole key being that I think .

The analogy we, we use in, in, in the book update, that’s an old blog post, is we liken it to the old Coke, Pepsi taste test. You guys remember that? So for the young, for the young listeners on here, don’t know what this is. everyone prefers coke, and if you do a blind taste test, most people prefer Pepsi.

And, but then you reveal it. Most people go back to Coke. And a lot of this has to do with branding. I don’t know, commercials, marketing, what your parents. Maybe you just like Warren Buffet big, big Coca-Cola drinker. Anyway, I think it’s the same thing was true with dividends. They have a great narrative, a great story.

Don’t even get me started on buybacks because that’s the next 50 minutes of this, of this discussion. I’m trying to keep these short because we got 20 of these, but, it’s if you do the whole column list of things that are horrific, terrible, no good, very bad ideas. And the other list is things that are probably totally fine.

Dividend investing is totally fine. It’s not the worst thing in the world, but, if you, if you get me into the, is this optimal question and why are, why is, why are there better choices? There’s, there’s certainly, I think better choices and better ways to do it.

Sam Ro: I think it gets to, I think it’s truth six, about valuations. that I don’t think it’s like a black and white disagree. I think there’s a, there’s gray area here. I slowly think valuations do matter when they get really extended, like we’re talking about. 50 or 60 or 80 forward PE on the entire market, or certain companies where it’s like, it’s really out of line.

I think there’s a case to be made, that maybe valuation actually do matter, but so much of the discussion right now is stuff like 17 PE versus 22 pe and I understand that in historical context that that seems like a lot. But what, what’s another way of thinking about PE ratio?

So, uh. 17 forward PE means, it’ll take 17 years of to earn back whatever you invest, into stock. And then 22 means 22 years. So what, what’s the difference between 22 and 17 years? You can send your kids through a nice school in Boston and, they can eat a lot of caja legs. That’s the difference.

Yeah. There’s so, like I said before, like. The long history of charting earnings and charting price. it has a very tight correlation. And when we talk about 17 versus 22, it’s just a brief pickup over time. So, I wouldn’t say valuations actually don’t matter, but, people spend way too much thinking about valuations when they’re not that far from historical.

Jason Buck: What just hit me, I think why I sound different is the, if we just use the word believe, and that’s what I think the problem is. I think in our industry, people believe a lot of things that aren’t true. It’s based on like insecurity, right? Like we, we are so desperate to manage our client’s wealth that we’re looking at these historical representations and drawing inferences of them, and then that provides a belief system that then we think through.

So I think about like things, there’s so many things. I don’t even know how to pick one. It’s like I don’t believe alpha exists over the long term. I believe you combine interesting betas. Obviously I’m actually with Meb too. Like I think the Fed does a decent job. I don’t know anybody else. I think that argues like the Fed’s doing a terrible job.

I know. I know. Two things. One, if they’re a hedge fund manager, it means their p and l’s down. And I’m like you could trade with whichever direction you think they’re going, even if you think they’re wrong. And then I also think rates don’t matter. it’s just a hurdle rate and everybody, like entrepreneurs are gonna be entrepreneurs no matter what the rates are, they can’t help themselves.

trying to think, I’m trying to give you a broad sample, but what it boils down to is essentially I think it’s really difficult what we do. And I think that if we’re truly honest, nobody knows the future. Nobody has a crystal ball. And so I just think if I can hold most of the world’s asset classes and rebalance, I should muddle along.

Okay. And that’s what I think the biggest lack of belief. I think it’s more of a lack of belief that I have versus I, I’m always shocked by the things that people say in our industry because I’m like, how do you believe that? What’s, what’s. How are you determined that, what’s, what’s the base truth in what you’re saying?

And if you find, if you, if you, I feel like I’m a, I’m a 6-year-old. Sometimes at some of these conferences, I’m, if you ask why three times they tend to fall apart. And, and it’s very interesting that the emperor has no clothes and what’s, it’s, it’s a really weird thing that like the ultra wealthy and the, and the, the aged just love to think they have a crystal ball to predict the future.

And it’s always kinda shocking to me. I just find myself out, out a kilter in that way.

Mike Green: It’s a lot harder today, right? Because if you’d asked me eight years ago, this is the same question that I was asked by Peter Thiel, in which I introduced the concept of how pennant was changing the behavior of markets. a i I, I honestly think most in investing now would actually acknowledge many of the points that I have emphasized and made around that.

Um. The, on the investment front, I guess what I would really highlight is, an element of, good heart’s law, which is once a measure becomes a, once a metric becomes a measure, once you begin tracking it or attempting to use it, that it no longer becomes an efficient metric. You’ve actually changed it by its participation.

And again, I highlighted this in my substack. I think Austrian economics is largely bunk. Right. I just wanna be very clear. I think there’s a deep misunderstanding of what money is in Austrian economics, but there is a really important concept in Austrian economics, which is that we are all acting individuals.

We are not passive participants in our lives or in the universe that exists around us. We tend to look at cycles from an anthropic principle, which is to say. The world exists, right? And these cycles have played out through history and therefore they will play out in my lifetime. The reality is those cycles were actually created by the actions of individuals who either resisted the cycles, amplified the cycles, tried to turn the cycles, et cetera.

We’ve become so passive as a society that were terrified of any attempt at action, and as a result, we’re passively sitting by it and saying, well, the cycle’s gonna play out. No, if you don’t act, the cycle’s gonna be different. It’s probably gonna be worse. And so I would just emphasize that like we should all be stopping and thinking at every stage in every action that we do.

Is it an intentional act to make the world a better place? And I don’t think markets tell you that. I think the participants in the markets tell you that

Jerry Parker: I am Really anti sharpe ratio. I think it’s only right to be antis Sharpp ratio when you’re, the distribution of your trades is not normal and you’re gonna make money from five to 10% of your trades and they’re gonna be, huge outlier trades. We’re really big into diversification, but you should not take us that seriously about diversification.

We pretend that we are really big into diversification, but I trade crude West Texas and Brent and I trade London copper. New York copper. And sometimes the differences between those are, are zero. However, the philosophy is yes, we wanna spread it out. We want to have lots of different markets, but we’re really trying to find is those outlier trades.

And sometimes New York copper will trend and make a lot of money in, LME. Copper won’t. And so you need to, um. Not have the optimal diversified portfolio and trade markets that have them in your portfolio, that, that are not, materially different 90% of the time. And I think that’s another thing too, that hitting oil trade I was telling you about in web 84, hitting oil, January, didn’t do anything.

March didn’t do anything. It was only February. Heating oil though there in the lesson in the markets is that diversification is great. Look the market that you’re underweighting or you’re assuming that you don’t need to trade or underweight because it’s correlated with other markets that can have a huge trend and you do not wanna miss that.

it has a different name, so it’s not the same thing. And I think, yeah, the whole diversification thing that’s a better answer has been sharp. I like that one a little bit better. trade markets, even though they’re all the markets, as many as you can and, and ones that are sort of correlated. Because you never know something could happen to one of those if you’re trying to find the outlier and let let those prophets run.

Chris Mayer: Well, I mean, mine is much more, uh.

Hands off style investing. So I don’t believe in the trimming and adding and trading around your positions, which all of my peers seem to love to do. when stocks get expensive in their mind, they cut it back and when they seem to find something they think is more expensively, add to it. So there’s a lot of activity going around the periphery of the portfolio and I don’t do any of that.

I would buy something and just leave it and sometimes. And, and that I should say, that grows directly out of the work that I did for a hundred VAs. I mean, I saw repeatedly, again and again, stocks these great businesses that they would look very expensive for a time. But the market’s making them expensive on the expectation of something good happening.

And if you just left it alone, you, you would’ve done just fine. even from sometimes from peaks peak to peak, which. were surprising, so I, it doesn’t mean that you only buy things once and don’t, because if I have capital inflows or whatever, yeah, sure. I’m gonna add to some favorites that are down or whatever, but I’m much less active and I think people would disagree with that a lot.

They feel like, as a money manager, they have the ability and they ought to, as part of their job, determine when something is, gets very expensive and they should cut it back. And when something becomes very compelling, they should add more capital to it. And, the way I look at it is that, if you really sit down and work out the math on that after taxes and the amount of time you have to be right, it’s a very high bar.

It’s not so easy. And, so the, the way I look at it is that these truly great businesses are so hard to find, very hard to replace. You’re probably just better off just leaving alone. so that’s, that’s one area I think. I agree.

Joseph Shaposhnik: If a stock has doubled or even tripled, you haven’t missed it. So many times people think that because they’ve seen a stock go up significantly the story over, they should look elsewhere, and so many times, that’s just the first act to a very, very long play. And I think about this all the time. Sometimes in my mind, and this may be even more controversial to say, I want to see the management team perform.

I want to see the stock go up before I buy it. I want to see the story play out, and then I have more confidence that this story has long legs, that I can feel confident that they are on the right path. And there’s something to be said for seeing some performance before you invest, particularly in the new issue market.

And one of the things I, I probably should have mentioned about the Peter Lynch conversation that I had, is he looks at new issues a lot. We look at new issues as well. We think that there’s a new opportunities there that the market kind of hasn’t, discovered yet. And so. If a stock has doubled or even tripled, you haven’t missed it.

I go back to my investment in Constellation Software. In 2016, the stock had gone from, I think it iPod at around $16 a share to 650 when the geniuses from Los Angeles showed up to the annual meeting 10 years too late in Toronto to meet Mark Leonard and see the story for the first time. The stock had gone from 16 to 600, 650, and the stock chart when you kind of plotted it on Bloomberg, was as scary as stock chart as you possibly could see.

It was a vertical line going straight up like this because the ascension was so significant over those years, and for whatever reason, maybe it was because I had remembered this lesson. For whatever reason, we weren’t dissuaded. I think the reason we weren’t dissuaded by the the move was because cash flow had followed the stock, the stock movement.

And when you see cash flow following the stock movement, you’re not as concerned about the stock going backwards on you because you always have that backstop of, of forward momentum of the free cash flow going in your favor. And I think that that’s maybe one of the more controversial things I could say.

If a stock has doubled or even tripled, you have not missed it. Maybe the other controversial thing is you don’t have to have an opinion on every security and just focus on your high conviction businesses that you think you can predict and put together a portfolio that comprises those elements.

Warren Pies: I don’t know if people would agree with me or not, but I really believe that you have to manage risk with technicals, with price and build eviction with fundamentals. And so I, I I think that, like you said, when does a gold trade over? When is that over? Like, I think price is the best way to manage risk, to quite honest, honestly.

Maybe the only way I know. And so, that’s my, one of my truisms that I live by and I don’t know. I think there’s a ton of skepticism around technicals. I think a lot of it is well earned. There’s some technical stuff out there that’s quite frankly, stupid. But it doesn’t mean that you, you throw it all the baby out bath water.

So that would be my, I don’t know if that’s, if people disagree with that or not, but, the other thing would be that us don’t think the market’s overvalued, which we talked about. I don’t think the market’s overvalued here. and we’ve been saying that for a while. And, we’ll see. I know that that pissed a lot of people off last year when we said that I’m there.

Probably only more mad people at this point in time, that cycle.

Katie Stockton: So I think in terms of like, my discipline of course is technical analysis and I, I do believe that you can make sort of investments based solely on technical analysis.

That’s something probably not a lot of people would disagree with, right. a completely price. The with Cision. So I, I would put that out there as more of, just a a comment on not just me, but, but technical analysis in general. There’s probably still a lot of skeptics out there. but what I would caution against is just using technical analysis for individual stocks, because you better know what those companies do, because if you don’t, then you’re taking on a lot more risks.

So I think when you’re applying technical analysis as you’re. Sole discipline for trading or investing that you should do it more from a top down perspective. I mean, we have so many tools by the way, at our disposal to not only understand the markets from a technical perspective, different software, some of it’s free, but then also investible products.

these diversified sort of thematic ETFs as an example. You can have a great technical take on a theme like AI and have this very low price investible product, and you can leverage the swings in a way. just through the price action that can be very sort of profitable and beneficial, I think.

So it’s a matter of, of investing, responsibly, of course. but I do think that there, there, there is that element that we can use the charts. Even as a standalone up time for that top down investing.

Jim Paulsen: I talked about, talked about one of them, earlier, just that I think that, that policy officials, monetary and fiscal policy officials aren’t nearly as important as we think that other other important drivers should work.

Mainly just the, the independent, decisions being made by. Laissez fair, if you will. And I think that’s, that’s what people miss is spend far too much time wondering, whether the fed’s gonna cut or not, or what tax policy’s gonna be passed. And I think while they’re doing that, a lot of economic policy is being implemented every day, every hour, every week.

And that’s probably more for, in driving things a a little bit. I think the other thing I thought about was valuation, losing its import, which I think most people think I’m nuts. Well on, going there, with that. And then I’d also maybe just say too that in many ways, I think Main street sentiment, cultural sentiment, what I call it, is far more important for investors than Wall Street Center.

We have a lot of bull bear indicators and that kinda stuff, but I think what would. The real potential or risk of a stock market a lot of more often has to do with culture suning on me.

Adam Parker: Well, Camin, I spent most of my career worried that I was a fraud and that that was gonna get exposed. Okay. And I would argue that if you don’t sometimes worry about that yourself, you’re probably a bit of a psycho. Okay? So if you start from that, that, that, that is, is like, okay, I, if you, if you don’t have some level when security equity investment isn’t for you, okay?

Like, I mean that, like you might get lucky, you might you might buy Amazon ‘cause you like the Kindle and be right for the wrong reason. But that doesn’t mean you’re good equity investor. what I mean? So like, I think. I’m always worried about like obsolescence of me as a relevant person and just generally, and so I spent a lot of time thinking about like, where’s the like.

Which stocks have high company specific risk, which starts are, well, stocks are hard getting replicated in a hedge basket, and then spend my time on those thinking like, if I can have a differentiated opinion from consensus on those needs, I’ll differentiate from the index more. And we give a lot of advice to our institutional clients on what we call available alpha.

Like if I have alpha generating work, widgets working for me, where should I deploy those people to separate from the index? So I, I spent a lot of time motivated by like generating performance versus the index. ‘cause I feel like that’s where I can add value still as a human and I hope. That last, but that didn’t directly answer your question.

I’d say the most out of consensus view I have is that I think the market’s telling me that the healthcare sector will be 0% chance is the best performing sector in the next five years in the equity market. And I think it’s like 30 to 40% chance. And so I’m trying to find more healthcare stocks to own.

‘cause I feel like they’re the primary AI beneficiary on the productivity side ‘cause they’re so unproductive today. And so it’s, anything that’s been outta consensus has just been wrong. Miller synonyms. But I feel like that’s the area that we, we could look back five years now and say, wow, there was a lot of innovation and a lot of stock to work here.

Rupert Mitchell: I think there’s a real tendency to try and emulate famous traders and investors trying too much to be. The new drug or the new Warren Buffet I don’t think that they would try to be themselves second time round, so yeah, by all means, read your market wizards.

Understand what they did, take little snippets or, oh, I haven’t thought of that, or whatever from, from these these, these investment geniuses of the past. But you’ve gotta, you’ve gotta, you’ve gotta, you’ve gotta craft your own, your own channel. Right. There’s no right answer and there’s only, the only right answer is the, the one that’s right for your personality.

‘cause it’s the enemy within that needs to be conquered.

Victor Haghani: I think that, I think that in the investing, in the investing world in general, that that people are not willing to change their asset allocations very dramatically in response to changing expected return or expected risk, premia and risk. there’s this, feeling that, changing your asset allocation is market timing and market timing is bad. I think market timing is what we mean by market timing is something different than this. That it’s rational to change your asset allocation, but that for whatever reasons people have, I think a lot of people think it’s rational. They just don’t want to, they’re just afraid to do it or they’re cautious about doing it, and they know how it, if they had done it, how it would’ve been, and they’re cautious about that.

But I think that’s probably one thing that, that I think so many, uh. Different investors, are not really agreeing with me on, which is that we, we should be dynamic in our asset allocation and pretty, and pretty dynamic not just a couple of percent here or there. but but fairly fairly big changes in asset allocation can be warranted by different conditions.

Ben Carlson: I think most investors these days are actually pretty well behaved. I think a lot of people look at like mom and pop and retail investors and think, oh, they’re the idiots, right? They’re the ones making all the mistakes. And those, those people do exist, but I think investors are far more well behaved these days than they’ve ever been at any time in, in history of investing, because I think we have all these different avenues.

We have automatic investing in 4 0 1 Ks and IRAs, and tax US harvesting and robo-advisors and target date funds and all these things and index funds. I think the general investing public is, is much has gotten better at investing than they were in the past. I don’t think a lot of pros actually believe that.

Dan Rasmussen: it comes back to something I talks about at the very beginning, which is sort of core to my worldview, which is the, the predictability of growth.

and I think that most investors implicitly or explicitly believe that historic revenue or EBITDA growth is predictive of future revenue or profit growth. and I do not think it is, and I think the empirical evidence supports the idea that you can learn almost nothing about the future growth of a company by looking at its historic financial statements.

and I think that is. The most controversial thing. and I think the implications of it are so massive. that I’d, I’d say that that’s my, my my greatest point.

Graeme Forster: Well, there, there’s one phrase that just bugs me to death. And, and, and almost all of my peers would use it. And they say, they say some along, something along the lines of even the best investors are Right. Only 60% of the time, like you’ve heard, must have heard that. Oh, yeah. Many times. Right? Okay. So I, I ly disagree.

Okay. So I think, and some of the very best investors say this, and now it might be semantics and I’m being very pedantic here, but investors often forget. Making a great decision and experiencing a great outcome are quite distinct, right? So poker players understand this very well ‘cause they play multiple hands in a single session and they understand that when they’ve made it, sometimes they make a decision, they get a terrible outcome.

Sometimes they make a terrible decision, they make about a great outcome. But investors forget this whole at time. Again, I think it’s a function of investors being pummeled by their clients for core short term performance. If they say. Oh, but I made the right decision. I tend to not go down very well, but it should go down well, and plan should recognize that that is, that is a the, the amount of noise of volatility and luck, frankly, in the investment industry, much, much higher than any in any poker game, which is controversial, but I, I a hundred percent believe that.

so if you go back to 60, right? 60% of the time, the correct phrase should be that the best investors have a 60% success ratio. That is 60% of their holdings go on to experience winning outcomes. Okay. now we’ve actually measured the percentage of good decisions that you need to make in order to get to that 60% outcome.

And the answer’s 90% or 95%. So you need to make great decisions 90% of the time, or 95% of the time to have a measly 60% winner ratio. So there’s very little roof error. And I think that’s, that’s, um. Underappreciated. This is a really, really tough, tough business.

Shannon Saccocia: So I will preface this as saying that I, I went to school and I got degrees in history and economics.

So, but I believe that. We spend far too much time as historians and not nearly enough time as futurists, as investors, so I, I think. Anchoring to these periods, having experienced them there are so many things that have happened in history that were point in time that if you put the actual context around you realize that they may be not at all applicable to what you’re experiencing today.

And so I think in order to actually be a successful investor. You you have to think about what might be instead of what’s happened in the past.

Cem Karsan: Options are not a derivative. They are the underlying. when people refer to, uh. Options and all the volume increases and wow, the, the, the, the phrase that everybody uses, it’s, wow, the tail is starting to wag the dog. I’m here to tell you that options are the dog. what do I mean by that?

Well, pretty simple. If you look at a stock or a bond or any asset, right? HUD people, it’s two dimensions. Either goes up or down. What if I gave you two stocks, white labeled, no name on it, same market cap, same industry. Same everything you would say, well, those are the same stock. What if I peel back that, option train and show you that one is incredibly right, distributed with a left tail, the time, which that distribution is completely different and, and the growth, trajectories are different, whereas on the other one is the exact opposite. very much a value stock, maybe, maybe left distributed bright fat tail in case they come up with a solution. Completely different stocks. The actual options, they’re giving you nodes and probability across the full distribution of what this thing looks like. At the end of the day, that asset, whether it’s a stock or bond, has a full three dimensional picture of its characteristics of what the asset is.

The asset itself is the thing, not the stock price, not the asset value. The asset value is just a, a summary of that full distribution by arbitrage every node on that, that distribution, that represents this asset is summarized by one price, which is the asset price, the stock value, the bond value.

Everybody started in that asset value, that very simple two-dimensional world and derivatives are new. So we call them derivatives ‘cause they’re derived from this thing, but the reality. They’re not a derivation. It’s a better technology. It’s a better way to full. We’re going from a two dimensional sheet to a, a hologram.

You’re seeing the whole thing in its full essence. And the reason it hasn’t been used more until more recently, but again, we’ve seen secular growth since I’ve been in business for 25 years, and it’s been exponential. But the reason is, is because of network effects, much like a technology, even if it’s a better idea, you need to build infrastructure.

For, and you need more volume and you need more participants for it to be an active and to become the core thing that people, everybody uses. What have we had in the last 25 years since I started the business? We, we went, when I started in 1998, we had, one, one quarterly expiration in the SP 500 and options were, were priced at every, three to 5% in the market.

That’s it. Now we have every day we, and by the way, the multipliers were 250. we have every day expiration. We have every five points in the s and p. we have a, an option. We have options for every single major equity and every single asset across the world. we have more education, we have access through, uh.

Brokerage and, and, and regulation ha has, has thinned out to allow much more access. Not to mention we’ve gotten from 250 multiplier to a hundred to 50, to 10 to one, to now 0.1. It is incredibly available now and people are beginning to, to get educated. Understand, but the reality is we are still at the tip of the iceberg.

It is a superior way to position based on information that you have on any asset. You can express any point without the sale of taking the full risk of the whole asset at, at, at any point in time or moneys on that asset. And that is just a superior, way to express information. So my view is that the world.

Is going to options and that options will be the primary way to, to invest, in, in the future. And whereas, even though notionally there’s more trading volume and realistically it’s still 1%, of total investment that happens in the market. and and my belief is that if you look forward in 20 years, 40 years even, we will be in a completely different world where options sit at the core.

Of invest.

Aahan Menon: So, I think the first one, is tariffs don’t matter that much. I think, I think, I think that’s the first one I’ll give you. So we’ll blow up your comment section with that. and then the second one I think is that, you don’t have to, you don’t have to account for every single thing in your investment process, right?

I think, I think this is less of a thing where it’s, it’s less of a concern when you have a really seasoned quant that’s been doing it for a really long time. It’s kind of. Like, the most common questions I I’ll always get is how the latest thing that’s moving news is going to impact our portfolios, our signals.

And about 50% of the time, I have no idea. and I think, as, as quantitative investors, we need to be comfortable with that. Like there’s a certain amount of the distribution that we’re trying to explain that we think that we can explain and, where. There is no way that your investment process is gonna be able to account for every single thing, and you’re gonna be able to engineer solutions for every single thing.

So I think as a macro investor being on top of every bit of news, what the Fed did, what power, what color tie, power wore, like it just doesn’t matter that much. Staying focused on the things that matter and staying true to that. I think that that’s something I generally think that my peers don’t seem to do.

Andrew Beer: Simple usually works better.

Yeah,

I mean I think it’s, I think, I think people think that hedge funds, I think people think hedge funds gravitate to complexity because it’s necessarily better. The very best hedge fund managers that, and investors that I know, it comes down to simple bets.

And it’s, and, and the geniuses are the ones who can see through all the noise to what the fundamental underlying bet is. And, and as it relates to our business, we, we made a simple bet. we made a simple bet that we could accurately figure out the big exposures in such an efficient way that we’ve a structural alpha advantage, by.

Cutting out what we saw were a lot of fees and expenses. We wouldn’t be right all the time, but we would be. But we would have. But going back to that model of being right often enough, and if that works simply, why would you change it? But, but if that’s disappointing to investors, a lot of allocators, ‘cause they’re so used, they’re so conditioned to hearing and and I end up always asking the question like look, if quants are so good.

If quantum models are so good, how can so many quant products are so bad, right? If, if complicated products are so good, why don’t they generate better returns in the s and p? and, so I think, I think that’s, you mentioned this quote about Renaissance, who’s the, so the, the, the quant investing gods, there’s this great quote from one of the early statisticians who said their, their superpower in a sense was just doing these simple regression models.

But they were pulling people who were doing field theory at string theory at Harvard to do, because it’s about asking the right questions and getting it right and resisting the temptation, as you say, to keep, ‘cause with models, people love to keep changing them. it’s very, very hard and, and there’s pressure to change them, ‘cause investors want to see that.

and so for years when we were talking about it, it was the fact that we weren’t change shading. It was viewed as being. we’re being lazy, we’re not paying attention. We’re this, that, and it’s, it’s, it’s, it’s hard. It actually ended up being a very contrarian bet, but I think people are coming around to that.

Bogumil Baranowski: I still believe that a lot of my peers would disagree with me with the idea of how little work you would actually have to do to be a successful investor. In terms of research, there’s this famous investor whose name escapes me, had this idea of a fin folder when we used to actually collect cutouts newspapers notes in a folder.

And when you really think about it, and there was somebody who reposted a Forbes article about Buffet, how he’s looking for things that are simple. Easy to to explain. I think we get drawn into investing because we think it’s such a fascinating intellectual puzzle that we go about it with full force, that I’m gonna turn every single stone and I’m gonna do all this research, and now there’s no shortage of tools that will allow you to do incredible research and really produce a hundred page reports about every single company within minutes, if not seconds.

The point is that the. You don’t need to do such an incredible amount of work. If the business makes sense, you can explain it in a simple sentence and you cannot, I choose not to own it. I don’t have anything in my portfolio that would take me more than a minute or two to explain why I hold it.

And it’s not that they’re dumb businesses, they’re doing incredible things, but the actual underlying thesis behind it is very, very simple. And as long as it applies, no matter what the quarterly earnings look like. I’m gonna hold onto them and I’ve held for, on things, held onto things for, for a decade or more.

I mean, it’s, it’s nothing unusual for me, but the amount of work that goes in, I would question that you need a hundred page write writeup. And I think a lot of my colleagues would tell me that I’m crazy, but I’m gonna say it. I think if you can explain it with a paragraph, I think it’ll do just fine.

Rick Ferri: The fees, I think advisor fees are

advisor fees should be advisor. Fee for advice and asset management fee should be fees for asset management. I believe there should be a separation of the two. So if you’re an advisor and you do both, you provide advice and you provide asset management, I believe they both should be separate line items on a, report fee report.

And it shouldn’t all be lumped together in what? One wrap fee of, call it 1% because I think that ends up overcharging the client for the advice side. So decide what you’re gonna charge the client for asset management. It should be reasonable. I mean, Vanguard charges 30 basis points. I think that’s a fair fee.

And then you’re gonna charge them maybe also fee for advice, which may be a flat annual fee. So I think they should be separated because there are two separate businesses that you’re providing, two separate services you’re providing. And I think I, I disagree with a lot of my peers on that point.

Probably the biggest point I disagree with on,

Cameron Dawson: I believe very strongly in a multidisciplinary approach to investing, and I think that there’s never one school of thought, one, one answer to a single problem, which means that you have to look at the.

Question of whatever you’re looking at within markets from multiple different angles in multiple different disciplines. The best analogy I have for it is, is the, the men in the dark room feeling different parts of an elephant and not knowing what they’re touching. And some people think it’s a tree trunk and some people think it’s a rope.

That the way that we can illuminate that is by looking at technicals, looking at top down macro, looking at bottom up fundamentals, looking at quantitative, looking at at, at behavioral, and pulling them all together knowing that they’re going to disagree and they’re going to tell you different messages about what’s going on.

But what what’s the be the f Scott Fitzgerald quote of the definition of intelligence is being able to hold two, conflicting your ideas in your mind at the same time, and I don’t remember how the quote ends, but something like you don’t lose your mind. The whole point is to take from all these different, methodologies of seeing the world, respecting them for their process, and understanding the different regime that some work versus at, at different times versus others.

So. Some people will throw out technicals and be like, I don’t believe in it. It’s all, it’s all witchcraft. And, and I, I completely disagree. I think that, that it’s an incredibly powerful tool, when combined with a bunch of other methodologies.

Mary Ann Bartels: when I saw that question and I’m glad I saw that before I came on. ‘cause I really gave that some deep thought. I’m old school. I was trained old school. my aunt Tra trained me, right? And she came into the markets in 1956. She was a trailblazer. She was the first woman trader, at Ladenburg Alman.

Of course. She didn’t start as a trader, she started as a secretary. And back in those days Warren Buffet days. You bought blue chip companies and you held them and you collected dividends. And I still believe in that strategy. I believe that that can fit in a portfolio. It may not fit every client, but I still believe in that strategy where you should own good companies and collect a dividend.

And if you can reinvest that dividend now, baby boomers, retirees may want to have that cash flow, right? And over time, get appreciation. It’s a great way of compounding your returns over time. The market has become so focused on products ETFs, for a form of investing. And I am not against ETFs.

I am all for ETF investing. and I’m not against products, but I do believe you can have a portion of your portfolio invested in blue chip companies.

Travis Prentice: I would say that it’s turnover. I think there’s a kind of a universal reaction to turnover as turnover being bad. And so I think I would differ most saying that, well, turnover should always be a reflection of the underlying strategy. So like in a value strategy, if you have a five year horizon Yeah. Then high turnover.

It’s probably not good ‘cause you’re not, you’re not, you’re not, you’re not, you’re not executing on that strategy. Right. but for a momentum strategy you don’t want a momentum strategy with low turnover that much. I know. So I think the fact that turnover being universally bad is probably one thing that I differ with, I think it just depends on the strategy and what you’re trying to accomplish.

And so I don’t think there’s one answer high turnover, bad, low turnover, good.

Scott McBride: It really is that I just hear so much. What is your catalyst? What is gonna unlock value? And for us, you just, you really don’t need a catalyst. What you need is to get the valuation right and to get the governance right. And as long as the company’s gonna give you that cash back, you’re happy.

We’re happy to have a low, low valuation. We’re fine to sit at a low PE for a long time. If a management team does the right thing, that means we get a big dividend yield and they can buy back along their shares and grow earnings really fast by doing it. So, that’s the number one thing I see. people talk a lot about where I, why I don’t agree with it.

Jared Dillian: I think the majority of people would disagree with me on tariffs. I remember in like 2001 or 2002. Lou Dobbs was going on Fox News and talking about tariffs and protectionism and stuff like that, and he was so, like, he was not reading the room.

Like people, it’s kind of hard to remember what this was like, but back in the nineties, in the early two thousands, like we were very much a free trade country people saw the benefits of free trade. Over the last 20 years, like that’s changed a lot. and I find myself consistently on the other side of people.

It’s almost to the point where I can’t even really talk about it in my newsletter because people get upset. Like if I say pro free trade things, like people get kind of cross with me. so it’s like I, have you ever heard of the allegory of the sandwich? You ever heard of this story? Possibly, but who’s what?

Jared Dillian: So the allegory of the sandwich is, let’s say you’re gonna make a sandwich, but you’re going to do it all yourself. You’re not going to trade with anybody. So you need to grow wheat in your backyard and mill it into flour and make the bread, and you need to raise hogs. Slaughter the hogs and cure the meat and make ham and you need to grow lettuce and you need to grow tomato and I don’t know where the hell you get mustard.

So making one sandwich is like 10,000 hours worth of work, right? Where obviously you could just take money and go to the store and trade and get the ingredients for a sandwich. Trade may is mutually beneficial. Transactions makes everybody richer all the time, right? So, I am, I am very much opposed to what’s going on right now.

and, by the way, I, one, one other thing I point I’d like to make about that it’s funny because the Democrats have become very much free traders over the last couple of months in opposition to Trump. My guess is if a Democrat wins in 2028, they’re not gonna get rid of the tariffs. The tariffs will stay.

Right. It’s, it’s part of the zeitgeist, like we are against free trade now, so I think we’re in for a little bit of a dark time,

Peter Atwater: the environment today is fundamentally different from the environment of the past.

10, 20 years, even the past 40 years, the corporate dis that, that the investor world today believes that shareholder maximizing shareholder value is a

equivocal truth That. They have been raised in an environment where the shareholder always comes first and their decision making reflects that bias. I don’t believe the shareholder comes first anymore. I think the shareholder at best is third or fourth. Given the, the environment of dominant leaders that we have today.

Ian Cassel: I don’t like if it was pure peers for micro cap that are also micro cap investors. I don’t think there’s too many, I don’t think there’s anything that my peers who are also experienced micro cap or Cappers would generally disagree with me on, agree with them on.

I think that it would be just like a lot of things with investing, I think Alpha’s generated in a lot of small ways. Know where we’re we, we agree, but it’s just executed slightly differently. And I think that’s how I’d answer that question if I was directed towards other experienced microcap investors.

For peers that are investors in general, but not microcap investors, I would say probably, and we hit on this already, I think just the belief that low turnover is good and high turnover is bad. I think that’s where I would disagree with a lot of folks in generally on financial into it.

Kris Sidial: Yeah, so I actually think that this is a really, really good question.

So, trading Psyche. In our opinion is extremely important, but a lot of guys in the vol space are, are like quant based and they tend to shit on that quite a bit. and I, I don’t understand why, because I think if you go back and you look at some of the great traders, that have come across all these years, guys like Paul Tutor Jones, ed Dorp, Druck, all those guys talk about like.

How important your trading psyche needs to be. so. It’s probably a controversial take with like the, the nerds in the space, but probably an uncontroversial take with the people who actually have done well.

Noel Smith: The idea that the most you can make is like what a top hedge fund makes. So the idea that you’ve got, I dunno, Bridgewater or whatever, and they make 9% a year. so if Ray Dalio and his group of eggheads can make 9%, what’s the chance that you can only make 9%? That’s total nonsense.

There’s all kinds of prop firms out there that make hundreds of percent per year and go to like, just go to the news and look at Jane Street, look at Optor, look at these prop firms that are just printing money year in, year out, and. The idea that you can’t time markets, that’s also not true. You can totally time markets.

So I would encourage people to learn more and try to figure out how to make money in the marketplace. ‘cause there’s tons of opportunity once you figure out what your niche is. So just the overall idea that I can’t make money, everybody who trades options loses money. It’s not true at all. Tons of people make money consistently.

Trading options, I’m one of’em.

Kai Wu: So we can kind of, continue on this AI theme is why not. so a lot of folks are pretty like, concerned about AI taking our jobs, not just in finance, but listen, in our industry portfolio managers, financial analysts.

So I actually wrote a paper on this. I actually wrote a few papers on this topic of, of how will AI LMS impacts our industry and our jobs, right? And I think the first thing to note is what I just told you guys just now, which is that I, I think that trying to use large language models to replace, like kind of capital allocation component.

Of investing. So in other words, hey, here’s factors. You have a thousand factors. Find the best ones based on historical, correlation with returns is non-starter. I think that’s actually not the way to do it. and I’ve written papers on this, on, on why not, um. I think that the killer use case, of ai, and this is the 2020 paper I wrote on, where, where I said, you don’t want to do the first thing, but what you do wanna do is to use large language models as a way of structuring unstructured data. I specifically called out this technology and said that this is the killer use case. And I think over the past five or so years since that paper came out, it’s basically become like common knowledge, right? Most people will agree that what large language models are good at doing is working with unstructured data.

Now to take this to the, my point is my last paper on AI financial analysts, one thing I did was I said, let’s look at the job of a financial or pm and you can decompose it into say, 20 or 30 different tasks. these are individual things like creating PowerPoints or mapping Q six, whatever, right?

and, um. It turns out that you can then ask the LM or figure out which of these individual tasks are most, are better accomplished using a large language model, and which are better accomplished using a human. And the results are intuitive, right? Talking to clients, building your business, that’s human.

using creativity with new investment strategies. That’s human. uh. Creating PowerPoints that’s better by machines, right? Proofing right. and so it turns out that about half of the tasks, an analyst today are better with large language models and half are with humans. and so you think about what our jobs are, they’re just bundles of tasks where I don’t see us being kind of like net messes and jobs.

I just see like a repackaging of those jobs, right? If you almost think of like a new AI enters the workforce, they take up the things that they’re better at, and you’re left with the things that you’re better at. which I think I’m pretty optimistic in general. I think that’s actually a good thing, right?

I don’t wanna sit here map Fus. I don’t wanna sit here building security masters again. I don’t wanna sit here, proofread a PowerPoint. I wanna sit here like you, you exercising high level thought and utilizing empathy and, and social skills to talk with other humans. So I think in many ways it’s a positive development.

And you think about the history of like the labor markets over the past 200 years there’s been massive technological change. We went from being 90% agrarian to what, 2%. Now. and despite that, the employment rate has basically been the same, right? Like there’s all these new jobs that have been created because of technology pilots, right?

Flood attendants prompt engineers. And, and throughout this period, right, we’ve seen just a massive increase in the wealth of the, of society. So I think like yes the jobs will be different moving forward, but like we’ll all be probably better off for AI and at least for those of us who are thoughtful about comparative advantage, thoughtful about exercising .

Development and trading our ability in areas that AI are less competitive. I think we’re actually gonna have a better time doing kind of more, meaningful work than, than in the past.

Tim Hays: well, I would kind of guess back what I was just talking about is that, you really can’t forecast market, and I think people would disagree with that, but, there have been so many times and we have expectations and clients wanna know what we think’s gonna happen, but we’re not gonna allocate based on that.

We’re not gonna take a position based on that. So, I, I think it’s, it’s, the idea you can forecast the market. It’s not, we don’t think you can, and we don’t try to put out forecasts. We don’t. say that the s like you said earlier, the s and p is going to this level. we don’t, we don’t do those kinds of, that kind of forecasting and that I think a benefit of that is that if you, and I, I remember way back, I think it was 1987 when, or 88, somewhere in there.

And, there was a presentation and Ned Davis, the founder of the company, came out and he was wearing a, a green tie and he gave a really bullish presentation. They said, oh, I brought, I brought the wrong tie, goes back, changes, tide puts on a red tie and gave a bearish presentation. So the point is, you can really make any case you want and especially when you have as much data and indicators as we have to support any argument you wanna make.And so the danger of that is that if you have a, a view and you really wanna support it, you will, but you’ll end up on the wrong side of a, a major move and you end up losing money. So that would be my, my answer to the question.

Doug Clinton: The bet that we’ve been making at Intelligent Alpha is that if we fast forward to clock a decade from now. That the AI powered asset management industry will be a multi-trillion dollar industry.

So just like we’ve seen this boom in, in ETFs and indexing over the past 20, 30 years, I think you will see a similar boom in AI powered investing. Some of that will look active, some of that might look a little more passive. some of that might look even a little more exotic, but I think. We are here chatting in, 2035.

I think Cliff asked this, just did a prediction piece, 2035. Yeah. My prediction would be that we’ll see a few trillion dollars being managed