Pods & Recs: No. 114
Today we have a great episode on a hedge fund replication strategy, an update from Ben Hunt on COVID-19, an episode on direct indexing, and lessons on running a company or team from former NFL front-office executive Michael Lombardi.
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Business
The Meb Faber Show: #220 — Andrew Beer, Dynamic Beta Investments — Can You Match Or Outperform Leading Hedge Funds, But With Low Fees, Daily Liquidity, And Less Downside Risk? Beer is as Managing Member of New York-based Dynamic Beta Investments, a firm running liquid portfolios that seek to match or outperform portfolios of leading hedge funds. He tells the story of starting his career with Seth Klarman’s Baupost Group in the 90’s, which gave him the education and idea to start the hedge fund replication strategy. He talks about the long/short strategy, which he says outperforms more due to sector allocation than security selection. He also talks about their managed futures strategy and how that differs from the hedge fund replication strategy, and then finishes with general trends within the hedge fund industry, including fees. [May 13, 2020–1 hour, 4 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
Macro Voices: #219 Dr. Ben Hunt: Charting the post COVID-19 economic recovery. After the market update that ends at the 19:45 mark, the hosts speak with Dr. Ben Hunt of Epsilon Theory, who has been one of the first commentators to focus on COVID-19. He talks about the three narratives he sees as issues with COVID-19: 1) What about the flu? was said by 99% of people who not blame others for saying that; 2) Herd immunity is a not as a solution; and 3) “Flatten the curve” has evolved from the goal of not overwhelming hospitals to having the R0=0. He talks about the issues with all of these and how confirmation bias with everyone is rampant. The interview ends at 1:06:00 and then the episode has more market updates. [May 14, 2020–1 hour, 25 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
The Investors First Podcast: Brian Langstraat, CFA and Steve Curley, CFA: Direct Indexing — Tax Alpha and Direct Beta. This is a great episode for advisors and consultants on outperforming the market the unsexy way — taxes. It features Brian Langstraat, who is the CEO of Parametric, a ~ $300 billion firm. He explains what direct indexing is, how it utilizes tax-loss harvesting to increase returns, how that can also be used within fixed-income portfolios, the degree to which direct indexing is affected by tracking error, and whether or not technology will affect account minimums in the future. [May 24, 2020–38 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link
Direct investing is the basic idea of garnering the benefits of individual security ownership and the flexibility from owning those stocks to build an exposure that’s customized to you and significantly outperform on an after-tax basis.
Capital Allocators: Laurence Siegal — Current Myths and Long Term Optimism. Siegel is the director of research at the CFA Institute Research Foundation. He previously spent 15 years as the head of research at the Ford Foundation and 12 years before that at Ibbotson Associates. In the first 12 minutes of the episode, they cover Siegal’s background. Then they dive into a recent paper he wrote called Debunking Nine and a Half Myths of Investing. Some of the topics include: “there’s no inflation, so the government can borrow all it wants,” “we are in a new era of technological change at breakneck speed where growth outperforms value permanently, or at least out as far as the eye can see,” and “we will be in a low-return environment in the near future.” Then, at the 47 minute mark, they talk about his recent book, Fewer, Richer, Greener: Prospects for Humanity in an Age of Abundance, which addresses the fact that society is wealthier, population growth is declining, and climate change is coming. [May 11, 2020–59 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
The Long View: Carl Richards: ‘Let’s Focus on Being a Little Less Wrong Tomorrow.’ Richards is a great listen on personal finance. He is a Certified Financial Planner and also the author of two books, The One-Page Financial Plan: A Simple Way to Be Smart About Your Money and The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money. During the episode, he talks about why he focuses so much on the behavioral gap, which he defines as the difference between investing returns and an investor’s returns. He talks about why this is so important and how to narrow the gap between the two, the importance of establishing goals and defining what’s importance in life so you can use money to help you get there, what some good questions are to ask clients to get that information, and how to realize we have “enough” in life. [May 13, 2020–42 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
Speaking to the advisors: How can you understand that you’re not in the solution business? You’re not in the solution business, you’re in the problem understanding business.
The Meb Faber Show: #219 — Paul Collier — What Capitalism Offers Is A Combination Of Competition And Collaboration. Sir Paul Collier is Professor of Economics and Public Policy at the University of Oxford’s Blavatnik School of Government and previously was the Director of the Research Development Department of the World Bank. He also authored the book The Future of Capitalism: Facing the New Anxieties, which is the topic of the episode. He talks about the class divide both within countries and between countries (especially with Africa in the latter), offers general thoughts on capitalism and the idea of “purpose beyond profit,” and why he thinks the world needs to help some of the poorer countries through this current crisis. [May 11, 2020–48 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
Sports
The GM Shuffle with Michael Lombardi and Adnan Virk: Keys to Building a Successful Franchise. Former NFL front-office executive with the Patriots, Mike Lombardi, offers advice for leaders on building a successful organization. Some of the topics he covers are: key ingredients of being successful at all levels of leadership, creating a philosophy for your team and defining the culture, and handling talent acquisition and development. Regardless of where you are, there will be a few takeaways for you. For a full list of what he discusses, you can read this. [May 5, 2020–34 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker
When you know you’ve made it is simply this: when you’re out somewhere and someone says “that’s the perfect guy for this company to hire, he fits you guys perfectly.” Now people know your philosophy.
RECOMMENDATIONS
Books
Robert Greene (Best-Selling Author):
- The Fall of Public Man by Richard Sennett — He traces the origins of narcissism in politics and the idea that when you support a politician or ideas, your ego and sense of self are involved. Your whole identity is now meshed with that cause, so for you to hear doubts about who you support, it’s personal.
Pau Gasol (Former NBA Player):
Bill Perkins (Hedge Fund Manager):
- The Four Agreements: A Practice Guide to Personal Freedom by Don Miguel Ruiz
- Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin — Completely changed how he looked at money personally and professionally.
Jim Chanos (Hedge Fund Manager: Founder, Kynikos Associates):
- Bubble in the Sun: The Florida Boom of the 1920s and How It Brought on the Great Depression by Christopher Knowlton — Fantastic history of the first credit bubble of the roaring 20’s. Great history of Florida and speculation gone mad before the hurricane hit and dashed all those hopes.
- The Demon-Haunted World: Science as a Candle in the Dark by Carl Sagan — About how we think about things as humanity and why we believe certain things we do in the absence of evidence. He goes into witchcraft and ghosts and beliefs in cures with no evidence.
Hugh Hendry (Founding Partner, Eclectica Asset Management):
George Karl (Former NBA Head Coach):
- Stealing Fire: How Silicon Valley, the Navy SEALs, and Maverick Scientists Are Revolutionizing the Way We Live and Work by Steven Kotler
- Stillness is the Key by Ryan Holiday
- The Second Mountain: The Quest for a Moral Life by David Brooks
John Mousseau (CEO & Director of Fixed Income, Cumberland Advisors):
- The Rise and Fall of the Third Reich: A History of Nazi Germany by William Shirer and Ron Rosenbaum
- Free to Choose: A Personal Statement by Milton Friedman
- Grant by Ron Chernow
- Life on the Edge : The Coming Age of Quantum Biology by Johnjoe McFadden — His favorite technical book.
- Loonshots: How to Nurture Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries by Safi Bachall — About the culture of Silicon Valley.
- Lying by Sam Harris — His favorite book of all time.
Andrew Beer (Managing Member, Dynamic Beta Investments):
