Pods & Recs: No. 138
Today we have a great list of high quality episodes. We have Ray Dalio & GMO’s Ben Inker on how they view the investment landscape post-COVID, Stephanie Kelton explaining MMT, and the former CEO of the London Stock Exchange on why innovation and equity ownership are so important.
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Investing
Real Vision: Finance, Business & The Global Economy: The Interview — The Big Changes Coming for Major Asset Classes. Since 1998, Inker has been the head of asset allocation at GMO, a massive asset manager led by Jeremy Grantham. He gives his insight on the investment landscape post-COVID and why he believes GMO has been wrong about certain things over the past few years, including their expectation of profit margins declining (they didn’t account for the fact higher margins were led by the FANG names who have benefitted by lax antitrust and increased monopoly power). He also explains why he believes investors shouldn’t use such a low discount rate because of global uncertainty, what he thinks about the future of the 60/40 portfolio, and U.S. vs. non-U.S. performance. He finishes with discussing bank stocks, which he says are trading cheaper now than they were after the financial crisis (and notes that crisis was financial). [October 18, 2020–1 hour, 6 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
Masters in Business: Ray Dalio on the Decline of Real Interest Rates. Dalio is the founder, co-chief investment officer and co-chairman of the world’s largest hedge fund, Bridgewater Associates, and will have his next book, The Changing World Order: Why Nations Succeed and Fail, released in January 2021. He starts with explaining the three major themes he sees happening right now:
- The creation and monetization of debt (last time it happened was in the 1930's)
- Large wealth, political, & social gaps
- The rise of a great power to challenge the existing great power (China)
He touches on all three of these and says the U.S. is testing the limits of the ability to hold the reserve currency and the devaluing of the U.S. currency is important for investors to watch going forward. He also touches on his LinkedIn piece, The Changing World Order, the five wars he believes are going on between the U.S. and China (trade, technology, geopolitical, capital, & possibly military), how he is thinking about the upcoming election, and the benefits of owning gold late in the debt cycle. [October 22, 2020–1 hour, 28 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
We are now in a government controlled capital market where the government will allocate resources based on fiscal policy that will be monetized.
Macro Voices: MacroVoices #242 Stephanie Kelton on Modern Monetary Theory. As host Eric Townsend says, whether or not you think it makes sense, we are living in a Modern Monetary Theory (MMT) world and investors need be aware of what it entails. After giving a market update for the first 13:50 of the podcast, he is joined by Stephanie Kelton, who literally wrote the book on MMT: The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. She explains what MMT is, why taxation is still needed, the nuance she believes people don’t understand regarding inflation and future inflation expectations, why the national debt can be exploded, and what the government should be spending on. Her part of the episode ends at the 44 minute mark, and then Townsend gives some good push back on certain topics he disagrees with. [October 22, 2020–1 hour, 30 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
The Money Maze Podcast: Sir Xavier Rolet — Former CEO of the London Stock Exchange. Sir Xavier Rolet was previously the Former CEO of the London Stock Exchange and was listed as one of the top 100 CEOs in the world by the Harvard Business Review in 2017. He talks about the fall of Lehman Brothers (he was the CEO of Lehman Brothers France) and why he believes it was more because of greed to become the top bank over anything else. The two major themes he ties everything to are the importance of innovation to spur growth and economic improvement and the importance of equity ownership to create wealth for individuals. He talks about the structural differences between the U.S. and Europe and why Europe’s reliance on debt financing has led it to slower growth. He relates that to the idea that innovation is really important, and the reliance on debt financing has led Europe to be less innovative than the U.S. He finishes the episode with advising younger people to work for a firm that is open to innovation. [October 22, 2020–54 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
CFA Institute Take 15: Investing and Beyond: Living your Best Life. Guest Michael Falk is a partner at the Focus Consulting Group, and he covers a lot in this episode. He touches on how to take an investment team from good to great, why investors sometimes need to realize this time is different, and why no investment strategy is passive. Then at 17:50, Michael opens up about his diagnosis with ALS (Lou Gehrig’s disease) and how he has chosen to mentally handle a terminal diagnosis by being grateful for what he’s been given and the life he’s been able to live. It’s incredibly humbling and inspiring.[October 21, 2020–33 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
You know the old saying is you can laugh or you can cry. I think I’ve chosen to laugh versus cry. I’ve had a wonderful life, I’m just appreciative. I’ve got gratitude for everything I’ve been able to experience and achieve.
The Meb Faber Show
The Meb Faber Show: #258 — Best Idea Show — Wes Gray, Alpha Architect — An ETF Centralizes Everything Into One Product. Wes Gray is a former Captain in the U.S. Marine Corps and founder of Alpha Architect, an asset management firm dedicated to an impact mission of empowering investors through education. This episode is a deep dive into what it takes to launch an ETF and what your rationale should be for doing so. They cover the asset management business as a whole and why an ETF is a great vehicle due to low fees and tax efficiency (especially when compared to mutual funds). They explain the process of getting an ETF launched from start to finish, including the large upfront fixed costs, the time it takes to launch one, and Alpha Architect’s white-label business to help others launch ETFs. [October 23, 2020–1 hour, 27 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
The Meb Faber Show: #257 — Marc Levine — A Lot Of Times, If You Could Just Make Fewer Bad Decisions…That’s How You Win. Levine is the former chairman of the Illinois State Board of Investment and ran the state pension, which is known for being extremely underfunded. He explains what the allocation was like when he first took over and what his process was to better position the fund by eliminating excess managers, lowering fees, and trying to automate their investments. He talks broadly about why and when it actually is acceptable to allocate to a hedge fund or manager who is charging high fees but why most funds over-allocate to these types of managers. [October 21, 2020–1 hour, 36 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
RECOMMENDATIONS
Books
Ray Dalio (Founder & Co-CIO, Bridgewater Associates):
- The Hero with a Thousand Faces by Joseph Campbell
- No Rules Rules: Netflix and the Culture of Reinvention by Reed Hastings and Erin Meyer
- Battlegrounds: The Fight to Defend the Free World by H.R. McMaster
- The Lessons of History by Will Durant
- River Out of Eden: A Darwinian View of Life by Richard Dawkins
- The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 by Paul Kennedy
- The World: A Brief Introduction by Richard Haass
Debbie Millman (Host, Design Matters):
