The Exchanges

Q very large amount of money. So a lot of people think that investing is random or luck or doesn't make any sense. Like here's a guy who's a legend who just did this consistently without losing money for 30 years. So clearly it can be done. Are there, are there, are there people like that you've interacted with that you really admire in the macro world who shaped your thinking?

A Yeah, I mean, well, I, the, the most important, the most formative were my CIOs at Soros, Scott Besant, um, who's worked under Stan for a long time, and, um, and Greg Jensen as co-CIO at Bridgewater. And, um, you know, like I say, they're, they were instrumental in different ways, and I think to some degree, I always wonder if I just happened to land in the right place to learn from those two guys, or whether, Uh, there was something sort of pulling me in that direction in the sense that we think about things a similar way and have similar frameworks for investing. And so when you have a similar sort of base level of parameter, you can then learn a lot and interface really well on all the particulars and, and refine your expertise that way. But those two guys, uh, in, in my career have been, you know, huge, hugely impactful mentors and, uh, and teachers for me.

AI assessment note: “the most important, the most formative were my CIOs at Soros, Scott Besant”

Q So you learned those lessons, things around that at Soros, and Bridgewater obviously is famous for its radical transparency. Was, was, was that something that was, you're taking with you?

A Yeah, well, ok, so, um, Bridgewater, uh, like, when people ask me what the thing, the most important thing I learned at Bridgewater is, It's, um, it's not investing specific. This is just, I think, the most important thing of all things, which is, you know, I think a lot of people live their lives, um, kind of afraid of the truth. Whatever the truth is, it constrains them. It creates, uh, sort of fears and, um, and things that they want to push against. And Bridgewater had completely the opposite mentality, which is, you know, you have weaknesses. We have weaknesses. There are just certain dynamics in play. And, you It's better if we understand what all of those things are. So let's be transparent. Let's get them on the table. Let's figure out, you know, if you're not good at scheduling, we'll partner you with somebody who is. And I mean, at the end of the day, if you can, um, evaluate your strengths and weaknesses in an unbiased way and kind of disabuse yourself of this shadow government that's driving most of your behavior, you know, then, uh, you can solve problems and you can create growth and progress. And yeah, I think it takes some discomfort, but that's,

AI assessment note: “Bridgewater had completely the opposite mentality, which is... Let's be transparent.”

Q When you say macro scenario ahead, this is how the economy is going to do ahead, it's how, it's how financial markets are going to do ahead, what does that mean?

A Yeah, so it's a, um, It's any number of things. So different currency dynamics, growth, inflation outcomes, how that all translates to where we are in the cycle, and how assets are reflective of that. Um, there's a few different, you know, at the high level, there's a few different things that matter. Um, any asset, any, any market, any economy, all of it is just transactions that add up to that thing, right? So as, like, any individual human's behavior, um, if there's a bunch of humans in a company, their behavior Adds up to the performance of that company. You can think about that, therefore, like any market, any macro, um, outcome as being a reflection of those same sorts of dynamics. Transactions that add up to the high level. All of those transactions are financed with something, so our particular lens in terms of looking at macro is understanding, ah, which flows of money, which flows of credit are coming from where and into what. What are people spending that money and credit on? And how sustainable is that? And therefore, what are the prices that that creates? That's just, it's not just true in, um, economies. It's true in financial markets. Where are the flows coming from that are going into U.S. stocks? How sustainable are they? What's motivating those flows? Can we figure out when they're going to stop? And when they stop, what happens? Because if they're setting the…

AI assessment note: “our particular lens in terms of looking at macro is understanding, ah, which flows”

Q I have lots of books from the 18th and 19th century here, which I like to read, and it probably do inform us, but let's, let's, so give the picture since the last 50 years. Like, what's, what's going on, and why would you start there?

A Yeah, ok, so, um, right, let's go back to the 19 seventies. So there's a few, ah, two very important changes that happened in that year, right? Up until that point, by and large, ah, the world had been operating, there's these alternating centers of power, and all these things change, right? Which countries are in control, which markets are deep, and all that stuff, where the flows go. But the same thing remained the case for hundreds of years, which was that Uh, the supply of money was a constraint on the supply of credit, and the supply of money was tied to gold. So, it's very, everyone knows this, it's, um, we've been in a weird experiment for essentially 70 years of, this is really the only time that we've had any currency, a global currency, uh, general.

AI assessment note: “let's go back to the 19 seventies. So there's a few, ah, two very important changes”

Q And this is probably going to make Uh, a lot of populists unhappy because a lot of people tied to global finance are probably gonna be able to make a lot of money from this, whereas the average guy on Main Street might not, right?

A Yeah, well, I mean, you know, part of, in my view, the Fed has been a huge contributor to inequality already, and, um, by virtue of juicing the assets that wealthy people own by definition, you know, uh, and so that's created a lot of the populist backlash that we've seen politically, not just in the US, but around the world, right? So anyway, coming to today and where we are from a macro perspective, uh, obviously, you know, this whole model of printing and spending and consumption, even though you're not producing things and all of that, um, all of that went to this crazy extreme in COVID, right? In COVID, we had a six percent of GDP shock. So the economy shut down for a quarter. It incomes basically fell from a hundred to 94. The government comes out and says, okay, you guys lost a dollar of income. We're going to give you 2.5 dollars back. So there's the first recession we've seen where incomes are expanding, where household wealth is going up, you know, everything, you know.

AI assessment note: “the Fed has been a huge contributor to inequality already, and, um, by virtue of juicing”

Q So the markets are gonna need to adjust. If somebody, like a lot of my listeners are very exposed to tech, they're very bullish on the tech stuff. How else can you position yourself financially with your money that's not in tech? What are you doing otherwise?

A So, you know, this comes down to this concept, which is, uh, do you invest just putting your money in the markets and seeing what they deliver? And that's beta. That's just taking what the market gives you. Or do you try to pick, pick winners and losers, either domestically or abroad within stocks or across assets, whatever you want to do to try to figure out, even if the market's going sideways or down, I'm generating returns by picking the right assets. Uh, I would say that it's a bad time for beta because we've Really pulled forward a lot of market returns this way, at least in real terms, because we sort of have to inflate the economy into these asset levels. But it's a great time for alpha because since so much flow has concentrated in so few assets in the world, it's left this whole range of other assets extremely dislocated from their fundamentals. And there's other shorts in the world, you know, there's, um, assets that are very overvalued in certain North Asian markets.

AI assessment note: “it's a bad time for beta... it's a great time for alpha”