Latest / Masters in Business / Citi Wealth Chief Investment Officer Kate Moore on Macro Investing

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Citi Wealth Chief Investment Officer Kate Moore on Macro Investing · Masters in Business

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts Radio News. This week on the podcast,
• 0:11
  Speaker 1: yet another extra special guest. Wow, what a fascinating career
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  Speaker 1: Kate Moore is having. Her background is everything from Morgan
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  Speaker 1: Stanley to more Capital to Bank America, Merrill Lynch to
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  Speaker 1: JP Morgan to Blackrock. She is now Chief Investment Officer
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  Speaker 1: of City Bank's City Wealth, which runs you know, something
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  Speaker 1: like a trillion dollars. The breadth and depth of her
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  Speaker 1: experience makes her uniquely situated to be a chief investment officer.
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  Speaker 1: She's had you know, just about every job on the
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  Speaker 1: Byside and South Side, including portfolio manager, consultant to LBOs
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  Speaker 1: and m and as. She's just done so much stuff.
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  Speaker 1: It's so interesting that she really brings just this union
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  Speaker 1: nique set of experiences to City. I thought this conversation
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  Speaker 1: was really interesting, and I think you will also with
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  Speaker 1: no further ado my conversation with cities Kate.
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  Speaker 2: Moore, Thanks so much, Barry. I'm psyched to be having
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  Speaker 2: this conversation.
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  Speaker 1: Well overdue. We've been like ships in the night. I'm
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  Speaker 1: so glad I finally got you here. Let's start a
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  Speaker 1: little bit with your academic background, which is kind of
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  Speaker 1: surprise me bachelor's and Political and Social Thought from the
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  Speaker 1: University of Virginia, a master's in political economy from University
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  Speaker 1: of Chicago. What was the original career plan?
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  Speaker 2: I mean, I think Barry underlying your question was like, Kate,
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  Speaker 2: you sound kind of nerdy, but not as nerdy as
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  Speaker 2: some of the folks who have like triple degrees in statistics.
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  Speaker 2: But so, where did this political and social thought and
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  Speaker 2: political economy stuff come from? So at University of Virginia.
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  Speaker 2: This PST program is interdisciplinary, and that was really attractive.
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  Speaker 2: You also applied during your sex an year, so you
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  Speaker 2: have a chance, to, like sen it kind of sample
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  Speaker 2: some different disciplines before you do it. And it's an
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  Speaker 2: incredible seminar program, so you're working with some really amazing
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  Speaker 2: professors throughout the way. I loved being able to take
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  Speaker 2: classes in economics, in politics, in theory, and philosophy. I
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  Speaker 2: also took a lot of studio art classes and stuff
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  Speaker 2: as an undergrad, but I was able to combine all
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  Speaker 2: of this stuff together. So I loved that. And then
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  Speaker 2: I worked for a couple of years and I decided,
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  Speaker 2: you know, hey, what I really am good at and
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  Speaker 2: what I love is academics, and I want to be
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  Speaker 2: a professor. This was my idea. I'm going to go
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  Speaker 2: back to school and get my PhD and be a professor.
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  Speaker 2: I had this whole vision for myself that involved, like,
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  Speaker 2: you know, writing books. In this summer, I would be
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  Speaker 2: doing cool research. I have a pack of golden retrievers,
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  Speaker 2: and you know, I'd like rock climb on the side.
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  Speaker 2: This is whole vision of my academic life. So I
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  Speaker 2: applied to PhD programs and I went to University of
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  Speaker 2: Chicago Political economy, so this intersection of policy and politics,
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  Speaker 2: you know, international theory and you know economics. And I
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  Speaker 2: found once i was there, honestly that many people in
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  Speaker 2: my program are taking eight to ten years to get
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  Speaker 2: through their PhD and becoming so specialized in very arcaane topics.
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  Speaker 2: And it was like not appealing to me since I
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  Speaker 2: had already worked and everything. So I left after my masters.
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  Speaker 2: But I did my work on you know, this intersection
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  Speaker 2: of economics and policy with a focus on emerging markets
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  Speaker 2: and China. So I was ahead of my time.
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  Speaker 1: It's so interesting that you talk about how specialized some
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  Speaker 1: people become. It's pretty clear, at least historically, many of
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  Speaker 1: the greatest investors in history had a very broad set
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  Speaker 1: of interests and a broad set of skills. Few of
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  Speaker 1: them were an inch wide and a mile deep. They
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  Speaker 1: weren't a mile wide and an inch deep, but they
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  Speaker 1: were broad enough that they were able to pull in
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  Speaker 1: things from other fields that applied to investing. Did you
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  Speaker 1: find something similar when you're studying political science and economics
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  Speaker 1: to how did that shape your investing philosophy?
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  Speaker 2: Absolutely? I think you know, the best macro investors are
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  Speaker 2: able to pull in, you know, different inputs from policy
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  Speaker 2: and politics. It's also really helpful, I think, to understand
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  Speaker 2: human behavior. So if you're taking an interdisciplinary approach to
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  Speaker 2: your academics and your investing life, I think you're well
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  Speaker 2: set up. So in this I mean I took a
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  Speaker 2: bunch of courses on game theory and stuff as in
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  Speaker 2: my graduate work, and understanding payoffs and incentives, doing some
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  Speaker 2: work on behavioral economics. All of that combines really well.
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  Speaker 2: And my experience too was that the best investors that
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  Speaker 2: I worked for over the course of my career also
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  Speaker 2: took in all of these different inputs. And we're constantly
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  Speaker 2: trying to solve a puzzle, right It wasn't just, you know,
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  Speaker 2: a two variable puzzle. It was a multi variable puzzle.
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  Speaker 2: Understanding that every day you wake up and you have
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  Speaker 2: to do it a new.
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  Speaker 1: Yeah, no doubt about it. It's so funny you mentioned incentives.
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  Speaker 1: Whenever I see a situation that I find completely perplexing
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  Speaker 1: and can figure it out, what usually leads to the
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  Speaker 1: answer is what are the incentives that led to this situation?
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  Speaker 1: And once you get work backwards from that. So let's
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  Speaker 1: talk a little bit about the strategy and consulting side
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  Speaker 1: you begin your career Mitchell Madison and Silver Oak Partners.
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  Speaker 1: Is that right? Those shops tell us a little bit
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  Speaker 1: about what you did for them and the sort of
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  Speaker 1: work and problem solving you did for those firms.
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  Speaker 2: Okay, so both Mitchell Madison Silver Oak no longer exists.
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  Speaker 2: For the record, Mitchell Madison was formed out of a
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  Speaker 2: spinoff of a bunch of McKinsey Partners, and it was
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  Speaker 2: taking kind of a new way or new approach frankly
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  Speaker 2: to some of the similar types of clients as McKenzie had,
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  Speaker 2: But it had this very entrepreneurial kind of environment because
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  Speaker 2: it was a breakoff, but it was still really large
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  Speaker 2: and global I did bunch of like strategy consulting projects
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  Speaker 2: things you would expect, including some cool stuff in the
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  Speaker 2: media space, just at the time where the Internet was
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  Speaker 2: becoming popular and some of these websites like Amazon that
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  Speaker 2: we take for granted were getting launched. So I learned
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  Speaker 2: a lot about media and e commerce in those early
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  Speaker 2: stages at Mitchell Madison. But Mitchell Madison, for those of
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  Speaker 2: you who may recognize it, went through a merger with
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  Speaker 2: us web CCS, which was a technology consulting firm Gaull.
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  Speaker 2: The combined Energy got rebranded as March first, which was
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  Speaker 2: the date that the deal was inked. Kind Of a
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  Speaker 2: weird marketing decision on that part, but you know, the
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  Speaker 2: business started to change and a number of the partners
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  Speaker 2: like broke off and started Silver Oak, which focused on
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  Speaker 2: leverage biot firms. Now here's what was really cool. I
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  Speaker 2: wasn't doing work for let's say, the LBO and master Form,
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  Speaker 2: but rather like a collection of the companies in the
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  Speaker 2: portfolio at the same time trying to find synergies. There
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  Speaker 2: were things that are traditional around sourcing, but things that
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  Speaker 2: were maybe less traditional around finding strategic combinations. And I
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  Speaker 2: had a great opportunity to get exposed to a lot
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  Speaker 2: of different industries, you know, from traditional manufacturers to telecom companies,
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  Speaker 2: financial services, and everything in between. And I have to say, Barry,
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  Speaker 2: that experience, you know, working for these kind of small
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  Speaker 2: and mid sized LBO owned companies really set me up
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  Speaker 2: well for understanding and investing in a broad array of equities.
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  Speaker 1: So let's talk about the investing side. Your next stop
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  Speaker 1: is Morgan Stanley, obviously a legendary and giant cell side firm.
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  Speaker 1: Tell us your about your experiences at Morgan Stanley.
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  Speaker 2: Yeah, so how I got to Morgan Stanley Investment Management
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  Speaker 2: is perhaps kind of interesting. So we were just talking
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  Speaker 2: about my academic background and I was doing this you know,
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  Speaker 2: political economy degree at the University of Chicago, and I
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  Speaker 2: had had this sort of moment where I realized I
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  Speaker 2: wasn't going to pursue the PhD. So I, you know,
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  Speaker 2: made an appointment with my advisor and I said, you know,
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  Speaker 2: Professor Herrigel, I'm not sure I want to do the PhD.
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  Speaker 2: And he starts laughing. And we're sitting in his office.
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  Speaker 2: He said, Kate, I've been waiting for this conversation for
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  Speaker 2: six months. Wow, I said, oh, my gosh, like, do
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  Speaker 2: you know, do you think I'm screwing up here? He said, no,
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  Speaker 2: you're top of the class. What I do recognize, though,
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  Speaker 2: is because you've worked before for a number of years
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  Speaker 2: before coming into a PhD program, you have a different
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  Speaker 2: skill set and you're approaching this differently. He's like, I
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  Speaker 2: think you can finish your PhD later and you know,
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  Speaker 2: do the masters and whatever. So I had this in
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  Speaker 2: my mind, and so I started to put out a
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  Speaker 2: couple of feelers, but I wasn't really committed to what
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  Speaker 2: I would do post you know, getting my master's.
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  Speaker 1: Great, and this is out of Chicago.
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  Speaker 2: It's a Chicago. And then a strange thing happened. I
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  Speaker 2: was back on the East Coast visiting my parents, and
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  Speaker 2: I got a call from the career services people in
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  Speaker 2: the University of Chicago. I was still, you know, enrolled
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  Speaker 2: in school there, just getting my thesis graded, and uh,
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  Speaker 2: they said, hey, we got an incoming call from the
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  Speaker 2: chief investment officer of Morgan Stanley Investment Management. This guy's
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  Speaker 2: name is Joe Mcalindon. Joe is looking to add to
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  Speaker 2: his macro investing team on the by side, and specifically
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  Speaker 2: is looking for candidates that are not MBAs. He wanted
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  Speaker 2: people who had this understanding of politics and economics and
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  Speaker 2: everything in between. And I said, hey, guys, I'm not
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  Speaker 2: interested in going back into that form of finance. I'm
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  Speaker 2: going to do something different. They said, do us this
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  Speaker 2: favor and go on the interview.
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  Speaker 1: Just just meet with them.
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  Speaker 2: Yeah, like, let's put up a good candidate. You kind
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  Speaker 2: of meet the criteria. If it's not your bag, it's
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  Speaker 2: not your bag. And I went and met this team
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  Speaker 2: at Morgan Stanley Investment Management of people who had economics
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  Speaker 2: and history and philosophy degrees but were macro investors. And
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  Speaker 2: I was like, okay, a these people are cool and
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  Speaker 2: b I love how they're solving the problems. Two weeks later,
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  Speaker 2: I accepted an offer I fell into investing Barry.
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  Speaker 1: Wow, that's really fascinating. And You've had a breath of
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  Speaker 1: experiences beyond Morgan Stanley. You were a more capital a
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  Speaker 1: well regarded hedge fund, Bank America, Merrill Lynch, JP Morgan,
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  Speaker 1: You spent a lot of time at Blackrock. Tell us
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  Speaker 1: what was fun? What did you learn at these other shops.
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  Speaker 2: So I've had a really cool career in the sense
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  Speaker 2: that I've done a variety of different byside more traditional
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  Speaker 2: mutual funds. But even when I was at EMSIM, we
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  Speaker 2: launched the first internal hedge fund. This is before Morgan
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  Speaker 2: Stanley bought front Point, and I worked at a big
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  Speaker 2: macro hedge fund through the financial crisis. As you mentioned,
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  Speaker 2: at more Capital, that was an adventure. I did a
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  Speaker 2: few years on the cell side at BAA. Merrill as
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  Speaker 2: global equity and emerging market strategist, and then I went
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  Speaker 2: to JP Morgan managed the discretionary multi asset portfolios for
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  Speaker 2: the private bank. Then I spent a long time at Blackrock,
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  Speaker 2: most of it as a portfolio manager for global allocation,
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  Speaker 2: kind of the flagship multi asset fund. I have to say,
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  Speaker 2: I love the fact that I've experienced all sides of
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  Speaker 2: the investing business, and it makes me understand what makes
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  Speaker 2: investors tick a lot more than people who just stayed
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  Speaker 2: in their lane. Like I get the retail side, the
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  Speaker 2: institutional side, but fast money does what traders do, what
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  Speaker 2: fundamental investors do, and I interpret all this sort of
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  Speaker 2: sentiment and flow data as part of my process. As
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  Speaker 2: a result of having this exposure to different parts of
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  Speaker 2: the investment management business.
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  Speaker 1: Huh sounds really really interesting. So from all of these
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  Speaker 1: different backgrounds, what finally brought you to city?
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  Speaker 2: Yeah? So I was at a bit of an interesting
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  Speaker 2: inflection point, I would say in my career. Here I am.
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  Speaker 2: I've loved being at Blackrock. I really enjoyed the work,
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  Speaker 2: but I also recognized I was kind of ready to
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  Speaker 2: take the next big step and I could continue to
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  Speaker 2: be a portfolio manager at Blackrock and it's an amazing firm,
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  Speaker 2: but I was kind of wondering what it would sort
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  Speaker 2: of what I should do to take this next step.
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  Speaker 2: And I looked around and said, where are the areas
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  Speaker 2: of growth in the business? And traditional mutual funds, we
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  Speaker 2: know are not a huge growth area for the business,
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  Speaker 2: even if your performance is exceptional, you know, keeping your
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  Speaker 2: assets can be a challenge. And I saw wealth as
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  Speaker 2: an area of consistent growth. I think most people would
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  Speaker 2: agree on that front for sure, and you know there's
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  Speaker 2: some growth and alternatives, but it felt like just a
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  Speaker 2: different flavor of the stuff I was doing. So I
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  Speaker 2: was sort of intrigued by this idea of working in wealth,
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  Speaker 2: especially because I've done a lot of asset allocation and
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  Speaker 2: the multi asset discipline I come from, and I love
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  Speaker 2: the challenge of helping people grow their money over time.
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  Speaker 2: But I didn't have like a great idea in my
• 12:47
  Speaker 2: head of what I was going to do. This was
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  Speaker 2: just sort of something that was a seed that was
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  Speaker 2: planted and not yet out of the soil, if it were.
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  Speaker 2: And in August of twenty twenty four, Andy c I'd
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  Speaker 2: known in the business for like fifteen years or so,
• 13:04
  Speaker 2: never worked together directly, but you know, we'd met a
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  Speaker 2: number of times, been on panels together, had good cordial relationship.
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  Speaker 2: He called me and said, Kate, I have an idea
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  Speaker 2: for you. And he had been at City for a
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  Speaker 2: year then, as you know, CEO of Wealth, and I thought, okay,
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  Speaker 2: this is interesting, but I need to turn it over
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  Speaker 2: in my head a little bit. Is this going to
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  Speaker 2: be the right pivot? And ultimately I got so excited
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  Speaker 2: Barry because City was already in this massive transformation. Andy
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  Speaker 2: is a really inspirational leader. I'm not just saying that
• 13:36
  Speaker 2: because he's my boss, but I think most people on
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  Speaker 2: the street will agree. He has a vision he executes
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  Speaker 2: and this was a new challenge for me. I'd be
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  Speaker 2: flexing different muscles and I thought to myself, for this
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  Speaker 2: next big push, in my career. I want to be
• 13:50
  Speaker 2: someplace where I can be entrepreneurial, where I'm going to
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  Speaker 2: be supported by the overall platform, where you know, I
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  Speaker 2: can continue to grow out my experience as an investor.
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  Speaker 2: And so ultimately I made the tough decision to leave
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  Speaker 2: a firm that I loved for a new and exciting challenge.
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  Speaker 1: Safe to say that this shift in career was the
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  Speaker 1: biggest inflection point.
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  Speaker 2: It feels like it's the biggest inflection point in my career,
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  Speaker 2: but it also feels cumulative. I don't know if that
• 14:19
  Speaker 2: makes sense, but perfect sense.
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  Speaker 1: I understand exactly what you're saying. All of these different
• 14:25
  Speaker 1: elements come together almost like a perfect storm, and suddenly
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  Speaker 1: now we're off to the whole other level.
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  Speaker 2: Yeah, I've been building up these experiences over the course
• 14:35
  Speaker 2: of my career and kind of setting me up to
• 14:37
  Speaker 2: take on this new challenge. It does feel the largest,
• 14:39
  Speaker 2: in part because I've been so concentrated on being an
• 14:42
  Speaker 2: investor over the course of my career. And this is
• 14:45
  Speaker 2: a combination of strategy and business leadership and investing, and so,
• 14:50
  Speaker 2: as I said, I'm flexing a bunch of different muscles.
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  Speaker 1: So let's put some numbers, some flesh on the bone.
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  Speaker 1: So the groups you lead, the wealth group at city,
• 15:00
  Speaker 1: what's the assets they're investing? And typically who were the clients?
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  Speaker 1: Are they mom and pop investors? Are they institutional? A
• 15:06
  Speaker 1: little of both.
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  Speaker 2: Yeah, So I'll give you some numbers as an end
• 15:09
  Speaker 2: of twenty twenty four because everything else, of course, is.
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  Speaker 1: In't flex and we know that works.
• 15:16
  Speaker 2: Yeah, I'm in the middle of studying for series sixty five.
• 15:18
  Speaker 2: What will be like my thirty ninth millionth of.
• 15:21
  Speaker 1: Yeah, but that one you could do in your sleep.
• 15:22
  Speaker 1: It's not like the seven which is or the options? Yeah,
• 15:25
  Speaker 1: I forgot which one was the options? That was a
• 15:28
  Speaker 1: giant Like, wait, I need to learn about Gamma one totally.
• 15:31
  Speaker 2: I've taken the options one too.
• 15:33
  Speaker 1: What I will tell you is twenty years ago.
• 15:34
  Speaker 2: The one thing that's a little bit annoying on the
• 15:36
  Speaker 2: economic section of the series sixty five is that you know,
• 15:38
  Speaker 2: I don't always agree.
• 15:40
  Speaker 1: I was gonna say the answers are wrong. Once you
• 15:42
  Speaker 1: have passed that, the test is really easy.
• 15:45
  Speaker 2: For example, was like, you know, are payrolls of leading
• 15:48
  Speaker 2: lagging or coincident indicator?
• 15:50
  Speaker 1: Barry, it's lagging butt lagging, Couse it's two months.
• 15:54
  Speaker 2: Old, totally, and like.
• 15:59
  Speaker 1: Totally, yeah, it's it's just there. I remember having in
• 16:02
  Speaker 1: this is, by the way, thirty something years ago, twenty
• 16:05
  Speaker 1: something years ago, I remember calling up and yelling at
• 16:08
  Speaker 1: somebody like, just so you know, I didn't get any
• 16:11
  Speaker 1: of these answers wrong, and the three you marked wrong,
• 16:14
  Speaker 1: you're wrong. And let me explain why totally. How can payrolls,
• 16:19
  Speaker 1: which are a model that uses one to three month
• 16:23
  Speaker 1: old data, be anything other than a legging.
• 16:26
  Speaker 2: And that get totally restated every two years and then.
• 16:30
  Speaker 1: But the subsequent monthly revisions, I mean, by the time
• 16:34
  Speaker 1: you get to the actual number, it's like half a decade.
• 16:37
  Speaker 1: All it's nonsense.
• 16:39
  Speaker 2: And yet of course the market moves a lot on
• 16:41
  Speaker 2: payrolls days, and we have to pretend that matters in
• 16:43
  Speaker 2: the moment.
• 16:43
  Speaker 1: But you know, we have to pretend.
• 16:45
  Speaker 2: Yeah, we have to pretend. Okay, where were we going before?
• 16:48
  Speaker 1: I have no idea, But I just love the fact
• 16:50
  Speaker 1: that you're studying for the sixty five I know, studying
• 16:52
  Speaker 1: in air quotes.
• 16:53
  Speaker 2: Studying in air quotes, I get to whizz through the
• 16:55
  Speaker 2: equity and hedge fund and everything sort of sections of it.
• 16:58
  Speaker 2: But I have to memorize their answer. Second, if it was.
• 17:01
  Speaker 1: An embarrassing to fail, I would say, you can wing
• 17:05
  Speaker 1: it and you'll do just fine. I think seventy is
• 17:07
  Speaker 1: a passing. You'll get like eighty, just off the top
• 17:11
  Speaker 1: of your head. But no one wants to go on
• 17:13
  Speaker 1: and fail, because.
• 17:13
  Speaker 2: No, very like I've made my career off of being
• 17:18
  Speaker 2: a perfectionist, you know, in my analysis, and you know
• 17:23
  Speaker 2: I do not accept a barely passing grade. I do
• 17:26
  Speaker 2: not expect accept you know, index like performance. I'm always
• 17:31
  Speaker 2: seeking alpha, and I'm doing my best to do that
• 17:34
  Speaker 2: in the most risk adjusted way.
• 17:35
  Speaker 1: Even in an examination that's past foul. And we know
• 17:39
  Speaker 1: objectively logically anything over a seventy one is wasted effort.
• 17:45
  Speaker 2: But but I know exactly where you're coming at night.
• 17:47
  Speaker 2: I can't sleep at night if it's just good enough.
• 17:49
  Speaker 2: And that's also how I want to approach things for
• 17:51
  Speaker 2: my clients. Okay, we're talking about city here, and so
• 17:54
  Speaker 2: city has about a trillion dollar city wealth has a
• 17:57
  Speaker 2: trillion dollars in assets, like six hundred billion of that
• 18:03
  Speaker 2: is in investments, and there's other parts and deposits and
• 18:07
  Speaker 2: loans and things like that. And there are three main segments. Right,
• 18:10
  Speaker 2: there's a traditional kind of private bank ultra high net
• 18:13
  Speaker 2: worth service, there's City Gold, which is mass affluent, and
• 18:17
  Speaker 2: then there is a Wealth at Work which targets like
• 18:20
  Speaker 2: very specific segments like the law firm, population, et cetera.
• 18:25
  Speaker 1: It makes a lot, makes a ton of sense.
• 18:27
  Speaker 2: What I will say is City as a bank has
• 18:31
  Speaker 2: so many global customers and clients and people with long
• 18:34
  Speaker 2: standing relationships that haven't been tapped. You know, there's there
• 18:39
  Speaker 2: is an enormous amount of potential to grow the wealth
• 18:41
  Speaker 2: business just from existing City customers. And I think, as
• 18:45
  Speaker 2: you probably know, half of our business is outside of
• 18:49
  Speaker 2: the US, and it is it is it.
• 18:50
  Speaker 1: Is it fifty, It's fully half. Yeah, that's amazing.
• 18:53
  Speaker 2: Yeah. And the Asia business for us, and particularly our
• 18:57
  Speaker 2: legacy in China and surrounding areas is incredibly strong. And
• 19:01
  Speaker 2: that was something that was also very attractive to me,
• 19:03
  Speaker 2: to be honest with you, as someone who has been
• 19:05
  Speaker 2: an emerging markets investor at times and a student of China.
• 19:08
  Speaker 2: You know, the ability to get really deep into the
• 19:11
  Speaker 2: opportunity to grow wealth in multiple different areas was exciting.
• 19:16
  Speaker 1: Huh, really really fascinating. So before we talk about City,
• 19:19
  Speaker 1: let's start a little bit with your time at Blackrock.
• 19:23
  Speaker 1: You join them almost a decade ago in twenty sixteen,
• 19:27
  Speaker 1: your chief Equity strategist tell us a little bit about
• 19:31
  Speaker 1: your initial role and how that played off of what
• 19:34
  Speaker 1: you had been doing previously.
• 19:36
  Speaker 2: Yeah. So I joined Blackrock to be part of the
• 19:39
  Speaker 2: black Rock Investment Institute, which is kind of the internal
• 19:41
  Speaker 2: macro think tank. And the Institute has a couple of
• 19:45
  Speaker 2: different functions. There is a segment that is client facing,
• 19:48
  Speaker 2: but there's also a big function around bringing together the
• 19:52
  Speaker 2: investors across all the platforms in black Rock and convening
• 19:57
  Speaker 2: for you know, forums and symposiums around specific topics. And
• 20:01
  Speaker 2: although I was called chief Equity Strategist, I actually sat
• 20:05
  Speaker 2: on the equity platform with all the equity pms and
• 20:08
  Speaker 2: my job was to be basically embedded in all of
• 20:11
  Speaker 2: the equity portfolios as the macro. My team was the
• 20:16
  Speaker 2: macro resource for them and it was great, and you know,
• 20:20
  Speaker 2: I always knew that I would do that. For a
• 20:21
  Speaker 2: little while, they basically said can you do this and
• 20:23
  Speaker 2: helped to sort of change some of the equity culture
• 20:25
  Speaker 2: into having some macro inputs and then you can kind
• 20:28
  Speaker 2: of figure out where you want to sit, and ultimately,
• 20:31
  Speaker 2: you know, moving back to a multi asset fund made
• 20:34
  Speaker 2: the most sense for me because here's my joke, Barry, Like,
• 20:37
  Speaker 2: I think of myself as being a macro equity investor,
• 20:40
  Speaker 2: you know, combining macro stuff into equities. But the macro
• 20:44
  Speaker 2: people will say I'm equity, and the equity people will
• 20:46
  Speaker 2: say I'm macro. So a multi asset fund is a
• 20:49
  Speaker 2: good home for me.
• 20:50
  Speaker 1: So twenty nineteen, you start working with the Thematic Strategy
• 20:54
  Speaker 1: and Portfolio Manager group. Yeah, tell us a little bit
• 20:57
  Speaker 1: about thematics that's become sort of an alternative to beta
• 21:03
  Speaker 1: and a lot of shops, Blackrock especially.
• 21:06
  Speaker 2: Yeah. Well, let me say this actually started my career,
• 21:09
  Speaker 2: you know, at Morgan Stanley Investment Management, and the hedge
• 21:12
  Speaker 2: fund that my team launched at MSIM was a global
• 21:17
  Speaker 2: thematic hedge fund. This is way back, like over twenty
• 21:21
  Speaker 2: three years ago at this point, so we were ahead
• 21:23
  Speaker 2: of our times, right. So I've actually had this thematic approach, frankly,
• 21:30
  Speaker 2: in my investment approach throughout my entire career, and it's
• 21:35
  Speaker 2: just now becoming really popular to call everything at the matic.
• 21:38
  Speaker 2: So let me say this. I think there are three
• 21:39
  Speaker 2: ways at this time to approach the matics three different flavors,
• 21:44
  Speaker 2: if you will. The first is this kind of like
• 21:48
  Speaker 2: long duration slow bleed thematic, like, eventually we are going
• 21:53
  Speaker 2: to have reduce the amount of plastics in all of
• 21:55
  Speaker 2: our goods, and so we want to lean into companies
• 21:59
  Speaker 2: that are investing in that transition.
• 22:01
  Speaker 1: You don't think microplastics accumulating in your lungs and bloodstream
• 22:05
  Speaker 1: is a bad thing.
• 22:06
  Speaker 2: It is definitely a bad thing. I wonder if I'm
• 22:09
  Speaker 2: a little bit cooked when it comes to that already.
• 22:11
  Speaker 2: But this is kind of a set it and forget
• 22:13
  Speaker 2: its strategy, right where you identify companies that are making
• 22:17
  Speaker 2: these changes or facilitating the changes, and you buy a
• 22:21
  Speaker 2: basket of them, and you or an ETF then invest them,
• 22:23
  Speaker 2: and then you just set it. The second type of
• 22:26
  Speaker 2: thematics is what I would call like discontinuous change catalysts
• 22:31
  Speaker 2: driven thematics, And these are more tactical, like you know,
• 22:35
  Speaker 2: it could be a couple quarters, it could be up
• 22:37
  Speaker 2: to a year or two or even longer. But this
• 22:40
  Speaker 2: is kind of a more actively managed way to approach thematics,
• 22:43
  Speaker 2: right where so you identify the idea, you identify the catalysts,
• 22:47
  Speaker 2: you identify the players, and actually there's more of a
• 22:49
  Speaker 2: rotation in the names and the sizing of that expression
• 22:53
  Speaker 2: in the thematic. That's really exciting. It's also hard because
• 22:56
  Speaker 2: sometimes you look around and say, I don't see a
• 22:59
  Speaker 2: ton of catalysts here. There's nothing really jumping out.
• 23:02
  Speaker 1: You got to get the theme right, the asset class right,
• 23:04
  Speaker 1: and the timing right.
• 23:05
  Speaker 2: And the sizing you know, within that right. And so
• 23:09
  Speaker 2: that's not like by forty companies that are thinking about microplastics.
• 23:13
  Speaker 2: It is like four to eight names, a more concentrated
• 23:17
  Speaker 2: expression around a theme. You're taking some idiosyncratic risk and
• 23:21
  Speaker 2: you are continuing to invest around that. And then the
• 23:25
  Speaker 2: third type of thematic investing, I would say, is really
• 23:27
  Speaker 2: business cycle thematic. And a lot of people talk about this,
• 23:30
  Speaker 2: you know, today there's a you know, where are we
• 23:32
  Speaker 2: in the cycle? What are the companies, sectors or qualities
• 23:37
  Speaker 2: that perform well in that part of the cycle. I'm
• 23:40
  Speaker 2: thematically investing in inflation beneficiaries, et cetera. And I've always
• 23:44
  Speaker 2: liked to do those two kind of number two and
• 23:47
  Speaker 2: number three together, which is the catalyst driven and the
• 23:51
  Speaker 2: business cycle, and I think that together makes a nice portfolio.
• 23:54
  Speaker 1: You know, I recall back in the day when we
• 23:56
  Speaker 1: were talking about sort of thematic cycle in business sycle investing,
• 24:02
  Speaker 1: it was used to go by the name sector rotation.
• 24:05
  Speaker 2: Yeah.
• 24:06
  Speaker 1: I don't know if anybody still does that sort of
• 24:08
  Speaker 1: stuff anymore, it seems.
• 24:10
  Speaker 2: Or the investment clock. Do you remember the investment the clock? Sure,
• 24:13
  Speaker 2: everyone had an investment clock, which was like this two
• 24:16
  Speaker 2: dimensional representation of which sectors or which maybe style factors.
• 24:20
  Speaker 2: Once that became part of our lexicon, performed well in
• 24:25
  Speaker 2: different macro environment.
• 24:27
  Speaker 1: It was always sort of a sign wave and here's
• 24:29
  Speaker 1: where we are and the sector here on the sector there. Yeah,
• 24:32
  Speaker 1: if it only were that easy.
• 24:34
  Speaker 2: Yeah, you know, I won't call out names, but I
• 24:38
  Speaker 2: know some folks that like to chart where we are,
• 24:40
  Speaker 2: which quadrant we're in, you know, on a regular basis,
• 24:44
  Speaker 2: and instead of this nice round circle or an oval,
• 24:48
  Speaker 2: you know, it's very sort of spastic point to point
• 24:52
  Speaker 2: to point to point because the macro data is moving
• 24:54
  Speaker 2: so quickly and the positioning data, which also indicates you know,
• 24:58
  Speaker 2: investor risk appetite change so rapidly that we jump from
• 25:02
  Speaker 2: one quadrant to the other, sometimes month to month.
• 25:05
  Speaker 1: So you mentioned removing plastic from the food supply or wherever.
• 25:10
  Speaker 1: What other trends have you looked at? Deglobalization, decarbonization, AI,
• 25:16
  Speaker 1: what gets you excited these days?
• 25:18
  Speaker 2: Oh wait, you just said a hot button word for me,
• 25:20
  Speaker 2: which is deglobalization. Uh huh, And let me just say,
• 25:22
  Speaker 2: I don't believe in deglobalization.
• 25:24
  Speaker 1: I'm with you, but I want to hear your reasons.
• 25:26
  Speaker 2: Why. Yeah, I don't believe in deglobalization because even if,
• 25:31
  Speaker 2: let's say, hypothetically, the US and China continue to separate,
• 25:34
  Speaker 2: And by hypothetical, I was making a joke for all
• 25:37
  Speaker 2: the listeners. Of course, the US and China are going
• 25:39
  Speaker 2: to continue to separate. That doesn't mean the relationships between
• 25:42
  Speaker 2: each of these countries and other trading partners or allies
• 25:46
  Speaker 2: is not going to deepen. Maybe we call it reglobalization
• 25:50
  Speaker 2: instead of deglobalization, but a shifting of some other relationships.
• 25:55
  Speaker 2: But I have spent a lot of my time, like
• 25:57
  Speaker 2: a lot of folks, frankly, looking at themes in and
• 26:00
  Speaker 2: around technology. I mentioned the microplastics, It's actually not a
• 26:03
  Speaker 2: theme I've invested in the only couple companies I've really
• 26:05
  Speaker 2: seen who are here towards that are private and so
• 26:09
  Speaker 2: it's harder to access. But around technology, you know, a
• 26:13
  Speaker 2: few areas I've been pretty excited about for a good
• 26:16
  Speaker 2: considerable amount of time has been you know, have been
• 26:19
  Speaker 2: in software, and one of those areas is cybersecurity. This
• 26:23
  Speaker 2: was a major theme for me in the portfolio at
• 26:26
  Speaker 2: Global Allocation at black Rock, and basically every time I
• 26:30
  Speaker 2: was thinking that I want to either shift out of
• 26:33
  Speaker 2: the theme or reduce it, there was another event on
• 26:36
  Speaker 2: the horizon or something happening that led to increased spend
• 26:39
  Speaker 2: in this space. I've now come to believe that investment
• 26:42
  Speaker 2: in security software is existential for companies right and while
• 26:47
  Speaker 2: there's room to rotate you know, names, based on capabilities,
• 26:51
  Speaker 2: et cetera, I believe it's a core part of a portfolio.
• 26:55
  Speaker 1: Long standing secular trend that's going to be ongoing.
• 26:57
  Speaker 2: Absolutely. But I first put on this investment in January
• 27:00
  Speaker 2: of twenty twenty, okay, when I was at Blackrock, and
• 27:03
  Speaker 2: that was before the pandemic, and it was basically based
• 27:07
  Speaker 2: on geopolitical risk, and of course the pandemic that increased
• 27:11
  Speaker 2: the risk from all this data for many different companies.
• 27:15
  Speaker 2: So we saw a big uptick and span as they said,
• 27:17
  Speaker 2: it's been a rolling series of catalysts over the last
• 27:20
  Speaker 2: five and a half years and makes it more of
• 27:22
  Speaker 2: a secular theme than a shorter term catalyst driven theme.
• 27:25
  Speaker 1: So let's drill down a little bit to your core
• 27:27
  Speaker 1: investment philosophy. You've mentioned thematics, you've mentioned pursuing alpha tell us.
• 27:34
  Speaker 1: What is Kate Moore's investment philosophy.
• 27:37
  Speaker 2: Yeah, I think it's really important to have three pillars
• 27:42
  Speaker 2: to your decision making and one pillar that's off to
• 27:45
  Speaker 2: the side that's controversial. So I think you have to
• 27:48
  Speaker 2: start with a macro view. I think you need to
• 27:51
  Speaker 2: understand politics, policy, the major economic data. You need to
• 27:55
  Speaker 2: understand government behaviors because so much of that dictates the
• 27:59
  Speaker 2: environment for different industries, and some people just sort of
• 28:02
  Speaker 2: brush it off. By the way, I love my equity
• 28:05
  Speaker 2: colleagues and friends, but nothing makes the hair on the
• 28:07
  Speaker 2: back of my neck go up more and kind of
• 28:09
  Speaker 2: me bristle than to hear I don't pay attention to
• 28:12
  Speaker 2: macro because I just pick good companies. Well good, you'll
• 28:14
  Speaker 2: be out of business. You don't have a choice in
• 28:18
  Speaker 2: this environment. You can't set it and forget it for
• 28:20
  Speaker 2: the next three years. And not focus on what's happening
• 28:22
  Speaker 2: in the business cycle and policy and how that may
• 28:26
  Speaker 2: impact the interest and desire to own your asset class.
• 28:29
  Speaker 2: So I think macro is critical and a good starting point.
• 28:33
  Speaker 2: I also like to get into the fundamentals of things,
• 28:35
  Speaker 2: right like where are the fundamental thematically like who's growing,
• 28:41
  Speaker 2: what technology has come out? Where do we think about,
• 28:45
  Speaker 2: you know, changes in consumer behavior, changes in supply chains,
• 28:50
  Speaker 2: and where are the real kind of fundamental opportunities. What
• 28:52
  Speaker 2: are the companies doing well. I think that's not controversial either.
• 28:55
  Speaker 2: But the third stage, and it's really important to me.
• 28:57
  Speaker 2: I mean it's grown in importance over the course of
• 28:59
  Speaker 2: my career is the positioning, sentiment and technicals. And this
• 29:04
  Speaker 2: has become really, really, really important for defining your entry
• 29:08
  Speaker 2: and exit points, even if you are a long term investor,
• 29:12
  Speaker 2: because markets move really quickly and you need to be
• 29:16
  Speaker 2: really thoughtful about how you enter an exit. So I
• 29:19
  Speaker 2: pay attention to flows, hedge fund mutual fund, positioning, introduction
• 29:24
  Speaker 2: of new instruments, you know, a million things we kind
• 29:28
  Speaker 2: of look at at our dashboard, and then this is
• 29:31
  Speaker 2: the one I was saying, the pillar off to the side.
• 29:33
  Speaker 2: Valuation is a nice to know, but it is not
• 29:36
  Speaker 2: a driving force of my investment process. And people might
• 29:39
  Speaker 2: kind of cringe when I say that.
• 29:40
  Speaker 1: You know, let me jump in here, and I won't
• 29:43
  Speaker 1: explore that because I don't disagree with any of that.
• 29:47
  Speaker 1: People kind of forget that bull markets that run ten
• 29:52
  Speaker 1: twenty years. Valuations tend to start on the lower end
• 29:56
  Speaker 1: and they tend to end on the higher ends. But
• 29:59
  Speaker 1: if you decide, oh, we're above the average valuation of
• 30:02
  Speaker 1: the past cycle, you're missing a lot upside, aren't.
• 30:05
  Speaker 2: You a ton of upside? Well, there's also this assumption
• 30:09
  Speaker 2: that underpins this view on valuations that there is some
• 30:11
  Speaker 2: sort of mean reversion right tomorrow.
• 30:14
  Speaker 1: We're gonna snap back. Look at the CAPE as my
• 30:16
  Speaker 1: favorite example. Yeah, the Schiller cyclically adjusted PE ratio. You
• 30:21
  Speaker 1: would have been out like since nineteen ninety one hundred.
• 30:24
  Speaker 1: You followed that. It's it's kind of wild.
• 30:26
  Speaker 2: Yeah, for sure, you would absolutely have not taken advantage
• 30:31
  Speaker 2: of an incredible run in equities. Like, just to make
• 30:34
  Speaker 2: this point and underscore it, I say, evaluation is a
• 30:38
  Speaker 2: starting point for your investment decision, what you're screening for
• 30:40
  Speaker 2: and entry exit points. You would never own US Tech
• 30:43
  Speaker 2: and you would be long Russia, you know, and anyone
• 30:47
  Speaker 2: who wants to take that trade, God bless, but you'll
• 30:49
  Speaker 2: be out of business.
• 30:50
  Speaker 1: Right, Russia's been cheap. But some stocks are cheap for
• 30:54
  Speaker 1: a reason.
• 30:54
  Speaker 2: They are European banks cheap for reason, and we know
• 31:00
  Speaker 2: that kind of over the medium term, this I'll define
• 31:02
  Speaker 2: as kind of three years. You know, stocks can stay
• 31:06
  Speaker 2: quote unquote expensive, or the way I like to say it,
• 31:10
  Speaker 2: be valued at a higher end of the market range
• 31:13
  Speaker 2: because they are superior businesses, and they can stay at
• 31:16
  Speaker 2: those levels for multiple years, sometimes much longer and continue
• 31:20
  Speaker 2: to re rate, and stuff can look like it's a
• 31:23
  Speaker 2: discount to the rest of the market, but be structurally
• 31:26
  Speaker 2: impaired and therefore deserve the discount. The other problem I
• 31:30
  Speaker 2: have when people do these kind of like mean reversion,
• 31:33
  Speaker 2: you know, valuation trades, as they say, like, oh, we
• 31:36
  Speaker 2: need to go back to some historical period where S
• 31:39
  Speaker 2: and P was at fourteen times why. I mean, the
• 31:43
  Speaker 2: market composition from a sector perspective completely different, the balance
• 31:48
  Speaker 2: sheets of these companies completely different, the cash profiles and
• 31:51
  Speaker 2: free cash generation of these companies completely different. The regulatory environment,
• 31:55
  Speaker 2: the politics, the behavior, the market technicals. I can go
• 31:58
  Speaker 2: on and on and on. It is literally the laziest
• 32:01
  Speaker 2: piece of analysis I have ever seen.
• 32:04
  Speaker 1: When you look at last century companies like US Steel
• 32:09
  Speaker 1: or even General Motors, you know, the expression was men
• 32:12
  Speaker 1: in material they need tons of capital, giant factories. Today,
• 32:18
  Speaker 1: two people with a laptop and Amazon web servers, you
• 32:23
  Speaker 1: could do as much business as any startup from any
• 32:26
  Speaker 1: decade previously.
• 32:27
  Speaker 2: Totally. I mean. Another example I like to use, like
• 32:30
  Speaker 2: near and dear to our hearts in terms of the
• 32:32
  Speaker 2: investment landscape, is you know, how many analysts do I
• 32:35
  Speaker 2: really need to cover all different sorts of sectors, you know,
• 32:38
  Speaker 2: And there was a time where I needed everyone to
• 32:40
  Speaker 2: be an expert on a different industry or a different sector,
• 32:44
  Speaker 2: and to be very siloed and deeply specialized. But right
• 32:48
  Speaker 2: now I can be in a meeting, sitting across the
• 32:50
  Speaker 2: table from a CEO or CFO, and they may be
• 32:53
  Speaker 2: talking about a business that I only know fifty percent about.
• 32:57
  Speaker 2: Right and in real time, I can use my AI tools.
• 33:01
  Speaker 2: I can pull up what their competitors have said in
• 33:03
  Speaker 2: recent earnings calls or you know, in the social media.
• 33:07
  Speaker 2: I can look up terminology, I can pull up data.
• 33:11
  Speaker 2: I am one hundred times more informed. I don't need
• 33:14
  Speaker 2: to be brief for three hours from an analyst before
• 33:16
  Speaker 2: I walk into that meeting. You know, just by understanding
• 33:19
  Speaker 2: the types of questions to ask and having this data
• 33:22
  Speaker 2: at my fingertips, I'm a faster and better investor.
• 33:26
  Speaker 1: So here's the challenge. And we could talk about AI
• 33:28
  Speaker 1: as a theme and a little bit, but the challenge
• 33:31
  Speaker 1: is you've gone through that whole process over the past
• 33:35
  Speaker 1: ten twenty years, where you've you know, done the reps,
• 33:39
  Speaker 1: put in the heavy lifting. Yeah, how is the next
• 33:42
  Speaker 1: generation going to become the Kate Moore in twenty five
• 33:47
  Speaker 1: years if they don't get to go through that process?
• 33:50
  Speaker 1: And AI seems to the phrase I heard recently was
• 33:54
  Speaker 1: removing the bottom rung on the career ladder? Is this
• 33:57
  Speaker 1: Is this a genuine concern?
• 33:59
  Speaker 2: It is somhat of a concern, And I think it's
• 34:01
  Speaker 2: more of a concern for kids who are going through
• 34:04
  Speaker 2: school and are incredibly specialized about what they're studying, and
• 34:09
  Speaker 2: this is kind of a flag. Frankly, I would say
• 34:11
  Speaker 2: to people, you don't want to just take courses in
• 34:15
  Speaker 2: one discipline your job as an undergrad. And I would
• 34:19
  Speaker 2: also argue, even in grad school, even in an MBA
• 34:21
  Speaker 2: program is to learn how to think and learn how
• 34:25
  Speaker 2: to ask questions, to get exposed to as many different
• 34:28
  Speaker 2: disciplines as possible. So I tell like young folks like
• 34:31
  Speaker 2: you got to study philosophy, you should also study things
• 34:34
  Speaker 2: like art history because there's context behind it. You should
• 34:36
  Speaker 2: study things like you know, hard sciences because you know
• 34:41
  Speaker 2: it gives you a discipline in terms of the way
• 34:43
  Speaker 2: that you're thinking. You should take a music theory class.
• 34:46
  Speaker 2: I mean, do all of this. You want your brain
• 34:49
  Speaker 2: to be flexible and pliant. You want to be able
• 34:51
  Speaker 2: to approach the problem by using these tools in unique ways.
• 34:56
  Speaker 2: And people who are only point and shoot, only have
• 34:59
  Speaker 2: one specific the way of approaching an investment problem are
• 35:03
  Speaker 2: often wrong.
• 35:04
  Speaker 1: Huh really really interesting. So you're brought to city specifically
• 35:10
  Speaker 1: to focus on the wealth business there, what's your strategy
• 35:15
  Speaker 1: for breathing life into that space?
• 35:18
  Speaker 2: So I think there are a couple of things. We
• 35:19
  Speaker 2: have a lot of amazing raw material at city in
• 35:23
  Speaker 2: terms of human capital and of course our clients. But
• 35:27
  Speaker 2: thinking about how to invest in a different way than
• 35:32
  Speaker 2: perhaps my other wealth competitors invest is one of the
• 35:36
  Speaker 2: greatest challenges and opportunities and here's what I will say.
• 35:39
  Speaker 2: You know, I want to examine the way that we're
• 35:43
  Speaker 2: approaching discretionary multi asset class act allocation products. Right, just
• 35:50
  Speaker 2: to sort of set it and forget it, here's your stocks, bonds, cash.
• 35:54
  Speaker 2: I'm not sure is going to be the right path
• 35:56
  Speaker 2: moving forward. I mean, we want to think about what
• 35:59
  Speaker 2: is the right combination of both asset class and factor
• 36:03
  Speaker 2: exposures for clients and different risk profiles, and how do
• 36:08
  Speaker 2: we implement in an interesting way in that space. So
• 36:12
  Speaker 2: it's not just like, hey, we have a you know,
• 36:15
  Speaker 2: large cap stock fund and we have a you know,
• 36:19
  Speaker 2: mid duration bond fund, and this is what we're kind
• 36:22
  Speaker 2: of combining together. This is really about, you know, what
• 36:26
  Speaker 2: are the best expressions of each of those things. How
• 36:28
  Speaker 2: much of it should be beta, how much of it
• 36:30
  Speaker 2: should be alpha seeking, whether it's you know, sector specific
• 36:33
  Speaker 2: or thematic, what is the best implementation and alternatives, And
• 36:36
  Speaker 2: particularly as we get more liquid alternatives available, you know,
• 36:40
  Speaker 2: that sort of diversification in a portfolio is going to
• 36:45
  Speaker 2: be kind of democratized, and we're going to see more
• 36:47
  Speaker 2: and more of our clients across risk spectrum be able
• 36:50
  Speaker 2: to access that.
• 36:50
  Speaker 1: So let's talk about the opportunities in the wealth business.
• 36:54
  Speaker 1: What's driving the growth here? Is it just the amount
• 36:58
  Speaker 1: of capital that's slash around? How big are demographics, the
• 37:03
  Speaker 1: move towards alternatives. There's so many different cross currents going
• 37:06
  Speaker 1: on that make that space so attractive. What do you
• 37:10
  Speaker 1: see as the key drivers?
• 37:12
  Speaker 2: Yeah, there's a bunch of different drivers, Berry, I'd say,
• 37:14
  Speaker 2: you know, first of all, there's been an enormous amount
• 37:17
  Speaker 2: of wealth created. We know over the last you know,
• 37:20
  Speaker 2: ten years. It's longer than that, but let's just say
• 37:22
  Speaker 2: in the last.
• 37:23
  Speaker 1: Ten years post financial crisis, post.
• 37:25
  Speaker 2: Financial Crist run absolutely and big concentrations of wealth. And frankly,
• 37:31
  Speaker 2: a lot of very wealthy families have held a lot
• 37:35
  Speaker 2: of these this wealth in cash, you know, or in
• 37:38
  Speaker 2: cash equivalents, or have reinvested in their business. I think
• 37:41
  Speaker 2: there's now an understanding that they want to diversify, so
• 37:43
  Speaker 2: the investment opportunity sat for all this wealth creation is huge.
• 37:48
  Speaker 2: I'd say there's another trend, and I'm sure people have
• 37:51
  Speaker 2: talked about this before with you, which is like the
• 37:53
  Speaker 2: transfer of wealth that's going to happen from the boomer
• 37:56
  Speaker 2: generation to my generation and then ultimately to our you know,
• 38:00
  Speaker 2: younger generation, and the values and the interests on the
• 38:04
  Speaker 2: investing side change from generation to generation. You know, the
• 38:08
  Speaker 2: types of risk clients want to take, the types of
• 38:12
  Speaker 2: like bespoke opportunities and private stuff that they want to do.
• 38:16
  Speaker 2: Maybe it's around you know, environmental social governance stuff. Maybe
• 38:20
  Speaker 2: it's around specific geographies, mission aligned. I mean, I think
• 38:24
  Speaker 2: that the flavor of investing is changing, which also makes
• 38:28
  Speaker 2: us super exciting. And then finally I would say, can
• 38:31
  Speaker 2: you know the breadth of investment instruments that are available
• 38:34
  Speaker 2: to individual investors and into wealthy families is actually really
• 38:39
  Speaker 2: exciting because you can do cooler things than just a
• 38:42
  Speaker 2: sixty forty portfolio, which was kind of the way wealth
• 38:44
  Speaker 2: businesses ran in the past.
• 38:46
  Speaker 1: So you had mentioned the role of behavioral finance in
• 38:50
  Speaker 1: some of your education and background. You were at University
• 38:54
  Speaker 1: of Chicago, which has become a hotbed of behavioral finance.
• 38:58
  Speaker 1: Stick sailor yeahs and recipient into of the Nobel tell us,
• 39:02
  Speaker 1: how you think about behavioral economics in your day job?
• 39:06
  Speaker 1: How do you help clients steer through some of this
• 39:10
  Speaker 1: year is a perfect example. A lot of volatility, a
• 39:13
  Speaker 1: lot of storm and drang and here we are above
• 39:17
  Speaker 1: where we were before Liberation Day? How do you guide
• 39:20
  Speaker 1: people through that?
• 39:22
  Speaker 2: Yeah, this is such a tough one, Barry, because you know,
• 39:25
  Speaker 2: this is where understanding kind of the positioning, the technicals
• 39:28
  Speaker 2: and the biases really differentiate a good investor from maybe
• 39:32
  Speaker 2: a less good investor. One of the things I try
• 39:35
  Speaker 2: and pay close attention to are all of these sentiment indicators,
• 39:38
  Speaker 2: and like you know, the dashboard for sentiment indicators continues
• 39:42
  Speaker 2: to change. Right. Sometimes we look at, you know, historic filings,
• 39:48
  Speaker 2: but we know that mutual funds and hedge funds change
• 39:51
  Speaker 2: their positions really quickly. Sometimes we look at the volume
• 39:53
  Speaker 2: and the flow. I like to pay attention to more
• 39:56
  Speaker 2: kind of third party and you know, coincident, like what's
• 40:00
  Speaker 2: being discussed and different social media or on different message
• 40:07
  Speaker 2: boards or whatever, and to just try and understand what's
• 40:11
  Speaker 2: capturing the attention and energy from different client segments. But
• 40:16
  Speaker 2: I also pay really close attention to, frankly, how the
• 40:20
  Speaker 2: market responds to different types of news, and that gives
• 40:23
  Speaker 2: you a good sounse. You gotta have your finger on
• 40:25
  Speaker 2: that pulse, you know. I learned this from someone named
• 40:30
  Speaker 2: Ben Hunt, who you may be familiar with you Asolon theory.
• 40:33
  Speaker 2: So I learned this from Ben years ago, but he said,
• 40:37
  Speaker 2: you know, number one, the first order to getting things
• 40:40
  Speaker 2: right is like having a good forecast.
• 40:42
  Speaker 1: Right.
• 40:42
  Speaker 2: Let's just say you have a forecast for stock earnings.
• 40:45
  Speaker 2: The second order is to understand what consensus thinks, right
• 40:50
  Speaker 2: and comparing your number against that. But to get it
• 40:53
  Speaker 2: really right in the market, you need to understand what
• 40:56
  Speaker 2: consensus thinks.
• 40:57
  Speaker 1: Consensus thinks it's a Cain's beauty contest.
• 41:02
  Speaker 2: Absolutely, but kind of instilling that in my team is
• 41:08
  Speaker 2: really important because it's like, great, I'm so glad you
• 41:11
  Speaker 2: think we're going to have two hundred and sixty three
• 41:12
  Speaker 2: dollars of S and B earnings this year. If consensus
• 41:16
  Speaker 2: actually thinks it's to sixty seven, we should know that too.
• 41:20
  Speaker 2: But if the printed number is to sixty seven, but
• 41:22
  Speaker 2: everyone's just dragging their feet on cutting the numbers and
• 41:24
  Speaker 2: they're actually a two fifty five, that makes a difference
• 41:27
  Speaker 2: in terms of how people take risk and respond to
• 41:29
  Speaker 2: different news. And so, you know, kind of putting all
• 41:33
  Speaker 2: these pieces together, doing the work understanding what like written
• 41:37
  Speaker 2: or published consensus is, and then getting all these kind
• 41:40
  Speaker 2: of sentiment inputs to really evaluate what is the whisper
• 41:44
  Speaker 2: a real number versus what's published.
• 41:47
  Speaker 1: So let me push back slightly on sentiment because I
• 41:50
  Speaker 1: want to get your take on this. So my experience
• 41:54
  Speaker 1: generally has been most day to day sentiment is kind
• 41:57
  Speaker 1: of noisy, and it really matters when it hits an extreme.
• 42:00
  Speaker 1: Least that's a trader's perspective. But the thing I really
• 42:04
  Speaker 1: want to push back on has been the University of
• 42:07
  Speaker 1: Michigan consumer sentiment data, which over the past couple of years,
• 42:12
  Speaker 1: it's been worse in the financial crisis, worse than the
• 42:15
  Speaker 1: beginning of the pandemic, worse than the two thousand and
• 42:20
  Speaker 1: one September eleventh attacks or the dot com implosion, worse
• 42:24
  Speaker 1: than the eighty seven crash. How do we figure out
• 42:28
  Speaker 1: what's going on in sentiment where it seems to have
• 42:31
  Speaker 1: just detached from consumer behavior. Hey, everything is terrible, but
• 42:37
  Speaker 1: we're going out and spend it totally.
• 42:38
  Speaker 2: We're still going out to restaurants even though we think
• 42:40
  Speaker 2: the world is ending. Yeah, you're absolutely right. So any
• 42:43
  Speaker 2: single sentiment indicator or survey needs to be discounted, right,
• 42:47
  Speaker 2: We need to combine all these things and look at
• 42:49
  Speaker 2: it kind of on a moving average of a number
• 42:51
  Speaker 2: of prints. Another one that kind of flagged for me
• 42:53
  Speaker 2: was the Conference board confidence, which hit the lowest levels
• 42:57
  Speaker 2: from like September of twenty eleven last month. And that
• 43:01
  Speaker 2: was a crazy number, right because September of twenty eleven,
• 43:05
  Speaker 2: we had just gone through this debt fiasco, we were
• 43:08
  Speaker 2: going to Operation Twist.
• 43:10
  Speaker 1: You know, there was like post flash crash, it had
• 43:13
  Speaker 1: gotten even crazy.
• 43:14
  Speaker 2: Absolutely, so you know that that seemed really disconnected from reality.
• 43:17
  Speaker 2: So sometimes you have to discount all of these things,
• 43:21
  Speaker 2: but your point is well taken. There has been a
• 43:23
  Speaker 2: generalized sentiment deterioration. Another one I look at is that
• 43:28
  Speaker 2: what is now the Richmond FED but historically had been
• 43:30
  Speaker 2: the Duke Fuqua CFO Survey. And you've seen over the
• 43:34
  Speaker 2: past couple of years this massive decoupling between expectations for
• 43:38
  Speaker 2: own company over the next six months, where the CFOs
• 43:41
  Speaker 2: are going like things are pretty good actually, and expectations
• 43:44
  Speaker 2: for the economy where they're like economies in trouble.
• 43:46
  Speaker 1: That's so funny you bring that up, because well, first
• 43:49
  Speaker 1: I had Tom Barkin and not too long ago. But
• 43:51
  Speaker 1: second we see that everywhere. My congressman's okay, but the
• 43:55
  Speaker 1: rest of Congress thinks my financial circumstances seemed to be
• 43:59
  Speaker 1: pretty good, but we think the economy is going lower.
• 44:02
  Speaker 1: Like that exact sort of sentiment split, What do you
• 44:07
  Speaker 1: imagine as driving people to think, Hey, things aren't that
• 44:11
  Speaker 1: bad for me, but everywhere else it stinks.
• 44:14
  Speaker 2: Yeah, I this is tough one, but I honestly think
• 44:19
  Speaker 2: the news flow, how media portrays recent events, the echo
• 44:24
  Speaker 2: chamber on social media, the fact that people are not
• 44:27
  Speaker 2: getting a broad based view. Do you see all these
• 44:30
  Speaker 2: you know, traditional news programs now that are trying to
• 44:32
  Speaker 2: dedicate one night a week or whatever the heck it
• 44:34
  Speaker 2: is to the good news, right, true?
• 44:37
  Speaker 1: That's yeah, It's like, that's funny.
• 44:39
  Speaker 2: There's a there's a local channel I've watched that will
• 44:41
  Speaker 2: do one good story after they've just reported a bunch
• 44:44
  Speaker 2: of like murders and you know, everything for the previous
• 44:47
  Speaker 2: twenty five minutes. The last story is like they're trying
• 44:50
  Speaker 2: to leave you on a positive note. I'm thinking, okay,
• 44:53
  Speaker 2: but the skew is definitely really negative.
• 44:55
  Speaker 1: If it bleeds, it leads, that's always been the news.
• 44:58
  Speaker 2: Then yeah, really, but now people are consuming more of that.
• 45:01
  Speaker 1: I think you're definitely onto something.
• 45:04
  Speaker 2: But so we do maybe need to za score the
• 45:06
  Speaker 2: sentiment right now, let's just put it that way. We
• 45:08
  Speaker 2: have to adjust for this declining overall sentiment. But when
• 45:12
  Speaker 2: I'm talking about sentiment, I also like I'm trying to
• 45:14
  Speaker 2: infer sentiment from price reactions to different news, right, And
• 45:18
  Speaker 2: that might be a better gauge in some of these
• 45:20
  Speaker 2: surveys where people can say, you know, the sky is falling,
• 45:23
  Speaker 2: but then just book a carnival cruise, right, like you
• 45:25
  Speaker 2: know the and you know, if a stock puts up
• 45:29
  Speaker 2: pretty good numbers in terms of earnings but doesn't beat
• 45:32
  Speaker 2: by huge margin and follows fifteen percent, you can tell
• 45:36
  Speaker 2: that like people are at the edge, right, And so
• 45:39
  Speaker 2: you know, you have to kind of correct your own
• 45:42
  Speaker 2: equity exposure for that type of behavior. But your point's
• 45:45
  Speaker 2: well taken. On you mish and on you know, all
• 45:48
  Speaker 2: of these other surveys. There's been a generalized decline. We
• 45:51
  Speaker 2: have to correct for that.
• 45:52
  Speaker 1: Huh. Really interesting. So let's talk a little bit about
• 45:55
  Speaker 1: today's market environment. Twenty twenty five has been kind of
• 45:59
  Speaker 1: a volatile, wacky year. What's your current macro view on
• 46:05
  Speaker 1: the global economy, What's going on in markets? The FED,
• 46:09
  Speaker 1: yield inflation, tariffs, it all seems to be kind of
• 46:13
  Speaker 1: tumbling together at once.
• 46:15
  Speaker 2: Yeah, I have to say twenty twenty five has been
• 46:17
  Speaker 2: a tough year for anyone, and it's also been a
• 46:21
  Speaker 2: tough year candidly for me to start a new job.
• 46:24
  Speaker 2: I like to say that every time I start a
• 46:26
  Speaker 2: new job there's some big volatility event. This one might
• 46:29
  Speaker 2: be the biggest and frankly totally self induced as opposed
• 46:33
  Speaker 2: to some kind of exogenous or external shock. So it's
• 46:37
  Speaker 2: been really difficult to navigate through this market. And yet,
• 46:42
  Speaker 2: you know, there are some things we can still anchor to,
• 46:45
  Speaker 2: paying attention to what companies are saying about their businesses,
• 46:48
  Speaker 2: this kind of sort of sentiment stuff we were talking
• 46:49
  Speaker 2: about a moment ago. Looking at the long term trends,
• 46:53
  Speaker 2: this all leads us to say, like, Okay, we can
• 46:54
  Speaker 2: still be invested, but I am deeply worried, barry about
• 46:58
  Speaker 2: what's going to happen to them over the summer and
• 47:02
  Speaker 2: into the beginning of twenty twenty six. We know that
• 47:06
  Speaker 2: companies have been operating more or less bau business as
• 47:09
  Speaker 2: usual despite all of the shocks on headlines around tariffs
• 47:14
  Speaker 2: and consumers may have pulled forward some demand, but they're
• 47:17
  Speaker 2: also kind of operating BAU. For the most part, there's
• 47:21
  Speaker 2: not been a significant change, and yet we know that
• 47:24
  Speaker 2: the introduction of these tariffs and the risk aversion that's
• 47:30
  Speaker 2: a result of these tariffs and changes in policy and
• 47:33
  Speaker 2: changes in expectations for global supply chains is going to
• 47:36
  Speaker 2: lead to some weakness and activity. The thing I just
• 47:39
  Speaker 2: want to point out is, like going into the end
• 47:41
  Speaker 2: of twenty twenty four, in the beginning of twenty five,
• 47:43
  Speaker 2: I was also like a little worried frankly that the
• 47:46
  Speaker 2: economy was slowing, not catastrophically, not recession style, but there
• 47:50
  Speaker 2: were enough cracks across the consumer and enough indications from
• 47:53
  Speaker 2: companies to basically suggest like this was not going to
• 47:57
  Speaker 2: be an accelerating year, even before these polices, the shocks,
• 48:01
  Speaker 2: and now I think despite some adjustments, you know, immediately
• 48:05
  Speaker 2: after the terrorf announcements, companies don't have an incentive to
• 48:08
  Speaker 2: do a bunch of different things, and that is engaged
• 48:12
  Speaker 2: in real capex. They'll spend what they need to to
• 48:15
  Speaker 2: stay in business or to maintain or things that are
• 48:18
  Speaker 2: absolutely necessary, but they're going to prioritize expansionary capex and
• 48:23
  Speaker 2: acquisitions I think are off the table. Number two on
• 48:27
  Speaker 2: the labor market. We've heard a lot of people talk
• 48:29
  Speaker 2: about it being frozen. Yes, there's still some hiring, but
• 48:32
  Speaker 2: when you look at kind of the composition of the hiring,
• 48:35
  Speaker 2: it's not as exciting as it might have otherwise been
• 48:37
  Speaker 2: in a policy risk free economy. And I think companies
• 48:43
  Speaker 2: have an incentive to kind of keep their labor force
• 48:45
  Speaker 2: where it is without really expanding because they don't know
• 48:48
  Speaker 2: if that's going to make sense for margins and stuff
• 48:50
  Speaker 2: going forward. And then the third thing I would say is,
• 48:53
  Speaker 2: you know, companies need to ask themselves what should my
• 48:57
  Speaker 2: supply chain, what should my corporate relations look like over
• 49:02
  Speaker 2: the course of the next couple of years, because the
• 49:05
  Speaker 2: truth of the matter is if they have to realign them,
• 49:09
  Speaker 2: it will be a significant cost. It will take a
• 49:11
  Speaker 2: ton of time and take a ton of energy. And
• 49:13
  Speaker 2: yet if there might be a policy shift, either at
• 49:15
  Speaker 2: the midterms or under a new administration, the incentive to
• 49:19
  Speaker 2: make these multi year investments is low. So I get
• 49:22
  Speaker 2: this sort of paralysis that's playing out in terms of
• 49:25
  Speaker 2: the market, in terms of corporate behavior, and so I'm
• 49:28
  Speaker 2: a little I wouldn't say worried about a recession, but
• 49:32
  Speaker 2: concerned about much slower activity in the second half of
• 49:35
  Speaker 2: the year.
• 49:36
  Speaker 1: So that raises so many different issues. We keep hearing
• 49:39
  Speaker 1: from CFO CEOs about the lack of clarity. If you
• 49:44
  Speaker 1: don't know what the policy is going to be, how
• 49:47
  Speaker 1: do you relocate manufacturing plan a headquarter, how do you
• 49:51
  Speaker 1: plan to do any sort of expansionary hiring. So I'm
• 49:54
  Speaker 1: completely with you that, Hey, this seems to be this
• 49:58
  Speaker 1: self inflicted wound that's preventing the economy from accelerating. And
• 50:04
  Speaker 1: yet despite all that, the economy seems to be incredibly
• 50:08
  Speaker 1: resilient and not taking too big of a hit from
• 50:13
  Speaker 1: all of these on again, off again tariffs. Does that
• 50:17
  Speaker 1: just mean that this administration inherited a really robust economy.
• 50:23
  Speaker 2: Yes, And I think there's another element to it. I
• 50:25
  Speaker 2: do think this administration inherited a resilient economy, one that
• 50:30
  Speaker 2: was perhaps underappreciated over the last couple of years because
• 50:35
  Speaker 2: not everyone was feeling that resilience in the same way,
• 50:37
  Speaker 2: or wealth creation wasn't as broad as some would have liked. Okay,
• 50:44
  Speaker 2: but I think there's another element to this too, And
• 50:47
  Speaker 2: this goes a little bit into kind of corporate behavior
• 50:50
  Speaker 2: and how investors react to corporate decisions, which is, you know,
• 50:55
  Speaker 2: if a company pulls back prematurely. Let's say they shed
• 50:58
  Speaker 2: a bunch of work for so they a lot of CAPEX,
• 51:01
  Speaker 2: and they really hunker down for a bad economic environment
• 51:04
  Speaker 2: and that doesn't actually show up for multiple quarters, and they.
• 51:08
  Speaker 1: Kind of, like the past few years, have prety forecasting
• 51:11
  Speaker 1: recessions that never came, and.
• 51:12
  Speaker 2: They lag their peer group and they look weak relative
• 51:15
  Speaker 2: to the rest of the industry. Wow, that makes people
• 51:19
  Speaker 2: lose confidence in that management team. So there's almost an
• 51:22
  Speaker 2: incentive for management teams to maybe have contingency plans, to
• 51:27
  Speaker 2: talk about that with their board and the rest of
• 51:29
  Speaker 2: their leadership, but not necessarily communicate that with the investment
• 51:32
  Speaker 2: community and keep operating with only a tiny bit of
• 51:37
  Speaker 2: defensive action because there's going to be a penalty on
• 51:41
  Speaker 2: their stock price, and frankly in the confidence people have
• 51:43
  Speaker 2: in the management team if it looks like they're being
• 51:46
  Speaker 2: too emotional and reactionary.
• 51:48
  Speaker 1: This sounds like the game theory work you did at
• 51:50
  Speaker 1: UFC is coming.
• 51:51
  Speaker 2: Into one hundred percent. It plays a huge part in
• 51:56
  Speaker 2: the way I think about this. So, you know, no
• 51:59
  Speaker 2: company has an incent to talk about how concerned. They
• 52:01
  Speaker 2: actually are publicly because the first one that does it
• 52:04
  Speaker 2: will be penalized.
• 52:05
  Speaker 1: That's interesting. And and since you work at a giant bank,
• 52:10
  Speaker 1: we've seen bank earnings that are pretty strong across the board. Yeah,
• 52:15
  Speaker 1: that's kind of unexpected. Tell us a little bit about
• 52:18
  Speaker 1: what does that mean in light of this environment relatively
• 52:23
  Speaker 1: high rates really just more normalize than what we've seen
• 52:27
  Speaker 1: in the prior two decades. What's going on in the
• 52:30
  Speaker 1: banking sector.
• 52:31
  Speaker 2: Yeah, well, I can talk a little bit about City
• 52:33
  Speaker 2: because we've had some pretty awesome operating performance and there
• 52:36
  Speaker 2: are a couple of things really driving that. Of course,
• 52:38
  Speaker 2: you know, there's been a real focus in terms of
• 52:41
  Speaker 2: cost and expense. This is not just City, this is
• 52:44
  Speaker 2: across the board at major financial institutions, and frankly, investment
• 52:47
  Speaker 2: investors really love this. They want to see that discipline continue.
• 52:52
  Speaker 2: Number two, like the mixshift has actually contributed to earnings,
• 52:56
  Speaker 2: and I think, as you well know, you know well,
• 53:00
  Speaker 2: has been a huge driver for many of the diversified
• 53:03
  Speaker 2: financial services companies. I expect it will continue and I'm
• 53:06
  Speaker 2: looking forward to wealth being an even bigger driver for
• 53:08
  Speaker 2: City over the next couple of years. And then I
• 53:11
  Speaker 2: think there's a you know, another element to which is
• 53:13
  Speaker 2: that the speed and sort of the facility that management
• 53:18
  Speaker 2: has in toggling between different types of business for different
• 53:21
  Speaker 2: parts of the cycle has significantly improved relative to how
• 53:24
  Speaker 2: people think about banks fifteen years ago. So we were
• 53:27
  Speaker 2: talking about valuations earlier, and you know, financial services and
• 53:30
  Speaker 2: kind of banks more specifically kind of dragged down overall
• 53:34
  Speaker 2: market multiples when they were a huge part of the
• 53:36
  Speaker 2: market cap for the US large cap indencies in the past.
• 53:39
  Speaker 1: So let's talk a little bit about soft data. It's
• 53:42
  Speaker 1: kind of been negative when we're talking about sentiment and
• 53:46
  Speaker 1: things like that. This really hasn't translated into the hard
• 53:51
  Speaker 1: data yet. Tell us what you're looking at in that space.
• 53:54
  Speaker 2: Yeah, of course, I mean I'm shaking my head as
• 53:56
  Speaker 2: you say that, because it's absolutely right. The soft data
• 53:59
  Speaker 2: into hard data in a normal period, you know, gets
• 54:03
  Speaker 2: translated over inconsistent time period. So if there's not like
• 54:07
  Speaker 2: a map that says like, hey, the soft data does X,
• 54:09
  Speaker 2: and then three quarters later or one month later, it
• 54:12
  Speaker 2: translates into something in the market or some other hard
• 54:15
  Speaker 2: data and economic activity. So it's always a bit of
• 54:18
  Speaker 2: an art interpreting the soft data into the hard data,
• 54:20
  Speaker 2: and yet it's really important to pay attention because it
• 54:24
  Speaker 2: may impact the marginal decision. Right now, the soft data
• 54:29
  Speaker 2: has went from catastrophic posts the April second to Tarif
• 54:32
  Speaker 2: announcements to really awful to maybe a hair better but
• 54:38
  Speaker 2: still pretty bombed out. And as we've talked about, the
• 54:40
  Speaker 2: economic data has stayed somewhat resilient. That doesn't mean that
• 54:45
  Speaker 2: the economic data will never show weakness. And again, I'm
• 54:49
  Speaker 2: expecting some soft pockets throughout the second half of the year,
• 54:53
  Speaker 2: not recessionary, but kind of like sub two percent, sub
• 54:57
  Speaker 2: one and a half percent growth. I think we should
• 54:59
  Speaker 2: buckle down for and that's where I expect more durable
• 55:03
  Speaker 2: earning stories, secular growth stories will outperform the rest of
• 55:06
  Speaker 2: the market.
• 55:07
  Speaker 1: So it sounds like there are a couple of catalysts
• 55:09
  Speaker 1: in the pipeline and you're just waiting to see which
• 55:12
  Speaker 1: direction the majority of these go. Tell us a little
• 55:15
  Speaker 1: bit about what you see as upside and downsize catalysts.
• 55:18
  Speaker 2: Okay, so around tariffs, any given day that we'd be
• 55:22
  Speaker 2: having this discussion, there's a new set of news. One
• 55:25
  Speaker 2: thing I do know is that we have a series
• 55:27
  Speaker 2: of deadlines over the course of the summer where people
• 55:29
  Speaker 2: are hoping for some level of resolution. And the way
• 55:32
  Speaker 2: I say talk about this, Barry is this is that
• 55:34
  Speaker 2: we may be past peak tariff shock, but we are
• 55:37
  Speaker 2: nowhere close to peak tariff pain. We don't really know
• 55:44
  Speaker 2: how bad it's going to be quite yet. And this
• 55:46
  Speaker 2: is why of horse companies have been reluctant to significantly
• 55:49
  Speaker 2: change their guidance and their earnings revision ratios have looked
• 55:52
  Speaker 2: better than some people expected. Here's what I will say.
• 55:56
  Speaker 2: Even if the reciprocal tariffs don't hold up and they
• 56:00
  Speaker 2: end up going to the Supreme Court, and that's a decision,
• 56:03
  Speaker 2: the sectoral tariffs, which take longer to implement, are much
• 56:06
  Speaker 2: stickier and frankly, have much longer, larger.
• 56:09
  Speaker 1: When you say sectoral, like North America, Canada, No like
• 56:13
  Speaker 1: semis oh, okay.
• 56:14
  Speaker 2: Gotcha, Urma copper steel. All of these sectoral tariffs are
• 56:20
  Speaker 2: much stickier and have much greater potential impact than the
• 56:24
  Speaker 2: country to country bilateral reciprocal tariffs.
• 56:28
  Speaker 1: It's so interesting you mentioned that someone was from a
• 56:32
  Speaker 1: biomedical device company was having a conversation with me, so
• 56:35
  Speaker 1: I don't understand an iPhone is exempt from China tariffs.
• 56:39
  Speaker 1: But the pacemakers we make that save people's lives are
• 56:44
  Speaker 1: not And if we have to relocate this to wherever,
• 56:48
  Speaker 1: to Taiwan, to Vietnam, to Canada, the FDA process starts
• 56:53
  Speaker 1: over and it'll be eight years. So for about half
• 56:56
  Speaker 1: a decade or so, as the Chinese manufacturered pacemakers sell off,
• 57:03
  Speaker 1: but before the new ones come online, there's not going
• 57:06
  Speaker 1: to be enough pacemakers right there.
• 57:08
  Speaker 2: We have a real risk of some of these important
• 57:11
  Speaker 2: raw materials and these important consumer goods and these important
• 57:13
  Speaker 2: medical goods, you know, not being adequately supplied, and so
• 57:19
  Speaker 2: we have to really watch this. So so I will
• 57:21
  Speaker 2: say this that the tariff side is not going to
• 57:24
  Speaker 2: be resolved over the course of the summer, and because
• 57:27
  Speaker 2: it's going to bleed out for longer, we may have
• 57:29
  Speaker 2: slower growth but not catastrophic, but eventually we'll have some
• 57:33
  Speaker 2: really big sectoral consumer and business impacts.
• 57:37
  Speaker 1: Huh, really really interesting. You mentioned some of the news
• 57:40
  Speaker 1: stories and how things are affecting sentiment. How do you
• 57:45
  Speaker 1: see the role of narratives driving market responses. It seems
• 57:49
  Speaker 1: like there are different stories for different asset classes every
• 57:53
  Speaker 1: other week.
• 57:54
  Speaker 2: Absolutely the narrative changes. It's sometimes it feels like on
• 57:58
  Speaker 2: thirty minute increments you used to be you'd have a
• 58:00
  Speaker 2: couple weeks of a narrative taking hold. I know many
• 58:04
  Speaker 2: people think about this, but the market can really only
• 58:07
  Speaker 2: focus on one thing at a time, one major narrative
• 58:11
  Speaker 2: at a time, you know, and that's where you end
• 58:13
  Speaker 2: up seeing the bulk of the price movement. For example,
• 58:16
  Speaker 2: is it around tariffs? Is it around inflation data? Is
• 58:19
  Speaker 2: it around FEDE expectations? Is it around the technology conflict
• 58:22
  Speaker 2: between the US and China? Is it around some geopolitical shock.
• 58:26
  Speaker 2: You know, it's but it's not going to be all
• 58:28
  Speaker 2: those things at once, even though I would argue all
• 58:30
  Speaker 2: of those things are happening concurrently, and I think the
• 58:35
  Speaker 2: market has become even more short attention span if we can,
• 58:38
  Speaker 2: you know, personified here, and as a result, the narratives
• 58:42
  Speaker 2: are shifting very quickly. This is why it's really important
• 58:46
  Speaker 2: that when you're thinking about portfolio construction, to anchor on
• 58:48
  Speaker 2: the right acid class in factor exposures, to layer it
• 58:51
  Speaker 2: with more medium term thematic alpha generating ideas, and then
• 58:57
  Speaker 2: offer some ballots to the portfolio, either in less core
• 59:00
  Speaker 2: releated assets or in expressions of the asset class or
• 59:04
  Speaker 2: factor that has a different duration.
• 59:08
  Speaker 1: So let's talk about some of the quote unquote less
• 59:11
  Speaker 1: correlated asset classes. There has been a giant move into alternatives,
• 59:16
  Speaker 1: most especially private credit, private equity. What do you see
• 59:21
  Speaker 1: in that space? How is that evolving over the next
• 59:24
  Speaker 1: five to ten years.
• 59:25
  Speaker 2: Yeah, let me answer that second part first. I think
• 59:28
  Speaker 2: the evolution of this broad bucket of alternatives is going
• 59:32
  Speaker 2: to be towards more liquid expressions.
• 59:34
  Speaker 1: More liquid, yes, or at.
• 59:37
  Speaker 2: Least more vehicles that allow for individual investors and you know,
• 59:42
  Speaker 2: family offices and things like that to invest in these
• 59:46
  Speaker 2: types of vehicles. Right, you don't have to set it
• 59:48
  Speaker 2: and forget it for like ten years. I think there's
• 59:51
  Speaker 2: going to be a lot of demand. Just as we've
• 59:52
  Speaker 2: seen say traditional mutual fund transfer into ETFs active ETFs,
• 59:57
  Speaker 2: the'll be more kind of combined vehicles. The challenge, I
• 1:00:00
  Speaker 2: think is that there's been so much money and we
• 1:00:03
  Speaker 2: know this, We've got great data around this chasing this
• 1:00:06
  Speaker 2: like a small number of deals, and it has become
• 1:00:09
  Speaker 2: so popular to think about alternatives as an asset class
• 1:00:13
  Speaker 2: that the returns that some of these strategies have been
• 1:00:17
  Speaker 2: able to achieve in the past. I think are much
• 1:00:19
  Speaker 2: more challenged in the future.
• 1:00:22
  Speaker 1: Haven't we seen that in sort of venture capital land
• 1:00:25
  Speaker 1: Back in the eighties and nineties, VC numbers were spectacular
• 1:00:29
  Speaker 1: and post dot com implosion, yeah, not only you have
• 1:00:32
  Speaker 1: more companies staying private for longer. It just seems like
• 1:00:36
  Speaker 1: a ton of low hanging fruit were picked, you know,
• 1:00:38
  Speaker 1: decades ago.
• 1:00:39
  Speaker 2: Yeah. The narrative is like eighty five percent of US
• 1:00:42
  Speaker 2: companies are actually still private, and so it's really important
• 1:00:45
  Speaker 2: to have all these vehicles to access them on the
• 1:00:47
  Speaker 2: equity on the credit side, I hear that, But there
• 1:00:50
  Speaker 2: are certain major differences. Of course, if you're a private company,
• 1:00:54
  Speaker 2: you may continue to need different types of funding. You
• 1:00:57
  Speaker 2: don't have to disclose to your shareholders on a regular basis.
• 1:01:02
  Speaker 2: Of course, that you don't have to deal with the
• 1:01:03
  Speaker 2: stock price fluctuation and all of that. What that might
• 1:01:07
  Speaker 2: mean for your employees, your paid and shares, But it
• 1:01:11
  Speaker 2: also creates a complicated environment where when you don't have
• 1:01:16
  Speaker 2: to disclose, when you don't have to report, you know,
• 1:01:19
  Speaker 2: you may make a different set of decisions. Some of
• 1:01:22
  Speaker 2: that might be good for the long term, and some
• 1:01:23
  Speaker 2: of it may be just like a poor allocation of capital,
• 1:01:26
  Speaker 2: because no one's calling you out on it because the
• 1:01:28
  Speaker 2: capital is already locked in. So it's I would say
• 1:01:31
  Speaker 2: this eighty five percent of companies that are still private
• 1:01:33
  Speaker 2: that the alternative managers are exciting about about giving you
• 1:01:36
  Speaker 2: exposure to, not all of them are the same quality
• 1:01:40
  Speaker 2: as the you know, publicly available, you know, large cap
• 1:01:45
  Speaker 2: megacap companies.
• 1:01:46
  Speaker 1: It makes a lot of sense. I want to get
• 1:01:48
  Speaker 1: to my favorite questions, but before I do that, I
• 1:01:51
  Speaker 1: got to throw you at least one curve ball. You're
• 1:01:54
  Speaker 1: on the Resource Council for the Grand Teton National Park Foundation.
• 1:01:58
  Speaker 2: Yeah, tell us about that. That sound random, do you there?
• 1:02:00
  Speaker 1: Yeah, it sounds totally rare. I know you're a former
• 1:02:03
  Speaker 1: a ski bomb I am, so maybe there's some relationship
• 1:02:07
  Speaker 1: with that.
• 1:02:07
  Speaker 2: Yeah. I actually split my time between New York City
• 1:02:10
  Speaker 2: and Jackson Hole, so I spend a lot of time
• 1:02:12
  Speaker 2: in the Jackson community. I'm super passionate about the conservation
• 1:02:17
  Speaker 2: and nature programs at Granteeton National Park and I've been
• 1:02:20
  Speaker 2: on the Resource Council now for about three years. It
• 1:02:23
  Speaker 2: is a kind of sub board of the board of
• 1:02:26
  Speaker 2: a Granteeton National Park Foundation, and we do some really
• 1:02:29
  Speaker 2: amazing things. One of the things I'm most passionate about
• 1:02:32
  Speaker 2: are some of these wildlife programs and the money that
• 1:02:35
  Speaker 2: we raise specifically for research that benefits some of the
• 1:02:39
  Speaker 2: biologists in the park and also that you know, all
• 1:02:44
  Speaker 2: of the visitors the park can take advantage of. My
• 1:02:47
  Speaker 2: favorite thing to do every summer, Barry is the wolf Watch,
• 1:02:50
  Speaker 2: which we do some days during August. We'll go up
• 1:02:54
  Speaker 2: with a biologist to this bluff and we will watch
• 1:02:57
  Speaker 2: a pack that lives in Grantee Down Nash Park and
• 1:03:00
  Speaker 2: learn all about wolf habitats, behaviors, and changes in their pattern.
• 1:03:04
  Speaker 1: So this is part of the national park system, but
• 1:03:08
  Speaker 1: yet there's a private foundation that helps raise assets and
• 1:03:12
  Speaker 1: manage resources for the park.
• 1:03:14
  Speaker 2: To tell us a little bit, almost all the national
• 1:03:16
  Speaker 2: parks have friends groups, and this granteed Don National Park
• 1:03:19
  Speaker 2: Foundation is the friends group for Grantee Don National Park.
• 1:03:23
  Speaker 2: We are a very large and successful one and we've
• 1:03:26
  Speaker 2: really helped a partner with the park on everything from
• 1:03:29
  Speaker 2: like visitors centers to you know, accessible options to the drivers,
• 1:03:34
  Speaker 2: to redoing the trail system, to sponsoring some of the biologists,
• 1:03:36
  Speaker 2: et cetera. The park is run by the park, but
• 1:03:40
  Speaker 2: the superintendent and the CEO Grantee Don National Park Foundation
• 1:03:43
  Speaker 2: are close partners, and I like to think, Yeah, we're
• 1:03:46
  Speaker 2: the best friends group out there.
• 1:03:47
  Speaker 1: Huh really really quite fascinating. Let's jump to our favorite
• 1:03:52
  Speaker 1: questions because I only I know, I only have you
• 1:03:55
  Speaker 1: for a few more moments. We'll make this our speed round,
• 1:03:58
  Speaker 1: starting with what's keeping entertain these days? What are you
• 1:04:01
  Speaker 1: watching or listening to?
• 1:04:03
  Speaker 2: Okay, so I don't watch television at all, very infrequently.
• 1:04:07
  Speaker 1: No Netflix, no Prime, no Apple TV, none of that.
• 1:04:10
  Speaker 2: It's not really my jam.
• 1:04:12
  Speaker 1: Wow, that's really interesting.
• 1:04:13
  Speaker 2: Yeah, it's not really my jam. I do watch like
• 1:04:15
  Speaker 2: things sometimes, a news magazine or whatever, but for the
• 1:04:18
  Speaker 2: most part, I am just an avid reader.
• 1:04:21
  Speaker 1: Uh huh.
• 1:04:21
  Speaker 2: And I like to spend my time when I'm not
• 1:04:24
  Speaker 2: working reading, playing sports, listening to music. And I'm an
• 1:04:29
  Speaker 2: amateur artist, so I've been watching screens after being in
• 1:04:33
  Speaker 2: front of screens all day long is unappealing to me.
• 1:04:35
  Speaker 1: Can I tell you that sounds shockingly healthy?
• 1:04:39
  Speaker 2: Yeah? I try to be shockingly healthy. I also try
• 1:04:41
  Speaker 2: to put my devices down and be focused on other
• 1:04:43
  Speaker 2: things because I get enough screen time during the day.
• 1:04:46
  Speaker 1: I totally get it. Tell us about your mentors who
• 1:04:49
  Speaker 1: helped shape your career.
• 1:04:52
  Speaker 2: I don't know that I had a lot of official mentors.
• 1:04:54
  Speaker 2: I will tell you I had more peer mentors, if
• 1:04:57
  Speaker 2: that makes sense. You know, growing up in the business,
• 1:05:00
  Speaker 2: I was often the only woman in the room or
• 1:05:02
  Speaker 2: the only woman on the investment committee, and I built
• 1:05:06
  Speaker 2: really strong peer relationships with other investors of similar levels
• 1:05:11
  Speaker 2: around the street. And there are a lot of people
• 1:05:13
  Speaker 2: who have helped to influence my way of thinking or
• 1:05:16
  Speaker 2: have challenged me. But yeah, I mean, I try and
• 1:05:20
  Speaker 2: be a mentor to as many, especially young women as
• 1:05:23
  Speaker 2: I can in the business, since I didn't have that
• 1:05:24
  Speaker 2: available to me at the time. But I wish I
• 1:05:27
  Speaker 2: had a long list of mentors. But I would say
• 1:05:29
  Speaker 2: it's more my peer group that I've really linked arms
• 1:05:32
  Speaker 2: with and grown with that I think of as kind
• 1:05:35
  Speaker 2: of playing that role for me in my career.
• 1:05:38
  Speaker 1: Interesting, So you mentioned you read a lot. Let's talk
• 1:05:41
  Speaker 1: about books. Yeah, what are some of your favorites? What
• 1:05:43
  Speaker 1: are you reading right now?
• 1:05:44
  Speaker 2: Okay, I'm a giant sci fi and fantasy.
• 1:05:47
  Speaker 1: Oh boy, were you talking to the right person?
• 1:05:49
  Speaker 2: I mean, so on this theme of not watching screens
• 1:05:54
  Speaker 2: after I work, I like to really escape, like deep
• 1:05:57
  Speaker 2: in escape after a long day of Star Dar, I
• 1:06:00
  Speaker 2: get numbers and analyzing, you know, economics. So here's what
• 1:06:04
  Speaker 2: I will say. I'm in an amazing series right now,
• 1:06:08
  Speaker 2: the Murder Bot series by Martha Wells. I know it's
• 1:06:11
  Speaker 2: been made into a series. I will not watch it
• 1:06:13
  Speaker 2: because it will ruin the entise.
• 1:06:16
  Speaker 1: It's gotten mixed reviews so far so far, but I
• 1:06:20
  Speaker 1: have that in my cue. The first murder book.
• 1:06:22
  Speaker 2: Oh, it's so good. It's amazing, and you know, thinking
• 1:06:25
  Speaker 2: about this intersection between bots and AI and the future,
• 1:06:30
  Speaker 2: and there's a lot of inner dialogue in there that
• 1:06:32
  Speaker 2: I don't think will translate well into a series, but anyway,
• 1:06:35
  Speaker 2: neither here nor there. So I love to read that.
• 1:06:37
  Speaker 2: Before I I'm on book six now. Before I started that,
• 1:06:42
  Speaker 2: I read the latest from ton of French, which is
• 1:06:44
  Speaker 2: called The Searcher uh and and the Hunters and two
• 1:06:49
  Speaker 2: books together. It takes place in Ireland. She's one of
• 1:06:51
  Speaker 2: my favorite contemporary fiction authors. It's like these are mysteries
• 1:06:55
  Speaker 2: and so I love that. And yeah, I pretty much
• 1:06:58
  Speaker 2: gobble up anything that will make it onto the Hugo
• 1:07:01
  Speaker 2: or Nebula shortlists and try and geek out as much
• 1:07:04
  Speaker 2: as possible.
• 1:07:05
  Speaker 1: I had no idea you were a geek. Any nonfiction
• 1:07:08
  Speaker 1: that crosses your transom.
• 1:07:10
  Speaker 2: Well, the one that's really kind of stood out to
• 1:07:12
  Speaker 2: me and it was recommended by a former colleague of
• 1:07:15
  Speaker 2: mine from Black Rock is four thousand weeks.
• 1:07:17
  Speaker 1: So good, so good.
• 1:07:19
  Speaker 2: And as someone who's tried to optimize my life many
• 1:07:22
  Speaker 2: times in the past but have had a couple of
• 1:07:25
  Speaker 2: health setbacks and things like that, this was a great
• 1:07:28
  Speaker 2: reminder that getting through the to do list is not the.
• 1:07:31
  Speaker 1: Goal, right Oliver Burke something like that. Yeah, the line
• 1:07:35
  Speaker 1: that I remember from that book was four thousand weeks
• 1:07:39
  Speaker 1: is about eighty years? Is human Life's man? Yeah, human
• 1:07:43
  Speaker 1: life is insultingly brief, And that phrase just stood out.
• 1:07:48
  Speaker 2: Yeah, and this idea that we are all every day
• 1:07:52
  Speaker 2: approaching our death is actually empowering instead of discouraging. If
• 1:07:58
  Speaker 2: you know that you don't have infan time, you make
• 1:08:01
  Speaker 2: better decisions.
• 1:08:01
  Speaker 1: Frankly, scarcity is an important economic.
• 1:08:04
  Speaker 2: Thesis, absolutely, but you cut out the stuff that's not
• 1:08:07
  Speaker 2: important and you focus on the things and the people
• 1:08:10
  Speaker 2: and the experiences that are. And anyway, I love this book.
• 1:08:15
  Speaker 1: Yeah, No, I totally agree. Final two questions, Yeah, what
• 1:08:18
  Speaker 1: sort of advice would you give to a recent college
• 1:08:21
  Speaker 1: grad interested in a career of Normally I would say
• 1:08:25
  Speaker 1: whatever the person's specific specialty is. But you've done so
• 1:08:30
  Speaker 1: much across consulting and strategy and buyside and sell side
• 1:08:35
  Speaker 1: and hedge funds and portfolio management, and now a chief
• 1:08:39
  Speaker 1: investment strategy. Someone interested in just finance or wealth management.
• 1:08:44
  Speaker 2: Yeah, I would say the most important thing is to
• 1:08:46
  Speaker 2: keep an open mind. One of the most frustrating things,
• 1:08:49
  Speaker 2: you know young graduates and even young graduates from business
• 1:08:52
  Speaker 2: school or other graduate programs, is that they have like
• 1:08:55
  Speaker 2: a path in mind. You know in three or five years,
• 1:08:58
  Speaker 2: I expect to be here in ten years. And I
• 1:09:00
  Speaker 2: say keep an open mind because there's so much disruption
• 1:09:03
  Speaker 2: and so much change across these industries. You can't have
• 1:09:07
  Speaker 2: a mapped out plan. Your goal is to be a
• 1:09:10
  Speaker 2: sponge and to learn and learn and learn, and also
• 1:09:13
  Speaker 2: to be patient. Honestly, Barry, I'd say this a lot,
• 1:09:15
  Speaker 2: because you know, you get some like really smart twenty three,
• 1:09:18
  Speaker 2: twenty four, twenty eight year old who you know wants
• 1:09:21
  Speaker 2: to find out what's over the next hill, and I
• 1:09:23
  Speaker 2: want to remind them. You know, if the actuary tables
• 1:09:26
  Speaker 2: are even somewhat right, they have seventy more years of
• 1:09:29
  Speaker 2: life ahead of them, right, and they don't need to rush.
• 1:09:32
  Speaker 2: They can enjoy the moment of learning, enjoy the experience,
• 1:09:34
  Speaker 2: and understanding that not just they'll have the opportunity to pivot,
• 1:09:38
  Speaker 2: they'll have the mandate to pivot. As you know, industries
• 1:09:41
  Speaker 2: get disrupted and technology evolves.
• 1:09:43
  Speaker 1: Fascinating and our final question, Yeah, what is it that
• 1:09:46
  Speaker 1: you know about the world of investing today? You wish
• 1:09:49
  Speaker 1: you knew twenty five thirty years ago when you were
• 1:09:52
  Speaker 1: first getting started.
• 1:09:54
  Speaker 2: I thought there was a more systematic way to approach
• 1:09:57
  Speaker 2: investing when I first started, you know, close to three
• 1:09:59
  Speaker 2: day gates ago, And now I understand that true investing
• 1:10:04
  Speaker 2: is both art and science. Maybe that's the reason why
• 1:10:07
  Speaker 2: I think I'll stay in this business for the rest
• 1:10:08
  Speaker 2: of my life, because I'm constantly intellectually challenged to not
• 1:10:12
  Speaker 2: get frustrated if a model doesn't work out. In fact,
• 1:10:15
  Speaker 2: sometimes the process of going through creating a model or
• 1:10:19
  Speaker 2: a piece of analysis, or going down a rabbit hole
• 1:10:21
  Speaker 2: and research that doesn't yield anything this year may actually
• 1:10:25
  Speaker 2: be really helpful for me in three years, or help
• 1:10:27
  Speaker 2: to reframe my thought process so understanding that it's not
• 1:10:31
  Speaker 2: perfect and that it's art and science.
• 1:10:33
  Speaker 1: Huh, really really interesting. Thanks Kate for being so generous
• 1:10:37
  Speaker 1: with your time. We have been speaking with Kate Moore.
• 1:10:41
  Speaker 1: She is the chief investment Officer at City Wealth, helping
• 1:10:44
  Speaker 1: to oversee over trillion dollars in assets. If you enjoy
• 1:10:50
  Speaker 1: this conversation, well check out any of the five hundred
• 1:10:53
  Speaker 1: and forty or so we've done over the past eleven years.
• 1:10:57
  Speaker 1: You can find those at iTunes, Spotify, Bloomberg YouTube, wherever
• 1:11:02
  Speaker 1: you find your favorite podcasts, and be sure and check
• 1:11:05
  Speaker 1: out my new book, How Not to Invest The ideas,
• 1:11:09
  Speaker 1: numbers and behaviors that destroy wealth and how to avoid
• 1:11:14
  Speaker 1: them How Not to Invest wherever you find your favorite books.
• 1:11:19
  Speaker 1: I would be remiss if I did not thank the
• 1:11:20
  Speaker 1: Cracked team that helps put these conversations together each week.
• 1:11:25
  Speaker 1: Steve Gonzalez is my audio engineer. Anna Luke is my producer.
• 1:11:29
  Speaker 1: Sean Russo is my researcher. Sage Bauman is the head
• 1:11:32
  Speaker 1: of podcasts here at Bloomberg. I'm Barry Rittolts. You've been
• 1:11:37
  Speaker 1: listening to Masters in Business on Bloomberg Radio