The Big Picture

MiB: Greg Fleming, Rockefeller Capital Management



This week, we speak with Greg Fleming, founding CEO of Rockefeller Capital Management based on the prior Rockefeller Family Office. They have about $43 billion in AUM. Previously, Fleming was President of Morgan Stanley Wealth Management and served as Chief Operating Officer of Merrill Lynch, where he ran Merrill’s Global Investment Banking business.

We discuss a variety of M&A transactions Fleming managed, including the spinout of Blackrock from Merrill Lynch, as well as the outright purchase of Merrill Lynch by Bank of America. He put together a group to bid on the Miami Marlins baseball team, eventually working with Yankee great Derek Jeter. They finalized the purchase in 2017; Jeter is the President and minority owner; Fleming owns a small percentage of the Marlins. He also discusses the only time in his career when an M&A deal resulted in a gratuity to the bankers involved.

He explains why Rockefeller Capital offers  a suite of unusual Advisory services, including: Private Aviation, Private Health, Personal Security, Philanthropic and Global Rescue. He explains how the firm came to offering these services, as well as the history of the Rockefeller family offices, and why he helped to convert that into a full advisory firm.

A list of his favorite books are here; A transcript of our conversation is available here Monday.

You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Catherine Keating, CEO of BNY Mellon Wealth Management. The group has more than $266 billion in assets, Previously, she was the Chief Executive Officer of Commonfund. Keating has been named to the “Most Powerful Women in Finance” list and one of the “Most Powerful Women in Banking” list by American Banker.






Greg Fleming’s Favorite Books

Team of Rivals: The Political Genius of Abraham Lincoln by Doris Kearns Goodwin

Endurance: Shackleton’s Incredible Voyage by Alfred Lansing


No Ordinary Time: Franklin and Eleanor Roosevelt: The Home Front in World War II by Doris Kearns Goodwin

I’ll Be Gone in the Dark: One Woman’s Obsessive Search for the Golden State Killer by Michelle McNamara


Pride and Prejudice by Jane Austen

The Fountainhead by Ayn Rand

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10 Weekend Reads

The weekend is here! Pour yourself a mug of Brazil Daterra Estate Sweet Blue RFA coffee, grab a seat by the fountain, and get ready for our longer form weekend reads:

Everyone you know uses Zoom. That wasn’t the plan “Our company that used to be a 100% enterprise-focused, is now powering the world. It’s powering governments, education, social activities… And then when the other shoe dropped, it’s like we need to get ready for that.” (CNN)
China Opens Its Bond Market—With Unknown Consequences for World Global pension funds, starved for yield in a low-growth world, will now have access to safe government debt that pays more than 3%. And if officials deliver on their pledges to open up, reinforced in the Communist leadership’s 2021-25 five-year plan outlined in October, Chinese investors may soon find it a lot easier to snap up shares in Apple, Starbucks, or Tesla—not just their phones, cappuccinos, and cars. The Chinese could join their government, which has long been a major buyer of overseas assets such as Treasuries, as a powerful source of funding. (Bloomberg)
Matt Drudge Logs Off: The Drudge Report has become a conformist shadow of its formerly bratty, oppositional self. Why? Drudge has always been an enigma, but the page is now updated only once or twice a day and almost never reacts to breaking news, as if it’s being run by someone who simply doesn’t care anymore. (Tablet)
With Toyota’s Help, This Secretive Entrepreneur May Finally Give Us Flying Cars  Bevirt has secretively developed an electric airplane with six tilting propellers that he says can carry a pilot and four passengers 150 miles at up to 200 miles per hour, while being quiet enough to disappear among the hum of city life. The as-yet-unnamed aircraft could cost $400,000 to $1.5 million to manufacture (Forbes)
“We are giddy”—interviewing Apple about its Mac silicon revolution The Apple Silicon story: What Apple needed was a chip that took the lessons learned from years of refining mobile systems-on-a-chip for iPhones, iPads, and other products then added on all sorts of additional functionality in order to address the expanded needs of a laptop or desktop computer. “During the pre-silicon, when we even designed the architecture or defined the features, we would sit in the same room and we say, “OK, here’s what we want to design. Here are the things that matter.” (Ars Technica)
Sex Lies and Videogames: Inside the spectacular startup failure of Oomba: A startup designed to make a lot of money from the games industry — instead, everyone played each other (The Verge)
How to Fix Economic Inequality? An Overview of Policies for the United States and Other High-Income Economies (Peterson Institute for International Economics)
400 years on, the Pilgrims get a reality check From the signing of the Mayflower Compact to the landing at Plymouth Rock, the grade-school story of the Pilgrims doesn’t quite square with the facts. (National Geographic)
How close is too close? The neuroscience of peripersonal space explores how you create, defend or relax the buffer zone between you and the world (Aeon)
Aimee Mann on the Music That Made Her The incisive singer-songwriter talks about the artists and albums that have meant the most to her—from Steely Dan to Sharon Van Etten to They Might Be Giants—five years at a time. (Pitchfork)

Be sure to check out our Masters in Business next week with Greg Fleming, founding CEO of Rockefeller Capital Management based on the prior Rockefeller Family Office. They have about $43 billion in AUM. Previously, Fleming was President of Morgan Stanley Wealth Management and served as Chief Operating Officer of Merrill Lynch, where he ran Merrill’s Global Investment Banking business.


Lessons From Europe’s Covid Surge: Control Is Fragile and Losing It Is Easy

Source: Wall Street Journal



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Succinct Summation of Week’s Events for 11.27.20

Succinct Summations for the week ending November 27th, 2020


1. POTUS belatedly admits loss, allows GSA to begin transition.
2. Home mortgage apps rose 4.0% for the second straight week.
3. FHFA House Price Index rose 1.7% m/o/m, above the expected increase of 0.9%.
4. Chicago Fed National Activity Index came in at 0.83 for October, above the expected 0.1
5. PMI Composite came in at 57.9 for November, above the expected 55.6.
6. Wholesale inventories rose 0.9% m/o/m, above the previous increase of 0.7%.


1. Congress still dithering over aid package as as 26 million Americans on food lines reach new records.
2. Concerns about Astra Zeneca vaccine raises questions about widespread distribution.
3. Jobless claims rose 30k w/o/w from 748k to 778k.
4. Durable goods orders rose 1.3% w/o/w, below the previous increase of 2.1%.
5. New home sales fell to an annual rate of 999k in October, down from previous 1.002M.
6. Retail inventories rose 0.8% m/o/m, below the previous increase of 1.7%.

Thanks, Matt!



S&P500 is Up 12.6% YTD for 2020

Source: YCharts


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Buy Less Junk!


When I was young and broke, carrying undergrad/grad school loans, I lived in Manhattan — an expensive city I couldn’t really afford. My first apartment on 17th street near 3rd Avenue was a 3rd floor walk up studio that cost $400 per month. I moved into a 2 bedroom at 90 Lexington Avenue & 27th street — $1100/mo, with a tiny galley kitchen, one bathroom, and I shared it with 3 other people. It had a great terrace and view, but no space or privacy.

It didn’t matter: When you are young, immortal, and having fun, you can live a great “rent poor” lifestyle. Bargain hunting for necessities while enjoying city life. Indeed, New York provided endless free (or cheap) entertainment, parties, socializing; Dining was usually inexpensive, ethnic and always “Cheap & cheerful.

You could get by on very little cash. When you have more time than money, you spend that time in wasteful ways. When you are broke you develop a keen eye for a bargain. You don’t mind lines if it saves money. You find books at the Strand, haunt the bargain racks at The Gap, buy all sorts of stuff at brand sample sales, get cheap suits at Rothmans, see what last year’s winter coats go for at Century 21.

And yet . . .

There was an unrealized cost to this lifestyle. When you are broke, there is an entire underlying psychology of unfulfilled desire. It creates a danger of wanting what you cannot have simply because you cannot have it. And when you are poor, you cannot have nearly everything.

This leads to some questionable decision-making.

Take your closet as an example. Some organization guru suggested this trick: Take all of your clothes and hang them backwards – the opening of the hanger hook on the bar towards, instead of away from you. Wear something, return the hook to the normal. After a year, the clothes you have worn are on hooks facing away from you, while the clothes you have not worn for a year are facing towards you.

I did this, and the results were both shocking and informative. Shocking, because I realized how little of my “wardrobe” I actually wore; informative because I instantly realized how much money I had wasted chasing “bargains” – things I did not necessarily need or even want, but rather had been on sale. This was 75% of my closet.

I vowed to change my purchase habits immediately.

Rather than shop price first, and thereby allow the retailer’s bag of tricks to influence my decision making, I refused to even look at prices – at least until I got to checkout. If I still wanted something at XX dollars, then I must really want it, and so I buy it. If I decide its too expensive for what it is relative to its quality and my wants/needs, I don’t.

I began this experiment when young(ish) and of limited means and have continued this approach now that I am old(ish) and of less limited means.

This was incredibly freeing. The most challenging part of being broke was the mental bandwidth — I found it psychologically exhausting to watch every penny, and when I eventually just stopped bargain hunting, I put that capacity to much better use. Anytime I backslid I regretted it almost immediately.

The results it has yielded are interesting :

1. I buy much less stuff. I make far fewer purchases than I was prior in my bargain hunting days. The fact something appears to be on sale is irrelevant to my calculus.

2. I only buy better quality. No more crap, no more outlet “B” goods, nothing discontinued. Only very fine quality items I actually need and/or really want.

3. I limit what I own. I only buy what I truly want. And for each new item that comes in, something old goes out – often (shockingly) unworn and donated to local thrift shop.

4. I save mental bandwidth. I don’t waste time and effort bargain hunting. It frees up brain cycles for mroe creative and fulfilling efforts.

5. I save time. I don’t give shit about Black Friday or a care about Cyber Monday. If something is on my wish list and Amazon Prime Day sends me an email, I think about making that purchase. But I find the mere act of putting something on a wish list is nearly as fulfilling as the empty gesture of purchasing it.

This is not a finger wagging lecture on the evils of materialism; I am not in the FIRE contingency; I don’t own a tiny home. I do have a beach house and a boat and too many cars and if it made sense, I would add a plane to that mix.

As we have discussed prior, I prefer experiences over goods in general. But my materialistic impulses have evolved over time, and for the better.

I am in the valley between two generations — the boomers are few years older than me, while Gen X are a few years younger. For better or worse, I see traits of both in myself.



‘Never Buy a Boat’ and Other Misguided Financial Advice (October 3, 2015)

Buy Yourself a F*^king Latte (April 5, 2019)

Best Route to Wealth: Savings or Earnings, a Debate (May 26, 2020)


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10 Black Friday AM Reads

My end of week morning train WFH reads:

Beat Black Friday Traps with Six Expert Behavioural Money Tips Shoppers will spend billions during the Black Friday and Cyber Monday sales. Retailers use a host of tricks to encourage you to buy what might not be the best deal. These behavioral nudges risk costing you money that you might not be able to afford to spend. (Mouthy Money)
Lessons from Japan: High-income countries have common problems There was just one lost decade of low growth and low inflation — when policy turned round so did the economy (Financial Times)
Delete Arrogance From Your Retirement Portfolio Is your retirement portfolio a faux-fortress? Many suffer from home-country bias, ignoring the rest of the world and concentrating funds where they reside. The United States has only about 5% of the world’s population, yet many keep all of their money domestically. That strategy, which worked over the last decade, may not over the next. (A Teachable Moment)
For Homeowners During Covid, It’s What’s On The Outside That Counts Large, landscaped outdoor spaces have become a top priority during coronavirus  (Wall Street Journal)
Happiness Won’t Save You Philip Brickman was an expert in the psychology of happiness, but he couldn’t make his own pain go away. (New York Times)
Here’s How to Give Thanks—Not Once a Year—but Every Day Find ways to express gratitude not for the things that are easy to be grateful for, but for what is hard. Gratitude for that troublesome client, delayed flight, damage from the storm. Be glad it wasn’t a more important flight, because the damage could have been worse, could have exposed a more serious problem that now we’re solving. (Ryan Holiday)
The Inside Story of Michigan’s Fake Voter Fraud Scandal In the end, it wasn’t a senator or a judge or a general who stood up to the leader of the free world. There was no dramatic, made-for-Hollywood collision of cosmic egos. Rather, the death knell of Trump’s presidency was sounded by a baby-faced lawyer, looking over his glasses on a grainy Zoom feed on a gloomy Monday afternoon, reading from a statement that reflected a courage and moral clarity that has gone AWOL from his party, pleading with the tens of thousands of people watching online to understand that some lines can never be uncrossed. (Politico)
The Logic of Pandemic Restrictions Is Falling Apart This is why you can eat in a restaurant but can’t have Thanksgiving. ​​ (The Atlantic)
This Is Joe Biden When No One Is Watching Just then, my phone rang: a weird number. I answered. It was the sitting vice president of the United States. “Ryan, it’s Joe Biden. Dammit I’m so sorry. What happened?” (Esquire)
Why ‘Gilmore Girls’ Endures This week brings the broadcast debut of “Gilmore Girls: A Year in the Life,” on the CW. The creator Amy Sherman-Palladino and other “Gilmore” veterans look back on the show’s lasting appeal. (New York Times)

Be sure to check out our Masters in Business next week with Greg Fleming, founding CEO of Rockefeller Capital Management based on the prior Rockefeller Family Office. They have about $43 billion in AUM. Previously, Fleming was President of Morgan Stanley Wealth Management and served as Chief Operating Officer of Merrill Lynch, where he ran Merrill’s Global Investment Banking business.


Coronavirus represents a step change, potentially, in vaccine development timelines

Source: Business Insider


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BMW iX All Electric SUV

For a while, BMW had an electric and a plug in hybrid that were competitive in their space in the automaker’s i subbrand. The gorgeous but woefully underpowered BMW i8 was 357-horsepower, all-wheel-drive coupe, was the flagship; had it used the wonderful M3 3.5 liter straight six instead of that pokey 3 cylinder, it might have been a bigger albeit more polluting seller.

The all electric BMW i3, introduced in 2013, was their first true zero emissions vehicle; it is still available as an updated 2021 model. The squat little cube was a good seller, ranking third worldwide amongst electric cars from 2014 to 2016. Global sales reached 200,000 as of October 2020. More than 42,000 units were sold in the US, although I have to admit to rarely noticing them locally.

BMW is introducing a full line of EVs: The 2021 BMW i4 Electric Sedan is released next year (looks kinda nice). But the hottest sector of vehicles has been trucks, SUVs and crossover, and so the BMW iX SUV will be a key offering from Bavaria. The iX flagship will be similarly sized as the company’s mid-size X5 and X6 crossovers, with similar passenger and cargo space. The interior design is modern and minimalist, a large curved touchscreen instrument panel in front, a large panoramic sunroof above featuring an electrochromic shading, faux and genuine leather.

It will be BMW’s technological flagship, incorporating the latest EV technologies, including electric powertrains, autonomous driving, and driver interface. This will be the automaker’s fifth-generation EV technology platform, and it was designed to be scalable to vehicles of different sizes and shapes. Launching in late 2021, it should arrive on US shores early 2022.

The details are evolutionary:

-500 hp from two electric motors
-0-to-60-mph in less than 5.0 seconds.
-75 mile range in 10 minutes of charge.
-zero to 100 percent in 11 hours at an 11kW Level 2 charging station.
-10 to 80 percent battery capacity in under 40 minutes;
-300 mile range
-retail price of $70,000 (estimated)

Lots of new BMWs EVs are in development: an all-electric version of its 5 Series and 7 Series sedans as well as its entry-level X1 SUV. Earlier this year, the company revealed the production iX3, the all-electric version of its top-selling X3 SUV. But the iX3 won’t be available in the US, only in Europe and China. That is a shame, because the latest generation is a well designed, handsome crossover.

A hybrid or all-electric X6 would get my attention. When my X4 lease ends in 2022, it will be replaced by an EV; it would be shame if BMW does not have a competitive offering in that class by then.


Source: The Verge
See Also: BMW USA, BMW

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Be Safe. Happy Thanksgiving. 

Source:  Covid Tracking Project


Some good and bad news this week in COVID-19.

The three vaccine updates show real promise of creating herd immunity. That means there is an end point in sight.

The rest of the news this week was pretty awful: Spikes of 1.2 million cases, mostly in the Midwest, with more than 2,000 deaths each day, and 90,000 people hospitalized with COVID-19. But after weeks of sharp increases, data shows a peak and decline beginning.

And that horrible stuff above is the good news. The bad news is travel this week has the potential to lead to a massive surge in cases.

Maybe we will get lucky. Perhaps people are getting smarter about this. How hard is it to mask up? Can we hope that more people are taking this seriously, realize it is not a hoax, and do something about it?

Maybe no one wants to die with this vaccine close.Let’s hope people are learning from prior mistakes.


Be Safe and have a happy Thanksgiving.




Source:  Covid Tracking Project



These are two weeks old, and you can see some massive increases since.



Nationwide COVID-19 Metrics by Week (through November 11)

Source: COVID Tracking Project

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10 Thanksgiving Day Reads

My Turkey Day reads: What are you thankful for?

Pope Francis: A Crisis Reveals What Is in Our Hearts: To come out of this pandemic better than we went in, we must let ourselves be touched by others’ pain. (New York Times)
Where Your Thanksgiving Meal Comes From Green beans are from Wisconsin, sweet potatoes are from North Carolina and other lessons in U.S. agricultural geography. (Bloomberg)
Should Americans Get Half Their Calories From Carbs? Two Camps Battle It Out As the U.S. government revises its dietary recommendations, opposing groups are fighting over the healthiness of carbohydrates (Wall Street Journal)
So You’re Flying This Thanksgiving? Here’s Which Parts Are the Riskiest. What can you expect in the air? Obviously, every airline is requiring passengers to wear masks on board, and many are keeping middle seats empty so that people don’t have to sit close to each other. HEPA and ventilation systems also cycle air out of the cabin and filter it at a much higher rate than indoor spaces you might enter on the ground. (Slate)
How to Socialize in the Cold Without Being Miserable The still-raging pandemic means social activities will stay outdoors as the temperature plummets. Here’s what experts say about the art of keeping warm. (Citylab)
How We Can Reconcile With Each Other When Our Politics Are So Polarized Sharp political divisions have disconnected us from friends and family. Here’s how to find common ground again. (Wall Street Journal)
Why streaming devices and streaming networks are fighting over your eyeballs Streaming TV should be easy, but fights among Roku, Amazon, HBO, and NBC are making it hard (Vox)
Your Brain Is Not for Thinking Your brain’s most important job isn’t thinking; it’s running the systems of your body to keep you alive and well. According to recent findings in neuroscience, even when your brain does produce conscious thoughts and feelings, they are more in service to the needs of managing your body than you realize. In stressful times, this surprising lesson from neuroscience may help to lessen your anxieties. (New York Times)
The Can-Do Power America’s Advantage and Biden’s Chance: the mishandling of the pandemic is just the latest in a string of lapses in basic competence that have called into question U.S. capabilities among both long-standing allies and countries whose partnership Washington may seek in the years to come. (Foreign Affairs)
Why ‘Gilmore Girls’ Endures This week brings the broadcast debut of “Gilmore Girls: A Year in the Life,” on the CW. The creator Amy Sherman-Palladino and other “Gilmore” veterans look back on the show’s lasting appeal. (New York Times)

Be sure to check out our Masters in Business next week with Greg Fleming, founding CEO of Rockefeller Capital Management based on the prior Rockefeller Family Office. They have about $43 billion in AUM. Previously, Fleming was President of Morgan Stanley Wealth Management and served as Chief Operating Officer of Merrill Lynch, where he ran Merrill’s Global Investment Banking business.


Those who are gathering with family are taking precautions; Most are staying home.

Source: New York Times


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What is a Recession?



Today in wonky economic ephemera:

This morning, Thom Keene was discussing the possibility of zero growth, a slowdown or a recession. He specifically asking Citigroup’s Global Chief Economist “Are we going to approach an NBER recession?”

Her answer: “Well, of course, the NBER recession is the two consecutive quarters of negative growth, thats the official word.”

Actually, no . . .

That is not the NBER definition (we shall get to that in a moment). As far as I can recall, it has not been the official definition of a recession during the entire course of my professional career dating back to the 1990s. I am always surprised that so many people get this wrong, but perhaps I shouldn’t be.

I traced an early mention of the unofficial “2Q” definition to Julius Shiskin, who was the ninth Commissioner of the U.S. Bureau of Labor Statistics. In a 1974 Op-Ed in the New York Times, Shiskin suggested two quarters of contraction might be a worthwhile rule of thumb:

“A rough translation of the bureau’s qualitative, definition of a recession into a quantitative one, that almost anyone can use, might run like this: In terms of duration—declines in real G.N.P. for 2 consecutive quarters; a decline in industrial production over a six‐month period. In terms of depth—A 1.5 per cent decline in teal G.N.P.; a 15 per cent decline nonagricultural employment; a two point* rise in unemployment to a level of at least 6 per cent. In terms of diffusion—A decline in nonagricultural employment in more than 75 per cent of industries, as measured over six‐month spans, for 6 months or longer.”

That was in 1974 that the head of BLS mentioned this “rough translation.” But if you look, you can find earlier references to this unofficial measure.

For a long time, the director of business cycle studies at NBER was Geoffrey H. Moore (obit). He defined a Recession many times in his career, but I would direct you to his 1983 book, Business Cycles, Inflation, and Forecasting (relevant PDF). Moore observes in the book:

“The definition formulated by Arthur F Burns and Wesley C Mitchell in 1946 is a modification of one published by the national Bureau in 1927 hence it has been used in substantially its present form for more than 50 years. It imposes no fixed requirement upon the duration of business expansions or contractions.” (emphasis added)

So if there were no fixed minimums going back to 1927, what was the source of two quarters rule of thumb prior to Shiskin’s 1974 OpEd?

As it turns out, it may have been a simple observation made by Moore:

“Even the limits on the period of a full cycle (expansion and contraction) are broad: more than a year to 10 to 12 years. In practice the shortest contraction recognized in the United States has been six months.” (emphasis added)

Perhaps this may have led other economists to simply extrapolate Moore’s observation that no contraction had been shorter than 6 months into the well known but erroneous two quarter rule of thumb. I cannot say for sure this is the source, but it seems like a realistic possibility.

Moore, it is worth adding, later goes on to form the Economic Cycle Research Institute in 1996 with Anirvan Banerji, and Lakshman Achuthan.

As to the actual definition, the NBER observes:

“A recession is the period between a peak of economic activity and its subsequent trough, or lowest point. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief . . . The NBER’s traditional definition emphasizes that a recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.”   –NBER Business Cycle Dating

Interesting side note: The phraseology has progressed from periods of declines being called “Depressions,” but then as the “declines in economic activity became less severe,” the preferred phrase became “Recession.” Ultimately the more politically neutral phrase “Contraction” came to be used.


If you must go somewhere this holiday week, please travel safe.



The Changing Business Cycle
By Julius Shiskin
New York Times, Dec. 1, 1974


See also:
Business Cycle Dating Committee Announcement (NBER, June 8, 2020)

Julius Shiskin, July 1973–October 1978 BLS History

What Is a Recession? (St Louis Federal Reserve, February 2009

Economic Cycle Research Institute


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10 Wednesday AM Reads

My mid-week morning train WFH reads:

What Stays and What Goes in a Post-Covid-19 World Some pandemic-induced consumer behavior will prove sticky, but not all. With effective vaccines on the horizon, the most important question for investors is how much never goes back to the way it used to be. The answers will have major implications for swaths of the economy. Each affected industry has its own nuances to consider. (Wall Street Journal)
We Begin Our Lives as Growth Stocks, But End Our Lives As Value Stocks What’s normal is lowering your expectations over time to the point where, as you head into old age, pleasant surprises will provide you with additional happiness. The high expectations of youth (growth) eventually get replaced by lower expectations and upside surprises as you age (value). (Of Dollars And Data)
Mutual fund conversions to ETFs gather momentum: Moves by two US asset managers to convert some of their mutual funds into exchange traded funds could trigger a wave of copycat manoeuvres by rival houses, industry figures believe. Latest attempt by Dimensional could be start of ‘significant trend’ if move proves to be successful (Financial Times)
Social media companies all starting to look the same: Tech platforms used to focus on ways to create wildly different products to attract audiences. Today, they all have similar features, and instead differentiate themselves with their philosophies, values and use cases. (Axios)
How ABS Survived the March Wipeout and Staged a Comeback “They’re liquid and have predictable cash flows.” Asset-backed securities, the runt of fixed income, has had a little-noticed turnaround. Its position as a popular diversifying asset, with steady revenue streams and sturdy cash flows. Yields tend to be low— often not much better than Treasuries but the relative peace of mind ABS bring is welcome. (CIO)
After Chaotic 4 Years, Wall St. Is Itching to Unfollow @realDonaldTrump President Trump turned his Twitter feed into a singular source of market volatility. Now, investors are looking forward to markets free of presidential tweets. (New York Times)
Spotify Loves You. Will Everyone Else? How the streaming platform’s playlists became a market-shifting force in the music industry. “Lorem,” a Spotify playlist which launched early last year, has unexpectedly risen to become one of the most powerful opportunities for new artists to break through on the streaming platform, and in the wider music industry.  (Hype Beast)
Two Rural States With GOP Governors And Very Different COVID-19 Results South Dakota’s  Governor loudly refused to impose any shutdowns or a statewide mask mandate; at 8000 infections per 100,000 people, SD’s infection rate is among the worst in the nation. Vermont’s Governor embraced safety measures, and has 500 infections per 100,000 people. That’s the lowest rate in the nation. (NPR)
The Divide Between Political Parties Feels Big. Fortunately, It’s Smaller Than We Think. Democrats and Republicans do disagree with and dislike each other. But members of both parties overestimate the size of the partisan divide. The judgements that we make about what others believe can be very inaccurate. Misperceive the beliefs of those who belong to a different political party can have damaging consequences for democracy. (Behavioral Scientist)
What is the Eisenhower Matrix? The Eisenhower Matrix, also referred to as Urgent-Important Matrix, helps you decide on and prioritize tasks by urgency and importance, sorting out less urgent and important tasks which you should either delegate or not do at all. (Eisenhower)

Be sure to check out our Masters in Business interview this weekend with Dennis Lynch, Head of Counterpoint Global at Morgan Stanley Investment Management, running $130 billion. Several of the funds Lynch runs have doubled YTD in 2020.


US Daily Air Passengers

Source: Paul Kedrosky


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Coronavirus Pandemic Halfway Point

This is a first: Martin Bamford of Informed Choice (Twitter, YouTube) made a video of our recent post, The Halfway Point:

“Over the weekend, I read an inspiring blog from Barry Ritholtz, where he makes the shocking observation that we are at the coronavirus pandemic halfway point. On that basis, and with another 8 months of this enforced lifestyle ahead, what will you set out to achieve in the second half?”

Martin’s video is a lovely take on that discussion:


Coronavirus pandemic halfway point – what will you achieve in the second half?




The Halfway Point (November 20, 2020)


See also:
Your Life in Weeks (Wait, but Why? May 7, 2014)

The Tail End (Wait, but Why? December 11, 2015)


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De-Politicizing Your Feed



I built my reputation on being a blunt, honest and a bit off the center of mainstream. At the same time, no one wants to purposefully alienate half of their clients (or listeners or readers). On occasion, it can be a challenge to thread that needle.

When the Matt Phillips of the New York Times asked for some thoughts on “markets in the age of Trump,” I recognized how easily I could give offense. Especially with the election barely over and nerves raw. So rather than offering yet another hot take on policy or creating some unfounded market narrative, I went in a different direction: How to reduce the Noise levels we all experience in Markets. 

Its one of my favorite topics, and Paragraphs 5 and 6 was where I threaded that needle:

“I just want my life to go back to normal,” said Barry Ritholtz, a money manager in New York who did not vote for Mr. Trump. “And I don’t mean pre-pandemic normal. I mean pre-golden-escalator-to-hell normal,” he said — a reference to Mr. Trump’s famous 2015 ride down the escalator in Trump Tower, at the end of which he announced his candidacy. “I just want the noise level to quiet down.”

The weekend Mr. Biden became president-elect, Mr. Ritholtz went to Twitter with one goal in mind: unfollow as many accounts in the Trump orbit as possible. In recent years, Mr. Ritholtz’s Twitter timeline had grown crowded with accounts — such as those of Mr. Trump’s children or press officers — that he felt he had no choice but to follow as he managed roughly $1.7 billion in client assets.”

The “Unfollow” metaphor is important — it acknowledges why it was important follow the president and his team, but it also recognizes a non-partisan reason for removing their torrent of tweets from my feed. It is not partisan, I just wanted to cool things down and lower the noise levels.

The Mooch tweeted it as did several other people. I got lots of feedback on it, but my favorite response was a DM from a conservative buddy who said, “I voted for him, but I will admit relief at no longer waking up in terror cause of some unholy distraction unfolding on the President’s social media timeline.”

I’ll take that as a win.



After Chaotic 4 Years, Wall St. Is Itching to Unfollow @realDonaldTrump
President Trump turned his Twitter feed into a singular source of market volatility. Now, investors are looking forward to markets free of presidential tweets.
By Matt Phillips
New York Times, Nov. 24, 2020

America is Purple, Not Red & Blue (November 3, 2020)

Manage Your Media Diet

More Signal, Less Noise (October 25, 2013)

Politics & Investing


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10 Tuesday AM Reads

My Two-for-Tuesday morning train WFH reads:

• This American Mess: Thanksgiving is here. Unfortunately, America is all over the place. Half of the states have travel restrictions of some kind. 4 out of 5 epidemiologists are having Thanksgiving at home with just their household. The C.D.C. is begging people to stay home over the holidays in expectations of an explosion of coronavirus spread. But, this Thanksgiving, Americans are still absolutely gonna America anyway. (New York Times) see also Why Even A Small Thanksgiving Is Dangerous With COVID-19 rates on the rise basically everywhere in the U.S., those small gatherings are being blamed for spreading the virus, and experts say they don’t want us to have Thanksgiving celebrations with people outside our household bubbles. (FiveThirtyEight)
Inside YouTube’s plan to win the music-streaming wars YouTube has always been important to the music business. Now, with YouTube Music, it’s trying to build a music universe Spotify and Apple can’t touch. (Protocol)
SPACs: The once obscure, derided financial product that just might transform deep tech venture capital Unless you’ve been hiding under a rock over the past year or perhaps docked at the International Space Station, it’s been impossible to miss the Special Purpose Acquisition Company (SPAC) craze that has overtaken Wall Street. (Medium) see also A16z is now managing $16.5 billion, after announcing two new funds The funds may seem somewhat typical, given the size of new funds that venture firms have been raising in recent years. Still, these are extraordinary amounts given that a16z was founded just 11 years ago. (TechCrunch)
Flee the city, keep your salary? Not so fast say more employers Global advisory firm Willis Towers Watson shows that many employers aren’t necessarily planning to let you keep your full paycheck if you move. About 20% of employers are “setting pay levels by first determining the market value of an employee’s skills and then applying a geographic differential based on where the employee is located.” However six in 10 employers say they will continue to pay remote employees the same as in-office employees “no matter where they work.” (Fortune)
Fox News Is No Longer Insane Enough for Fox Viewers: They built a huge outrage machine. Then some of them tried to be real news people for five minutes, and now the outrage machine is outraged at them. (Daily Beast) see also Fox News’s election fraud pandering may be its most dangerous lie yet Rupert Murdoch doesn’t believe Trump was cheated. But he’s letting Fox personalities spin tales that could permanently harm America. (Vox)
COVID-19 falsehoods lead Stanford to examine ties to right-wing Hoover Institution Stanford University took a step that might be career-shattering in almost any field except academia: It formally distanced itself from a faculty member. (Los Angeles Times)
Bentley Goes All-In on Electrification “Beyond 100” strategy for the British company, founded in 1919, includes two new plug-in hybrids (PHEVs) in 2021 and PHEV availability on every model by 2023, a battery-electric car in 2025, PHEVs and battery cars only by 2026, and an all-electric range by 2030. (Penta) see also The Secrets Behind Your Rolls-Royce, Bentley, Bugatti Hood Ornaments Inside the close-knit world of the badge fabricators for the greatest automotive brands in history. (Bloomberg)
Azerbaijan’s drones owned the battlefield in Nagorno-Karabakh — and showed future of warfare Armed drones have increasingly become part of warfare since the Pentagon deployed its Predator in Afghanistan following the 9/11 attacks. Missile-firing drones are now produced in many countries including Turkey, China and Israel, and have been used by various sides in battles including Libya’s proxy war. (Washington Post)
This GOP Lawmaker Denounced QAnon—and Fears for His Party “There’s a lot larger percentage in the Republican Party who believe there’s a deep state coup or cabal than people might think.” (Wired) see also The 31-day campaign against QAnon In Georgia, what happened when a ‘nice guy’ named Kevin Van Ausdal ran for Congress against a candidate known for her support of extremist conspiracy theories. (Washington Post)
The Nerdy Quarterback Who Solved Football—50 Years Ago Virgil Carter pioneered expected points—a foundation of modern NFL analytics. Half a century later, NFL teams are still catching up to his thinking. (Wall Street Journal)

Be sure to check out our Masters in Business interview this weekend with Dennis Lynch, Head of Counterpoint Global at Morgan Stanley Investment Management, running $130 billion. Several of the funds Lynch runs have doubled YTD in 2020.


Industries where employees can operate remotely without significant loss of productivity

Source: Paul Kedrosky


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MiB: Generating Performance via Concentrated Growth



What if your investing process was to find attractive companies to buy, regardless of style, size, or location? Once you have identified which of these companies have the greatest growth potential, figuring out the best home for it is almost secondary. Surprisingly, this is the opposite philosophy of how most mutual funds operate. Most have preordained and well-defined parameters that limit what they can buy.

Dennis Lynch, Head of Counterpoint Global at Morgan Stanley Investment Management, has embraced that less common process. Counterpoint Global is a “firm within a firm at Morgan Stanley, managing about $130 billion.

Several of the funds Lynch and his team manages — InceptionDiscoveryGrowthInsightAdvantage & Permanence — have doubled YTD in 2020. Their long-term track record has been similarly outstanding.

Lynch describes the group’s process as somewhat unusual: Their 19 products are concentrated globally in just 200 companies. He explains how they have used personality tests to shed insight into how one’s personality type might impact their stock-picking and decision-making.

He observes that the relative momentum of tech stocks during the 34% drop in February and March 2020 was strong, and quickly translated into absolute strength as the market began to rally. He does not expect the torrid pace of growth to continue indefinitely. While remaining long-term bullish on technology and growth names, he warns that investors might want to ratchet back future expectations. Assuming the economy will be substantially larger in 2022 than it has been during the pandemic and lockdown, much of that growth is already reflected in current asset prices.

A list of his favorite books are here; A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotifyStitcherGoogleBloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Greg Fleming, founding CEO of Rockefeller Capital Management based on the prior Rockefeller Family Office. They have about $43 billion in AUM. Previously, Fleming was President of Morgan Stanley Wealth Management and served as Chief Operating Officer of Merrill Lynch, where he ran Merrill’s Global Investment Banking business.



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10 Monday AM Reads

My back to work morning train WFH reads:

Zillow Surfing Is the Escape We All Need Right Now: Scrolling through real estate listings in far-flung destinations is a way to visualize an alternate life, whether you’re trying to move or not. (New York Times)
Tesla’s Addition to S&P 500 Shows Why Indexes Are So Weird Vast amounts of money are being shifted around based on strange and conflicting rules (Wall Street Journal)
It took a pandemic to change the movie business Why you can see Wonder Woman 1984 at home on Christmas Day. (Recode)
• ‘Creditor-on-Creditor Violence’ Lands Big Managers in Court Some leveraged loan providers say their fellow creditors are rewriting the rules to their own advantage. (Institutional Investor)
Bucket List Travel is Being Booked in Record Numbers for 2021 and Beyond: The world’s most in-demand luxury tour operators haven’t been spared from the complications caused by the Covid-19 pandemic, yet many are reporting a surge in bookings for bucket list-style trips into late 2021 and 2022. (Penta) see also Slump in Air Travel Hindered Weather Forecasting A decline in air traffic during the coronavirus pandemic sharply reduced the amount of data routinely collected by commercial airliners. (New York Times)
The Big Lessons From History: History is full of specific lessons that aren’t relevant to most people, and not fully applicable to future events because things rarely repeat exactly as they did in the past. An imperfect rule of thumb is that the more granular the lesson, the less useful it is to the future. (Collaborative Fund)
How brunch became political “Going back to brunch” is a meme used to mock political complacency and centrist indifference. (Vox)
Larry Brilliant Says We’ll Beat Covid—After We Go Through Hell The epidemiologist calls it “the best of times and the worst of times,” as good news on vaccines and testing coincides with a terrifying rise in cases. (Wired)
Trump challenges cement Biden triumph: President Trump’s frantic post-election challenges are having the opposite effect of what he intended: He’s documenting his demise through a series of court fights and recounts showing Joe Biden’s victory to be all the more obvious and unassailable. (Axios)
Our ‘Lost’ Weekend With Van Halen: A couple college dudes won an MTV contest to tour with Van Halen. Then all hell broke loose. (Vulture)

Be sure to check out our Masters in Business interview this weekend with Dennis Lynch, Head of Counterpoint Global at Morgan Stanley Investment Management, running $130 billion. Several of the funds Lynch runs have doubled YTD in 2020.


Astra-Oxford Shot Is Key to Escaping Pandemic for Many Nations

Source: Bloomberg


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Transcript: Dennis Lynch



The transcript from this week’s, MiB: Dennis Lynch, Counterpoint Global, is below.

You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.



This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest. You may not know his name but you probably should given the stellar track record he’s managed to put together over the past 20 or so years.

Dennis Lynch is Head of Counterpoint Global that is sort of a group, a firm within a firm at Morgan Stanley Investment Management. They run a ton of money about $130 billion and their track record, especially this year, has been pretty banoodles.

The growth fund is up 85 percent, discovery is up about 100 percent. There was performers advantage, it’s only up 50 percent. They run very interesting concentrated portfolios. Their entire approach is somewhat unique.

They’re not like very many people. Maybe Will Danoff or Bill Miller run a similar style of investment management. To give you an idea of how outside of the box this group thinks, they recently, by recently a year ago, they hired Michael Mauboussin to be the head of their research just for the group. Mike has been on the show a couple of times and I just love the way he thinks. And any group that brings someone like him in, obviously, is not your traditional Wall Street stock picking fund managers.

I found this conversation to be absolutely fascinating. If you’re at all interested in how to build a portfolio, how to select stocks bottom up, why the buckets we use and phrases like small cap or value or growth can be so constraining and really harmful to performance, I believe you’re going to find this conversation to be absolutely fascinating.

So, with no further ado, my conversation with Counterpoint Global at Morgan Stanley’s Dennis Lynch.

VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: My special guest this week is Dennis Lynch. He is the Head of Counterpoint Global at Morgan Stanley Investing Management running about $44 billion. He has five separate funds his group is responsible for, Advantage, Growth, Insight, Discovery and Inception. The largest of which is about $15 billion and year-to-date is up about 85 percent. Dennis Lynch, welcome to Bloomberg.


RITHOLTZ: So, let’s talk a little bit about Counterpoint Global. Everybody knows the name Morgan Stanley but not everybody knows the name Counterpoint Global. What is the thinking behind a company within a company?

LYNCH: I’ve been at Morgan Stanley, I think, over 20 years and ever since I have it within the investment management, they’ve followed the philosophy of trying to make sure they have a diverse group of thinkers and small decision-making teams and I think that’s a really healthy environment for trying to do the hard — one of the hardest things out there which is beat the market.

So, it’s been a great environment for that and in that context, we’ve been able to build Counterpoint Global, our group, over the course, really in a strong manner, over the last 16 years with the great resources we also get from Morgan Stanley generally. So, I think it’s been a good combination of a good — big term philosophy from Morgan Stanley and then allowing Counterpoint Global and the key members of the team to be very entrepreneurial in that context.

RITHOLTZ: So, not to read too much into what you’re saying but you’re giving me the impression that this is a model within Morgan Stanley and there are number of small entrepreneurial teams within investment management, is that right?

LYNCH: Yes. That’s been the model and I think it’s really heathy. I think there’s been some good research that shows that strong decision-making, particularly in the investment committee side of things, tends to occur when you’re dealing with small groups of — and teams as opposed to kind of large bureaucracy.

RITHOLTZ: So, I count five different funds that Counterpoint Global is running, Advantage, Growth, Insight, Discovery and Inception. Are these all run as a group or are there different managers for each? How do you guys structure this amongst yourselves?

LYNCH: So, believe it or not, actually, Counterpoint Global in its totality is about 19 products globally, which include the portfolio management team in New York that I had as well as the portfolio management team in Asia, which my partner and co-CIO, Kristian Heugh, runs.

And so, in total, we have 19 products, currently 130 billion in assets and we probably own about 200 companies though globally. So, despite the fact that sounds like a large number of products, we’re very concentrated in each product and we’re very picky about what we invest in.

So, it is a pretty small group of companies when you think globally. We basically — we run — we have two lead managers in two different locations and the portfolios are kind of informed by the insights of the entire team and we go through the process kind of at the end of the process to figure out what you go where based on how big a company is, where it’s domiciled, et cetera.

RITHOLTZ: On other words, you identify a company you want to own and then figure out afterwards which fund, which product is the right fit for it?


RITHOLTZ: That’s very different than the typical mutual fund.

LYNCH: Yes. And I think it’s a big different. When I think about Counterpoint Global and how we’re different, it is one of our big differences. The people on our team aren’t what we call investors. They show up or wake up each day looking for the best ideas in their areas of expertise but they’re not trying to find the best large-cap growth healthcare companies.

So, if you’re Jason Young, a world-class health investor on the team, that’s not how you’re approaching your time spent your day to da. You’re looking for great ideas within healthcare. And it just so happens, given though we have U.S. products, international, global products and ones that focus on the market caps on different parts of the overall product set, we have a home for your idea. And so, I think it is one of the things that differentiate the team.

RITHOLTZ: So, you went from being an analyst to being a portfolio manager. How challenging is it should go from analyzing a business to building an investment portfolio? What was that transition like?

LYNCH: Well, I think there are a lot of different personalities out there and I think it really depends on the person. Actually, one thing we try to do from time to time every few years is do personality assessments for people on the team just to promote a little bit of self-awareness. So, it’s good to get another view kind of how your hardwired especially in times like this where we’re having extreme volatility.

It’s kind of nice to remember that sometimes you’re hardwired to react to certain way under duress and maybe that self-awareness helps you make more high-quality decisions. But I guess in our case or in my case, I’ve always — while I love details and certainly can be very detail oriented at times, I also love learning about a lot of things.

I went to liberal arts college and so, I have — I really do enjoy the extra perspective of learning about a lot of different industries and sectors. So, going from an expert or analyst in one area to being an investor more broadly I think kind of fit my personality specifically.

But what we try to do on the team is attract really unique people and then based on their personalities and their passion sort of enable them to do what they do well. And so, we’ve got all sorts of different types of people doing — playing different roles. And in my case, I think, given my love for learning about a lot of things, the transition probably made more sense and was easier than for someone else.

RITHOLTZ: So, I have read a lot about personality testing.

VOICEOVER: Masters in Business is brought to you by T. Rowe Price, delivering a strategic investing approach with a long-term perspective to help advisers and their clients feel more confident through good markets and bad. Expect rigorous research and prudent risk management from an experienced team of fund managers. Since 1937, T. Rowe Price, invest with confidence.

RITHOLTZ: And there seems to be two groups of thoughts on it. One is there’s a lot of down and dirty kind of oversimplified tests and they’re of no value whatsoever and there’s another group of thinking that says, hey, if you ask the right questions and you really dive deep enough, you can find things out about how people think, how they behave and what type they fall into.

So, I’m going to assume you guys aren’t doing anything down and dirty, you’re really doing a serious dive into that sort of profiling of various researchers and managers in the group.

LYNCH: We are but here’s the thing about anything like this personality test, this sort of topic and we have got a great diversity of thinking on the team here. Some people think it isn’t very useful and some people find it extraordinarily useful.

I look at it as a low-cost way of getting the team together in one place and spending time as a larger unit where we can hopefully bond and share a day where we’re where — sometimes we were making fun of each other for our differences. But I think that — so, worst case from my vantage point, it helps the team culture.

But we have some people think this is very useful and some people think it’s useful and I get both sides of that. I actually used to think it was useless earlier in my life and as I start to explore, I found there to be some utility.

So, it really depends on the person. It’s why we do it every few years. The worst case, it’s like — it’s a cultural bonding thing and best case maybe people gain (inaudible) self-awareness.

RITHOLTZ: Quite interesting. I find myself about halfway in the process that you already went through going from pooing it to, all right, maybe it’s worth exploring and who knows what will come out of it.

LYNCH: I was very disappointed when I initially took the Myers-Briggs a long time ago to find that I wasn’t so unique after all. It was a lot more accurate than I expected it to be. So, that’s worked on me kind of moving in that direction.

RITHOLTZ: Reminds me of my favorite scene in Monty Python’s “Life of Brian” where all individuals, everybody chants together, we’re all different. It’s pretty hilarious.

LYNCH: It’s awesome.

RITHOLTZ: So, let’s talk a little bit about growth investing in 2020. Obviously, the stay-at-home trade has been enormously profitable. One of your biggest funds has — is up almost a hundred percent year to date.

Some of these stay-at-home names like Shopify and Zoom and Twilio, were these in your portfolio pre-COVID or did you guys recognize, hey, this is going to be a long working remote scenario and we want to load up on the names that would benefit from that?

LYNCH: These — for the very most part, these are all holding going into 2020 and they — usually, our performance to any given period of time is more function of this is what we made a year or several years prior than it is kind of the moment — sort of the in-the-moment reaction to what’s happening and, obviously, 2020 being an exceptional time.

So, we did all these stocks that you’re mentioning prior to 2020. That was actually the transition we made maybe a few years back. If you look maybe eight or 10 years ago, you might have seen in our portfolio the large stakes and companies like Amazon and Apple and Google and Facebook.

And a few years back, we’re looking at the opportunity set and I think all good investing opportunity set driven, we thought there were some really interesting young companies in some of the areas that have benefited more recently not just from COVID from secular growth.

And so, what I would say is we added things like some software as service and e-commerce companies two to three years ago, all of which fortunately benefited this year. And what I’d say there is I think many of these companies offer time and cost efficiencies to their customers or their clients.

And in a time of general — generally, in a the time of crisis, you’re going to see a more likelihood of faster adaption or people sort of looking more at the world from a blank sheet of paper standpoint and more likely to do things that are different and change their behavior.

In addition — so, I think that’s generally true but from a luck standpoint, in addition, I think we were relatively fortunate and a tough time for everybody that some of the specific needs that a pandemic required, like delivery and staying at home and working and streaming from home, certainly were extra benefits and much more luck driven that it was, I think, and us reacting quickly to that environment or anything like that.

RITHOLTZ: So, that raises an interesting question, how much of these spectacular gains in 2020 for this group of companies is future growth being pulled forward to 2020 and how much is a permanent shift in the dynamic?

LYNCH: Well, I think there’s definitely some evidence of few things. There’s some evidence you’ve seen some of the fundamentals pulled forward for some of those companies, i.e., growth — faster growth than expected coming into this period.

But as you’re alluding to, you’ve also seen pretty dramatic outperformance of the companies in relation to the rest of the market. So, I think it’s a combination of both forward — fundamentals being pulled forward as well as potentially to a degree future returns also being pulled forward.

And so, yes, it’s not as — we still really like the portfolios today from a fundamental standpoint, but when you think about perspective returns from here, we’re not as — we’re not expecting the high returns we’ve seen over last 10, 20 years at Counterpoint Global.

But I think that’s really true of all asset classes with interest rates, where they are and especially real interest rates were possibly negative. It doesn’t — there are no — there doesn’t seem to be a whole lot of great places to find new incremental investments.

So, we’re mostly happy staying in the course but we recognize that by pulling some of those fundamentals and valuation expanding in the near term, you’re not likely to see the return profiles we’ve been able to achieve historically.

RITHOLTZ: We’re recording this the day after the big Pfizer vaccine news came out, 90 percent effectiveness in a large study and the market action was value stocks, I think, had their best day in at least five years. Tech didn’t do nearly as well. Do we think this trade is going to be changing on a permanent basis or is this just a little bit of digestion as to what everybody thought was eventually going to come, namely, some sort of vaccine, some sort of return to normalcy?

LYNCH: Yes. I think — if you’re a trader and you’re really focused on the next few months or the next few weeks or shorter time horizons, then I think you’re very interested in this kind of question and you might be looking at market activity as a barometer for whether or not there’s been a really dramatic — what has surely been a very dramatic short-term impact to that news.

Whether or not that would sustain itself, it’s very hard to predict and certainly, we don’t have a strong view as to whether that will continue or not in the very short term. I think it’s great news in general. I think the economy is going to be a lot bigger five to seven years from now, the sooner we get out of this.

And it’s hard to sustain an economy through fiscal stimulus and other means and that’s not good for anybody, including the companies that have done — the small group of companies that have done really well this year. So, I look at it as a positive development and having said that, it’s also — there’s also a lot of unknowns and uncertainty.

I think how fast we can get any sort of functional vaccine distributed and implemented, there are other things that can also still go wrong in terms of mutations of the virus, et cetera. So, this is still a time of uncertainty. Usually, when you see this sort of dramatic change in things, it just — what it does tell you is how people might have positioned in the short term that are trying to make short-term profits.

And so, obviously, this suggests that some people were — there’s — these stocks would become popular in the short term and that the people that need to protect their short-term gain or think in terms of those smaller increments of time are going to have a problem.

I think even within the last year, for example, our stocks weren’t doing — some of the stocks that done so well this year were doing terribly in relation to the market in the fourth quarter. And when we didn’t do as badly in the initial drawdown post-COVID occurring, let’s say in March-April, I think part of that had to do with some of the people that are shorter more and didn’t know (ph) our stock at that point because their relative momentum was pretty terrible at the end of last year.

So, this is not the fun part of being a long-term investor because we’re all human and you’re going to experience these kinds of times. But how we think about the decision-making and how we’re kind of making our choices, it’s more of a three to five-year thing and it requires being able to zoom out from time to time and recognize that the rest of the market is going to focus on short-term reactions sometimes more than you’d like.

RITHOLTZ: So, let’s briefly discuss that short-term reaction back in February and March. In a very short period of time, I want to say five or six weeks, the S&P 500 was down 34 percent. You’re running some pretty high beta names and a lot of volatility. How do you manage around a drawdown like that? Is it merely the cost of admission if you’re going to own some of these high-flying names?

LYNCH: Well, it’s pretty interesting, right, because as you — you used the word beta which is obviously the modern portfolio proxy for risk and one would have guessed that if you’re — you had a higher than average beta profile in your portfolio that if the market was going to have the drawdown at that earlier in the year that these stocks or those stocks would do worse and it actually wind up being the opposite which is pretty amazing.

But I think what it shows you is the limitations of quantifying risk in that way or really — we love quantifying things, right, but sometimes, it really only tells us so much and we can kind of overly — that oversimplification can lead to over confidence.

So, meanwhile, now you have the opposite happening where you have good news and these companies going in that direction at least temporarily. So, I guess how we think about drawdowns are — they are part of investing in general.

No matter what you do, you’re going to have — any successful investment over time that’s publicly traded usually has some drawdown period and we’ve lived through so many of them over the last few decades. I mean, I can remember vividly having a large position in Facebook after they’ come public and having the stock go down 60 percent at a time when I believe market was up pretty significantly and that was a very challenging time.

And the way we think about risk generally is not really beta, it’s more about company specific fundamentals and exposures and we’re trying to make sure we build a portfolio that has exposure to all parts of the economy. So, it’s not one take that.

But from time to time, on a company specific basis and even sometimes kind of short-term correlated basis with a group of companies, you can have these drawdowns and they’re painful. And I think it’s why Warren Buffett says, it’s not really about how smart you are investing, it’s more about your temperament.

These are the timeframes where you kind of learn a lot about a team and whether they can handle that and off to your clients and there has to be a nice, hopefully, symbiotic relationship whether your clients understand that that’s the part of the equation that you’re going to experience from time to time.

So, while we would love to avoid them, at the same time, I think it is a part of any successful investment in a public market that you’re going to have this kind of really dramatic swings. And the way we think about it is not really trying to figure out things like beta or whether some companies are currently correlating that that maybe don’t have real fundamental correlation long term.

We think about it more on a company specific level and making sure we believe in those companies, the people running them, the skin in the game of the people running them hopefully. There’s a lot of – often mostly in our case, a lot of equity ownership of the management teams.

And then just thinking first principles, are we betting on one big thing or not. And sometimes, everyone else thinks you’re betting on one thing but my guess is when we look back in five years, many of the companies that are being grouped in some of these artificial classifications like work from home or FAANG or the Four Horsemen, these types of things that are used from time to time to discuss markets.

If you look later on, five — three, five, 10 years later, often the outcomes are very different on a company specific level and part of our job is to be able to communicate that with our clients when we live through periods like this.

RITHOLTZ: So, last question in this area, you mentioned not everything can be quantified, ow much of the success of these portfolios of the past few years is driven by quantitative analytics and how much of it is more qualitative insights into the potential of the underlying business?

LYNCH: Definitely I’d put most of it in that second category, which is certainly so much of our time is spent on numbers in the industry when we do our research. But at the end the day, I think that this is more of an insight business and a creative business and looking at the world differently or looking at an idea differently than the rest of the world and trying to understand what that is as part of the process.

So, I think we’re much more qualitatively driven. But it doesn’t mean we’re anti-quant. I think a good investment culture is constantly thinking about alternatives and not being close minded but being open.

I do think generally the problem with quantitative or algorithmic or kind of very specific rule-of-thumb-based investing is that markets are complex adaptive systems that change over time. So, the idea that — while it’s appealing human on emotional level that there might be some secret formula that always works or works for both extended period of time, I generally think that’s a bad thought given that like the markets today are so different even than they were three to five years ago in terms of the level of passive investing or the number of hedge funds or the types of companies in the markets that comprise the markets.

So, it’s very hard to think in those terms. It doesn’t mean quantitative can’t be a useful tool in some ways maybe in helping us conduct our research. But generally, we’re set up more in the judgment business, in the qualitative assessment business. And I think that that — given the nature of markets that you have to have that as part of your DNA.

RITHOLTZ: So, Dennis, let’s talk a little bit about being an active manager and being a manager that’s running a concentrated portfolio. It’s been pretty tough for active managers the past decade. How have you been able to stand out from the move towards passive?

LYNCH: I think — if you think about the investment industry, it’s become, over time, maybe as a mature industry, very compartmentalized. And so, most people have a very specific area that they’re focused. Maybe it’s small-cap growth or international large-cap value.

So, I think to some degree, that’s a bit of a trap and people get — lose perspective in being so compartmentalized in their knowledge. So, I think one thing we’ve done, and we talked about this upfront, is as a team, we’re structured in a way that the investors spend their time looking for great ideas regardless of those — the end objective of those kinds of compartments.

And I think that that additional perspective is valuable and useful when we look at the opportunity set. It gives us a different perspective. The fact that (inaudible), who’s the world-class Internet investor, can look at small-cap companies that could disrupt large-cap companies or large-cap or non-U.S. companies that can hurt the small-cap companies I think is something that not all teams share and I think it’s a huge competitive advantage from a structural standpoint.

I think also — we look at great — I think really good investing over a long period of time is opportunity set driven and that’s how we kind of define ourselves. We don’t think in terms of the — sort of the value growth and some of the — sort of the standard nomenclature because as we said before, the markets continue to evolve, it’s a complex adaptive system.

So, the behaviors and ideas you had 20 years ago might no longer be going to — leading to success today. When I think about my own career, I went to Columbia Business School and I was — I got the chance to learn a lot about things like return on invested capital and free cash flow and yields. This was back in — early 1990s.

And when I got into the investment industry, I was surprised how little people were focused on those metrics. This is probably around the time when Joel Greenblatt wrote a book like “The Little Book That Beats the Market” about those kind of variables, ROIC and free cash flow.

And I think for quite some time, being more focused on that and sort of the earnings and P multiples were sort of an interesting way of looking at the opportunities in the market differently than other people. When I think about our experience halfway through the 20 years and having some successful companies like Amazon and Facebook before they had reported earnings, it let us to continue to be open in the idea that investing through the income statement can be a good idea.

And more recently, I think there’s a little more recognition that investing today on the corporate level is happening more from a — into things like intangible assets relative to tangible assets. And so, back in leads of things like lack of earnings but not necessarily a bad decision-making at the corporate level or something bad about the business.

So, that openness and willingness to look at the different opportunities out there also has led (ph) us more recently as some of the companies that have succeeded more recently. So, I think, overall, the team has an open mindset but also, we’re constantly trying to understand where the best ideas are there in the markets given the fact we have a global mandate. And I think it’s the perspective plus that openness that hopefully beats to environment where we can succeed.

RITHOLTZ: So, you’re echoing some of the thoughts I’ve heard from people like Will Danoff at Fidelity or Bill Miller formally of Legg Mason now with his own shop as well as Joel Greenblatt who have said, if you’re just looking at P/E ratios, you’re missing a lot of the pictures.

Is that something that has evolved over the past 20 years? Have there been a group of people who recognize that and basically profited from it while a lot of people were stuck in the old dynamic or am I overstating that?

LYNCH: Well, I definitely think to an extent that is true that if you define yourself so narrowly in any business but particularly in these businesses, low P/E investor or high P/E investor or a low price (inaudible), if you sort of identify too much of one variable and you’re not open to thinking about how the actual economic circumstances in reality might affect those variables, i.e., intangible capital being more valuable in those investments than they have been historically and more important and more necessary, then I think it’s just important not to anchor on I can’t buy something because they’re one variable.

I mean, the reality is real life is more complex than that and looking at a lot of different vantage points, I think it help you understand the situation more fully. And in this case, I think what you’re saying has some validity because sometimes people just to keep — it’s easy — we all got to get through our days and it’s a lot easier to live with rules of thumb or either you identify with the tribe or you identify with an approach and just stick to that and to kind of think — try to think beyond some of those things and explore the ideas that might be the drivers behind them.

RITHOLTZ: So, we’ve mostly been discussing the factors in decision-making behind selecting a stock. But a number of studies have discovered that the bigger challenge is identifying when to sell a stock. That seems to be where all the profits are made and it also seems to be where all the mistakes are made. How do you determine when to sell something that’s been in your portfolio either for a short time and it looks like you’re wrong for a longer time and it’s gone as far as you might think it might go?

LYNCH: Well, yes, there’s several reasons we’ll sell. I mean, the first that comes to mind is diversification. Sometimes, company, as part of the portfolio, just gets too big and we need to think about that to some degree on an — now I’m talking primarily on an individual company specific name basis that we don’t want to have too much exposure to one idea at some point no matter how strong it’s been.

Then we also might sell because we think the risk reward is no longer as compelling as other ideas that we’re looking at that would be under devaluation bucket of selling. There, I think, it’s important to — it’s important distinction like you mentioned earlier around P/Es and such.

What we’re really looking at when I said valuation is what’s the market cap today. And based on our analysis over the next five and 10 years, where can the market cap be, not necessarily a multiple because I think people sort of conflate that. When you hear the word valuation, it usually means — what it really means is a short-term multiple and, again, after simplification, it’s not really giving you a full picture of the potential of a company in my mind.

And then finally, we’ll sell because the pieces changes, right? So, we’re constantly focused on competitive — the competitive landscape that our companies are operating in and monitoring that every second of the day. And from time to time, threats will merge for our companies that are competitive and might be from a company that’s disruptive, young and most people aren’t following it or two different existing company trying to follow some sort of bumbling type of approach.

But we will closely watch how that’s changing and that might be a variable that hasn’t shown up yet in the companies’ results, but that we’re starting to anticipate that the uniqueness of the company and their competitive advantages and what we thought otherwise.

RITHOLTZ: Let’s talk a little bit about how you construct portfolios and what they look like. And one of the first questions I have to ask is you have fairly concentrated portfolios, how do you know what’s too concentrated, how do you figure out how to size various positions?

LYNCH: Sure. I will — look, I think there are only so many great ideas globally, right? And so, I think — and as I’ve mentioned, we’re opportunity set driven. So, you’re right, today, we’re fairly concentrated in relation to what you might expect generally within the mutual fund industry.

But right now or at least in the last two years, we thought there were just a unique group of companies that warranted taking a larger position and maybe slightly more concentration given our conviction in their competitive advantage and the opportunity that they have in front of them.

I also think though it’s bad to be dogmatic and that you can have another environment or an opportunity set where you want to own some more names. More names make the cut and that might affect the weightings that you are going to allocate too all the names that you currently already own or want to continue to own.

So, we generally, though, are going to be more active and different than the market by our DNA and I think a big part of our culture is our willingness to be different. You don’t want to just be a contrarian in life. I think Jeff Bezos has said that being a contrarian is usually wrong but when — but the big ideas and the big kind of gains in life occur when you are willing to be a little bit outside or away from the crowd or against the crowd and you have to have that in your DNA.

But in terms of our general thought around sizing, generally, when we have a core position that we think really fits all of our criteria, it’s usually going to be 2.5 or .5 percent of the portfolio type of allocation cost initially.

Occasionally, we’ll have ideas that are a little more speculative but have maybe some binary components to them, things like biotech might fit there or there’s some limitation but the upside is significant enough for us to want to make a small allocation. In that case, we’re on things even in the small like a 50 basis-point increment because I would call that as betting small to win big where you’re not risking much but it’s still — it’s kind of worked in the context of the overall portfolio because the upside is so great.

And I think more broadly away from even the funds that we manage like somebody might put bitcoin into that category as a personal investment. Amount that you’d willing to sort of take a risk that this is going to zero but you’re opening up your overall portfolio. There’s some big upside potential and maybe even potential that can help at a time of crisis, something that’s anti-fragile or that can benefit from a disorder while the rest of your portfolio is going down as always appealing (ph).

So, the bottom line is we have our core position size as I mentioned. We think a little bit about speculative value and speculation and binary outcomes and manage that risk by resizing the — those ideas properly.

I think there really aren’t any bad ideas in life. I mean, obviously, you could probably come up with a really bad idea. But just — it’s really about sizing.

RITHOLTZ: (Inaudible).

LYNCH: If you bet one penny out of a dollar, you really haven’t lost much if you lose. So, it’s really about sizing that and sizing is a function of our conviction and the quality of the idea.

RITHOLTZ: Right. And obviously, anytime you have an opportunity for really asymmetrical risk reward bet, you can do that with one percent.


RITHOLTZ: So, you mentioned …

LYNCH: And it really depends on you and personality, right? Some people might think one percent is too much or not enough and for us, at least for our funds, that’s usually more of 50 cents out of a dollar, 50 basis points.

RITHOLTZ: Got you. So, you mentioned Jeff Bezos and But I’m curious about your process, what brings you the names like Amazon and Shopify and Slack and Zoom and Moderna, not specifically the work-from-home theme but what was the pre-2020 approach that led you to these companies? Is it growth? Is it growth at a reasonable price? Is it the unique winner-take-all companies with a moat around their business? What’s the thinking that leads you here?

LYNCH: I mean, those are some actually good stabs at it. I think our ideas tend to emerge from all the activities of the people on the team. We’ve been lucky to have people on the team for, I think — I think we had very low turnover over the last 16 years. So, we’re proud of that.

And part of the benefit of them being in one place for a long period of time is they get to develop really stable contact networks with an industry, companies, corporate world, the investor world, et cetera. So, we always have ideas that tend to emerge from our research and our daily activities.

But you’re right, we’re — there are certain things we’re looking for apart (ph) from screening for high growth rates or something of that nature. It’s more certain characteristics jump out at us. Like inside ownership. Like a lot of these cases that you just mentioned or at least many of them, you have the founder or the person in charge has a large equity stake, a lot of skin in the game.

So, that’s always really interesting to us. When you have somebody who’s not just the CEO and managing a business but really someone who acts like an owner. Similarly, for us, our team has a lot of ownership of our products. I mentioned, we have a large number of products across the platform.

I personally have money in every one of them. I don’t think you should start a product unless you think it could succeed and that you’re willing to put direct investment in. In addition, I think what’s great with Morgan Stanley through its deferred compensation program forces you whether you like it or not or to put at least 25 percent of your preferred pay into the products you manage. Our team tends to put over 90 percent.

So, for me, we’re putting our skin in the game every day in the products we’re managing for our clients like at Counterpoint Global and we’re looking for companies that do the same thing that are owner operators not just people that are caretakers of something that’s already been built.

And not to disparage some of those situations but I think the more interesting component is trying to find that — identify cultures that act like owners like we do and I think that that’s really appealing. And when you can combine that with high growth potential and big addressable market, obviously, that’s even more appealing.

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RITHOLTZ: So, much of your process sounds very much bottoms-up stock picking fundamental analysis of different companies’ businesses. How much do you pay attention to what’s going on in the world top-down?

I don’t get the sense that you’re hanging on every Fed release or every macroeconomic release like ISM or international deficit. Do you guys factor top-down into your process very much?

LYNCH: So, yes, we’re mostly focused — I want people to call it bottom-up. So, making company specific investments. Like a few things that come to mind when you asked that question.

I mean, one is I think I’d be remiss and anybody would be just in for all-asset classes in general but the fact that we had a tailwind behind the — a lot of — pretty much every asset class over the last 30 years with interest rates kind of going from where they had been to where they are today and that’s part of — this is something that sort of lifts all asset classes to some degree and probably does help companies on the margin more.

Intellectually, you can understand that that have high growth in the future where the values undercome as opposed to something that’s like right today currently there, something that might be more of a hard asset.

So, I think interest rates obviously matter. The problem is we don’t know what they’re going to do. And so, are they going to go up, are they going to go down, and if they do, why? We don’t know what circumstances may lead to those things happening or why the Fed might do what it does.

So, I think given that we — our mindset is that some of that is so unknowable that it’s better to focus on specifics that you can control. And in the process, when we look at our companies and play around the sensitivities and what they could be worth, we obviously need a cost of capital. We need an alternative to look at and that includes other companies and asset classes, including the retreat (ph) rate.

We tried over time to not give a whole lot of benefit to the fact that interest rates are as low as they are today and generally, we don’t. But when I play around the sensitivities to buy (ph) the companies, it is a consideration because it’s also possible to stay where they are.

So, it’s probably along with a way of saying we’re not that focused on the macro. It does matter in the sense that things like interest rates represent fundamental alternatives and cost of capital and the consideration in how you think about company valuation whether you like it or not.

Having a strong view about what’s going to happen in those — to those variables though, I think it’s — some people might do that well. It’s not a part of our DNA and I think that the only problem with that thought process is that if you think interest rates are going up and you’re going to build a portfolio around that thought, if you’re wrong, you got to change your whole portfolio.

And what we try to do is buy unique companies that have exposure to many different end markets ultimately that can be, hopefully, a lot bigger than the market caps are today in excess of hopefully their alternatives and let some of the rest of that all play out. And really, it’s control what you can control and it just fits the way we think about the world, which is more individual judgments as opposed to kind of larger takes on asset classes and things of that nature, which I think part that — to us, they’re not that useful.

If you tell me the market’s overvalued in aggregate, it doesn’t help me make a decision about the one company I’m looking at. It might be really undervalued, right? It actually might hurt you think the market is overvalued 10 years ago.

And so, I think the market is overvalued right now so I’m not going to buy Amazon even though I’m interested. So, if anything, sometimes, I think, the discourse in the industry around these aggregate notions of high-cost mutual funds are bad or the markets overvalued or like in hindsight, those things are always obvious but it almost hurts your ability to make individual decisions. So, again, we’re really focused on individual company decisions.

RITHOLTZ: Quite interesting. So, as long as we’re discussing decision-making and the thought process behind the selection, let’s talk about someone you brought in recently to be the Head of Consilient Research at Counterpoint Global, Michael Mauboussin. How significant is that role and how closely do you work with him?

LYNCH: Look, we’ve known Michael for a long time. He’s — in fact, when I was at business school, I was exposed to some of his great content and great thinking at Columbia.

And we’ve always respected a lot of what he has to offer and in fact, when he was on the sell side, he was kind of the guest star in our team meetings at least a few times a year. So, we wanted to know what was kind of going on in his mind.

And I think reading Michael’s research and being a part of it now is kind of like (inaudible). It really helps. You prepare for making good decisions and thinking about thinking and I think that that’s — there’s a lot of utility there. When I think back over time as an example actually, I think when Michael was at Legg Mason with Bill Miller, they had — Bill had — particularly it was — had pieces about Amazon which wind up being one of the only things that matter over the last 20 years in equity markets.

And they had this whole concept around how Amazon was being looked at as or kind of misclassified. People were looking at it as a retailer and it was really logistics company. And Michael, I think, we should talk about that as misclassification or looking at circumstances versus attributes.

So, sort of the mistakes we make as decision-makers, we got to put something into a bucket in order to compare to things. But sometimes, that initial decision is wrong and when it is, that can lead to this pretty big misperception.

So, this is the kind of stuff that Michael is about. It really fits the intellectual curiosity, which is a big part of the team, and a lot of people talk about intellectual curiosity and talent development. I think bringing Michael in just — is the real natural thing for us to do given what we’re about.

And already a year into it, we’re seeing great benefits. Michael is also a great coach for people earlier in their careers to just become not just good analyst but good thinkers and decision-makers. And he’s rebooted our book club, we had some great authors in.

So, knowing the team’s DNA and what Michael does is a very — it was a very natural thing. We were happy to have the opportunity to do it. And Consilient Research is basically the idea that — exploring ideas not just in day-to-day financial world but in other domains can lead you to may be coming up with good decision models or rules of thumb or help you think differently about some of the things that are occurring in the financial world and Michael had a long history doing that for his boss then (ph).

And so — and he call this piece the Consilient observer. So, we just said, well, why don’t we just reboot that because it was so great. So, we hope to continue to benefit from his insights and share them with people in the community as well.

RITHOLTZ: Yes. That was definitely a good hire. And I see him as a very good fit into what you guys do. You mentioned Bill Miller. Bill Miller has brought up what he sees as a problem in part of the active world of investing and it’s what he describes his closet indexers and low active share. I think his active share is pretty much in the 90s.

I’m getting guess your active share across the big funds are going to be pretty close, right? You don’t really seem to look very much like any of the indexes out there.

LYNCH: Yes. We have a wide range of products but we’re in the 80s and some in the 90s. So, it just depends on Page 1. And then part of that really is about the benchmarks. Some of them are super concentrated. So, that can affect those metrics. But, yes, we’re at the extreme similarly to what you just characterized.

RITHOLTZ: Yes. And we really haven’t spent much time delving into valuations and I want to ask you a very big picture question. We’ve seen valuations creep up not just over the past 30 years of falling interest rate but over the past — go back to World War II, valuations have continued to rise since then. How much of this has been a significant undervaluation of the economies of scale of technology and how digital can grow with far less needed capital and labor?

LYNCH: Yes. I think it’s a good point. We talked earlier about how markets can change over time and that’s why rules of thumb are sometimes useful for periods of time but have a — often can become — actually, they can become a problem, right? They can become — just like expertise, it’s useful when the world is not changing too quickly.

But if there is a change over time, expertise can become a real — a problem. You suddenly — you have to jettison your way of thinking and learn new things that most people are often hesitant to do that. I think the constituencies in the market today, meaning the earnings or the cash flow that sort of backs up ultimately the valuation of let’s call it the market even though I don’t love talking in aggregate frankly.

But, yes, there’s no question that it’s driven more from more of a capital light vantage point than maybe when you look back over time in the history markets and their times and railroads are 50 percent. So, certainly, today’s market is very different and the earnings of it, maybe the quality of those earnings might be different.

And there are puts and takes to be fair. I don’t want – it could be a very long discussion. But the – I think that is a very — I think this whole concept that — of tangible versus intangible and Michael’s actually written about that a bit and looks really focused on as we speak, Michael Maubossin, is it’s something that most people haven’t appreciated enough probably that earnings and the way companies make investments, has have changed and that has — that definitely affect some of these rules of thumb that maybe people have thought about for many years.

So, again, the last thing I’ll say here, though, some — reacting to the question which is really kind of about the market and I think you always have to be a little careful about market aggregate discussion because again, our DNA and what we’re focused on is company investing and finding those unique situations.

And if you get too — if you spent too much of your time on the aggregation of trends or the aggregate trend and predicting them and discussing them, I think, it’s a little bit, gets you off track, at least, from — it does for us from what our — what our core mission is.

RITHOLTZ: Quite interesting. So, you mentioned the aggregate. Let’s get a little more granular and drill down into at least those five funds. I love the names of these. Advantage, Growth, Insight, Discovery, and Inception. I mean, kudos to whoever was putting — putting those titles together.

They range — the smallest one is about half a billion, the biggest one is almost 15 billion and they’ve all done super well this year. Advantage, up more than 50 percent, Growth up over 85 percent. Insight is almost 88 percent, Discovery is 99 percent, Inception is 72 percent. What are the differences of these five funds? Is it U.S. versus overseas? Is it small versus large or are those buckets just not relevant?

LYNCH: No. So, ultimately, it’s a great question because I talked about the team — I think the differentiator for us is that we’re investors first and the sort of category stuff happened at the end of the process. And I think most of the industry is — start off with a product or a category and build a team around it.

And obviously, their strength and — could be strength and weaknesses to both of those strategies. I think in a world where most people are compartmentalized, it’s better to have some perspective because you’re kind of going against the grain and maybe picking up things that they can’t.

In terms of these individual products, Inception is our small-cap product. And so, ultimately, when we find companies that have market caps in the range of general to Russell 1000 growth small cap arena, that’s the home for which we can take — with which we can take advantage and hopefully, those insights or ideas.

Discovery, a really more of a mid-cap growth strategy in the sense of the market cap range. And by the way, both are U.S. and the ones we’re discussing here are all U.S. as well, it’s centric.

And then where large cap is or Growth — sorry, excuse me — growth is a large-cap growth strategy by market cap. And so is advantage but the only difference there is that we do two — we have two different constraints. Growth can own whatever it wants in terms of opportunity set whereas Advantage, from a competitive advantage standpoint, when we look at why a company is unique, like is it network effect or scale or switching cost or brand or these — the designation that we look at there, we stay away from intellectual property driven, technology driven, competitive advantages in Advantage and we tend to own companies a little bit later in their life, not in the early part of their lifecycle.

So, it’s a different variation for that product of our large-cap growth thinking. But at the end of the day — and as you said with the names, I mean the names were really what we want to do is not be the large-cap growth fund or small-cap growth fund. I think great investing is you have to define yourself to a degree, but if you limit yourself to the designation, you’re doing a disservice to the people who have allocated your money.

Because if I take a real big step back at the industry, the real goal is to be an alternative. And the alternative is really, probably, the S&P 500. And if you’re really good at doing this part of that world that still doesn’t beat the S&P 500, and you haven’t given yourself enough flexibility to do that, then at some point, your asset class is not that useful or might considered null and void or not worth pursuing.

So, what we try to do is name the fund in in ways that are indicative of the pain (ph) culture but also are — and have tendencies, like I said, these buckets at the end of the process, the conventional consultant thinking, but we’re — there’s still more flexibility in running inception than there is as I call it — we call it small-cap growth because there are more constraints with that naming from a 40 Act legal standpoint.

And so, leave yourself — be who — you have to know who you are in this business but you go to leave enough flexibility to evolve. And I think that’s, hopefully, something culture we’ve been able to achieve but part of that is even what — the name of your funds or even the name of your team.

So, Counterpoint Global, the idea behind counterpoint, simply, there’s two — actually two meanings. One is Counterpoint is often used, thought of it the other side of the argument. And so, it connotes that willingness to be different, not always contrarian because that, I think, is generally wrong, but you have to be willing to stick your neck out in order to succeed from time to time.

So, that’s — that the symbolism there. But the other meaning in music is counterpoint in music is when you take unique melodies or voices and you — when you — that sound great on their own. But when you layer them together to get — in a situation where the outcome — the output’s better than the sum of the parts.

So, like in a musical, usually each character has its own theme and at some point, at the end of the first act or the final act, those themes kind of intermingle musically at some point and your kind of like, wow, you’re like, wow, that’s amazing. Or like, “She’s Leaving Home” by the Beatles or “I’ve Got a Feeling” by The Beatles. These are cases where there are multiple melodies happening that stand alone.

But so, hopefully, from a theme standpoint, that whether it’s our ideas that we can put in the different products where they fit or whether it’s the people or the way we can combine our products, hopefully, there’s the benefit of counterpoint which is creating something that exceeds the sum of the parts.

RITHOLTZ: Quite fascinating. I know I only have you for a certain limited amount of time. So, I want to jump to my favorite questions that I ask all of our guests and see what — see what’s going on in your life these days.

Let’s start out with streaming. Tell us what you’re watching either on Netflix or Amazon or anything you happen to be listening to on podcast, what’s keeping you entertained during this period of work from home?

LYNCH: The series I just finished and I blew right through it, I thought it was — and not super well-known, I think, but might’ve flown under the radar, it’s called “Halt and Catch Fire” and it’s available on Netflix and it’s kind of like a Madman version of the gaming world, the video gaming world in ’80s and how that environment went from the ’80s and what was happening with the Ataris of the world and all the early PCs and then and then the evolution of that up until sort of the — of the the Internet.

And you follow these characters through that journey. So, it’s really interesting to watch, the progression, to — I think it’s really well known from an entertainment standpoint but it also happens to fit, things we’re interested in in terms of how technology’s evolved over time.

My wife and I are also enjoying Ted Lasso on Apple Plus or Apple …

RITHOLTZ: So good.


RITHOLTZ: I just — I just read it was renewed for a second season so I’m thrilled about.

LYNCH: Good.

RITHOLTZ: It’s awesome. It’s funny you mentioned “Madmen.” I missed that when the first time it went around and my wife and I has just started streaming it a few weeks ago and I had to find someone who lived through that year to say, hey, how hyperbolic and exaggerated is this? And the consensus seems to be, no, that’s pretty much how it was like which is kind of shocking.

LYNCH: It’s literally a different universe than where we are today. But, no, we — I enjoyed “Madmen,” too. It’s a — there’s some really great stuff in there.

RITHOLTZ: Tell us about some of your early mentors, who helped to shape your career.

LYNCH: Well, I would — I mean, very lucky, my dad has always been a great influence. He was an investor as well. He is — he had his own firm for many years. But just — and what we do is very different than what he did back then and partly that is opportunity-set driven.

But really, my dad, which has always been a really great role model in terms of how he handles himself and how he — he’s very thoughtful and he finds — he’s really able to find the positives in other people which has really been valuable for me, in my life.

In terms of specifically in investing as well, certainly he helped me there as well. But that — when I think more specifically in my career, I took a classic combi (ph) business with a guy named John Griffin to used to be the President of Tiger, the hedge fund, and had his own hedge fund, Blue Ridge Capital for a long time.

And if you take — and that happened to me as first class which is very lucky that he taught, first class that he taught. And he — if he leaves his class and you haven’t gotten passionate about investing afterward, then you probably shouldn’t be in the field.

So, John had a great way of communication passion and sort of establishing what it takes to make it in the business, I think. So, that was a really — he’s been a really valuable person for me.

And then there are a lot of people in the industry I admire. We talked about Bill Miller and his willingness to be different and you talked about Will Danoff who I’m friendly with. And I really think he’s been unbelievable over the course of his career, to touch base with him on things.

Other people like Ron Baron, I admire mostly from far. I think he’s been really good at what he does and Henry Ellenbogen. He used to be at T. Rowe, now who runs Durable. There’s another person, Baillie Gifford (inaudible) organization, James Anderson have also been great.

So, sometimes the mentorship happens just by sometimes being friendly with but also in addition, just kind of learning from people from afar and some of those people had been influential for me.

RITHOLTZ: Quite interesting. Tell us what you’re reading, what are some of your all-time favorite books and what are you reading currently?

LYNCH: Sure. So, my favorite all-time book, probably, might — it’s probably “The Art of Learning” which is by Josh Waitzkin who was the subject of the movie “Searching for Bobby Fischer” which is about the young chest prodigy who might be the next great chest player for the United States.

And the book’s about what it was like to be him during that timeframe and his journey as a chess player and eventually went on to be, I think, the Tai Chi Push Hands Champion of the World which is a whole different domain where he excelled in division (ph) of the chess.

And really, I’d say the heart of the book is about the side B of having a growth mindset versus the fixed mindset and the idea that be willing to fail and try new things and learn from it as opposed to getting too wrapped up in your current identity and having that and limit your ability to learn as a person.

And I certainly know what that’s like. I think, probably, most people as they think about themselves, will -can find themselves doing a lot of fixed mindset things.

So, just a concept of trying to be somewhat open to new things and (inaudible) learning stuff for me, it’s actually, really helped to me in my life and I probably read that about 15 years back but I highly recommend it.

What I’m currently reading, frankly, I don’t read a lot of books as much as I used to because there’s so much material investment related that I like to read. But we do have a Book Club that Michael rebooted at the — for our team, Michael Mauboussin.

This year, we just had two people and the first one was a guy named Michael Kearns who is the — actually, he’s a consultant or adviser from Morgan Stanley but he wrote a book called “The Ethical Algorithm.” And it’s really about the pluses and minuses of algorithms and where they can be strong and benefit us in society and how they can be harmful. And I thought that’s a really — that was great framing and good — a good topic for the team.

But then we also had David Epstein (inaudible) wrote “Range” and “Range” is kind of the other side of the Malcolm Gladwell argument about 10,000 hours equals expertise or mastery. It’s more about cases where people don’t declare what they’re going to do until a little bit later in life, like Roger Federer in tennis as an example instead of like the Tiger Woods model of — playing, literally playing, golf right out of the crib.

And really interesting thinking there around the benefit of having broader perspective before you get too narrow and that resonates us without team, too, based on some of the things we talked about today just having that, being able to cultivate perspective in a world where there’s a lot of expertise.

Our whole industry is based around expertise. So, I think, often what’s missing is being able to connect things between areas of expertise and hopefully that foreign place were set up to do that as a team.

RITHOLTZ: Really interesting. What sort of advice would you give to a recent college grad who was interested in a career in asset management?

LYNCH: Most — well, actually, very similar to what we just talked about previous — and the previous question that you most job start off in that sort of expert. You’re given a very specific task and I think that’s just the nature of how the system is set up and you follow a sector or an industry.

I mean, when I was at JPMorgan on the sell side, just got to follow EMP companies, companies that, explore (ph), produce for energy and, well, yes, excuse me. And so, it’s great to dive in and become an expert and there’s a lot of value, like, in that learning process.

But to the degree you can complement that with broadening your learning and not just be so narrow, I think there can be benefits to kind of pursuing that.

And today, in today’s world, there are so many sources for doing that. You can — you use stuff like Twitter to you advantage or there’s ways if you want to be a learning machine, you can — you can find Internet resources that are really — really throw a lot of interesting stuff at you and hopefully round out your perspective if you’re really been put into a narrow position. So, that will be my first instinct.

RITHOLTZ: Quite interesting. And our final question, what do about the world of investing today that you wish you knew 30 years ago when you were first starting out?

LYNCH: Probably everybody learns in math class or at some point in their like, compound annual growth and you can see when you’re doing it that it’s a powerful thing. But I think as I’ve gotten further on in my life, and I think we tried to certainly professionally but in many ways, in my life, you try to take advantage of those — the developing habits that will lead to good things down the road and making investments today that will benefit you later.

Like — but I would say I wish I’d had an even greater appreciation of that earlier my life. I mean, somebody like Warren Buffett, the real great investors, I would say probably really get that very early in life and he’s somebody who just started young and that time is such an advantage.

So, just a — a really great, even better awareness of those — that concept in hindsight is something that I always try to highlight the younger people because while I knew that a little bit mathematically, I probably didn’t focus on how that can really benefit you whether it’s financially or whether it’s even habit formation and what it leads to down the road that might be your health or some skill you want to develop.

So, I’d say compound (ph) annual growth and really taking that to heart and making it a part of your DNA.

RITHOLTZ: Thank you, Dennis, for being so generous with your time. We have been speaking with Dennis Lynch, head of Morgan Stanley’s Counterpoint Global.

If you enjoy this conversation, be sure and check out all of our previous such discussions. We have almost 400. You can find those at Apple iTunes, Spotify, Stitcher, wherever you feed your podcast fix.

We love your comments, feedback, and suggestions. Write to us at Give us a review at Apple iTunes.

You can sign up for our free daily reads that’s Check out my weekly column Follow me on Twitter @ritholtz.

I would be remiss if I did not thank the team who helps put these conversations together each week. Michael Boyle is my producer/booker. Maru Ful (ph) is my audio engineer. Atika Valbrun is our project manager. Michael Batnick is my head of research.

I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

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10 Sunday Reads

Avert your eyes! My Sunday morning look at incompetency, corruption and policy failures:

Conspiracy theories, explained Americans are embracing dangerous conspiratorial beliefs, from QAnon to coronavirus denial. (Vox)
Kansas welcomed my immigrant parents. Then I built Dropbox, an $8 billion company aaa (Kansas City Star)
As Soon as POTUS Leaves Office, He Faces Greater Risk of Prosecution The president is more vulnerable than ever to an investigation into his business practices and taxes. (New York Times)
A Real-Estate Empire Tied to Purdue Pharma A look at the most notable U.S. homes owned by members of the Sackler family (Wall Street Journal)
Parler Makes Play for Conservatives Mad at Facebook, Twitter The platform also has some deep-pocketed investors. Rebekah Mercer, daughter of hedge-fund investor Robert Mercer, is among the company’s financial backers, according to people familiar with the matter. The Mercers have previously financed a number of conservative causes. (Wall Street Journal)
Inside the longest lockdown in the world Poverty and inadequate healthcare in South America makes shutting down society unworkable. (UnHerd)
The Final Hurdle in the Covid-19 Vaccine Race Is Bureaucracy Patriotism and haste combine with an alphabet stew of regulators around the world to raise the prospects of coronavirus chaos. (Businessweek)
An explosive exposé of MI5’s unaccountable spying on communists and industrial militants KEVAN NELSON reviews MI5, The Cold War and the Rule of Law by KD Ewing, Joan Mahoney and Andrew Moretta (Morning Star)
Was It Worth It, Jared and Ivanka? The glossiest grifters become Vuitton vagabonds.  (New York Times)
Humanity at night A violinist plays in a concentration camp. A refugee carries a book of poetry. Art sustains us when survival is uncertain (Aeon)

Be sure to check out our Masters in Business interview this weekend with Dennis Lynch, Head of Counterpoint Global at Morgan Stanley Investment Management, running $130 billion. Several of the funds Lynch runs have doubled YTD in 2020.


GOP election litigation is seeking to disenfranchise 10-15% of Americans

Source: Washington Post


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