#520: Jordi Visser on Allocating Billions of Dollars Today

Jordi Visser is President and Chief Investment Officer of Weiss Multi-Strategy Advisers, which manages $1.7 billion in assets. In this conversation, we discuss the macroeconomic environment, the federal reserve, inflation, alternative assets, bitcoin, and digital assets. ======================= OKCoin.com is the leading crypto exchange for both beginners and experienced users. You can fund your account in under 2 minutes, and get access to the most advanced trading engine, all while paying the lowest trading fees in the industry (0.1%). Visit www.okcoin.com/pomp and open your account today. ======================= With 10M+ users, Crypto.com is the easiest place to buy, and sell 100+ cryptocurrencies. The Crypto.com Visa Card gives you up to 8% back instantly, and 100% back on Spotify and Netflix. Also, Crypto.com lets you earn up to 8.5% p.a. on BTC, and 14% p.a. on stablecoins. Get $25 when you download the Crypto.com App with code "pomp". Download the App now: https://crypto.onelink.me/J9Lg/pomppodcast2021 ======================= Pomp writes a daily letter to over 140,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Jordi Visser is the President and Chief Investment Officer of Weiss Multi-Strategy Advisers, which manages approximately $1.7 billion in assets. In this conversation, we discuss the macroeconomic environment, the Federal Reserve, inflation, alternative assets, Bitcoin, and digital assets. I really, really enjoyed this conversation with Jordi, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is OKEX. Crypto moves fast and many crypto-focused companies can't keep up. Crypto exchanges that cut through the noise are the ones that give you access,

• 0:44Anthony Pompliano?

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• 1:28Anthony Pompliano?

  entry point for many of the people who are now new to this asset class. On OKEX, you can easily use your credit or debit card to buy top cryptocurrencies with almost 40 different fiat currencies, including euros, Canadian dollars, British pounds, and many, many others. Open an account today at OKEX.com/pomp. Again, one more time, OKEX.com/pomp. Go check them out today and get on board. Next up is Crypto.com with 10-plus million users. It is the easiest place to buy and sell 100-plus cryptocurrencies.

• 2:10Anthony Pompliano?

  Crypto.com Visa Card gives you up to 8% back instantly and 100% back on Spotify and Netflix. Also, Crypto.com lets you earn a bunch on your stable coins and Bitcoin. You can get $25 off or $25 deposited, not off, $25 when you download the Crypto.com app with the code POMP. Download the app now using the link in the description, Crypto.com. Not only do they have an awesome URL, but Crypto.com is the place for massive adoption is occurring. Go check them out, Crypto.com. You've got a Visa card and you can get $25 if you download the Crypto.com app with code POMP. Lastly, don't forget that I write a daily letter to over 145,000 investors about business, technology and finance.

• 2:55Anthony Pompliano?

  I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at PompLetter.com. Again, PompLetter.com. All right, let's get in this episode with Jordy. I hope you enjoy this one.

• 3:10Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by POMP or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by POMP as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:36Anthony Pompliano?

  All right, guys. Bang, bang. I've got Jordy here with me. Thank you so much for doing this, sir.

• 3:41Speaker 02

  I appreciate you inviting me, Anthony. Thanks.

• 3:43Anthony Pompliano?

  For sure. Let's just start with your background. You run a very large hedge fund today, but how did you get your career started? And then what were the steps you took before you got here?

• 3:54Speaker 02

  My background started at Morgan Stanley right out of college, but I always try to give people a little bit of perspective on just a little further back. Just because it didn't start the traditional way, and I think it kind of helps explain. How I approach things when it comes to markets. And my father is and was a construction worker who invented all his own equipment. So it's this dynamic of someone who had an engineering mind, who didn't finish high school, understood probabilities and taught me those things. And that led to kind of a non-traditional path to to Wall Street, which was really focused on just my love of risk reward and probabilities.

• 4:37Speaker 02

  And so when I went through school, I didn't particularly embrace school, but I made it through for my family. And then when I got the job at Morgan Stanley, it was in kind of the controllers and risk management area. And I had the luxury of being able to build some risk systems as my first job. And that transitioned into me moving into the derivative world. And so derivatives is really about probabilities and outcomes. And so I I ended up in a place where I think my father kind of taught me how to think about things and it was a good place for me to be. And then through luck and circumstance, I ended up in emerging markets for almost all of the 90s, which was a great place again to be because you not only had to deal with

• 5:21Speaker 02

  risk reward, but you had to deal with volatility and volatility and uncertain outcomes. And so you really had to focus on the tails of the distribution. And I think that's become more important today, even in the developed world, where maybe in the 90s, the developed worlds were the stable place. I think over the course of the last 10 years, really since the great financial crisis, we've seen a shift. And so I think my background, just in terms of derivatives, emerging markets, believing that not only do tails occur more than the statistics would argue, but also that when they do occur, if you're in a position beforehand to not get emotional, those are the greatest opportunities to be involved in.

• 6:02Speaker 02

  And unlike past crises that have occurred in the United States where they tend to fall and then take a long time to recover, we seem to be in this boom-bust cycle where things happen at a much faster pace. And I think that matches up with the technology side. So that's a little bit of the background and how it all feeds in.

• 6:19Speaker 03

  Yeah, talk a little bit about the emerging markets. Obviously, as we kind of watch what's happening in the United States today, I think there's a lot of people who point to, you know, a certain emerging market and say, hey, we've seen this kind of play out before. And they try to use emerging markets as kind of evidence, whether it's for or against any specific topic. But it seems like emerging markets just serve right now as kind of a historical example in some cases. And so maybe just unpack a little bit more about what that experience in emerging markets was and kind of what some of your takeaways were as you spent so much time there.

• 6:54Speaker 02

  Yeah, it's a good question. So I lived in Brazil from 97 to 99, and there were a bunch of things I learned there. I think it was important for anyone who lives in the, you know, the safety of the United States to get a chance to live in countries where there's a lot more risk. And it opens up your eyes to some of the reasons for it from a macro basis. It's where all of my macro kind of background began. And I would say emerging markets compared to where they were in the 90s are very similar in some ways and extremely different in kind of where they are, both from an interest rate and inflation perspective. And if you think about Brazil as an example, when I had my first Portuguese lesson, I

• 7:39Speaker 02

  remember we spent almost the entire time when we got to the history of Brazil, almost all of it was on the currencies, just because they had had so many in such a short amount of time. But the recognition for me was I'm in a completely different place than the United States. And the financial situation for the country, having just come out of hyperinflation, left a residue of people waiting for when the next time it'll happen. When I moved to the country, I remember the first example of this was they were giving you the things you needed to buy to fill out your apartment. And one of the three things on the list, one of the top three, was a meat freezer. And I asked the person, why do I need a meat freezer? And they said, well, to protect you against inflation.

• 8:22Speaker 02

  So since we're going to talk about probably inflation later on, that was a thought process that you just don't know what the future is going to look like. And now we've got rates at insanely low levels relative to where they were when I was there. Inflation has been under much better control. The biggest change right now for me, and where emerging markets have a sweet spot in terms of where I think people should view them, not where they are right now during COVID, but where they will be five years from now, is this whole concept of leapfrogging. And they get the benefit of not having invested a tremendous amount of technology. They have people that are being educated more so than ever on YouTube or taking advantage of something they didn't have when I was there,

• 9:05Speaker 02

  which is there were shortages of teachers inside the country. And now because a million people can go to class online, these countries are going to benefit significantly in the next five to 10 years from having a lot of hungry people that have been very poor, that are able to learn online, which they never were able to do. And those changes take time to pass through. But I would say the biggest difference is that technology there, the leapfrogging is going to be a major story over the next five years. And I'm sure with your knowledge on the crypto side, you know, Brazil, Argentina, all of these countries are heavily involved on the crypto side. And I think a lot of that has to do with the governments and the way that they've not trusted them in the past. So it's giving them a strength and a populist movement in those countries

• 9:50Speaker 02

  that again, takes a long time to represent itself in the capital markets. But it's one of the places that I have a very, very strong opinion of going forward, that they will be the, a big, they will benefit a lot from what's happening post-COVID.

• 10:03Speaker 03

  Absolutely. Before we get into Bitcoin and cryptocurrencies, I want to talk just about the macroeconomy. And I know you've obviously been paying a lot of attention to this. We're about nine, 10 months from when I would say really the macroeconomy reaction to COVID started. So in the United States, once we started to shut down in March of 2020, the Federal Reserve and elected officials stepped in, they intervened in the markets, they printed now, you know, four plus trillion dollars and really kind of in a very historic way, we've seen both positive and negative, right? So kind of historic levels of unemployment, historic levels of quantitative easing, historic kind of emergency rate cuts down to zero, just so many different things that have happened that just hadn't happened before. What's your evaluation of kind of what's

• 10:47Speaker 03

  happened over the last nine or 10 months and then like where we stand today from a macro kind of evaluation?

• 10:55Speaker 02

  One of the things I think to say right off the bat, and you know, I've written, well, I've done webinars for most of last year, but since really when the printing started, and that's where we have to kind of start the conversation, I think one of the problems is the concept of the dollars. There's a different side to dollars and I'll just, I'll give you an idea. If you have $100,000 saved up and 50,000 of it is in your house, meaning you have $50,000 net worth in your house and you have $25,000 in art, and then you have $25,000 in the bank. If you had $100,000 in the bank, you obviously can immediately

• 11:40Speaker 02

  go out and spend the 100,000. The other one, you have to go through a bunch of inertia to get the money to be able to go spend. And the reason I bring that up is that's the way I viewed the difference in March and April of this year and continued now is that it's not just four trillion dollars. It is the fact that we are handing checks to people. And this is a major difference than what had happened to where during a recession of this magnitude where the entire world was shut down, personal income could grow. In the United States, and that's what happened last year. It never happened before. So if you go back to the great financial crisis, it took a long time for personal income to get back up to the levels that it was before the crisis, and that makes sense. People are out of work until everyone gets their job back. You don't have your income

• 12:21Speaker 02

  back up. But in this case, we magically found a way, and I say magically because it hadn't been done before, and it's continuing. We're doing more stimulus checks now. And so the first part is for people when they think about last year in hindsight, I don't think enough people grasped on the fact that we were handing people money, and that meant it would be spent. The second thing was because we shut everything down, everyone in the world has excess expenses, and nothing makes you realize you've been overspending on things you don't need to spend on, meaning a restaurant, a bottle of wine, anything is a lot more expensive if you go out and get it than if you stay at home and you order it in. Everyone saved a lot of money, so the savings rate exploded, and it's still high, and we're

• 13:04Speaker 02

  about to give people more checks. So you had this unique event around the globe where people's income was being made up for them while they were home, and their expenses went down. And so the macro economy coming out of this, as far as I'm concerned, has changed forever because of COVID. We had an election that coincided with it. The election is going to lead in some form to some redistribution of wealth, or at least that's the path that it seems to be going. And that's, that's very different than what we've seen. So some people call it modern monetary theory. I don't want to label it because I think the reality is just like when they change rules in sports and want to get more points on the board, which every, every sports team has done to keep them interactive. I think

• 13:49Speaker 02

  between what's happening in Reddit and the amount of money sloshing around the system, we've just increased the speed of this game dramatically, and that means you have to adapt significantly in the macro economy. And I think you can't use history as a gauge for what's happening right now, because I think the amount of dollars that are sitting in the system is dramatic, and I think the changes happening at the political level in terms of the redistribution are probably far greater than, than we realize, and they lead to a drastic change that I think we're seeing in all aspects of the global economy.

• 14:19Speaker 03

  So two questions off of that. The first is in terms of the importance of actually handing money. You talked a little bit about kind of personal income levels and the savings rate. Are there any other kind of ramifications from that activity of actually giving money directly to people versus maybe stuffing it somewhere else in the economy?

• 14:37Speaker 02

  There's a lot of differences that happen when you hand out money. I don't think we've seen the full impact. And what I mean by that is we're continuing to give people money. And remember, COVID is still going on. It's just not happening. We're not shutting down everything in the system. And people have gotten used to being at home. But my strongest belief for the next six months is people are underestimating the partying that is going to go on once the northern part of this hemisphere gets warm. There are more people out in Manhattan now, far more than there were at any time during, I would say, March to June of last year, yet the cases were much higher this time. So people have just come to live with it.

• 15:21Speaker 02

  So the recency bias over being worried about it is down. And yet their pockets are full of cash, which they will spend. Now, this is obviously not everyone, but when you go across, the economy is driven by the amount of dollars that's sitting in the system. It's not about any one group or any one person that's out of work. So when I talk about this, the economy is kind of, it puts everyone together. And I just think the amount of dollars that people are sitting on is going to be spent in a very big way. It has clearly helped housing. So you've had this move away from New York. And it involves a lot of things with millennials that were way behind the baby boomers and the Gen Xers in terms of their homeownership.

• 16:04Speaker 02

  And nothing drives human beings more to doing things. First, then running away from a disease which they can't see. But then, secondly, as they see other people making money on their house, it leads to more people wanting to own houses. Because why pay rent when you can put it into an asset that's going up at 15% a year? And we're getting to levels in terms of house appreciation that rival back, you know, before, really before the great financial crisis. So I think that's going to continue. And when you buy things outside the house, it means you're probably going to go buy cars. At the same time, we ended up with rates at historically low levels. So it's a very combustible situation. So it's not just the money printing, it's the low rates that are associated with it, too.

• 16:46Speaker 02

  And the fact that we're going to have this grand reopening in about three months that, regardless, I think of where COVID is in the US, I think people have already proven that they're ready to spend money. It's just a reflection of getting through the winter time at this point.

• 16:58Speaker 03

  Yeah, I think that you're dead on on a lot of that. You've mentioned kind of changes to the macro environment now that there's so much money sloshing around. You mentioned Reddit and a couple of other aspects to it. What are some of those main changes that you are paying attention to, right? Not so much just the kind of simple, hey, there's more spending or housing had a kind of a short-term benefit, but what do you think the long-term changes to the macro economy are going to be?

• 17:22Speaker 02

  Well, let's go back to what happened post-Great Financial Crisis because the world changed after that as well, and I think we all know, you know, the winners and losers. So, post-Great Financial Crisis, we've seen six companies in the United States of America, Facebook, Apple, Amazon, Google, Tesla, Microsoft, and some other one, I guess I'm forgetting. Their total market cap as of today is $8.3 trillion. The growth we've seen and the dominance by six companies to be that big, those six companies, the S&P 1500, which is a broad-based index in the United States, that sum of market

• 18:07Speaker 02

  cap for the top six names out of the 1500, it's greater than the bottom 86%. So, you've had the number-one theme coming out of that is that software has gobbled up everything. Amazon-dominated malls, and you had all of this thing that happened post that time. So, the question is, what will be the themes coming out of this one? So, when I talk about the fact that there's a redistribution of wealth going on, when you hear things about wealth taxes, well, wealth taxes impact people that own a lot of stocks in those six companies. If you go through a lot of the owners, and I won't pick out their names, but they have lots of money. And so, if you put a wealth tax, it's not good for those stocks. At the same time, we're seeing the Reddit community rev up and have an impact, and the impact is having on the bottom names.

• 18:50Speaker 02

  So, I just gave you a stat on the S&P 1500 for the last, yeah, for the market cap. So far this year, I went through this today, the S&P 1500 is up about 3%. There's over 120 names in the S&P 1500 that are already up this year over 25%. There are zero that are down 25% or more.

• 19:12Speaker 02

  The names out of the 120 plus that are up, only eight of them have a market cap of over $10 billion. So what you're left with is the Reddit community is having an impact on smaller securities like they did with GameStop and some of the ones that got all the attention last week. They can't move Amazon around, it's too big. But they can certainly move around the smaller groups, and I think that is going to continue, and that's a change. So one of the reasons is because the millennials took over the baby boomers as the biggest group or demographic in the United States. It's not just that fact, but I think everyone knows that every day, and if they don't know, there's about 5,000 baby boomers who die every day. The wealth transfer that's expected to occur over the next 30 years is, the numbers I've read, are up to $70 trillion.

• 19:55Speaker 02

  But there is money being transferred every day from a passive investing group that is older into a group that has shown to be a little bit more comfortable with single names and getting involved in the market and probably is more of a gaming community. And I think that dynamic has shifted the stock market. So those things are kind of impacting the market. Where it flips into the macroeconomy and starts to get into inflation, which is where I've spent a lot of my time writing, we have had three events occur that I think are really important for people to think about. One is the trade war that went on with China, which is still having repercussions. We will never have the relationship that we had with China. So the divorce has occurred.

• 20:35Speaker 02

  And when you build all of your, kind of your inputs in both labor and kind of getting cheaper goods over there, and now you're saying you have to redeploy the supply chains all around the globe, that has an input on costs, it just does. Secondly, you had the printing that went on, an enormous amount of money to offset the slowdown. And then for COVID, COVID is impacting the supply side because where it does have a massive impact is in social distancing. And so most of the supply side has some form of people being close together. And you've seen that whether it's been through meat companies having to shut down, all of these different places where you shove a lot of people into a short term. Has created a situation where there's going to be supply shortages for the rest of

• 21:19Speaker 02

  this year until we can catch up. You just can't, you can't get it going fast enough with COVID still out there. And in particular, when it's in a lot of the emerging markets, worse than it is in the developed markets, you end up with this whole situation. So the demand side keeps moving fast, but the supply side has been impacted both by the trade war and, and the COVID situation. So I think people are underestimating the inflation side. I can't think of a more combustible situation than all of those happening at the same time. So when people refute inflation or they say it's not going to come, I think the mistake will be for people that we haven't had enough investment on the input cost side of commodities over the last 10 years, primarily because of, again, ESG and the movements that it's had in terms of forcing people to focus on climate change. The problem is

• 22:04Speaker 02

  we still drive mainly cars that are fossil fuel. And until that changes, if you under invest in that area, you end up with another input cost inflation side. So if inflation doesn't happen, I'm going to be shocked, but all of the paths say that the number one thing coming out of this crisis that will surprise people is, is inflation.

• 22:22Speaker 03

  And when you think through that inflation can mean a whole bunch of different things, both in severity and also where it shows up. Talk through a little bit of just what is your expectation, fully understanding this, you know, complex system, literally facts change on a day to day basis. But just kind of as we stand right now, where do you expect the inflation to show up and how severe will it be?

• 22:44Speaker 02

  You know, it's, that's the first time someone's asked a question like that. It is the way it should always be with inflation. In fact, someone asked me the question on inflation. I said, you know, when you listen to the recaps of in the morning of what happened in sports the night before, and they try to find different words to define the outcome. And they'll go, and the Cavaliers crushed the Lakers and there was, the Knicks blew out, or they squeaked by. It's always somewhere. Well, that's what inflation is. Inflation at the end of the day has no true definition. So what a big number is, it, I just don't understand what it really means. So the way that I've kind of said this is core inflation in the United States, the one that the Fed predominantly uses, which is the PCE core deflator.

• 23:27Speaker 02

  Has really not migrated far away from the one and a half to two and a quarter percent range for basically my entire career in this industry. Very seldom will you find a more stable thing than the PCE core. And I think that has everything to do with the technological influences that have been going on since really the personal home computer entered in and we started going through it. And I am a deflationist at heart. I believe technology will continue to keep inflation in check. But when you're defining inflation, I do think we're going to have commodity inflation. I do think we're going to have problems with restaurants and restaurants are going to pass through expenses. There's going to be supply shortages for airline seats, for hotel rooms. Once this thing opens and everyone tries to travel at the same time, I don't know how

• 24:12Speaker 02

  we're going to ramp up the supply that quickly and hire all the people that we laid off when they're getting paid to stay at home. It's just not going to be the simple thing to get through it. So in the short term, until we get through that, I think there's going to be inflation for at least the next 18 months. My guess is that people will start to learn the difference between headline inflation and PCE core. Core inflation will have trouble going up too much. I do think it'll get up to probably the highest levels we've seen in some time, but my guess is, you know, 3% would be the highest that we could see on that. And then headline inflation, I think we will see five and a half to 6% by the time we get through the end of the summer. I think that's going to be the peak of this. But then at that point, as has been the case with Silicon Valley, any place where there's

• 24:56Speaker 02

  any kind of margins in anything, there will be people coming with technology to drive those margins back down. And within three years, four years, my guess is that we will find a way to move inflation back down to where it traditionally has been.

• 25:09Speaker 03

  Yep. I think it's a very rational way to look at it and probably a pretty likely scenario. Let's talk about kind of the solution. So obviously the macro environment's going to kind of do what the macro environment does. It'll kind of ebb and flow and eventually probably return back, you know, towards the mean. When you think of what investors can do, there's a whole bunch of different theories out there. So some theories would be, you know, stick to precious metals, real estate, Bitcoin, you know, many others. How did you just think about portfolios and kind of capital flows? And if people do buy into the inflation narrative, what should they be doing or how are you thinking about it?

• 25:47Speaker 02

  Well, let's start with with an important dynamic to start off, which is there's very few bonds existing on the planet that are yielding more than 2%. And the bulk of them, from the last chance I saw, were Chinese bonds, predominantly because that's the size, they're just so large. But the rest of the world, Europe, Japan, and the US, were yielding basically under 2%. And in a lot of cases, it's still negative yields. The reason that's an important starting point is because bonds have historically been an asset that we've all learned is investable, and it's no longer investable without taking significant risks of mark-to-market. I don't think that rates are going to really move higher at any time soon.

• 26:29Speaker 02

  In fact, there's one place where I differ with most strategists and most people I talk to is the assumption that if we get inflation in the US, and that's one thing I want to emphasize, when I'm talking about inflation, I'm really, I think this is going to be very, very specific and localized to the United States. We'll obviously see it in some other places, but I think the biggest story will be the United States having inflation because we've printed the most money, we've given the most in checks to people, and we have a consumer-based economy which loves to spend money, and we have this problem with China where we're literally at a trade war with them. So I think the combination of that will lead to a localized situation of the US, and the problem is for bonds, bonds are a global asset.

• 27:13Speaker 02

  So the US yields are positive, which is different than Japan and Europe. So it makes it very difficult for people not to buy US bonds. And so when you end up in that situation, the first thing you have to think about is where bond yields are going to be, and that forces people out on the risk curve. So for stocks, the big theme for me, again, is what I started to say, which is we've had a market driven by very few names creating the performance. And I think this is going to be much more geared towards the smaller cap and micro-cap securities, partly because of, like I said, on the buy side, these community of people that love buying these securities. Second thing is that we've beaten these down, a lot of them are in the financial space.

• 27:56Speaker 02

  The energy space, the material space, places that have been hurt for the last 10 years where I think there's a resurgence. But then one of the things that happened last week that definitely impacts the way, you know, directly to your question, portfolios and the way that we think about things. There was, you know, a, when Saturday Night Live is talking about GameStop and joking about it, you know, you've reached a point that something big happened in the marketplace that will leave an impact. And I think the impact it's going to mean for people who short securities on, on the institutional side is that they're going to avoid these micro cap or, you know, smaller than $10 billion names. And so that kind of creates a lift to those as well. And so I think for the next at least couple of years, it's going to be about small caps and micro caps.

• 28:37Speaker 02

  A lot of securities will double. That's not, that's not surprising coming out of a recession like this. But I think people are going to look there more for, for alpha. In terms of themes, aside from kind of the rise of the small caps, I'm big into believing that one thing COVID did was through these vaccines is open up the next few years and thinking about leaving kind of software for corporations and for home use. And now we're going to be getting into software for the human body and it'll lead to longevity and some things that I think we're already headed in that direction. But I think the amount of capital, both from the government and the private side that went into this area.

• 29:16Speaker 02

  And using COVID as a way to learn more about the way the immune system works towards fighting off diseases will open up an enormous amount of places in the biotech side, but really geared towards longevity. I'm very focused on 3D printing at this point because with this trade war, you're having, being forced to be more localized. And so there should be massive investments in 3D printing. And so I think you're going to start to see a lot of those companies. And some of those have been beaten down and are micro cap stocks. Some of them are up big this year. So those would be kind of the, the themes that I think coming out of here. And then for the crypto side, I do think. The world is changing and I'm just gonna, you know, I'm gonna kind of give you in my conversations with with this.

• 29:58Speaker 02

  Bitcoin is quickly becoming a emerging store of value. So the debate between gold and Bitcoin, I really have no interest in other than, you know, people below the age of 50 dominate Bitcoin and people above the age of 50 dominate gold. I don't want to be in that trade the other way, meaning I'll take the Bitcoin over gold side. Because of the generational wealth transfer that I mentioned, I don't even know how people argue this. It just doesn't make any sense. So I'm not saying it replaces it, but I'm saying anyone that owns gold should have a percentage of what they own gold for in store value in Bitcoin as well. Bitcoin is also, it's part of a technology ecosystem which you can't ignore. It is a better medium of exchange than gold. It's or I've already seen it in coffee shops and stuff on the West Coast. I've never seen gold

• 30:44Speaker 02

  accepted in coffee shops. So as a medium of exchange, as a technology and just as an emerging one, if you believe in decentralized finance, if you believe in any of these parts of the ecosystem regarding the blockchain, I think Bitcoin has become the dominant force in it. And I really do believe from an asset inflation perspective, if you believe the governments have now figured a tool, where elected officials are now directly pumping money into the system. Bitcoin is just going to benefit because it doesn't have a large size at this point. And I see it becoming an asset every day from real institutional people. So some themes, some stuff on the future.

• 31:22Speaker 03

  Got it. And so when you think through kind of creating a portfolio, you mentioned a little bit like taking a percentage of what you would allocate to gold, putting it in Bitcoin. How do you think about some of the kind of other elements, right? So as a hedge fund manager, you've got to balance between what I'll call like the old world and the new world, not necessarily because the old world is bad, but just like, you can go buy a stock, you can go buy a bunch of commodities, you can buy some crypto assets. Like, how do you just think about where you spend your time? So maybe not so much like moving capital, but are you spending 50% of your time in kind of the legacy world, 50% in the new world? Is it 75, 25? Just, you know, and I use time almost as a proxy for interest in kind of like where you see the world moving? How does that break down for you?

• 32:09Speaker 02

  It's a good question. Let me answer it this way because I'm in a unique position. As I mentioned, my first job at Morgan Stanley involved creating technology to deal with risk management on options traders and exotic options. And so from a business perspective, the first thing that I think about where I spend a lot of the time is infusing a firm with technology that is specifically meant to help me make better decisions. So I'm a moneyball freak. I believe you cannot make decisions without a combination of intuition and experience combined with analytics. And you have to measure biases to be able to do that. So a lot of people, particularly running companies, I think in this day, if they're not using technology, they're leveraging too much experience.

• 32:54Speaker 02

  And that experience assumes that the data you have in the past is representative of what the future is going to look like. And for any business to be successful, you have to make sure that you're making decisions based on some kind of trends that are going on. So we use a lot of technology and the people that, over the years, have kind of ended up being the drivers of the business, I will say they tend to be younger, they tend to have different backgrounds from each other so that we're getting a lot of different opinions on where things should be. So the first thing is kind of making sure that the firm is using technology, that the people have differences. And then the people that are managing money for us more directly, those people I mentioned, that's kind of the business side. The people that are managing the money, we've tried to give them technology to help them understand their biases.

• 33:39Speaker 02

  So, you know, I think I mentioned to you before we started to speak just briefly that I think of our firm as combining an approach which uses poker to kind of figure out behavioral decision making and try to make sure the people that we have fit the macro environment that we're going to be in. And where that fits in is through turnover. So turnover of a portfolio, we're not a long-term investment place, so we try to make most of our returns based on dispersion in the marketplace. And dispersion is driven a lot by the volatility in the market, but also kind of the velocity of change that's happening. And so vol-a-vol is really important to us. And so Not a lot of people are that comfortable in a fast game like that. And so if we believe that's what the environment is going to look like, we want to make sure that

• 34:24Speaker 02

  the people that we have managing money for us are capable of transacting at as fast a volume as the market would be. If you just sit in something, that's not what we do for a living. We actually want to take advantage of things like last week, be able to provide liquidity into those situations if we don't think they're going to continue. I did a webinar last week where I talked about the fact that it wasn't systemic to me and that it was an isolated event to the way some people manage money. We take a different approach to managing money. We do not have concentration. We have diversity, sorry, diversification and the fact that we have a lot of securities in the portfolio. And so we're really trying to use the technology to help identify through a scoring system of the way people are able to construct a neutral portfolio, but then also the behavioral

• 35:09Speaker 02

  analysis on the alpha that they create and how much that that turnover is luck and how much of it is skill.

• 35:15Speaker 03

  Yeah. And it's really fascinating to kind of think through the diversification and then not only to diversify across securities in the public market, but then you can diversify across kind of all asset classes, different markets, and you can really layer kind of a couple of different things in there. Before we go to the rapid fire questions to finish up, I want to ask one question, which I'm always fascinated by, especially people with macro backgrounds. What's been the most surprising thing, the thing you least expected that happened over the last kind of nine to 12 months?

• 35:46Speaker 02

  All right. I'm honestly going to answer this with something that is, you could have said the last nine or 10 days. So I grew up in emerging markets, which means those tails are always going to happen. So I don't get fixated on the tails, but I do ask myself the question every day, what would hurt market participants the most? And I'm specifically in my world of just the hedge fund community, which I know fairly well and I've spent a lot of time with. I never would have expected what happened last week, and I'm not going to go through all the details, but to see GameStop go up as much as it did and to hurt funds to the

• 36:28Speaker 02

  degree that it did, I never thought you would see something where the market was unchanged and we would have those kinds of losses in established funds with a lot of assets. As much as COVID was a shock, we all knew that a pandemic was part of the distribution of outcomes. We may not have envisioned it shutting down the entire world, but if you go back and look at all the documentaries done over the last 10 years, they pretty much called what would happen if there was a pandemic, meaning we'd have to shut everything down and people wouldn't be able to go in. Everything that they said would happen did happen and went on. And that's why I'm going to lean towards the fact that I never would have expected what went on last week. And I think it has huge implications, as I said, for the hedge fund community and the way that they manage, the way they manage money,

• 37:11Speaker 02

  because I don't think people are going to be comfortable on the short side. And it's going to change the way some funds manage their business. And these have been some of the more successful ones, at least over the last four years. So honestly, I'm still trying to figure out, because it never was in any of the distributions I had as a potential and a pandemic was.

• 37:30Speaker 03

  What is the thing that you're doing differently now after that's happened? Is there anything?

• 37:37Speaker 02

  I was on a call today and in our morning meeting, which we have every day, I highlighted to our teams that they really need to be wary of any short positions they have on any of these micro cap securities. And if they like securities that are on the smaller side, I think this is the beginning of a long-term trend. I mean, I could take you through a bunch of data, but the reality is, as I said about the fact that there's out of the 120 plus that are up over 25% this year, only eight of them have a market cap of greater than 10 billion. I mean, that's an insane statistic when given in the past years, it's been the mega cap stocks and the bigger cap softwares that have dominated, even a company like Zoom. I forget where they started last year, but at one point,

• 38:22Speaker 02

  Zoom was the same size as ExxonMobil. You know, you had a change last year where big cap tech software names were going. So I think it's mainly the thing we're talking about the most internally is this situation with.

• 38:37Speaker 02

  With the small caps, and then I'll just reiterate it again, which is, I think the inflation side coming out of this, without COVID, I don't think we would have had, there's no way we would have had as big an inflation, because you needed that, that printing of money, the stimulus checks being handed to people, along with people being shut in their house, saving money by not spending, and then at the flip side, having this trade war that was existing, and COVID preventing the supply side, the shortages are going to be much bigger than people realize, and it's going to have a short-term inflation component, and everyone has a recency bias that whatever's been happening is going to continue to happen, and that's why I think the peak panic, or the peak conversation on inflation will happen by, by August of this year.

• 39:16Speaker 03

  Yeah, it's a, it's a very unique view of the world, but I like it, it seems to, it makes a lot of sense to me. I always ask everyone the same three questions before I wrap up, and you get to ask me when to finish us. The first is, what's the most important book that you've ever read?

• 39:30Speaker 02

  The Art of Learning by Josh Waitzkin, I included it in the paper I wrote at the end of the year, but I think I've always been someone interested in the brain and the way people think. Once I started to meditate, I think I started to appreciate the powers of the brain a little bit more in terms of what, what's important about being calm, that you make your worst decisions when you're, when you're emotional. But I think what Josh was able to do was just show that if you really want to be great at anything, there is an element that gets into with the preparation, and really the, the focusing on your brain at very small points, and being able to slow down everything. And so, I think after that

• 40:12Speaker 02

  book, I changed a lot of things that I probably did as both a manager, but as a portfolio manager. My cooking got better, my skiing got better, my golf got better, a whole bunch of things that I think I incorporated those, those, those little elements that he brought in, but also, I think for all of us, we're trying to, we want a constant pursuit of happiness, and I think that book led me to ways that I can be more happy in life, too.

• 40:40Speaker 03

  Yeah, that's a great answer. Uh, second question is a little bit more personal. Uh, it's brought to you by our friends at Eight Sleep. They've got a thermoregulation bed that basically makes it super cold. I used to be one of these guys who didn't sleep at all. Uh, and now I'm like a religious eight-hour sleeper. What's your sleep schedule? Are you, uh, five, six hours? Are you eight or nine hours? How do you think about that?

• 41:00Speaker 02

  Uh, because I have both an Oura ring and a, a watch that measures my sleep, I have been consistently six and a half hours for pretty much the last, uh, 18 months since I had all of the technology. Um, I, I definitely care more about my quality of sleep and that's where I was trying to get the, the stuff to go through it. I, I will say this, the one thing I learned, the easiest way to, for me to have a good sleep is to make sure that I'm asleep by 10 o'clock. So, you know, I, I heard, I, I read a lot from people on sleeping and that was my one little thing was if I consistently went to sleep right around the same time, uh, that was when I had the best sleep scores, even if I didn't

• 41:42Speaker 02

  get the right amount of sleep that people would go. But six and a half is my, uh, is, is my, my normal sleep pattern.

• 41:49Speaker 03

  I'm, I'm jealous. If you, uh, if you're well-rested after six and a half, you're, you're saving 90 minutes that the rest of us, uh, need. Uh, last question is a little bit more fun. Uh, aliens, are you a believer or a non-believer?

• 42:02Speaker 02

  Uh, 100% believer.

• 42:06Speaker 03

  I'm, I'm the same way. Now, the big question is, are you a believer in that they exist somewhere out there and maybe we never come in contact? Or are you a believer in that, uh, they've come to Earth and no one's telling us?

• 42:17Speaker 02

  I've watched enough documentaries to know that anything is possible. And like I said at the beginning, when it gets into distributions, the one thing I'm really, uh, I'm really good at is, uh, I, um, every single thing that I make an answer to, I know there's a good chance that whatever answer I say is wrong. Um, and so if you go through life that way, if it's anywhere in the 30 to 60% range, I'm indifferent. It's just art to me. It's a flip of a coin. I don't care. It's when we get into the tails where, like, if I say 100%, which I did, absolutes are not my game in, in distribution, but I'm 100% certain, uh, that we are not the only creatures in, in, in, in, in the galaxies around us that exist. So, uh, there definitely is a high probability that...

• 43:03Speaker 02

  Someone's come down here to investigate what's going on.

• 43:08Speaker 03

  I love it. I love it. You could ask me one question to finish up. What you got for me?

• 43:12Speaker 02

  What's each day? What's the most important thing that you try to do each day?

• 43:17Speaker 03

  Uh, this has changed. Um, so pre pandemic, who knows what I would have said. Uh, now basically I go for a walk every day. And even if it's just a 20, 30 minute walk, or sometimes, you know, if I got a couple of calls back to back, I'll go and I'll walk for two hours. Uh, but just getting outside and, uh, and trying to get a walk in. Um, I don't know if it's just the, you know, kind of science behind just literally walking and, and, uh, what it does to your brain and your ability to think, uh, or what it is. But, uh, that's been something that's just kind of been a routine that I make sure that I do every day. And, uh, seems to, uh, to be pretty effective. So I keep doing it.

• 43:51Speaker 02

  Great.

• 43:53Speaker 03

  So, Jordan, listen, thank you so much for, uh, for taking the time to do this. Where can we send people to find you on the internet or find more about some of the work you're doing, the white papers, all of that?

• 44:01Speaker 02

  Yeah, we, we have a website. It's, uh, G W E S G W E I S S dot com. Um, everything, all the content that I do is on an insights tab. I write papers about every quarter. Last year was a little different, but then if you're interested in just what's happening in the market, I do webinars. They're 15 minutes. They're meant to be, uh, very fast with a lot of information. You can pause them and go back, but that's the way I kind of get my stuff out to the people that are both our investors, but also the people I talk to on a regular basis. So that's where you can find everything.

• 44:34Speaker 03

  I love, uh, the 15 minute webinar. That is a, uh, that's a really, uh, powerful thing. So, listen, thank you so much for taking the time to do this. Uh, I really enjoyed it. I hope people learned a lot. I'll have to do it again in the future.

• 44:46Speaker 02

  Anthony, looking forward to it. Anytime something comes up, give me a ring. Happy to, happy to jump on.