Why This Billionaire Investor Thinks Value Investing is Back ft. Mark Holowesko

26:09I think there are some really interesting energy plays because they're giving that cash back to you as shareholders. But in terms of Scott, the new Treasury Secretary, I think the only way they're going to get energy costs down is by allowing companies to drill, this drill baby drill, and also expanding the usage of natural gas. It's the quickest way of meeting your energy needs is through natural gas. So I think that's an interesting way to play it. Another interesting thing about Scott, if you go back and read some of his old letters before he became Treasury Secretary, I kind of feel that it's better, according to what I read in some of his letters, to let the dollar weaken and then to put tariffs on everything.

26:54That's right. And I think this idea that the dollar is going to be super strong and the U.S. administration wants a strong dollar, I don't agree with that. I think the dollar is certainly overvalued. The dollar is being driven by differential in yields around the world. Those yields differentials are narrowing. And I actually think Scott and the U.S. government would be very happy for the dollar a week. And that would take some of the pressure off of some of the manufacturing base in the United States. And so I think that's probably one of the things in the marketplace that's misplaced. And I think Scott would be very happy to see the dollar weekend.

27:27Yeah, I mean, he's a macro guy, he understands the game. And a weak dollar means not only do the US is able to export more goods, but global growth picks up. And we need a global growth cycle with what will come on to China in a bit. Also, Steve Mirren has talked about the same thing. Yeah, he's been very clear on this, his desire for the weaker dollar. And if we go back to the previous Trump administration, 2017, first thing they did was weaken the dollar. Right. So as a global equity investor, that's very exciting for me. Yeah. That really offers up opportunities. Yeah. One of the things normally a week a dollar kicks off is a commodity cycle.

28:08Yeah. Is that something that's on your radar screen as well? Yeah, I mean, you're talking about the need for electricity in the United States and electrification needs copper. And if you look at commodity prices generally relative to the price levels relative to the market, it's underperformed tremendously. And, yeah, so commodities generally, mainly copper, is very interesting for us. A lot of those stocks have generally underperformed more recently. And that's an area that we probably have about 10 % of our portfolio. And they're mainly non-U.S. copper producers. Most of the copper producers in the United States are a bit expensive.

28:48But some of the non-U.S. copper producers are very interesting. and are we seeing yet the demand for copper are we waiting for the demand to materialize when china and europe and everybody starts picking up where are we in that cycle yeah china's been the real drag on copper because obviously they've the demand for copper and the growth in the demand for copper has come from china mainly through infrastructure and obviously they need to move to more of a consumption economy and um the fact that they've slowed down so much has put pressure on the copper price. But I think electrification and the need for copper and electrification and energy production is going to start picking up.

29:26And even if the Chinese economy stabilizes, it takes too long to get copper production in place. We're not spending enough money around the world to put it in place. And even if you look at reasonable demand estimates for copper going forward, we don't have anywhere near the supply at these price levels. And it takes 15 or 20 years for some of these projects to get up to speed. So I think even though there's a bit of a surplus today, you're going to find out in the next two or three years that you're actually going to have a shortage of copper and it'll cause price adjustments and then you'll get the production.

30:00There's some really interesting copper deposits in the United States that can be tapped with better regulations and higher pricing. So it's not that the copper is not there, it just has to be accessed and higher prices are needed to access it. And these long cycles in things like copper mean that it's investable for somebody like yourself because you've got a structural trend that takes a while to play out. Correct. Yeah, that's correct. So how are you thinking through China right now? Because that's, you know, we're just, seems to be a debt deflation going on. It's not a surprise to many of us because it's been around for a while, but, you know, they need to stimulate, something needs to change because we need them as part of the global economy, even though we're sort of fighting with them over tariffs, but we all need that leg of the demand stall.

30:50What's your thinking on China right now? Yeah, well, we have a long history of investing in China and Hong Kong, as you probably know. I mean, we were coming out of the financial crisis in the 90s. We were the largest investor in Hong Kong. You know, I remember one of my first overseas trips was with Dr. Mark Mobius to Hong Kong. We went into China to look at watch manufacturers, a couple of which didn't even exist. You know, we were told about facilities and went there to look at them and they weren't even there. So, you know, it's a long history of going to China, looking at China and trying to figure the Chinese market out.

31:27You know, about two years ago, I think most people thought China was uninvestable. and particularly beginning of 2024 with the problems associated with Taiwan. I think today that's changed a bit in people because the market has turned around a bit. People are starting and they realize it's part of an index. People are starting to put some cash in there. But look, I sit on a board in Europe that had money in Russia when Russia invaded Ukraine and those assets went to zero. and um you know china makes any approach to taiwan you know those chinese assets that you have in your portfolio are going to go to zero because you just won't be able to trade them and i think that's that's the risk is it a is it a large risk no um but is it a 25 30 risk maybe you know maybe some people think that's a large risk um so if if you're going to look at china you have to take that in consideration.

32:23Up until, you know, I'd say today, there's so many other opportunities around the world that are cheap that you don't necessarily have to take that risk in China. So we only have about 5 % of our portfolio invested in China, but most people have much higher level of that indirectly exposed to China and they don't even know it. You know, if you invest in, you know, BMW as an example, you know, 40 % of their business comes from the Chinese market. You mentioned copper and the copper demand and the impact that has on pricing. So I believe that there are enough ideas around the world outside of China that you don't have to have a large investment in China.

33:05But there are some investments in China that are so interesting, that are so cheap, that they're worth looking at. But having said that, in Asia, most ideas that we're finding today in the Japanese market are cheaper, with better catalysts than the ideas in China. So I'm sort of avoiding answering the question a bit because... But you're not sure. Yeah, I think that, you know, who knows what the Chinese are going to do with Taiwan. If they invade Taiwan, all bets are off, your investments go to zero. My working hypothesis on that, it came up at a global macro investor round table last year, is that the game theory suggests that there can't be a conflict because it's too catastrophic, not only from the kinetic war thing, but TSMC.

33:56Right now with AGI, the dawn of AGI, this is far too important for everybody. Including China. the answer has got to be what the uk kind of did with hong kong and the us and everybody needs to say look you can have taiwan but the three tsmc plants in arizona need to get built the one in germany the one in japan and everyone kind of just goes their own way quietly yeah yeah i i agree with that i mean china does not have an aggressive history um you know i would you know argue i'm not an American, and I love America. It's the greatest country in the world. But America has more of an aggressive international policy than the Chinese do.

34:39And America has been more active militarily overseas than the Chinese have. And so my belief is that the Chinese won't attack it militarily, but that is a risk. But I do agree with you. I mean, 90 % of all of the most advanced chips in the world are produced in Taiwan. And you've got to believe that if the Chinese invade Taiwan, that those facilities won't be scuttled to some extent. There's no way in the world you could have the Chinese control over 90 % of the advanced chip production in the world. But that would be very detrimental to the Chinese as well. I mean, basically, it's detrimental to the world.

35:21And if that happened and the world went into some sort of depression because we didn't have chips anywhere, that's incredibly bad for the Chinese as well. And, you know, I think the Chinese really need to get their economy growing. They need stability in their economy. And they need that to control the place politically. So logic tells me that it doesn't make any sense for them to invade. And there needs to be a political solution. But if the political solution is what you've just recommended, then all these manufacturers of chip facilities must be incredible buys, because we have to duplicate that capacity around the world.

36:00Now, we started it to a certain extent, but we're nowhere near where it needs to be. And it's going to take, you know, three to six years to get that done. Yeah, I don't see another solution. So it just kind of feels like the obvious trade because anything else is so suboptimal for the world that we don't go there. And what kind of opportunities are you seeing in Japan? Is that on the kind of industrial manufacturing side? What are you seeing there in Japan? Well, it's one of the few or only countries in the world where the stock exchange itself is acting like an agitating shareholder. So basically, the stock exchange is mandated that companies trading below book value have to show how they're going to get their returns on capital up above their cost of capital, or they're going to be delisted.

36:49And we went through a process at the end of last year where they actually did that. they started delisting companies. And so you have the stock exchange itself agitating for change, which is really quite amazing. You have something like 40 % of all companies in Japan trading below book value. And despite the fact that the market hasn't done well, people don't realize that over the last 15 years, earnings growth in Japan has actually been better than earnings growth in America. And it's just because the multiples have been contracted and also the currency is weakened that your returns have been much lower.

37:24But because of this agitation that's going on, you're getting Japanese companies that are returning cash to shareholders and you're getting more M &A activity. Despite the fact that they're returning cash to shareholders, cash still continues to build up on balance sheets. So when you ask, what are we focusing on? We're focusing on those companies that have the greatest ability to return cash to us as shareholders. So those companies below book value, we have the greatest opportunity to increase the returns on capital above their cost of capital. And, you know, we just bought a whole basket of stocks in Japan where they have leased assets on there.

38:03You know, a lot of companies there have excess real estate and a lot of the real estate they don't use for manufacturing or service facilities. And as a result, they lease it out. It's not booked properly, not looked at properly when people value the companies. And if you looked at some of these companies, the least assets in their portfolios is 70 % or 80 % of the stock price. And these are assets that could be spun out at some point in time. So you basically have this massive change in Japan in a country where earnings have been doing well, returns on capital have been improving. And you've got the stock exchange itself agitating for change.

38:41And it's a lot of domestic companies as opposed to a lot of export companies. But it's very eclectic. It's basically companies that are cheap relative to book, companies that are cheap relative to assets on property, properly reflected on their balance sheets, where there's agitation for change. And is it realizable value? Does the market actually reprice these things or does it remain cheap? Yeah, absolutely. I think, you know, we're investing in a company today where they have a plan to distribute $350 million of capital back to shareholders. If they don't do that, the entire market cap of the company will be covered by net cash in three years.

39:26And this is a company that's making money and selling products around the world to a lot of different manufacturers. And they have a plan to do this. And even when they do this, they'll still have, and that's about 60 % of the market cap of the company. So because of the distributions that are being made and the share buybacks that are being made and the amount of shareholders that are going in and demanding change in Japan. Yeah, these are very investable companies with real catalysts and real change that are occurring. And it's very exciting. I think it's one of the most interesting non-US markets in the world today.

40:07And it's also the right time in the cycle as well. You know, as global growth starts finally to pick up again, Japan usually is the outperformer from that, from the cyclicality perspective as well. And you have an incredibly weak currency as well. I mean, incredibly weak currency. Now, you've got a lot of issues in Japan. The biggest probably, which would be debt, particularly government debt. But you do have cheap currency, cheap assets, and a lot of big change that's going on. And so it's a fantastic market. You know, when I used to go to Japan in the 80s and late 80s, if you ask somebody what their cost of capital was, first of all, they wouldn't even know what cost of capital was, much less what it was for themselves.

40:50And today, you know, the emphasis on return on capital and understanding what your return on capital is and your cost of capital is. It seems basic, but it's a big driving force in Japan. How much of a basket case is Europe? Because this is the age-old value trap, right? Europe's been a pig of a trade for a while. How are you thinking through this one? You know, I just came back from London, what's the name? Thursday, so Monday, I guess I came back. And, you know, it was interesting to see that market come down with Brexit and then come down again with COVID and then it got down to unbelievably cheap levels.

41:32If you want to know about the problems with Europe, you just have to need the Draghi report. I think it was an interesting report, but I don't think he said anything there that none of us don't know. There's too many regulations. I tried once to buy a small piece of land in Italy. Just getting your documents notarized in Italy is just an unbelievable process. It takes 10 minutes in the Caymans or in the Bahamas where you just go into a lawyer's office and you notarize it. You know, in Italy, you have to get the document in Italian and in English. You go to a notary office, which is a government office.

42:03They read every single page in Italian, and they read every single page in English. Then you have to sign it. Then you go on to the next page. You know, so it's just, it's a mindset that they've lived with for so long that it's going to take a while to turn it around. Mainland Europe is a bit of a mess. I'm actually quite hopeful about the UK. I think the UK has a lot of world-class companies, something like only 15 or 20 % of all the revenue generated by UK companies actually come from the UK. The rest comes from around the world. And so they've been forced to be fairly competitive. You've got a lot of world-class companies there in the energy sector that have been beaten up in the pharmaceutical sector.

42:41You've got some world-class packaging companies based in Ireland. um uh so look i think they're better ideas i think in a global portfolio if you look outside the united states i'd say the uk and japan are probably the two markets that are the cheapest with the greatest amount of potential i think europe is cheap but i don't europe x uk is cheap but it doesn't have the same amount of potential the only trade that seems doable still in in europe appears to be the defense stocks although that's getting more expensive yeah but they're you know they've run i've been looking at those i went to presentations you know two years ago and again last year in paris um by some of these manufacturers and um yeah i mean they definitely need to spend money i mean people are waking up to the fact that you know the united states is not going to only come to their defense but maybe a lot of this american equipment that they have for their defense can actually be controlled by the Americans.

43:42There's this theory that maybe a lot of the equipment has cut off switches, and even some of the nuclear arsenal in the UK is all maintained by the Americans. So I think there's an enormous amount of money that needs to be spent in that area. Generally, money flows tend to drive returns, but those stocks seem like they run ahead of themselves a bit. In the US, we've talked about some of the sectors in the US. What's interesting for you there? Or are you trying to avoid the US because the dollar has to weaken? You know, stuff like that. How are you thinking through the US? Because it's been so dominant for so many people.

44:20Yeah, America's now what, 75 % of the world index? That's incredible, right? Yeah. And in a global equity, long-only portfolio, I have 20%, which people think is crazy. In a hedge fund, I have 10 % because I can short out some things as well. And people think that's crazy as well. It kind of reminds me of Japan. In the late 1980s, Japan represented 60 % of the EFIN index. I used to run the Templeton Foreign Fund. At one point, I went to zero in Japan and it was 60 % of the index that I was compared to. People said, that's ridiculous. You're taking an enormous amount of risk. My response is, you're taking an enormous amount of risk.

44:56You're putting 40 % of your portfolio in a market you know is expensive only because it represents 60 % of the index you're compared to. And I think that's the same case in America today. Nobody wants to underweight America. You know, America is overvalued. America is historically overvalued. America is a phenomenal place, but everything has a price. And, you know, the amount of technology names trading over 10 times revenues today is just higher than it was during the peak of the bubble in 2000. and you know the market in america could fall 40 it still wouldn't be cheap it would be closer to fairly valued than cheap so um i don't think people understand the potential downside in the u.s market i think it's what would be the catalyst that causes that because there has to be a structural shift in the flow of capital out of these large technology stocks where people re-rate.

45:52I mean, we saw a bit of that in 2022 with inflation, but it needs to be significant inflation to stop these beasts because they generate so much free cash. How do you stop that? Well, you've already seen start of this, I think. I mean, you know, look at what's going on this year. You're seeing massive flows out of the US into Europe. Now, I think it should go to Asia and other places. And I think that the realization that rates aren't going back down. We never really know what the catalysts can be, but some of the catalysts could be rates maybe stay higher than people anticipate. Maybe, yesterday when the Fed announced that they were going to pause on the unwinding of their portfolio, I find that fascinating.

46:33Because most of the Fed owns, the Fed at the peak owned 20 % of the government debt. Now they own about 14 % of the government debt. It's all at the long end. Now, are they saying it's getting more difficult to unwind their portfolio at the long end? or are they pausing the unwinding because they know the Fed eventually, the Treasury eventually has to go to the long end because they have to roll a lot of the debt? There's so much debt in the system in the United States and so much of it has to be rolled. Maybe it's a problem in the debt market. Maybe the bond vigilantes come back out and take control of the direction of rates.

47:06We never really know what the cause of it is, but I can assure you that in all the work that we do, we're at historically high valuations. On a price to sales basis, we're well above the peak in 2000. On a price to replacement value basis, we're way above. On the cap ratio, which is the price relative to 10-year average earnings, we're well above where we've been other than going into 2022. The American market used to be a market that generated lots of free cash flow, but it was mainly tech-based. Lowe's tech companies now have to increase their CAPEX spending, and that's going to lower that free cash flow.

47:45If you look at the S &P 500, and if you take the seven stocks in the S &P 500, the big MAG 7, in 23 and 24, those seven stocks generated 30 % plus earnings. But the other 493 stocks, earnings were down in 2023 by about 4 % and up by about 3 % in 2024. So basically, everything outside of the big MAG7 stocks, the earnings have been poor. It's been the government that's been driving the economy in the United States. The government spending has to slow down. So I haven't answered your question what we're investing in yet, but I'm sort of saying that one of the reasons why we're so undervalued there is because why invest in stocks just because the market represents a large part of the index, so you can find so many better ideas outside the country.

48:36What we are investing in the U.S. is natural gas. I mentioned natural gas. I think that's a really interesting area. We're also investing in companies that help to increase production of oil and gas because that's going to pick up. Although some of the natural gas companies have moved, a lot of the companies in America, world-class companies that are dominant around the world that help companies expand oil and gas production, they're looking fairly cheap. Also, gold producers, gold producers don't, I'm not really a gold bug, but gold stocks don't necessarily represent anywhere near the price of gold today.

49:14There's a lot of undervalued companies there. There's some packaging companies that are really interesting. On the back of the fears of Ozempic, the dietary drug, and also what Robert F. Kennedy might do, a lot of these food stocks just got slammed. And, you know, okay, they may not have very great growth or any growth at all, but they're sort of becoming really interesting yield plays of, you know, cash alternatives. So there are things to do in the United States, but when we look around the world, about 20 % of our portfolio is invested long in the US. The rest is invested around the world. So when we look at your long only book, give me a rough idea of regional weightings and then sort of some sort of sector weighting you know just just so we can kind of visualize in our heads how you're seeing the world via your portfolio and then we'll talk about the shorts and about on the hedge fund side yeah so in a long only portfolio um it's actually 22 u.s it's about 14 in the uk it's about um 17 japan well so uk and japan are the two largest ones but we have about 40 in uk europe but it's mainly that that uk weighting um and um in asia uh it's um dominated by our weight in Japan.

50:40You know, we only have about 45 investments, and we really let our stocks drive our asset allocation. That's right. So you're not trying to follow an index. You're just trying to do what you do, and that just happens to be the weighting. Right. And, you know, sometimes we get massive overweights or underweights in countries, not so much in industries. We tend to keep our industry weighting sort of mid-teens on the high-end basis. We also, when you look around on industries, there's this big difference between upper income individuals and middle and lower income individuals in terms of their financial stability and their ability to spend money.

51:20And so a lot of our consumer weightings have been traditionally more geared towards the upper end of that income scale because that's where the spending is. You know, having said that, every 10 % move, I think, in the S &P impacts GDP growth by about 0.8%, 0.9%. That's been working really well on the way up, but it's going to have an adverse impact on the way down. Having said that as well, I think all these, you know, I keep telling people all these people getting laid off in America from government work, they're all getting a year's salary. The first thing they're going to do, Raul, is book a trip to the Cayman Islands or the Bahamas.

51:57On the cruise ships. Yeah. I mean, cruise ships are just, you know, jam packed, you know, and I flew in when I flew into here at the beginning of the week, you know, the airport's absolutely jam packed. So I think you're getting this sort of mini boom from, you know, I get laid off from my government job because of Dodge and, uh, I've got a year's worth of income. I'm going to go to the Bahamas for a couple of weeks and then come back and worry about what I'm going to do. I mean, it's full here right now. Spring break here is just like crazy full. Yeah, we have the amount of yachts we have roaming around the Bahamas, too.

52:31It's just it's unbelievable. I've never seen so much wealth in my life. I mean, it used to be that, you know, people would come over here in their 25, 30 foot sports center console boat. Now, you know, the smallest boats over here are 100 feet, you know, and you've got 150, 200, 300 foot yachts anchored everywhere. and so there's enormous amount of money at that wealth category and I think you're going to you might see a little bit of a boom as people spend money when they get it from the government as they get laid off but look you can't you you can't tell me that going from six percent budget deficit to GDP to three when you're pulling money out of the system when you're sending all the illegal immigrants home I'm not saying that any of these things are you know not the right policies but that's going to have an impact on, on the economics of the country.

53:24And it, you know, I'm not, I may have a degree in economics, which means I'm dangerous, but I would say that, um, you know, stagflation is probably a real possibility at some point in the U S after you see some of this money come through the system. So on the hedge fund side, because it's a different game, how do you think about shorts? It's all well and good being underweight something. it's very different being short something so when you're looking through the short book a what's your philosophical framework for what you'll short um is it the relative underperformance or you're looking for absolute performance on the shorts obviously we all want the absolute but it doesn't always work that way how are you thinking of that and what opportunities are you finding there yeah shortings change a lot over the years it used to be individual stock shorts, that's becoming very dangerous these days.

54:14So it's more baskets of shorts and indices to hedge.

54:21But generally, when we look at shorts, we're doing individual company shorts. We're doing shorts that are associated with arbitrage positions. So you have share class arbitrage, you have holding company arbitrage. And I would say the vast majority of our shorts have been associated somehow with some kind of arbitrage position. If you have a company that, you know, I'm not, we don't, I won't name the company, but if you have a company in Asia and it holds listed companies and those listed companies make up 80 % of its stock price and the remaining stub is, you know, super interesting. You can either just go long it or you can go long it and you can short out what it owns and create that stub.

55:00So the vast majority of our work historically has been non-directional as opposed to directional shorts. And most of the directional shorts have moved from stock-specific to more indexes. But look, I think that the indexes are the way to protect yourself these days because the indexes are so expensive. And if you just wait for opportunities in the market in terms of volatility and do it right, you can basically... You've had an opportunity to have great index shorts in place to offset some of the stuff you're doing. You know, technology is a great example. We have a list of, we're short a basket of stocks in the technology space that all trade over 10 times revenue.

55:5070 % of them don't make any money. They trade, you know, we feel the stock, that basket of stocks probably has 50 % to 60 % downside. any of those individual names, we could probably go short, but we're more comfortable having it as a basket because we just feel the individual names. So the only reason why we have that basket on is because we have four names in our portfolio on the technology side that we think are fantastic investments. And we sort of hedged that a bit by having this basket of very expensive loss-making technology stocks. It's been a tough game to try and play the relative performance of value versus growth.

56:33So do you try and avoid structuring your book that way and just saying, listen, we're just trying to find value that performs and shorts that do a decent job for us, as opposed to ending up fighting the war, which is a war that has been very painful for a lot of people to fight? Yeah, we're not going long value and shorting growth. I'd be raking beaches in the Bahamas if I had that trade on. I might be raking beaches in the Bahamas. It's not a bad job, it's not terrible um so yeah we don't try to play that relative game at all um we're on directional shorts you know company specific shorts we're trying to find problems with companies that are reflecting the stock price um and there's a fair number of those but um you know sometimes they can run much longer than you think you have to be very careful with those and we try to use options as much as we can, as opposed to shorting outright, because then obviously we limit our downside.

57:29The other thing that's interesting too, is just from a hedging perspective, we're 80 % now or 78 % non-US in terms of our exposure. But with the differences in interest rates around the world today, you don't have to take that currency risk as well. So there's an awful lot of hedging that can be done from a currency perspective. And in most cases around the world today, you get paid, in fact, in the forward market to hedge away most of your currency. So we do a fair amount of hedging there. And there's also, you have companies listed on two different exchanges, and sometimes they share different share classes, the values of those blow apart for different reasons.

58:08Sometimes we'll be able to take advantage of that. But in most cases, we have an upside and a downside for every stock we invest in. If I'm right, how much money am I I'm going to make and if I'm wrong, how much money I'm going to lose. If you try to buy stocks that are sort of four to one upside, you don't have to be right more than 50 % of the time, but you can also use options or short positions to try to achieve those targets as well. So we, I would say that most of the shorting that we do is conservative in nature and tries to reduce risk in the portfolio. And what about, I mean, you've had a, you know, a small and very loyal, steady investor base, but do have investors lost the love of value investing?

58:54How's that? What's the mindset of the investor? Because, you know, it's all well and good. You know, you, you've done your homework, you've been doing this for years, but investors are also a fickle bunch sometimes. Yeah, they are. I remember when I ran the Tumbledore Foreign Fund, I tied Peter Lynch for outperforming the index for a certain number of years. And then in 1998, when Asia was collapsing and I was buying Singapore Airlines below the cost of its aircraft and getting the business for free, and it kept going down, I think it was flat and the US market was up quite a lot. and we had net redemptions from the Templeton Foreign Fund for the first time.

59:34And I was sort of shocked. And Barron's wrote an article, Portfolio Manager Falls Off the Mountain. And then in 1999, I think we were up over 30%. And Barron's wrote an article, Portfolio Manager Comes In Out of the Cold. And it was nothing that we did in 1999. It was everything that we did in 1998 to sort of set ourselves up. I only say that because, you know, it was also one of the reasons why I decided I wanted to go off on my own because I was sort of shocked that, you know, you outperformed for, you know, from 85 until 98. And, you know, and then you have one year where you're not, you know, you didn't lose a lot of money.

1:00:13And, you know, all of a sudden a lot of people leave. And being a competitive person that sort of, you know, hits you right between the eyes. So, yeah, it's been a rough go for people in the value space. But I would say there's an enormous amount of interest in value today. And there was enormous amount of interest in value last year, but nobody really wanted to commit to it. Nobody really wanted to be the first one to miss out on that. But that's changing quite rapidly. I mean, I did a call last night with a massive pension fund that is looking to increase their allocation to global value money managers.

1:00:52you know rather not a lot of people in the value space that have been around 20 or 30 years do you know des kinch sure yeah this is my neighbor here i'm little and there's and you know a lot of people that are in the value space you know they sort of slipped into the growth space you know because they had to yeah um you know a large portion of the money we manage our owns that gives us luxury of sticking to our knitting but um i i really think you know and the numbers will show it, that value turned around when the 10-year turned around three years ago. And okay, you could say last year that wasn't the case, but last year I think was abnormal because of the election and all the liquidity that went into the system because of the election.

1:01:32And growth has been a liquidity and a difference in growth game. And the amount of liquidity that was thrown into the system last year prior to the election was just unprecedented. So I think it was a blip, and I think value has already turned around. I just think it's wrong to also think of it as value versus growth. it's like if you are a large pension plan you should have an allocation to both and they're different things they give you different return profiles different streams um and that's okay too but there's people have this thing in the head it's one versus the other i just don't see it that way one gives you a lot more comfort and ability to take long-term risk because of the embedded value the other is a more momentum-based play they're just two different things well i think a lot of people will criticize value money managers and say, look, value investing should encompass growth.

1:02:24And I agree, but growth became momentum investing, as you just mentioned. And so I think that's been the big issue. But look, if you look at a graph of growth versus value from 1975 until the global financial crisis, value generally outperformed growth with periods of dramatic growth outperformance, but generally, you know, value was outperforming for a long period of time. Since the global financial crisis, growth has outperformed tremendously with small periods of value outperformance, particularly 2022 and 2023 prior to the downturn last year in value versus growth. Once again, I just think that over the long run, it's a sensible approach because you're looking at, you know, we take an intrinsic value approach.

1:03:12intrinsic means unto itself we're not buying something that's cheap relative to the market we're buying something that we feel is cheap um on an absolute basis and if you do that you also protect your downside quite a lot and i think growth and value tend to make you tend to get these big readjustments in markets like this and markets like 2022 when you have these big down drafts and you know uh value tends to hold up very well in those down drafts and all of a sudden And people look back and, you know, they're your three-year numbers and they go, wow, that's not a bad number. Well, yeah, because in 2022, we didn't, you know, lose our shirt like a lot of growth managers did.

1:03:50Mark, fascinating conversation. I really appreciate it. And let's see how this plays out going forwards. I mean, I personally am more of a growth person, but I also can't help but think that there is incredible value that is misunderstood and mispriced still. and you know i'm also a business cycle guy and it just feels like it's the right point in the business cycle that it's it actually for once then becomes much easier once the business cycle starts expanding you know the cyclicality of this stuff is super interesting yeah well that's my space i'm having a lot of fun in it there's a lot to do and uh things are not only cheap relative to growth things are just cheap in our space so it's a lot of fun and i appreciate the time with you.

1:04:36It's been a lot of fun. Absolutely. I look forward to it. I haven't been to the Bahamas for a while, so I'll come at some point. We'll come visit. Get on one of those cruise ships and come on down. Oh my God, no way. Never going to happen. Yeah. All right, good to see you. All right, cheers. So in a discussion like this, it's not for me to extend my views, but to glean as much from someone like Mark as possible. We have a different investing approach, but Mark has an extraordinary amount of experience. And what I take away from it is where the other opportunities lie that I may not be focused on.

1:05:15And for you guys, not everybody wants to be a growth investor. Not everybody wants to be a crypto investor. But what you need to do is listen to the world's best investors. So I really hope you enjoy it. See you next time. Join over 7 ,000 attendees on June 18th to 19th at Super AI Singapore, Asia's largest AI event. East will meet West as industry leaders converge for two unparalleled days exploring the exponential AI age. Join us to unveil the future of LLMs, the intersection of AI and crypto, robotics, drones, space tech, the societal and economic impact of generative AI, and much more. Get tickets at superai.com with promo code realvision for an exclusive 20 % off only while tickets last.

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