Top Podcasts of the Week

August 31, 2020

Below is our “Top Podcast” episode with our curator, Colby Donovan!

Today we have a must-listen with Tom Basso on trend following, a couple of great episodes on the macro-environment, and an episode with possibly the best natural gas trader of all time who’s pivoted to devote his life to philanthropy.

Business

  • ***Must Listen*** The Meb Faber Show: #244 — Tom Basso — Investing Is A Mental Game More Than It Is Having The Perfect Indicator Or . . . Even The Perfect Position Sizing. This is a must listen on everything trend following and trading. Basso is a long-time trader, trend-follower, author, and founder of Trendstat Capital Management. He covers a lot, including the importance of adjusting position sizes over time as the market adjusts, embracing the idea of the long-tail of massive winners and therefore letting your winners run, and the mental aspect he approaches every trade with (he’s learned he only has a ~33% chance of being a winner in the long-run). [August 26, 2020–1 hour] iTunes Podcast | Spotify | Overcast |Google | Breaker | Website Link

My estimate is every time I go into a trade I tell myself I have a 2/3 chance of losing on this trade. And part of the mental side is then hey, if I’ve got a 2/3 chance of losing, I better watch my stop loss, make sure I set it properly, and make sure my position sizing is right.

Macro

  • We Study Billionaires: TIP311: Macro Mastermind w/ Lyn Alden, Luke Gromen, & Jeff Booth. This is a great conversation with three people all about the macro environment. They discuss whether there will be liquidity issues with the dollar, possible alternative currencies to the dollar and the potential of having multiple instead of just one dominant currency, the impact of infinite global quantitative easing. and potential inflation. They wrap with a deep discussion on what they think about bitcoin and potential government crypto currencies. [August 22, 2020–1 hour, 39 minutes] iTunes Podcast | Spotify | Overcast |Google | Breaker| Website Link

In the long-term, removal of fiscal stimulus, short everything. There is a repricing event coming on everything, Everything will be repriced. Whether it comes from a policy error or whether it comes from continually printing and people lose faith in printing and then people lose faith in currencies, one way or another we’re going to have a repricing event.

  • Resolve’s Gestalt University: ReSolve Riffs with Michael Green on Market Reflexivity. Green, the Chief Strategist for Logica Capital, has been in the spotlight over the last year discussing the dangers of passive investing. After explaining the why behind his thesis, he talks about how his firm tries to profit off this phenomenon, what he think the end-game is if this continues, what he thinks about rates, inflation and MMT, and why this is the golden age for frauds (see below). He backs his points up with a lot of history lessons along the way as well. [August 24, 2020–1 hour, 33 minutes] iTunes Podcast | Spotify | Overcast |Google | Breaker| Website Link

This is the golden age of frauds. What could be better for a fraud than a situation in which the single largest investor and by far the majority of flows, actually and more than 100% of the flows, are flowing to an investment theme where the current price is the right price and there’s no understanding of the fundamentals.

Valuation & Portfolio Management

  • The Acquirers Podcast: Moat Master: Brian Bares talks small cap, moats, and high growth. Bares is the author of The Small-Cap Advantage and founder of Bares Capital Management, which has a heavy focus on micro-cap stocks. He explains he chose to run a very concentrated microcap portfolio after he realized endowments would have to allocate to managers with different niches. His microcap fund is ~$130 million with 7–12 names and the firm has branched out into funds that focus on larger names with lower expenses. He explains his process of idea sourcing, how he conducts valuations with a 10% cost of capital, and why he really focuses on holding stocks for the long-term unless there’s a quantitative crack in the investment thesis. The episode finishes with his thoughts on moats and his focus on management’s capital allocation ability. [August 24, 2020–57 minutes] iTunes Podcast | Spotify | Overcast |Google | Breaker| Website Link

I saw the world shifting to more concentrated, active share managers. So despite the fact there were less absolute dollars going to public equity, the large firms were getting fired, and Yale and others were starting to find firms like ours that are highly concentrated.

  • Michael Covel’s Trend Following: Ep. 896: Tim Koller Interview. This is a great conversation on what constitutes value creation and what firms should be focusing on. Koller authored the famous ‘Valuation’ book 30 years ago with McKinsey that’s used widely to this day. He explains it was originally written to help CEO’s understand what created value when they weren’t focused solely on that. He touches on what’s changed since he wrote the book and the current focus on satisfying all stakeholders instead of focusing on shareholder returns, which he says align for the most part. [August 23, 2020–45 minutes] iTunes Podcast | Spotify | Overcast |Google | Breaker| Website Link

Companies create value through the combination of high invested return on capital and how fast can they grow the business. Those two factors translate into cash flows, and that drives the value of the company.

  • The Long View: Steve Romick: ‘We Think Defensively.’ Romick is the manager of the FPA Crescent Fund, which is a contrarian value strategy. He discusses his thought process on handling risk and reward as COVID occurred and why he is more invested with little cash at the moment. He also talks about how he’s positioned: he’s holding little cash and tilting towards foreign while avoiding duration risk. He also explains why he’s favoring cyclicals that won’t be permanently effected by COVID, such as leisure and hospitality stocks. He also makes the pitch for being long Wells Fargo. [August 26, 2020–51 minutes] iTunes Podcast | Spotify | Overcast |Google | Breaker | Website Link

  • The Investors First Podcast: Chris Cannon, CFA & Michael Falk, CFA: Six Deadly Sins of Investing. Falk is a partner at the Focus Consulting Group and reviews his six deadly sins of investing before focusing on one throughout the rest of the episode: we do too much with our money and don’t have a sell discipline. He says most of the investment teams he works with say they struggle with when to sell and don’t have written rules about selling (like how to predetermine when a stock has run too far, when to take some chips off the table, or when to get out completely). He also suggests tracking stocks you chose not to buy and stocks after you sell them. [August 27, 2020–28 minutes] iTunes Podcast | Spotify | Overcast |Google | Breaker| Website Link

People denounce overconfidence as being this demonstratively negative thing, and it is. But without it, how do you ever make the decision to invest in the first place?

The Rest

  • The Peter Attia Drive: #125 — John Arnold: The most prolific philanthropist you may not have heard of. This episode is essentially divided into two parts and you can listen to one or both parts depending on your interest. The first 69 minutes are about Arnold’s professional career as a natural gas trader, both at Enron and on his own. He is regarded by some as the most successful natural gas trader of all time and moved up the ranks at Enron incredibly fast. After Enron blew up, he moved on to start his own fund and doubled his money in a week in February 2003. Then, he moves on to discuss his philanthropic work and giving roughly $500 million a year. His firm, Arnold Ventures, now has 120 employees and has a major focus on driving systematic change at the root cause of issues. Some of the issues he’s focused on fixing include criminal justice reform, improving people’s ability to integrate into society after being released from jail, driving down drug prices, and improving K-12 education. [August 24, 2020–2 hours, 24 minutes] iTunes Podcast | Spotify | Overcast |Google | Breaker | Website Link

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Good investing,

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