YouSaid · the spoken record

Antti Ilmanen

lines on the record: 67
first: 2022-07-15
most recent: 2022-07-15
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“I thought I'll say this lightly that bond yields can go negative. Didn't expect that to happen. But the funny thing is that I thought that really I would have then expected that to coincide with bearish equity markets. But in 2010s, it actually happened with a big bull market. So it wasn't that equities equity weakness pushed bond yields down, but it was that low bond yields pushed equities up. So causality went that way and that's surprising. So I think that's one. And then another serious point is how important and how hard patience is. So with all of these ideas, I talk about this long-run strategies and you just... It doesn't matter too much if you don't have the stickiness. So I think one has to really calibrate one's investment to the amount of patients one can reasonably expect to have.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Telling how different the people who are most often studied in various psychological studies, the Western university students, how different they are from most cultures. And then it's explaining why things went that way. And it's both parts of the story are very interesting. But again, a very long book.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I am a voracious reader, lots of investing fiction, nonfiction, all kinds of things. I thought I will highlight from fiction really big one Hilary Mantel's trilogy on Thomas Cromwell, Wolf Hall. I was thinking, I think maybe I heard in your show also the three-body problem, very different, the sci-fi, the Chinese one. That was great. And then on... On nonfiction, I think the most impressive book I read in the last couple of years was Joe Henrich's The Weirdest People in the World. So this is weird is Western educated rich democratic. And it's basically telling”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“So obviously, I told the dissertation chairman Fama in French, so they've been very influential in many ways. But I would especially then highlight Marty Liebovic. Before, during, and after calamity, yes, and he's such a mention that it's wonderful to have known him for the case.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Cautionary tales is fun, and Zingales and Bethany McLean capitalism has got very thoughtful topics. So I think they are good, but I love in history area. I love Dan Carlin, Mike Duncan, Patrick Wyman. And there's a British so-called Rest Is History, which just always makes me laugh.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, so as a first nonviolent or non interesting answer, I think recently, better call Sol, looking forward to the last few episodes. So that's been great. But I thought that I'd rather highlight than some less well-known older series. So my favorites, I think, in last 10 years were sort of slow burn the Americans, the Russian spice, that one, or rectify, it was a story from southern US and just, I think lovely stories, we've got to take time for those. And likewise, then in podcasts. I listen a lot to history, and so beyond investing, and I'll just leave. Well, near investing, I would say Tim Harford's”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, sure. Yeah, I thought about this in recent months when I have heard you ask this question. And by the way, I've gotten some good tips. I got Le Bureau and call my agent, the French ones, and some Israeli shows from here. So thanks for those. Yeah, yeah.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Or you go to polar ice, you go into icy water. That's even better, but that's hard. But yeah, no, it's... Great fun when you can rarely do that.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“I was thinking whether you are talking Fahrenheit or Fahrenheit. No, we are talking water. No, no, no, with centigrade. No, we do go close to 40 degrees”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that possibility always exists. And now that we had it, I think it is going to raise more discussions in some organizations than how to deal with any financial trade-off. And I must say that in Europe, I think that investors will largely stay with their ESG beliefs and there's not going to be question if they think there's some financial cost that's okay. In US, there's more doubts and it has become such a political issue that it's going to be, I think, harder. Or anything I can say on this one, I think, is that there was a sort of easy travel towards more ESG for the last few years. And now I think we are in a world where it's going to be harder. I think the trend is still the same, but it's going to be more jagged going ahead and maybe especially so in US.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“When investors really like something for non monetary reasons, and that includes ESG, then I think the reasonable counter-argument is that we may be in a transition phase here where we are getting the repricings. How do we get to those higher risk countries? Well, we get it basically by making those companies cheaper. And then we can debate now whether we are in early innings or late innings on that question. In the long run, I think there will be some cost and I think most investors who are ESG oriented should be willing to take some cost as a flip side of their virtuous investing. But in between, they might get sort of the win-win outcome that they saw.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“So it is clearly growing force, and I would argue also largely a force for good, but the expected return impact is debatable. And so Cliff Rot already a blog a few years ago highlighting this simple logic that, well, one logic is a constraints always should have a cost. But another logic is that if you want to be virtuous and you want to raise the discount rates for sinful companies, Well, you do that by maybe investing less in them, or even in some cases you could short them. And so if you do that and you raise their discount rate, you also raise that discount rate is a flip side of expected return. Makes them more attractive. So somebody else who is willing to basically buy those sinful companies then will earn higher return. So that is pretty much a long run story that should happen.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, and lots of single ones of them. And so again, commodities, you know, these types of Effects happen in any investment on your equities, on your bonds, and so on. It just doesn't matter so much with them because the correlations tend to be higher or volatility is lower. Commodities have got this glorious combination of high volatility and local correlation that makes this really matter.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Focused on it in the commodity sector, telling that part of it is related to commodity role maybe, but important part is related to diversification returns. So basically this is getting very geeky, but let me just try commodities on a single commodity basis have got 30-40% volatility, which means that that type of volatility hurts compound returns a lot. And when you combine lowly correlated commodities together, you can reduce that volatility roughly half it, and you can get this volatility drag much smaller. And so if, as the evidence suggests, that a single commodity has pretty much not outperformed cash in the long run, the portfolio of them has done it because of this saving on this volatility drag thanks to diversification.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“I think commodities is the most interesting case. And so I've got a double positive story on that one. The first one is the obvious one, that when we look for inflation hedging investments, they are pretty much the best there is. So most portfolios that invest, most constituents of anybody's portfolio, stocks, bonds and so on They have with this inflationary tilt. That was helpful for a long time, but not recently. And so if you want to have a pretty neutral portfolio, you should have some allocation to commodities. Then the second point. Is that many investors think that you don't earn a positive long run reward on commodities, but the data says otherwise basically? Diversified combination of commodity futures has earned something like 3-4% long-run reward. And it's a weird thing.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“And one further thing is that these questions were already relevant a few years ago, but private equity did very well the last few years. And I saw Dan Rasmussen wrote quite nicely. I sort of recognize, I mean, that's rare and lovely when somebody does. Post mortem on my mistake. That's what he did there. And he said he got it wrong because the private equity, like hedge funds and especially venture capital, were pushing a lot into the growth sector. And that worked out very well for a few years. And I think to the extent that we are right about the value versus growth, that benefit will turn into disadvantage, I think, in the coming years.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say just positively that historically, in particular, if we look at private equity, it has a great 35-year history of outperforming S&P 500 by 3% or something like that every year. And that's after 5-6% fees. That gross alpha is just mind boggling in some sense. But looking ahead, we should be much more cautious because the gap has already been much narrower over the last 15 years and it seems to be narrower because the money was flowing in because of the popularization of the Yale model. Since then, the forward-looking opportunity has been much narrower and realized opportunity has been much more modest. And the fees are the good old fees. So I think next decade will be more disappointing.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“So, apart from thinking about illiquids overall, one of these great selling points there is the wide dispersion between outperformers and underperformers. And to me, that's such a lovely example of investor overconfidence. That when people see this dispersion, they think, oh, the upside is for me, the downside is for someone else. And so clearly this opportunity involves some risk as well. And it's just somehow that industry doesn't seem to have anybody getting that. Downside. So, sorry, I do think that some investors have got a decent claim to expect to get those top quart or let's say top half managers. But for others, I think it's somehow It's better to just think that okay, if we get the industry level returns, that's reasonable.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“And that may totally offset the amount of excess return that you get. So if there's a 2-3% required illiquidity premium for locking money, we might accept the same return for public and private equities because with the private equities, you don't get the great volatility that comes.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so I've written a lot about it, Cliff, of course, also and more wittily on this. And I think it's dangerous that people think too automatically that if I invest in illiquid investments, I'm going to earn an illiquidity premium. I think after equity premium, that's probably the second most confident statement people would have on longer than expected returns. And data doesn't really support. May be disappointing, I think, that people somehow confuse. They think that The illiquidity is the only important feature. So, yes, I think it is fair to require illiquidity premium for locking your money for 10 years. But then there's this other characteristics, lack of mark-to-market, the smoothing services I call it.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Assets have cheapened, as one would have expected in this situation. And the question is whether there's going to be more. I think it is interesting that we've seen the biggest moves in bonds, smaller moves when I think of yield space, not price space. But in yield space, equity yields have risen, and then illiquid yields have risen so far very little. And of course, there is a smoothing effect. And so that's a, but I do expect that there's going to be an issue. I saw in March when equities didn't instantly respond to rising yields, it reminded me of Wiley, Coyote running over that cliff and sort of waiting for gravity to hit. And I think something like that maybe still happening with the private assets that they are sort of waiting to price things.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. I think overall I feel totally blessed that we got the book came out at the time when markets were roughly acting the way the title was saying, talking about low expected rate as we got low realized returns. So that sounds great. And it also turns out that some of our strategies, value strategy trend following these types of strategies are doing very well. So I'm getting great response. But of course, things have some things have happened as expected related to inflation central bank tightening. But then I had no idea what the geopolitics, Ukraine or the greater split we have between US fear and China and so on. And I don't have great insights to this. For us, when I think of the long-run expected returns, the key story is that”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“It's mainly it's great, though. If you had him with us here on this studio, I think you wouldn't hear much of me. And that's just as well because he's faster on his feet and he's wittier. So that's in everybody's benefit. So seriously, it does help that our investment thinking, investment beliefs are so similar. So I really rarely have got any wish to second guess anything he says or does. So that's great. And then most importantly, I do love his ethical antenna and this kind of truth telling obsession that he has. I mean, sometimes there are overshoots there, but it's really, it's a reason for me why I love to work in AQR more than in any other place in financial industry.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“And with that, the key story of this recent bubble was really markets favoring these disruptive profitless growth companies within every sector. And that opportunity remains still very wide. And we love seeing pretty good performance behind us and then very good runway because those value spreads remain quite wide.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Value premium is still very cheap, and it's been a lovely year in the sense that we have had positive returns, and yet the value spread, this forward-looking measure of how cheap value stocks versus growth stocks has remained wide, and partly it is that you get some pullbacks like we have recently gotten, but also we are basically rotating into new values stocks and growth stocks. And the fundamentals have actually further had favorable developments favoring value stocks versus growth stocks. So for all these reasons, we see that value stocks, the way we tend to trade them, are as cheap or even cheaper than they were at the worst times during the dot-com bubble. And it is important to just distinguish, and Criff wrote about this in a blog recently, that that dot-com bubble was very much about tech versus others. And across sectors, we haven't gotten to the new highs, but we tend to focus on within industry stock selection in our value strategy.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I would be surprised that we would get that much cheaper. And again, the economic logic I have is there, the savings clutch somehow, that basically real yields are not going to allow that we have two, I don't know, fragile economies, two fragile financial markets to allow that much deepening. So we might be talking of 40-50% further market falls.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. So I think the long horizon estimates are very difficult to change. The starting yields are a heavy anchor. So I think it would really require the growth environment to change. Again, I mentioned earlier the technological progress, those types of things. So short term, anything can happen. But somehow you have to have this type of idea of the greater internet usage globally and all kinds of technological progress. moving us from the 2% to 3% 4% reality.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Either if it acts more or financial markets drop enough, then there's going to be some pretty bad outcomes to risky assets. Without that, I think we are going to continue to have that inflation problem. There's a narrow path how it could go in a more benign way and market seems.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“First, just a qualifier here that nobody knows. Nobody knows, and we don't trade on my views. That's important. And it's incredibly difficult. But we certainly do think about those issues a lot. And I'm pretty much, let's say, Larry Summerskamp there thinking that it's very hard to get immaculate disinflation here. will need Fed needs to do more to get that inflation into control. And if it does...”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“That is right. And again, we have got now this cyclical situation where basically the inflation problem forced finally central banks to act quite aggressively then on, well, Fed anyway on the interest rate front. And then how much more they have to do is going to be important in the near term. But I just don't see a scenario where they would raise rate so much that we would get back to the kind of 4-5% expected real return so 6040 portfolios which used to be there. We are about half of that nowadays. We've come from the lows but we are still like let's say 60-40 2% real yield is roughly the number as opposed to the 4 plus long run.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“High valuations on all other on stocks and real estate and so on, and those rising yields have been very important in cheapening those other asset classes. And so I think there's going to be more pain on that front, but not too much. I don't think We will get so much higher yields and cheaper asset valuations that we would sort of solve the long run problem of low expected returns. We will still get some pain, but I think the slow pain will be with us quite a long time.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the main story of the book is about those low starting years, and therefore we are talking of long run story. Then I'll sort of turn into more speculative pundit here by thinking about the current situation where I do think that we are now in this fast pain situation, where we will probably get more, we will surely get more monetary policy tightening and I suspect that the latest market positivists on yields is maybe way too optimistic. I think you will need more tightening to control inflation. Again, this is a speculative talk here. So I think fast pain will be with us for various risky assets, but I think there will be a limit to it because of the structural forces. I refer to the savings clutch. I think that's not going away anytime soon. And therefore, there's going to be a lid on how far yields can rise. And basically those bond yields, they have been underwrite.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think it is for any investor, but if you have made some commitments for the future, then it is maybe more legally binding and that makes it tougher than for somebody who can basically adjust expectations or try to just live through these things without sort of recognizing the low expected return until somewhere far into the future.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Some interesting yield levels 20 years ago, you had a 3-4% real return of cash, not around in this situation. So I do think that the main story with cash C is like you said there's something about the dragging it dilutes. It's not a great diversifier, it dilutes the performance. It would be good if you have got some great market timing skills, but let's be humble about it. Often I'd even say that cash may be best used as a basically, on the other side, like you want to use it for leverage for some long shot strategies. And so that may be a helpful answer what you do with that.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, even in 2022, again, in relative sense, cash is, of course, doing fine, but the real returning cash is whatever, minus 5%. It just happens to be better than even more bearish results. And so I think one interesting thing is that you need to have some market timing ability, I think, to make cash useful and use it almost as an option. And then it matters whether you have got...”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“It's quite amazing. And there are some stories why that's the case. Basically, one logic is a GDP growth doesn't capture how the pie is shared between corporates and so on. And there's a different sector compositions. There's public versus unlisted sectors, all kinds of questions like this that can then mechanically explain why this happens. But it is a weird result and it's understandable. And I think it commonly motivates people to look for those fast-growing countries. Taking it for granted that that's a good equity investment.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“It's surprising that whether you look at over time in one country or you look at across countries, the relation is very modest. And my favorite poster boy on that one is China, which had this 30 years of very fast GDP growth. And for equity investors”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Five to ten years, something like that. And yeah, it's interesting if you go even further, then sort of valuations even don't matter. Everything gets diluted. And then you have to think about what some theoretical long-run return. But for 10 years ahead, then starting eats and valuations are essential. And again, so I think those are very helpful anchor for thinking about those returns, even though you can get this very ugly forecast errors like what happened in the last decade. But when such a thing happens, then it pretty much stores problem for the future. So last decade, as it's richened, it just meant that you are going to have even more problems in those future returns. And I think the only way you can sort of solve the low expected return problem here is, at least for risky assets, is that there would be this much faster growth, this techno-optimism that you hear in some quarters. And there I could be, but we've had wonderful technological advance.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Really depends on what horizon we talk about. So monetary policy, macro conditions are very important for short term. But I think I'd like to focus and I do focus in the book mainly on long-term expected returns.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“So rebalancing, I think, is a way of ensuring that you can retain your risk targets and you can retain your diversification. So I think of it primarily as that there's a follow-up question whether you can get better returns and then how you do it and so on. And I talk a little. I think I wouldn't be too strict on rebalancing. I think one good idea is to be somewhat lazy with rebalancing strategy. Yeah, something like that. Or maybe four times a year, but part of the portfolio. So you are sort of averaging. You don't get so dependent on when you did it during the year. So that type of thing, but basically, if you are a little lazy or patient with rebalancing, you let the near-term momentum play out and you might get closer to the time when there's mean reversion and advantages. So you are trying to play a little bit these advantages that tend to be in financial markets with momentum and mean reversion.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“But I think there are challenges that good risk diversification often then requires you to use some shorting and leverage and there are limits to how much people want to do that. There's unconventionality issues. And then there's what we've highlighted in recent years, that you sort of inherently you lack stories. And so it's very sort of math-oriented or algebra-oriented type of thing as opposed to great stories which drive most investment passions.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“I do think it's a cliche, but diversification is pretty close to a free lunch and it is a wonderful aid to improving portfolios. I think it's much easier to improve your risk adjusted returns through good risk diversification than by getting somehow greater insights in one particular strategy. I write about it both, I don't know, the simple maths about it, how you can double sharp ratios with four uncorrelated strategies, and then remind that it's really difficult to find four uncorrelated strategies in long only world. You may have to get to long short world to take advantage of those types of opportunities. And then the flip side of that, I am saying that diversification has got some critics, of course there's diversification or that diversification fails when most needed and so on. And I think I can counter those to some extent.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Than today. All fair. So I'll just say, well, first I say, you just do the best you can. And I think there's some value in the data, but there are data problems. There are investibility questions. Even if the data were fine, maybe you couldn't do foreign diversification or something like that. Well, actually, before first World War, maybe you could. That was pretty international era. And then this whole criticism that the world has structurally changed. And that criticism has more bite the further back you go. So I think for all these reasons, we should be skeptical, but I still like it as a supplementary evidence, not as main motivation for anything. So you meant...”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Different centuries pervasively across different countries and asset classes and robust with different specifications. So that makes me more confident. But I have recognized, and that's something I say in the book as well, that when people see my 100 and 200 years of data there, some just roll their eyes, why do I care about 200 years of data? I really care about last three years with my own portfolio.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. So the first point is that we accrue out of sample new experience so slowly that it's painful to do that weighting. And therefore it is helpful supplementary source to get some old data sources. Most early studies were done with data since 1960s to 90s and then it was extended to beginning of CRISP data 1926 and now we've had people going further back and I am so I haven't been one of those in the archives but I'm one of those looking at that data and studying it critically and seeing what we can learn from there mainly whether you get similar patterns. I do love it when I find that some strategies have worked persistently over”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“I like the basic framework still in the book, but I think certainly it was a terrible decade for all kinds of contrarian strategies. And I have become even more humble. It's sort of funny that I wrote my dissertation 40 years ago on duration timing and I've thought about all kinds of market timing. Every decade I become more humble about the endeavor. And yet even as I told at the end of this latest book, I'm still mentioning stars are aligning and it might be. So the temptation is there, but I think the main point I want to say is I think we should really try to think of investing as a strategic effort, good diversification and so on, as opposed to some great tactical timing because that doesn't do too well. So I think that would be, and partly relearned through the difficulty of contrarian timing strategies. Then another thing which was very important in this decade was there was a growing interest in this diversifying return sources.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the demand has been driving things and the supply has been there. There's been plenty of supply as well to cater for it and really given the need to cover public deficits and so on. But again, I think if one thinks of what sort of started this among fundamental forces, I choose to go with that savings clutt. That's my best reading of the literature.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's the same idea. So always when you think of real yields, you think that, okay, there's either an issue with investments or savings and it's a balance between those two. And he was highlighting that it probably is more coming from the savings side. And then he was emphasizing that this is China and often emerging market foreign reserves, those types of excess savings where the culprit for the conundrum in 2005 or whatever it was. And I think that story still has some legs, but sort of the key culprit then became demographics and retirement savers and the latest story now is in the 1%.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think short term, what happened this year was really there was a catalyst of inflation and Fed tightening, but the long-term story was always about valuations and the important thing, as I said, is related to this common part, low real yields. And should we blame Fed for that or should we blame somehow greedy investors? I buy more the stories that there was this fundamental effect most important probably savings glut, excess savings coming from pension savers, also another story is that when the wealthy were getting a bigger share of the pie, their savings rates are higher, there are research on both fronts which sort of explain why we've gotten this exceptional savings clutt, which was then pushing all assets yields”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source
“But it's true, and what we saw then in that decade that rich things can get richer, and that can take quite a long time. And so actually my favorite quote is to think about what happened to S&P 500, the SchillerP. That went from mildly above historical average 20. To double and wildly above average 40 in 10 years' time, and that type of thing gives you basically 7% annual returns prorated then. So that's the key reason. And something similar happened real yields on bonds were already low. They went even lower. rental yields on equities, credit spreads, anything you look at had basically tailwinds from these falling yields. And that repricing then gave high returns and that there's a danger that people then look at the rear view mirror and become complacent just at the wrong time.”
2022-07-15 · Masters in Business · Antti Ilmanen on Expected Returns · IDENTIFIED FROM THE TRANSCRIPT · source