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Cliff Asness

lines on the record: 200
first: 2023-03-17
most recent: 2023-03-17
sittings or episodes: 1
sources: podcast

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“You've flipped. And now I think I'd be 75, 25. And all that means is more of why our stuff works, I think, is taking the other side of behavioral biases than a rational risk premium than I used to. And we're all a prisoner of our lived experience, right? Living through both the tech bubble and those last five years to terrible, two and change very good, that may have over-influenced me. Sometimes you see more crazy events in a career than the average. But I've definitely moved. I still vote Gene, the MVP of academic finance throughout all of, again, I'm impugning the Roman Empire throughout all of history. But I probably have moved more towards the behavioral side.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely, and I'm a fan of both. If you ask me who I think is more right, now I think Gene's contributions are actually the biggest in the entire world of finance because a lot of the field ones exist without him. But that's a different question of who's right. I think I would have been 75, 25 in the gene camp when I left Chicago, even finding momentum.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Going back, there's always been this tension in academic finance and in applied quantitative finance in why these things work. Then we talked about it very briefly earlier. If someone shows you a great back test, there are really three possibilities. One is it's gibberish data mining. Let's assume it's not that they've just tortured the data. Let's assume you think it's real. It can work because you're taking an actual rational risk and being compensated for it. Or what's often called behavioral finance. Some people are making errors. I often take two Nobel laureates, my gene pharma as one end and Dick Thaler, also at Chicago as the behavioral guy. There are a lot of other great people in this field. I don't mean to make it these two. But I would say you could.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“You think it's all about balance sheet and income statement analysis? No, about half of it is the right personality and the right emotional makeup and the right partners.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Young people, and I say this all the time is try very hard not to chase what's currently hot. Particularly starting out your career, don't try to be suicidal. But going into what's currently hot, you're going to be five years off every time. So, I would back off that. And if someone is really considering a career in value investing, I recommend investing, as I said earlier, at least half your time in building up your psychological endurance level”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“In broad general, a financial career I'll go with I don't like either and if someone tries to only steer you to lucrative careers, that's not a happy life. If people only steer you to find your bliss, well, if you're not the best in the world at your bliss and the bliss doesn't actually pay you anything, it's not such a great thing. I got into finance because I liked it because I work for these professors. I found an interesting thought I'd be a professor. Not everyone has to follow that route, but you want to blend those two things. The only concrete advice I'll give people.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm terrified of because he may have seen some of the things I've said about private equity over time. I'm kidding, he knows about those. He still wants to interview me. But I got to be prepared for that one.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Elegiac kind of, I'm not sure I pronounced that right, but he's going away. So I don't recommend that, but I do like that.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“For the same reason. They were already a little too long, and the extended versions basically like Bilbo says goodbye 11 times. You have like 11”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Eye on it. If you go through tokens' experience of World War I and then writing in World War II, he really had that light and dark going on. But it was balanced. But I did enjoy the movies because part of it is just when you're going to fan your whole life, seeing it come to life.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Now? I'm liking it more. I have found historically I have a small tolerance for 12 pages of Elvin poetry, which I think Tom Bombadiel. Some reason the character scared me as a kid, even though he's not very scary. So let me.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Because I am rereading the original basic Lord of the Rings, which you use the term table steaks before. That's table stakes for a fantasy fan, right?”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“No, he created Conan, and his writing was so rich. It dripped with feeling and color. So I was a big fan of that. This actually segues nicely into what I'm reading now.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Blows that away. The last movie was the first time I've seen Dune Reasonable on TV. Don't even start me on sting dueling with the made-up swords that weren't in the book. Also, I'm a big fan of some of the old pulps. Like the original Conan stories by Robert E. Howard in the 30s. We're not talking, I'm not against him, but I'm not talking about Arnold Schwarzenegger's Conan. I'm talking about the book, stuff that appeared in weird tales, serialized and then became books. I think Robert E. Howard, he unfortunately killed himself very young.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“A thread thread. Yeah, it was a threat. It got crazy. But it became all that. But I love doing complex which book. You know, sci-fi or fantasy sometimes gets a simplistic, childish label. Dune.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the first two Dune books I thought were great. The first one much better than the second one, then they got totally weird. Right. Very messianic, religious, odd.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Movie they did, two of them total recall, right? We can Short story. My all time choice, one is very cliche. Go ahead. Dune, I loved Dune when you're ready.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Internet, and it's really the one thing fun about him is he's written a lot of things that became like famous movies that no one knows. Labrunner, minority.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“They should find every copy, which is hard digitally these days of Doctor Strange and the multiverse of madness. And they should bury it in the sun Move on. That's all I want to say about that one”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I love those. And it's not some people want to be purists and say that's not how the comic books were. They're wrong. If you're really a purist, they were wise cracking during every fight. So I do love those for the combination of humor. X-Men didn't have much humor, I'll admit that. Iron Man 1 did mainly because Robert Downing Jr. is just hilarious. Great, right.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“We saw maybe Michael Keaton's Batman in 89 But for me, certainly with Marvel, it was the first time I saw a superhero movie or TV show that didn't look ridiculous, that looked, the CGI and the effects caught up. And it was good. So I think that was a milestone. So those two.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And not in the MCU. Before the MCU, the first X-Men movie. I don't remember even how great it was. But it was the first time.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I do like both. I'm a comic book fan. I was reading how I learned to read. I'm more of a Marvel guy. Though sometimes DC's great, it varies with current writer crop is better. Favorite movies hard. And what I'm saying is if you go find other people who have asked me this, I'm not claiming full consistency. It varies over time. I think The original first Iron Man that kicked off the MCU is an underrated movie. It's a damn good movie.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Best thing for you is to walk into a casino and lose. Then, no matter how smart you think you are, you think you're smarter than you were. You're always looking for”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Chance in it in one tournament over time, poker's pure skill Over anything, it's very similar to investing. Over current horizons, it's really not anything can happen. One of the worst things that can happen to you as an investor or a gambler is to get lucky early. Yep.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Career first time I ever learned poker to play in this math for America tournament. I didn't know Hold him. I didn't know how to play. Arguably. And my second year I played and I came in second.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“This year? Since the GFC, which really had nothing to do with it, it was just coincidental timing. I have only played poker in every third year in that charitable tournament. My skills, to the extent I ever had any atrophy. I was never a great poker player because I have a short attention span. And a lot of poker is being willing to stare at somebody for seven hours so you can remember what they did six hours ago. I had fun with poker. I think I was pretty intuitive. I didn't lose a ton, but I probably lost money in my poker.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“The last period. All this can be situational. Our model is simple, right? If it's in your own zone, you put the goalie back in for a while. But all sequel, the two goal result is the one that always shocks people. You pull about 11 minutes to go.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Doesn't make any sense. But above three, maybe I think Pimpo is super firm, but I hate to give competitors any credit anytime But we may have a new normal of lower than normal Lower than historically normal.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So basically, I think the three today may, this is very arguable, but maybe as good as the four and a half historically in terms of what you get to keep and what risks you have to take. To get it below two, and this is art, not science, nobody can tell you what this number should be. At below two, I and Auntie and a lot of people did think that's too low.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So, a lot of friction and the effective volatility of your portfolio has double the markets because you owned a handful of stocks. So both the top line was lower because you didn't really get it. And second, you were facing higher risks by choice. But the index fund concept didn't exist for much of this time. Right.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That's always true. The costs of investing in various ways were far higher today. And almost all portfolios were not like index funds today. They were, you know, you had a broker who bought 10 stocks.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“It may have been repriced, higher priced to a lower expected return. Here's my favorite argument for that, and it's not a complicated one. Very few people actually got the 4.5%”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That we need to get four and a half. Four and a half, and I know you've heard these arguments, may have been just too good of a deal historically. For instance, for much of that. Are you saying?”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“How interesting it is depends a lot on what your actual inflation outlook. Bonds are interesting again. So basically the fairly massive trade-off. Still only a one year trade off after a 13 year bull market. You don't fix not all of that bull market was bubbly. A lot of that was fundamentals. A lot of that was repricing things getting more expensive. You don't fix 13 years of getting more expensive. In general, in one year, I'm not sure you want to because you got to go down a lot more than we did. So Auntie's numbers, which I agree with, instead of four and a half, he'd probably use in the low threes. Now if you're sitting there saying, what do I need to retire? What's that number? By no means are we certain that three is irrational.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, remember, this is real. But inflation is right now. This gets back to you challenging me on is there more uncertainty. It's pretty hard to come up with a really good 10-year forecast of inflation right now. But certainly positive is forecasted. So five cash is interesting again. I'll say that.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Very nice. Auntie's forecast, which I think is quite useful, obviously, got down to below two. It was in the high ones at the end of 2021, just looking at current valuations and saying, how does that usually play out over 10 years? By the end of 2022, after all the pain, I think it got into the just about three.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And 60 40, I'm going to try to get this right. Sometimes we talk global, sometimes we talk US. Call it. It's made about 4.5% real. Meaning overinflation over the long term. That's actually quite a nice real return. We're used to talking about nominal returns and almost half bonds. So 4.5% real is very low risk.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Pretty good timing. I always feel guilty when I say ever, maybe in the Roman Empire it was worse, but we can't measure it just towards the end. In the measurable universe that we have.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Time you saw that again, Auntie will be the first to admit he looks like his timing is better than it really was because he's been saying this for a while. But that was the core of his work. He does a 10-year forecast on the Outlook for 60-40. What current valuations, Cola, it's more complicated than this, but call it the Schiller Cape for Stocks, lower expected real returns when the Schiller Cape is high, and just really yields on bonds, yields versus economist forecast of inflation. He takes 60%. Here's the genius math to get to 60 40. He takes 60% of the stock forecasts, adds it to 40% of the bond forecasts. That number hit the low ever, at least as we can monitor it. I won't say the Rome. At the end of 21, call it”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“This is not an Haseem to Leb Black Swan. Moment. The move in the bond market was very big. Closer, but still not a black swan. The move in 6040, maybe not still Black Swan, but was far more extreme than either alone because they happened at the same time.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Everything can't be in a bubble at once. By definition, by the way, the opposite. You can short the value style. We were in a depression, not a bubble. But there were some correlated things going on for the market as a whole. The move in the stock market in one year was big, not something we don't see occasionally. 90%.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the hard parts is in a fun way because they're all relevant, we're mixing a few different things. There is the level of the overall stock market and the overall bond market. And then there's internal to the stock market, how cheap stocks did against expensive stocks, how profitable stocks did against unprofitable stocks. Hedged without a market exposure. People have used the term everything bubble.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, this is actually much more normal. Historically, When junkier profits Because the cheap stocks are often unprofitable. So, when the profitability factor, if you will, is doing well, it has at least a decent negative correlation. It's been stronger in the U.S. than globally, but it's negatively correlated value. So what's going on this year is more normal. But that is not what was going on for the prior few years. Value and profitability in particular. Highly correlated because in a bubble, remember, in a rational loss for value, we can do well, profitability does well, in a bubble, it's not the profitable stocks that are soaring to the moon. It's the story stocks.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“The way we measure value and keep in mind everybody does it a little different. You can have 10 great people here and they're all going to have their own favorite ways. One thing we do is since 1995 when we wrote a paper on this, we don't allow value to take an industry bet. We try to make it apples to apples. Everyone talks about value in terms of like tech versus textiles. You can't fully remove it in a bubble. These are all correlated, but we think value can be hard to compare. Valuation ratios can mean very different things in different industries. But broadly speaking, and compliance gets nervous when I talk about performance to the public, but I will tell you, value has had a loan start. This year, which you would not guess if I told you it's a junk rally.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Profitability, choosing more profitable and underweighting or selling low profitable, and beta, choosing low beta and underweighting or selling high beta together as a group and individually have had a really bad start to this to this year for the exact reasons you're talking about. It has been a junk rally. Now, here, I'm hoping to blow your mind a little bit”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“But it's confusing in a different way, I think, even than you're thinking. Break up. What's going on into pure measures of junk, no valuation here. Low profitability, as Goldman does against high profitability. And Goldman's not wrong about that. Not surprisingly, the results are right. Low beta against high beta. That we often consider part of quality. All else equal, you'd prefer a low beta. All else is not always equal, but if you can have less vol and less sensitivity, it's a good thing.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So, still wildly. Also, tactically, I said, I think I did, I tilt it a little too early because I went on just value, not on trend. The trend is now at its back. So we're at, you know, nothing is a certainty. There can be huge reversals in any trend interim. I don't want to predict the next quarter, but we are still very excited. We're seeing still a mispricing that prior to COVID, I would have considered close to tide with the most extreme ever And we're seeing the wind at its back. So again, I don't want to overpromise. The short term can always make anyone look silly. But on a few-year horizon, we are super excited about value.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“It's funny. It takes a much longer time for excesses to get squeezed out of the market than people think, particularly if you're on the wrong side of it. If you're a gross stock investor, the last two years, I'm in such pain this has to be extreme. No, again, we start with measures that don't look at returns, that look at the actual valuation ratios of stocks. And at the peak of the bubble in 2020, a few months after COVID, it got to by far the widest error north of the tech bubble. After two plus phenomenal years. Now, last time I looked, which was a couple days ago, it was at the 89th percentile.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“But I think even more from fundamental trends. We started to see the fundamental trends that could lead to a more inflationary environment. Again, it's not us sitting around making inflation forecasts. We're not macroeconomists. Fundamental trends are things like those actual economists revising up their inflation. Forecast. Growth trends are things like GDP surprises aggregated for the whole world if you're doing the all of equities or country by country. Those did a really good job of getting ahead of the inflation that came. So there I'll say on the value side, I'll say we didn't do a very good job on the catalyst, but we did a really good job on sticking with it and has paid off. On the trend following and macro side, I will say, I'll give us higher grades on the catalyst side as to the timing.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source