YouSaid · the spoken record

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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“It's just, you know. Again, that could be 40 arguments for why buybacks are neutral and are not the evil thing you think. Let me”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“More tax efficient dividend. And by the way, I don't take a great stance on how they should be taxed. That's a separate issue. I take a stance on the idea that they're evil. And by the way, this is one of the fun ones today because it's horseshoe theory. Both the left and the right hate buybacks. Yeah, it's kind of interesting, isn't it”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Buybacks. You gave this Manichian evil or good. My positions actually, I don't say it mildly, but much more mild than that. My position is they're largely a nothing. They're largely. Very close to a dividend. You can say, you can argue there are.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“What's a little sad, and I won't go through all the other subtleties, what's a little sad is we kind of won the battle in that current accounting standards make you expense stock options, and that was a change But we also lost the battle because plenty of firms, particularly in the tech world, still issue kind of pro forma earnings that don't expense them. And a lot of Wall Street analysts, to their shame, in my opinion, Let them get away with it and use those numbers. They're just not real.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Go through them. Stock options and the lying liars who don't want to or won't expense them, I forget the exact title. It was a play on an Al Franken book back in the time. I think Rush Limbaugh was the villain in his title. Was particularly post tech bubble. There's been this issue. Forever, that stock based compensation, be they options or particularly if they're options. Not considered an expense of the company. The paper I wrote does this beat to death. Let's look at the 22 ways you could argue this and why they're all stupid. The best argument is the simplest one. These people accept a lower salary and want these things. Obviously, they're costly, ultimately to shareholders.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“For multi factor, it was actually a nothing. Value did well enough that it was not a particularly, but if you were a pure momentum investor, that was a very, very ugly period. So in another way, I think this couple that I've never watched is probably getting it wrong.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And you just got to watch your 10s. It's very easy to identify what has going up, and it's part of our process. By the way, I would not be a pure momentum trader. Momentum has what the geeks will call a very bad left tail. Some famous periods of reversals in market, the most famous being spring of 2009 when we came off the GFC.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Not a momentum investor. So I feel obligated as a co author of some of the momentum stuff to defend that a little bit, but this is not adding up well for these people. I promise. One last thing about it. A running joke I've had for years is people in describing this kind of thing often subtly use the wrong tense. They talk about buying what has been going up But the implication is it is going up.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“As one of Jagadish and Tippman are the two academics who really deserve pride to place on momentum, but as one of the very early discoverers of momentum, I always got to give them there's a little truth to what they're saying, but they don't do it and tend to do it in a very disciplined way. And very often... Individuals and institutions and professional investors tend to be what I call momentum investors at a value time horizon. They look at something that's been strong for three, five years and they go, it's got to keep going. And at that time horizon, you want to be a contrarian.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Do you wrap your stuff on investment on TikTok? No, do you? No, never. Do you may put it to a Sinatra melody might be more appropriate for you?”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Is that right? My wife has a master's in social work, so I guess behavioralist is accurate, and anyone who's been happily married, which I'm going to assert she is, and she can rebut if you invite her on. To me for a quarter century, it has to be a bit of a behavioralist. But what we all want, which we'll never get, is a world where there are opportunities, where active investors. We think we make the market a more efficient place. We think we make capital markets better. That's important for society. But we exist to a large extent to take the other side of errors and correct that. We don't want a world with no errors because it's nothing to do. We want a world where errors are significant errors. And after Barrier Cliff puts the position on 11 minutes later, the market realizes we were right and hands us our money.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And she said to me, she only said one sentence. The rest was implied. She said, I thought you make your money because people have some behavioral biases. And the rest is implied. She's saying, but when those biases get really ugly and they make really big mistakes, you whine like a stuck pig.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“This is from the tech bubble. I am probably late 99, early 2000. At home at night talking to my new wife, and I'm whining and worse than whining. I'm cursing up a blue streak about how stupid and crazy this world is, none of which I can repeat even with the laxer laws today on George Carlin's seven words. I still wouldn't go through what I was screaming that night.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“It's an active manager is a line from West. No pain, no premium. I'm not good at offering attribution. I'm not always good at accurate. Getting it right. But they're both awesome. But I do think there's truth to that. My favorite story, which I'm going to make you listen to now. Okay.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Out of favor downside? No, Wes Gray, someone you and I talked about before we started, has a great, I think it's Wes's term.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And I am schizophrenic about this. Half of me hates it because these times are hell. But half of me realizes that if they didn't exist, Every value manager on earth, and this probably applies to non value, but this is the people I talk to.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And this is perhaps self-serving, but this raising a rational after being open-minded and cynical stick to half the battle is also why I think some of these things last and don't get arbitraged away and are real. As late as 2017, which again was a bad period for value, but a very good period for us and our firm grew. Most common question I get, particularly in public forums, would be, and it's an intelligent question, if this is as good as it looks like, Why isn't it an arbitrage away? And I literally did not expect or want to be as right as I was over the following three years. But I would say particularly having lived through the tech bubble, you have no idea how hard this can be to stick with at times. It is not that easy. It seems easy now over full cycles.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Days long and decades ashore. It feels far longer than it really is in what I might call, I don't think there's a real term, but statistical time. When can you actually say this is wrong?”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“We talked about children. That's an example of decades that go by and days, drawdowns are an example of days that go by. Right.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So you're defending yourself. I do think we've done a great job of sticking our guns at these times, but I do worry that some years at the end of my life have been used up.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Or 11. Because I know these numbers precisely. Drawdowns have this amazing subjective. We borrow the term from physics time dilation, even though we use it differently, where You will look at a, if you look at a back test or even real life returns and you see a fairly horrible drawdown, but you know it ends well. You look at it and go, of course I'd stick with that. It's a great process. Look at what it delivers. Two, three years as some of these can take, they are an eternity. Everyone wants quarterly numbers, which means you've gone back to people 11 times, 12 times, and said, we stink again. It becomes a proof statement. The world, and your show is a partial anecdote to this, but the financial media does a great job of coming up with stories, why, whatever's working is the truth, and whoever's losing is the church of what's working right now.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“If you had asked me what will make a great Investor, quantitative, in my sake, but in general, I would have probably given you an arrogant answer that, oh, just being smarter than other people, being smarter than other investors, then the market as a whole. The arrogant part is the implicit assumption that kind of comes along that I'm one of those people at the... I still think this is a bold statement. Smart is good. I haven't changed the sign on smart, but I now think long-term success, half the battle is after keeping that open mind, you can't skip that step, if you decide you're right, having an extremely ordinary stick-to-ness to you is an equal partner to being smart.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Basically, any explanation that someone from the outside, a strategist, a pun did, a client, a consultant, or internal that we could come up with for why we might be wrong. The way I think of these is you've got to keep a really open mind, consider why you might be wrong. Test that story, and if at the end of the day there's something that's unprecedentedly crazy looking and you have after keeping that open mind rejected those stories, then you got to plant both feet and say, I will not be moved. And I think we've gotten pretty good at that over time. I never wanted that. One thing you asked earlier about investment philosophy changing, and we went off and 20 other fun tangents. One major way my investment philosophy has changed is at the beginning of my career, 30 years ago, really, if you go back to the Goldman days.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Before COVID and then just really went next level. Though value as we are almost anyone else measures, it was destroyed over the first six months of COVID. And it turned out not to even be directionally true. The value stocks fundamentals, what I call them executing outside of what the market cares about, just executing in their companies. Was actually strong, even including the pandemic. So the fear did not materialize. We thought those spreads got crazy. But as opposed to approaching tech bubble highs, never thought I'd see in my career again after the tech bubble. Admit I got that wrong. They blew past it, well past it when COVID hit. And we stuck to our guns and even added to that tilt a bit. We tried...”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Certainly, that was not in my predictive power. Also, I think the market reacted ex post certainly crazy to COVID. You remember all you needed to own was Peloton and Tesla and value stocks were going to cease to exist in the lockdown.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“You want to be able to do something that works on average many, many times. You only had one shot at this, right? If this came back in a three-month meltup for value stocks, you could miss a lot of it if you didn't do this. And it turned out if I had listened to Trend Plus value, it has worked out well for us. It would have been even a little better. So there's a little bit of a moral story. I give you my faults as well as my. But I wrote this thing, and then about, I don't know, four or five months later, I wrote a follow up piece saying no sin has ever been punished. This violently and this quickly.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That's one of the main ones Auntie and I look at, and saying it's pretty hard to make your money actively timing based on only The Schiller cape. It is much more reasonable to have a valuable 10-year modification to historical norms because the Schiller cape is high or low. But in late 2019, I wrote this, it's time. I thought this was epically crazy, and it could come back very, very quickly. Just because on average, trend in momentum work on average.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I know a lot of people are going to shrug emoji. Some indicator that when the Schilla cape is very high, the PE is very high, the 10-year perspective returns are low. We don't actually go short something because of the Schiller cape.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Late 19, we were not there yet. And I'm talking about the spread between cheap and expensive, not the whole market, the entire market, if you like, a Schiller cape or something, was much worse in 99, 2000. It hit about 45 where it hit the low to mid-30s at the peak in 2020.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Value looks better versus growth on a three to five year horizon. It's also not. Pure value is never a great timing tool. I think you do put yourself on the right side of so-called catalysts when valuations are that extreme. Bad catalyst for you will hurt a little and good catalyst will help a lot. But it's still, I wrote this in late 2019 because spreads were approaching something I never thought I'd see again. Back to 99. They were approaching the tech bubble peaks”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Or every stock is coincidentally selling for the same price of sales. But sometimes that spread is huge, and sometimes it's very tight and it does correspond to times that would intuitively strike you as frothy. So the wider spread.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“But if those returns were, say, justified by massive earnings growth, right? If your earnings double, your PE stays the same and your return is 100%. And that didn't make you more expensive. It just was a great result. And some of that can always be in there. So you want to be prospective. So we built this measure that was very simple. All the academic and applied work that was published at the time, sorted stocks on valuation measures, generally went long or overweight the cheap and short or underweight the expensive. And really never addressed how cheap and how expensive. You always get a spread. I'm fond of saying otherwise your spreadsheet is broken.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“You got two Jews here. We need a Catholic. What I basically said it's time for a, I'm going to say venial value sin. Venial value timing sin. And I was looking at the spread between cheap and expensive. I want to say we created this. That is probably false. You never know who created things privately and didn't share them. We were the first to publish on this. And it was back in the tech bubble. This is a 24-year-old result from 1999. Very similar period to particularly 19 and 20. Value killed, we think irrationally, so the other parts of the process don't help. Extremely painful, huge recovery afterwards. But during the teeth of the pain, we wanted a measure of how extreme it is. And you can't always just look at returns. Returns tell you the pain you're in.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Experience of beyond anything we've seen before. It would have been 20% above the prior 100th percentile. It's the new 100th percentile. And we've really tried hard and we can't find any rational reason for it. A small move. Don't be a hero because, again, these things can get crazier and crazier. That's the sin a little. We recommend sinning a little and occasionally. I recommend that barrier in your personal life also in a very different context. You can apply that anyway. You would like. And so at that point in 2019 with Bonds, I think we would have told people we probably own a drop less than normal on a really long horizon, but mostly we're telling people assume you're going to make less. Now, the late 2019, it's time for a sin. I think it was, I think I tried to use, is it pronounced venial or venal, a mild sin?”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“But I do not recommend trading on just valuation except that sin a little when things get, I like to joke to the 120th percentile. The joke, of course, is there's no such thing as the 120th. Meaning this is being.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Saying, how much do I have to save to retire? What you're going to earn on that money is an important number, but it's not necessarily a timing actionable number. For years, my dad, it was in spreadsheet. It was a little piece of paper, and it was probably calculated all wrong, because believe it or not, my dad was enumerate. My mom was a math teacher. So I got it from somewhere. But he had that little sheet. What do I need to retire? Which I think everyone has in some extent, including institutions. So we think that number is really important.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“You lose less than you would over history. And you get to go to your client after 10 years. Well, I lost you money for a decade, but the good news is I lost you less than I would have lost over the average decade. And it's a good example where forecasting the 10-year period can be interesting and can be vital, right? If you're anywhere from an individual to a pension fund”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“The odds of this happening 4 Yeah, this stuff is always wishy washy. You know, statisticians never say we know this. They say the chance we're wrong is small. But it's also intellectually accurate. Ever know something, but imagine you have a forecast. Stocks usually make 10% a year, and don't hold me to any of these numbers. We think they're going to make 5% a year, but not negative. You know what? If someone who shorts for the next 10 years or underweights against a benchmark. You know what happens if you short a positive but smaller than historical return”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, we can get into the Tina. There is no alternative. Equities didn't look great either. I think a lot of why we publish these long-term forecasts, and my colleague Auntie Elmanen is really the master of this, is both we're interested in it and our clients really seem to value it, but we don't trade on a 10-year forecast. Let me give you an example. A 10 year forecast, let's say you value has power, and that's even disputable, but we believe it does, to tell you, is this going to be a better or worse than normal 10 years going forward? Very often, the answer will be, we predict positive returns, but considerably less than history. Okay, what are you doing?”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“As long as they're going to a wedding. Because it's in there with momentum That piece on bonds being freaking expensive? Which is going to eventually be a technical term. I'm going to push it. That. I stressed in there. I don't know how to time this. This is a five to 10 year view. I know I tried various methods of looking at bonds. This was well before the yield backup and well before the inflation spike. Compared to any forecast or trailing version of inflation and doing that consistently through time, bonds were about tied with giving you the lease they've ever Given you. And tied for worst is, I think, expensive. How someone reflects that, if they are taking a long horizon,”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“As opposed to. And it's really the same concept. We do believe that if you systematically follow a legit, meaning you're not forward-looking, you're only looking at backward data, try to time the stock market, the bond market, or even value. Based on how cheap or rich it looks, they usually have very, very modest positive long-term risk adjusted returns. As you said, you can go through long, long periods where they're overvalued and get more. Overvalued We do use valuation in concert with things like momentum and profitability and things where now it starts to be better because it's negatively correlated to those and all else equal if you have momentum and you're not overvalued and maybe better. It's irrelevant, right?”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, it's so much better than. I'm actually bad at keeping the catalog of my own work. There's a lot going on here. The one you're referring to was about value timing.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, first of all, I'm going to somewhat disappoint you saying we do not take very big bets on views like tim Based on valuation. Auntie Illman and I wrote a paper. I forget the exact title. I think one of them was called Sin a Little, where we say timing the market, and this applies to the bond market as well as the stock market, is an investing sin. And ultimately, we recommend you sin occasionally and a little.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, no, no, I'm kidding. It had nothing to do with your research. I'm kidding. I am proud of the fact that I do think AQR on an academic resume, at least doesn't hurt and maybe even helps.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. There are exceptions, I think, you know, kind of near the end of 2020. Maybe people were being quiet about that affiliation for a while. That was a short.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“With us, we can play with them. Exactly. It's absolutely twofold. They're allowed, again, within the stricture of if it's staggeringly proprietary, no. But broadly speaking, we're helping their academic career also because we're okay with them writing about a lot of this. And that's very attractive versus a firm that says you can't say a word. Second, I don't think we could have even access to these people to the same degree if we weren't producers as well as consumers of this research. You get a different respect level when you're publishing at least occasionally in some of the same journals they are.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“We hire some full time and we have very strong relationships where they work kind of halftime for us. Usually they get to work full-time for their school also. It's a great deal to say multiple jobs. And that, of course, what they're doing for us is also what they're researching. It's actually quite beautiful. I don't think we get taken nearly as seriously in that world.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“But there are things we think, even if there are things we think the world will discover where you think you're somewhat ahead on, and we do try to walk that line on, but a lot of what we do is, you know, is the value strategy cheap. Someone will write a paper saying the betting against beta strategy is really all only small cap stocks and we'll respond to that. So it's really not giving away some of the stuff, which I think does exist that has really unique. It does go to our taste. And I do think besides just the advertising aspect, I think one huge benefit to our business is we hire a lot of PhDs, including professors.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And how you're regarded in those circles. And it's just part of our utility function. I do think a few things. First, I always point out. Know the exact breakdown, but a fair amount of what we do is public, but there's a fair amount that we think is proprietary. And there are things that I would have AQR researchers hunted down and killed if they published. Yes, my compliance area would like you to know that I'm speaking hyperbole. I would like you to know that I'm not.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So I won't pretend part of it is not a business decision, but it's really not most of it. A lot of it is the DNA. Three of our four founders met at the PhD program at the University of Chicago. We consider writing academic or often that kind of area in between academia and applied. You know, we've written a lot of papers in the Journal of Finance, the JFE, and that's true academia. A lot of our work shows up in great places like the Financial Analyst Journal and the Journal of Portfolio Management, which is kind of the nexus between those two. This will sound childish, but a fair amount of this is just personal consumption. We enjoy being part of that world. We grew up thinking part of the way you measure success is whether you influence the intellectual debate.”
2023-03-17 · Masters in Business · Cliff Asness on Quant Value Investing · IDENTIFIED FROM THE TRANSCRIPT · source