YouSaid · the spoken record

James Montier

lines on the record: 50
first: 2020-04-17
most recent: 2020-04-17
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

“Oh man, that's such a good question. I think I wish I knew not to be so confident. My very first job was as an FX strategist, and I had an incredibly humbling lesson where I recommended a position that was short the Swedish kronor based on some very bad economic analysis that I'd done. It turned out eventually to be correct, but in the first week that we had that trade on, the head of the Forex division told me we lost more money in that trade than I made in an entire year. Now, I was a graduate, so I didn't make a huge amount, but it was an incredibly humbling experience. And I think the older I get, the less certain I am about almost everything I'm not sure is a good thing or not, but certainly I wish the younger me had not been quite as arrogant and confident as I was.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Don't do it. Go and do something useful with your life instead. No, look, I think that investing needs bright, sensible people, but I kind of think there's an awful lot else that we need in this world. And investing is probably not the highest and best pursuit. I think far too many people who go into investing are kind of blinded by the dollars. And so I think go and become a doctor or an engineer or something that might actually help humanity.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“What else am I reading? Enjoy. I actually enjoy really my guilty pleasure is airport thrillers. I will read almost any airport thriller when I'm stuck on a plane. I will quite happily dig into pretty much any thriller. So the lower brow, the better.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“I tried to read fairly widely. I think one can often find insights into all sorts of problems from very different perspectives. But I think my favorite investment book is probably Seth Carman's Margin of Safety, which we've mentioned earlier. I think there is a tremendous amount of value in there. Outside of that, I'm currently reading a book on biomechanics. My big passion outside of investing is taekwondo. And I was fortunate enough last week to take part in the seminar with one of the Russian Grandmasters, Grandmaster Kang. And he's a big exponent of understanding biomanics to improve our taekondo performance. And so I'm trying to understand how physics applies to the human body right now.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Albert Edwards above and beyond all else. We spent nearly 18 years working together, I think, and he had a huge impact on me from when I was joined the team he was on, when I was a junior economist way back all those years ago, and watching the way that Albert worked and thought really did define the way that today I work and think.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“You for I am something of a Luddite, I confess. I am probably much more likely to be found reading a book than I am watching television. But I have to say, on Netflix, I did thoroughly enjoy Stranger Things. That to me was a very well-made and entertaining program.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“That he believes to be wrong, that he will update his beliefs. And there I found a lot of wisdom about the way to be happy is not surrounding oneself with materialistic possessions, but experiences. And to me, that really rings true. And I think too many people focused far too much on money and materialistic pursuits rather than on thinking about what might make them a happier individual.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Devalued quite a lot in your own eyes, let alone its economic worth. And so we're on this what they call the hedonic treadmill that we adapt very fast to our environment and our material ownership. And this rang through with me because when I was young, I spent a long time traveling the world. And some of the poorest people were amongst the happiest I've ever met. I was traveling in Thailand and there were people who essentially had very, very little and yet they were absolutely some of the nicest, friendliest people I'd ever met and they were willing to share what little they had with me as stranger just traveling through their village. And I started reading both science and then the Dalai Lama on happiness and the Dalai Lama is an interesting man because he very obviously a very spiritual individual but one who is absolutely certain that if science proves something”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of that threshold, it really isn't obvious that greater increases in wealth and income lead people to be happy. For the vast majority of people trapped in poverty, of course, an improvement in their income would help them, but for, let's say, the top 10% of the population increasing their material worth is probably not going to have a great deal of impact on their happiness. And I think the problem A lot of people have is what we call hedonic adaptation, which is you get used to stuff very quickly. So you get a new car and you really love it and it feels great. But within six, three, six, 12 months, whatever it may be, it's just your car, right? Your kids are in the back, they've scuffed up the back seats, they've put their muddy boots on it, the dog's been in the boot. And it's really not a new car.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, yeah, a long time ago, I wrote a couple of notes on how to be happy. And it just struck me as something that I spent a long time working at investment banks at that stage. And I kind of was slightly worried that I looked into people's eyes. And it was like staring into the zombie's eyes. The lights were on, but nobody was home. And they seemed dead on the inside. fathom how that could happen. And I began to do some research on happiness and the science of happiness. And it turns out that there are a number of people who have thought about happiness. And one of the big difficulties is that people tend to associate happiness with wealth or income. And don't get me wrong, a certain level of income is necessary. But beyond that level of kind of...”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, exactly right. In the US, you had the slowest and weakest recovery ever. And in the UK, it was a total disaster. We essentially didn't have any recovery. And so the austeritians and the kind of advocates of sound finance, which is the balance, you must balance the budget, et cetera, I think are at odds with sensible evidence-based economics. And I'm a big fan of evidence-based anything, evidence-based medicine, evidence-based investing, evidence-based economics. One should always mark one's beliefs to market, check the real world, see how it looks.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Their means, but it is not the case for government. As long as they meet the criteria we talked about earlier, they are absolutely capable of going out and spending. It's very interesting that today we see a much broader acceptance of that in the response to the various corona outbreaks around the world. And here in the UK, government is underwriting 80% of people's wages. And that would have been unthinkable. You know, we saw a conservative government.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“The case right now, and it hasn't been the case in Japan for a very, very long time where they've run very low interest rates and very big government deficits. And quite rightly, they've had to do that. But certainly those deficits haven't led to high interest rates. Then you get people turning around and saying, oh, well, printing money to finance budget deficits is inflationary. And you're like, really? Where's the evidence for that? First of all, governments don't actually worry about printing money. It's how they've always acted. You have to print money in order to spend it and to get it into circulation before people can even pay their taxes. So there's kind of a whole series of myths that people have that are very much caught up with the analogy of governments and households. And it's certainly true for households. They cannot live sustainably.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Delta is the word for guilt, an obligation, which is the historical form of money. And so I think it's, to my mind, MMT is a much more accurate description of the way the world works and therefore understanding how the world works, which is ultimately kind of my aim in life goes back to the topic we were on earlier. I'm paid to sit and think and try and understand the world. Well, MMT to me offers a much better framework for understanding the way the world works than a lot of other economics. And it does lead one to say that, look, budget deficits are not nearly as problematic as people believe. There's a school of thought that they lead to incredibly high interest rates. Well, just look at the evidence.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think MMT, modern monetary theory, is that label tends to get people's hackles rising, right? It doesn't matter whether it's on the right or the left and people get very upset and very passionate and start throwing Zimbabwe around and hyperinflation in Venezuela and those sorts of things. But actually, I think the core of what I perceive of modern monetary theory is a descriptive model of how the world actually works. And it says that effectively governments don't have to finance their deficits if, as you say, they are what we call monetarily sovereign, i.e. they issue bonds in a currency which they control. So it is absolutely a description of the US, Japan and the UK. It is absolutely not a description. The Eurozone, where the countries obviously issue debt in euros, which they don't control. That's in the hands of the ECB.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Modern day asset pricing for the better or worse takes its cue from the interest rates. Now, much as I don't think that's particularly sensible, I do acknowledge that a lot of people behave that way. And it does strike me that the negative interest rates could potentially muck up quite a lot of that approach. And so I think it's an odd policy with unknown consequences, which I do not think should be pursued lightly. As to whether the US is ever going to get there, I have absolutely no idea. If I go back 20 years, I used to be one of those people who said interest rates can't go below zero because it seems so unthinkable. And yet I probably should have to go back more than a decade, right? Two decades for me to have been saying that. But fast forward. There we are. We've seen them. So never say never, I guess.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's fascinating, right? Because people, central banks, when they take rates negative, I genuinely don't understand what they're thinking. I can get why you want to take rates low if you're a central banker. I do not understand negative interest rates because negative interest rates are a tax on banks. Now, don't get me wrong, I'm perfectly happy to tax banks, but from a policy response to effectively trying to create an economic stimulus, one of the things I do remember from economics is that taxes are a leakage, they're a break on economics, not a stimulus. And so therefore, relying on negative interest rates to try and boost activity, I think is kind of weird. I don't think it makes a great deal of economic sense. I think it also kind of blows up a lot of people's models because an awful lot of...”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“End up with the consumers, not the producers. And to me, that is why I think that we get these kind of historical echoes, and it makes some sense to say, hey, look, there are some constants evaluation. That isn't to say every valuation metric is perfect. It isn't.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Position evolves over time, but it is often with a strong technological bias. And it's a wonderful book by a friend of mine called Sandy. His name is Sandy Nairn. The book is called The Engines That Move Markets. He actually worked as the head of research for Templeton a long time ago. And in that book, he traces all of these waves of technological innovation from the railroads through the telegraphs to radio to television to the automobiles, etc. And the one thing they all have in common is they start off generating enormous returns. People then drive the prices up to a bubble or something that approximates a bubble. They effectively extrapolate profitability into prices. And eventually that bubble unwinds because the gains of that technology”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let me have It's an extraordinarily good question. I think that there is another Ben Graham quote, which is effectively that the only constant is change. And it is certainly true, right? And I totally understand that when one's comparing long runs of data, let's say looking at Schiller, KPE, In the 1880s that reflected an environment which was essentially mainly railroads today, that does not seem like a terribly useful proxy for anything of any interest. However, I think it is worth pointing out that in the 1880s, railroads were cutting edge. The railroad booms of the 1840s and 1870s were the cutting edge of technology. And so I think the stock market obviously evolves over time.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So my role is a research role, and that's one that I thrive on. I enjoy solving puzzles. And to me, investing is perhaps the ultimate puzzle. It's never exactly the same. And there are always uncertainties. And really, my job is to sit there and think. My children ask me, my daughter turned around to me and said, what do you do for a living, Dad? And I said, well, I think. And she was, I don't think, enormously enamored with that answer, but it is essentially what I am paid to do. I'm paid to sit here and think about life, the universe, and everything and really understand as much of that as I can and make sure that we are investing in a way that kind of makes sense.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm kind of glad to say I wouldn't rewrite any of them. I'm glad to say the immutable part is still true. I never really thought about the order. They were just kind of I didn't write them in any specific order of importance. And so I think all seven of them are probably as true today as they were when I wrote them. But I'm glad to say I definitely wouldn't rewrite any of them.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is obviously it is far better for reputation to fail conventionally than to succeed unconventionally. And the combination of those two, that innate human desire to be similar to other people. And then the overlay of the institutional framework really do make it incredibly hard to be a contrarian. But ultimately, this is a Templeton quote, if you want different results from other people, you have to do something different from other people. And so we end up there saying, okay, you just have to be a contrarian. It doesn't mean you have to be a blind contrarian. It doesn't mean you have to be unthinking. I suggest both of those are foolish. But I think ultimately you have to be prepared to look different if you want to achieve a decent set of investment results or at least different ones. And that is something that people find incredibly hard to do.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. And it's really, I think, the essence of investing. And you can trace that back to Ben Graham, to Maynard Keynes. They all have quotes. In fact, every good value investor, I think, has a quote on the importance of being contrarian. And one of the contributions I think Jeremy Grantham has really made to our understanding of that is why it is so hard to do. And there are two different sources of hurdles, if you like, that we have to overcome. One is human nature. Human nature tells us that it is warmer and safer in the middle of the herd, and we should probably stay there. We don't like to look different with social animals. And then there is, on the other set of hurdles are really what one would describe as the institutional imperative, and that's really Keynes' observation about career risk.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly, that is definitely a buffetism, the fat pitch and Ted Williams, and I had to learn a lot about baseball to understand that one, which is not easy, as you can tell from my accent. But once I got by the hang of it, I said, oh, yeah, I get it, really about waiting for those good opportunities. There are long amounts of time when doing nothing is the right thing to do. And that's really hard because people expect their investment managers to be active, to be doing stuff, but there are long periods when there are no fat pitches, in which case you shouldn't be doing stuff. Don't do something just fit there kind of thing. And that can be very hard to justify. It allows you to.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“You constantly find that these parallels come back and Galbraith had a nice expression, which was the world keeps going and finances the one industry where we keep reinventing the wheel each time in a slightly more unstable fashion, which I kind of like as a summation of most of the problems of finance, but remembering that this time is never different is just a reminder that, hey, we've seen most of this before. We've seen this movie before. We know how it ends, and it generally doesn't end well.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“That shiny phones were going to change the world back then. In fact, they did. The internet did change the world in ways that I couldn't even begin to imagine, but generally not in a highly profitable fashion and certainly not the fashion that people were pricing in in 1999-2000. So to me, remembering that this time is never different is really just reminding ourselves that human experience is sadly not linear. It tends to be more cyclical. Seth Klaarman, whose book you mentioned, The Margin of Safety, has a wonderful discussion in it about collateralized bond obligations during the early 1990s, which have unparallels with the experience with collateralized loan obligations in 2007-2008.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“The foremost dangerous words of this time is never different. Probably five most dangerous words in investment. This time it's never different. Jeremy Gransom takes a slightly different view and says from a value manager's perspective the most dangerous words are this time is never different in a slightly different way. He points out that we constantly assume mean reversion and perhaps that can be an error sometimes so that they become pretty dangerous. Whereas everybody seems to believe to me that this time is different is the usual explanation. So the tech bubble is the prime example going through the tech bubble, oh you don't understand this time is different because bang bang bang bang which it just it's never been true yet I didn't understand”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right? So I think that that was really borne out of thinking about our experience of bubbles and particularly talking with my former colleague and very good friend Edward Chancellor who wrote a wonderful book called Devil Takes the Hindmost, which is an extraordinary history of speculative mania. And it struck me that looking at his work, looking at Charles Kindleberger's mania's panics and crashes, there were an awful lot of similarities to our experience with manias, bubbles and these kinds of environments. Of course, the details are always different. But actually there is a core of rhyming within each of these experiences that is always true. And therefore it was indeed Sir John Templeton who said the”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“List of things that I would held to be always true that if I had to kind of pass this on to my kids without ever being able to talk to them again, what would I tell them were the kind of the rules they had to follow in order to make sensible investment decisions?”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was really an exercise in trying to distill the experience of myself and many others into something that was easily digestible. And as I realized as I described that, I've committed one of the sins I hate, which is kind of the great dumbing down of everything, the reduction of anything important to 240 characters drives me to distraction. And I suddenly struck that the seven immutable laws was an attempt to do exactly that, which is somewhat embarrassing. But it was really about trying to distill the wisdom of a great deal of investors past who I had respected Ben Graham, John Maynard Keynes, Sir John Templeton, Warren Buffett, obviously, numerous others, and really come down to us.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rates Europe, Japan forever, yet they haven't enjoyed high multiples. So you automatically begin to question the sanity of that statement that low rates are the justification for high multiples. I think the one where I have perhaps the most sympathy, but still not, I don't find overwhelmingly compelling, is that the US has higher quality companies. And I think that is, in essence, true. There are some exceptional businesses that happen to be domiciled in the US, but I simply don't think it justifies the degree And the US has become more and more expensive. So certainly our faith has been well and truly tested. But as of yet, I haven't found a compelling, sensible explanation that explains that differential”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's exactly the debate that we have had internally, interestingly, that strangely enough, given how wrong we have been on the US, it is certainly the question that we have spent an inordinate amount of time trying to understand is how could we be wrong? What could stop mean reversion? What are the rational reasons for the US having such a premium valuation relative to the rest of the world? And unfortunately, when we've done that, personally, I have found most of the explanations to be very wanting. So one of the most common ones, low interest rates, just doesn't cut the mustard on multiple different levels. First, there is no provable relationship between interest rates and valuation. Second, there are any number of other countries that have low interest rates.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Confidence, but acknowledge the fact that, yes, you are taking on more risk and therefore you want that greater return. That's why these things are priced at a discount even under normal times. Now, right now, that discount is way wider than normal times. So your margin of safety is much greater than average, which is why these things to me look very attractive.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that is why they trade cheap, right? You're absolutely right. You have a lower degree of confidence and you have to scale your positions appropriately. So you don't put everything into Rushi. Don't put everything into China. You build a diversified portfolio across any number of countries ranging from the ones with the greatest corporate governance risk, China and Russia up to places that have considerably less, Taiwan, Korea. They're not perfect by any means. But you are being compensated an awful lot for the risks involved right now at least. Not always the case, but right now that is the return you are getting, I think, way outweighs the risks you are undertaking. And so to me, the arithmetic of the situation says, look, size inappropriately and invest with a degree of”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Look really cheap. You're like, well, look, let's take Gazprom as an example. The Russian energy company. It trades on a PE of about two times, which is pretty ludicrous. Nobody thinks Gazprom is worth two. It's either worth zero because Putin thinks it belongs to him or it's worth a lot more than two, but it trades on two. And you're like, well, look, I am being paid a lot to take on that risk. Now, if push comes to shove, I will probably lose because Putin owns tanks and I own bits of paper. And his tanks will trump my bits of paper. But every year that I get that carry on on Gazprom, it's paying out a dividend yield of 6%, 7%. That's a very nice return for taking that degree of risk every year without any worry about anything else. And ultimately, as long as you size a position like that appropriately,”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that is the pertinent and perennial question that one has to ask. And the answer is we can never be sure, or at least anyone who says they're sure is probably a liar or a fool or some linear combination of the two. Because you can't know. And so all you can do is say, have I got sufficient margin of safety? And it goes back to good old Ben Graham, and I know I sound like a Broden record, always quoting Ben Graham, but to me, he really is one of the most insightful of history's examples of great investors, because he always said you have to operate with a margin of safety because you know that if you're dealing with something like EM, yes, they have much lower legal standards, much poorer corporate governance than, say, the US does. But we all know that. And that's already in the price. And so if those things then...”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like a model of rationality. They invested irrespective of the outcome in the previous round. So our brains are designed by this process of evolution to work in certain ways that keep us alive, but don't give us necessarily the correct outcome when it comes to the problem.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Who looked at the impact of fear on investment decision making? And they set up a really simple game where you've got to choose over 20 rounds each round whether you wanted to invest. And they wanted to see if you suffered a loss in the previous round would it impact your decision to invest in the next round? And obviously it shouldn't if you were rational. What they found was for normal people, people like you and I, that actually it did. When you lost money in the previous round, they were much, much less likely to invest in the next round. That wasn't true for a subset of people that they examined. And that subset were very unusual. They had a specific form of brain damage, which meant that they could no longer feel fear. They're Amyglodala, which is one of the brain center of fear had been irreparably damaged. And so they behaved much more like...”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if you see a twig and you think it's a snake, that's fine, right? You stepped out the way, you took a slightly wider path, but it was fine. Get that wrong and the downside is potentially pretty terrible. If you think it was a twig and you step on it and it turns out it was a snake and it bites you, you are evolutionary toast. And so the brain is designed to work in a certain way. And when it comes to fear, it's designed to make very short, quick decisions that will keep us alive. Now, the problem is that when it comes to investing, let's say markets are falling as they obviously have been over the last month or so, then what we're doing is we're triggering that fear response. And there was a wonderful behavior experiment by Shiv and some co-authors.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of course, so I think it's kind of important that we acknowledge that the way we are because the evolution. Evolution has designed us to work, but evolution is in essence a glacial process. It does not reflect the world we live in. We are really designed for the African savannah of 150,000 years ago, not certainly the industrial age of 100 years ago, let alone the information age in which we find ourselves drowning today. So I think that the brain is a product of those same evolutionary forces that have designed us in every other regard. And that means our brains are not well adapted to the problems we're trying to solve. And so if we think about fear as a really good example of this, in evolutionary terms, the cost of getting it wrong is pretty terrible.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the way that we do it is to have that valuation disciplined. So when the world is falling apart, our value models are all else being equal going to be saying, hey, look, things are getting cheap. You should be buying. Now we are just as much human as everybody else and are likely to sit around and go, well, you know, what own the models know? What happens if the world does end tomorrow, that kind of thing? that's at least step in the right direction and seeing those numbers when you're seeing you have double digit rates of prospective return, you have to be really, really sure that you know something that the model doesn't in order to override it.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“The best laid plans Exactly right. It's precisely that. It's easy to have a plan. It's the discipline of sticking to that plan. And it's one of the reasons that I enjoy my time at GMO so much is because we have a discipline. We have a series of valuation-based forecasts that help us anchor. And in psychology, as you know, I have a great interest in psychology. There is an expression which is, if you cannot debias, then rebias. And what that really means is it's incredibly hard to stop people being people. It is of our very nature. So instead of trying to stop them being people, the best thing to do is to try and knowing they're going to fall into these behavioral pitfalls is to design a process that will actually allow them to benefit from those same behavioral pitfalls. It's kind of like nudge, if you like.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of them. And on the other hand, there is the way of pricing. And on the way of pricing, you simply follow the rules of valuation. Now, if you're going to do that, you're going to need to have a long time horizon. And that is one of the most important, if not the most important, cornery of being a value-based investor, is you're going to have to be long-term. And the problem is, of course, as we well know, everybody starts off as a long-term investor. But as soon as they hit a patch of poor performance, they become rather too short-term. And that is why I think so many people struggle with the whole staying true to being a value-based investor over any length of time.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it is a momentum issue. You're absolutely right, and it is both momentum in terms of the movement of prices and also momentum in terms of the underlying economics of the situation as well on occasion. And I think the way I've been forced to reconcile it is to say, look, I simply don't know. I never know when something is going to unravel. I can often see the unsustainable nature of what is happening, but it doesn't tell me anything about timing. And I think that's one of the things that really harks back to some of the writings of Ben Graham. Ben Graham said there were two ways of thinking about investing in the market, the way of timing and the way of pricing, the way of timing was trying to effectively guess what was going to happen. And that is essentially next to impossible as far as I'm concerned. I think there are potentially people who can do it. I just know that I am definitely not one.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And as ever, an unsustainable process can't go on forever, but it generally goes on for longer than one imagines. And that was one of the things that we were really battling with was the kind of when. And it is every time when we get bearish, it's the when.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I think from our perspective, there were kind of number of events that were going on that really kind of triggered our caution. But the most obvious one was kind of the immense housing bubble that we've been talking about for, in fairness, a couple of years before the GFC. So as usual with most of my work, I find it's best to read it, then put it in a drawer and forget about it for two years and then take it out and actually act on it because it seems to take about that long for my sense timing to come good. But it was really the housing market and the economic imbalances that were so obvious to anyone who kind of studied the flow of funds, who looked at the sectoral balances for the US. They were just such obvious glaring imbalances that were unsustainable.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“There was indeed some table pounding going on. I was getting very, very excited about particularly non-US-based equities. The US didn't get cheap enough for my particular brand of value, but emerging markets were looking really, really cheap. And a lot of the international markets, Europe was looking pretty damned exciting as well. So there was a fair amount of table pounding. And hence the reason I actually put pen to paper a couple of weeks ago and wrote a piece on fear and the psychology of bear markets to try and galvanize people to action because it struck me that this was one of those opportunities where prices and fundamentals were potentially getting dislocated.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really, really scream and shout and make sure that we're not missing out. I've only had to do that a couple of times, which is a sad reflection on the state of the markets that I've had to sit through for the last decade or so. But it's a kind of perfect job. There are essentially two jobs at GMO you would love and one that you really wouldn't want. The two that you would love are the one that Jeremy has as chief strategist and the one that I have, which is effectively Minister Without Portfolio. The one you really wouldn't want to have is poor old Ben Inca, the head of asset allocation, because he gets to sit there and has to kind of listen to Jeremy and listen to me and then try and build that into a real portfolio. So his is the job you definitely wouldn't want. Mine is a pretty sweet gig.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, so I've done a lot of things over the years and incredibly I've been at GMO for over a decade now, which is startling and testament to how time flies when you're actually enjoying yourself. So what I do at GMO is essentially ask the questions that people don't want to be asked. I finally found a job that I am perfectly suited for. My job is to think about all the places we could be wrong, whether that's in kind of the micro level or indeed at the macro level. So I spend all of my time worrying about what the models are missing for part of my job. And then the other part of my job is really thumping the table when things get cheap. So when I joined GMO, Jeremy said to me, look, one of the things that we really want you to do is when you think things are cheap.”
2020-04-17 · Masters in Business · James Montier on Fear and Investment (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source