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Mark Neuman

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2023-08-25
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2023-08-25
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  1. “I was shocked to learn, Mark, that when you said next era energy, I'm not even going to say the ticker. I currently don't own it, but that they were not, they had a low ESG score because of nuclear, because they are a leader in solar and nuclear, both of which have very low carbon intensity.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  2. “Oh, say, you know what? I want out of that. I want into the rest of the universe in that universe is a lot of these orphans that have been left alone. So on top of the value and the dividends and the cash flows, there's an underowned reversion potentially that helps buttress these. Like if Exxon says, hey, I'm starting the green revolution in energy. Well, Exxon has the cash to do it. And even Chevron, I believe, they're one of the leaders in renewables. And so is Next Terra in nuclear.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  3. “And I get real cash flow quality companies that we all know. So there's so many good attributes to that basket by itself. And then I add in, which is where I really think the kicker is, the pendulum and ESG. It's over here. And all of a sudden there's pushback and everyone's saying, wait, ESG is not working and ESG is not all that it's cracked up to be. So as those groups of ESG investors”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  4. “Look, fossil fuel kept a lot of people from freezing to death and a lot of people from overheating. That's just basics like we need that. So when we talk about each sector and what's least owned, I look at it as which it is or least owned and I think it could be tobacco would be my guess. I definitely think energy is still low. And what attributions do they provide to my portfolio? And looking at the whole basket of these, this is a non-correlated basket. It's got a good dividend. It screens like value and it's underowned. People do not own this. And here's the other thing, Jack. Like when I look at dividend funds, the dividend yield on the index of ESG orphans is higher than a lot of the dividend funds. So I get dividends. I get value.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  5. “Zero carbon, right, and a pellet of a pellet of uranium has more energy and power than a ton of coal. What are we talking about, right? So I look at these as all important pieces in bridging the energy gap from where we are now to what it looks like. We're not going to abandon these and say, hey, windmills and batteries and we're good. No, we're going to need to keep the factories powered and lit and, you know.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  6. “He gets it. So, I want some of that exposure, right? And so, look, the nuclear space, if we're really ESG conscious, we have to look at the positive attributes of nuclear energy versus the negative. And you have to do that for all energy. Zero”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  7. “And then the old sin, tobacco, alcohol, gambling. And I look at these not from the negative, social, blah, blah, blah scores that it gives me in my portfolio. What do they each provide that I would like to have as an attribute? For tobacco, it's high dividends. Five, six, eight percent. I'll take that all day as a portion of my portfolio. Oil. Well, look, I still live in this country where oil is a factor, whether it's, look, not everyone's got an EV. I don't have any EVs. I still drive a car. I still heat my house, oil, gas, whatever. I have inflation risk on my day-to-day. I want to own some oil stocks in case my 14-year-old son said, Dad, isn't oil going to 1,000 before it goes to zero? He's 14.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  8. “So, if at the end of a quarter or the end of a year you're going to say, hey, here's my portfolio, what percentage of your constituents, your investors, your clients are going to say, you own ExxonMobil? I don't want that in my portfolio. It's killing the environment, whether it is or not, is a debatable one. But that, you know, the cover your butt element of what my portfolio looks like and who's watching and who can see it is a it has more influence now than it did so back to the question of which is the most underowned i'm gonna i might say it's tobacco and look when i look at these things and it could be alcohol too and we'll get into that in a minute but um i look at each of these sectors so the six sectors that are the esg exclusions right fossil fuel nuclear energy weapons that's the new woke shame ish aspect”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  9. “Sure, and I think that's super important, Jack. It's a really good point because There is, well, if you go back and let's just talk fundamentals for a second, oil was $100, it was 140 at one point in 2008 there. If you go back and look at where oil was then, where gas was then, and compared to the prices of these stocks, where they were then versus, you're going to look at those two and say, nah, something else other than the fundamental story here. I don't know what percentage to assign to that. And it's a fair point you make, but think about it from the, I'm a big fund manager and I have an ESG mandate flashing across my board, my email every day”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  10. “I'm going to be a little bit of a nerd, Anti-You can make fun of me. But people make the point that nothing is ever overowned or underowned. Everyone always, the investing public always owns 100% of something. So when you say as a percentage of S&P was 1.8% and now it's probably closer to four or five percent and it peaked at 30% in 2007 and 2008 people could say that's justified by fundamentals. When the price of oil was at 30 bucks and we had this global pandemic that no one was flying or a commercial activity was down, like that made rational sense. So what I'm just trying to say, I'm not disagreeing with you. I'm just saying it's hard to isolate the fundamentals from, oh, Larry Fink said not to own this, so let's not own this.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  11. “So oil in the past two to three months, okay, has seen an uptick and a balance. And I think that's part of the rotation. You know, as people look at, look at tech and see how big it's move and realize what has lagged, in which case it has been fossil fuel. And so, yes, in the last two to three months, there's been an uptick in ownership. It's still low. And look at the trough of energy waiting as a percentage of the S&P. I think it was like, I want to say 2.3, 2.5, 2.7%, somewhere in like late 2021. So in November 2021, energy bottomed. And that was like nearby where percentage allocation in the S&P was near historic lows. Yeah.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  12. “What do you think of the six categories? What is the most underowned? Because I could make a case that oil and gas stocks are now not overowned, but they're owned. I mean, there's XLE and everyone on CNBC is talking about the oil stocks. Number one, would you agree with my statement that oil is owned, not vastly underowned, maybe slightly underowned? And then what is vastly underowned? Nuclear.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  13. “And my ESU fund looks like the 500, 150 out there that are already there that own the same stocks. So that's the conflation of sort of ESG outperformance.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  14. “NVIDIA, Tesla, and Amazon, or whatever, you know, we know what the big five or six or seven are, but all the new funds that launch ESG, they're all flowing into those same names because 7% of the S&P is Apple. If I don't hold Apple, I'm losing to the benchmark. So the performance in 2017 to 21, where all these large cap techs really led the way, that made people in ESG say, see, we bought these ESG funds and they really did great. Well, let's strip out the big five or six tech names that aren't really ESG that you included and your funds lagged. So that's the misconception, misperception of ESG funds outperforming. They only outperform because in the last five years prior to 22, there was this massive flow towards these big funds, free, easy money, pile-in. And hey, I'm launching an ESG fund.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  15. “Well, right here, now let's get to this. This is important, Jack. And we talked about saying how ESG funds and ESG companies are doing better. Well, between 2017 and 21, the Nasdaq had a rip. Apple, Google, Amazon. So we talked to Amazon. Apple, Foxconn, net zero, meaning I buy your carbon credits and I can pollute. I don't know that I buy into that Google net zero type things. There's a lot of flaws in their analysis in ESG, and we can get into the ratings agency and stuff like that. But again, I launch an ESG fund and I'm really beta, really benchmark to the S&P. So I have to buy what the top holdings of the S&P looks like, which happens to be what the Qs look like, the big five or seven, right? Apple, Google, Microsoft.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  16. “Yes. And so I get, and I use Amazon. I'm not saying Amazon's a bad company. I'm just saying it's not ESG because the logistics, the cardboard boxes, the Amazon Web Services, that uses a lot of energy and Jeff Bezos is not the most friendly to the unions like we know”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  17. “KOL, yeah, it was there. But the point there is they starve those companies. Those companies underperformed. But in the end, don't we need fossil fuel to keep society going and to get us to wherever the future of energy is? We do. So everyone was shadowed, sent away from those. And in fact, I think there's probably banking deals. Larry Fink may be telling the banks, don't lend these guys money if they're practicing oil and gas. And that, again, further constraints on the oil fossil fuel sector. So there to me is the opportunity because I believe we're going to need these companies. And ESG has, again, constrained and misallocated capital away from these important vital companies, nuclear energy, same thing, and the weapons, as I said. They're going to be vital going forward. Now.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  18. “Yeah, I'm sorry. Sorry, the CEO of BlackRock, who's built that company into a behemoth that's arguably a monopoly. We don't need to go there right now, but their narrative, and Larry Fink said himself, we're going to shape behaviors. We're going to push behaviors. So that's, again, constraints, misallocating capital to where Larry Fink thinks is the best decision. But his best decision is based on how can I gather so many assets, not because I love ESG as the environment, social, and the governance. No, he really loves AUM and fees. So he can sell that story as here's the ESG. Answer to your prayers. We have this ESG fund. And part of the conflict, again, we talk weapons, we talk tobacco. Let's talk about the little bit of malinvestment and misallocation of capital that goes with us. So we starved the energy companies.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  19. “An odd lot. So 100 billion goes there. Ukraine is not buying McDonald's and Coca-Cola with that money. They're buying weapons. But the irony is the ESG world has not been allowed technically to buy weapons companies. So what are we talking about here? Are we giving them weapons to make sure that they pacify the world and avoid greater bellicosity? That's ESG friendly, I think. But they're not allowed to buy those stocks. So this is the inherent conflict of ESG. And again, I think it's sort of false pretenses in a way to let's shape the narrative with your flows and we'll buy the companies or will support the companies that are in our view good. And that's where the inherent problem lies. Who's the decider on what's good? Is it Larry Fink? Is it Larry Fink, the guy who says?”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  20. “It's the sixth sector in my group. Most of the ESG supporters proponents say we've got to defend Ukraine and we've got to help the Ukraine. Look, I'm not a warmonger, right? I don't believe in war as a solution, really, but I'm not in charge. But for a very long time, the weapons companies were non-ES were ESC exclusions. They were part of the orphans. They make weapons of war. So then we give the Ukraine $100 million? I lose track. Billions and millions. I think it's billion overall, right? It's not $100 million. That'd be an option. Definitely not.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  21. “Tobacco is bad in the ESU world, ironically, by the way. Yes, their product is not great. But from their governance and the way they run their company, diversity, caring for their workers, caring for their employees, they actually score very high, but for their product itself. We could talk about, is it ESG or something? Is it being nice to the society, if you will, they're fighting a war. Here are some cigarettes to help you pass the time. Now, again, I'm not passing judgment on whether you should smoke or not smoke, but Philip Morris has made an overture to say, we're going to make life on the front line a little bit more manageable, however you want to. So is that ESG? It's tobacco company. And then let's also now talk about weapons. Okay, that's the.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  22. “So that's a great question. And let me give you a couple examples in each of those sectors, okay? So tobacco. Let's just look at that one for a sec. I don't smoke. I do not smoke cigarettes. Tobacco has never been a thing. So I don't. But there's a big dividend in there. And, you know, there are a lot of people who still rely on nicotine and tobacco as part of their life. And I'm not passing any judgment on them. I'm looking at it from the, you know, investment thesis behind a company like Philip Morris or Altria. Now, during the Ukraine war, Philip Morris sent, I think the number was 500,000 cartons of cigarettes to the Ukraine soldiers. So on the one hand,”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  23. “Has gotten a little bit clouded. It's really become focused on gathering assets, gathering momentum in making statements, and a little less focus on actual investment results that are measurable.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  24. “The saying good versus doing good disparity within ESG is the big problem because not a lot of the theory behind ESG is statistically provable. Oh, I mean, look, I believe in diversity and getting varied opinions on a decision within a team. Absolutely. I am an environmentalist. I mean, you and I hung out in Maine. We enjoyed nature. We went on a hike. I swim in the lake. You know, I'm active. So I do what I can to make sure I don't impact the environment in a negative way. I do what I can to make sure decision making within a group has diverse opinions. But it's hard to impose my view, let's say, on a company or on an investment thesis as opposed to what's provable what is actually measurable. And I think that that's... Where sort of Wall Street's version of ESG.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  25. “S or G in any sort of order is very personal. It's not some panacea. Oh, BlackRock determined that this is ESC and they're going to push that story. That becomes sort of what I'd say a little bit of sort of the lazy man's I'm invested in ESG, but I really have no idea what I own. So I think that as far as it goes”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  26. “Right. So the environmental side, the S to Societal and the G, the governance, right? Those are the three pillars of the ESG stool. There's not enough in there, in my opinion, that's quantifiable. Yes, you can measure carbon output and carbon input and the byproducts, let's say, that are given off by these companies and their investments and what they do on a day-to-day basis. the societal, right? That's sort of someone's opinion on what's good. And that one is super hard to quantify what you think of Jack as the most important things in your ESG mindset, environment, social, governance, is going to be different than what I think. And it's going to be different what the next guy thinks. So to rank the different elements of each.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  27. “So, what is something that is theory maybe a little bit fluffy that a lot of folks who work in ESG, and it has become a good professional field, or people who allocate to ESG that they believe that you say, I'm looking at the numbers and I'm just not seeing it.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  28. “To seven years ago, in 2015, 16, ESG was sort of in every, at least where I was looking, every place. And then in 2017, that's really when the assets under management under the ESG umbrella really exploded. And that's where I dug into sort of investigate top to bottom, both from the provider's side, so Wall Street grabbing an idea. And from the investor side, what are they seeing and hearing and being told versus where does the reality and the value and the investment knowledge base and decision making come from in the ESG field? And for me, it was really about trying to separate the wheat from the chaff and what's real and what's measurable and what's impactful versus what's opinion and what's theory as opposed to actual Quantifiable numbers that you can point to and say, here are the benefits.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  29. “Gotten its arms around ESG, and I think that some of the industry has seen it as sort of a new shiny object to gain investors funds to put to work in those investment theses. And unfortunately, this is where sort of my sort of CFA charter holder take notice flag popped up in that constraints on capital cause misallocation of funds and malinvestment overall. And I think that there's some false pretenses associated with ESG in the sense of saying good, this is a good idea. Let's appeal to everyone's sense of like being virtuous versus doing good. And what are they actually doing? What are the measured effects of ESG? And for me, the evolution of ESG, I really took notice, let's call it five.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  30. “Right. Actually, ESG investing sort of birth from SRI, socially responsible investing. And it's actually been around a while. If you go back and think of even the SIN stocks, alcohol, tobacco, gambling sort of, you're shunned from owning those. Those are societally bad and you can't own those and you shouldn't own those if you're really, let's say, in the past devoutly religious, you wouldn't invest in alcohol or tobacco type investments. And that sort of how constraints work. And with ESG, the environmental, the social, the governance, that's really become the acronym over, let's say, the last decade or so. SRI started in Europe in the 70s and 80s, and it's been around a bit. And it's sort of morphed and evolved. Europe was the leader originally, then Asia picked up Japan. And then in the last decade or so, the US has really”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT

  31. “Hey, good to see you, Jack. Thanks for having me. So constrained capital emanated from sort of the idea that constraints exist within the market and the imposition of constraints sort of results in malinvestment and misallocation of capital in general. And the biggest constraints in the market of the past decade or so has been around ESG. So that was really the impetus in creating constrained capital and developing that first thesis around the constraints of ESG and how that impacts markets and investors and the finance industry overall.”

    2023-08-25 · Forward Guidance · ESG: The 40 Trillion Dollar Bubble | Mark Neuman · IDENTIFIED FROM THE TRANSCRIPT