YouSaid · the spoken record

Rishi Ganti

lines on the record: 79
first: 2017-07-18
most recent: 2017-07-18
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

“That payment you were expecting in June or early July, it's not coming or really sorry. It's coming in a couple months. Our state budget turns over in July, new tax revenues will come in. We're just delaying it for a little while. Now, if you're a public school, you might be a little panicked. You call the district office, you speak to the CFO, and she or he says, oh, don't worry, I'm all over it. And that CFO will have called Morgan Stanley, who seems to have a lock on this business, and Morgan Stanley will issue something called an IRAN, an educational revenue anticipation note. And that bond works just the way you think of it. You pay money for the bond and that money goes to the school. And then when California gets around to paying, you get that money. Since it's a quadruple A asset, IRANs are issued at yields in the basis points, and this was true even as Lehman was failing. That's how safe they were. But if you're at a charter school, you don't have a phone call to Morgan Stanley.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“He would say the only entities that I need to pay are schools Now, here's the next part that's interesting. Charter schools couldn't borrow for the life of them. So it was interpreted in California and many other states that they weren't violating their obligations to schools by delaying payments to the schools. They just had to make the payment. To my knowledge, that hasn't been tested in court. It may have been tested. But California would say something like, look,”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Very familiar with in which we started charter school capital. What's interesting in California is that the schools are actually safer than the bonds. California has a waterfall in its constitution. It's a very modern constitution in some ways, and there's a payment waterfall in it. And the teachers made darn sure that schools were the number one payment in California. It pays the schools first, and then it pays the bonds. This means that schools in California are essentially quadruple A. If schools should ever float bonds, they are rated A1 plus P1, and in some sense that rating is too low. In 2008, during the crisis when Arnold Schwarzenegger was governor, John Chang was a very media hungry comproller, John Chang would get up and give speeches as he announced that he would be paying state workers in California in script, in IOUs. Well, California will pay you someday.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. And by the way, I should be a little more humble here and just say that there's a team that did that led by Stuart Ellis and Brad Coburn. I was very proud, if anything, to be associated with it and to finance it and to find them and to help get this underway. So what was going on there? So let's talk a little bit about schools because in order to understand esoterics, you can't speak in generalities. We're going to have to get concrete. So what's interesting about charter schools that most people don't realize is that they're not private schools. They are public schools and they will be paid by municipalities including, for example, a state like the state of New York in order to teach students. They're just alternative public schools. That means that the payments that go to charter schools are essentially municipal obligations. You'll have to check each state as to what the rules are. Let's look at California, which is a state that I'm”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Has done more for charter schools than any Betsy DeVos or any education secretary ever could. When we surface assets into markets, we create value that extends far beyond that which we capture for our investors”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Talented. You need a perfect SAT score. He went to Wharton. And what did he do? What did this gentleman who had everything open to him do? He did what everybody else does. He went to banking. And so there are these well-trodden, well-paved highways, whether they're stocks, bonds, derivatives, venture capital, private equity, real estate. It doesn't matter what distressed any business you can name is a well-trodden highway. And for some reason, people want to be on the highway. They want to shop at Whole Foods with the credit card and the perfectly wrapped fish that they know is fresh, that they can get into their car and to the subway and just go home. And so there's something about that there's such a...”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“A fishing rod and plies his or her trade on the open ocean. And the value of the assets brought back, the fish, will have no logical or necessary relationship to the costs of the enterprise, the boat, the fishing rod and reel any permits or licenses that may need to be bought. That doesn't mean that there isn't high human capital involved. It's not easy to sail a boat or to fish or to know the laws regarding same or to pull in the fish and keep them fresh. But that's what it takes. And so in one example, the latter one, you have a raw asset. And in the former one, you have a refined asset. In the former one, you can never get alpha. In the latter one, well, maybe you will and maybe you won't. And so those two things are there. Now you ask the question about barriers, basically barriers to entry. And I work with someone, his name's Brian, and Brian's very, very...”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Anything you can pull up on a Bloomberg is just a vanishing fraction of what's really out there. And to work with that, you pay a terrible, terrible price. I'm going to lead to my second analogy. And for some reason, it always ends up being Whole Food, so I'm going to do this. So I eat a lot of fish, and I like buying fish at Whole Foods because the selection is great. It's very convenient. You can pay with your credit card. You can get there with the subway. They'll even give you the cut that you want. And if you know the correct questions to ask, you can get sushi grade. There's a variety. And what happens for all this convenience? Did you get the fish below fair value? No. In fact, you know you got it above fair value because Whole Foods needs to make a profit margin. Or maybe you can argue that's fair value. Compare this with, I don't know, a fisherman. The fisherman just goes out with a boat and”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“But the vast world of assets has to be somewhere else because they could never possibly have been so refined. The analogy that I use there is light matter and dark matter. Light matter is what we're concerned about. It's what we can see. If you think about it, 99.9% of your attention is focused on things that are within 100 meters below the ground to about 200 meters above the ground. And that is just a fraction of the matter in the universe. But all of your attention is concerned with that. Isn't that the case? And so physicists say things like, we don't really know, but we calculate that there's 10 times as much dark matter in the universe, stuff we can't see, than stuff we can see. And we're even only concerned with a fraction of what we can see, which is just like a thin sliver on the face of the earth. And that the same thing is true with assets. So the stuff you read about in the newspaper and all the markets you can see.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“In order for that to happen, the asset has to be very refined. No stock can simply be on the New York Stock Exchange. If you own your little coffee shop or something, you don't just get to be on the New York Stock Exchange. There's quite a bit of process in order to quote unquote go public or to be traded on an exchange And so The assets that we read about in the newspaper, what do we read about? We read about Janet Yellen, we read about Mario Draghi, we read about student loans, we read about Apple, Uber, Google, Facebook. This is just the tip of the iceberg. We have all this attention there.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Here. We know that the world of non-traded assets simply has to dwarf the world of traded assets. But our attention is exactly the reverse. We spend all of our attention on traded assets. So let me show you both of those principles. In order for an asset to be traded, whether it's a stock, bond, currency, or even something like a venture capital deal, frankly, that's a trade, because if somebody's raising money in Silicon Valley, a whole bunch of VCs will hear about it. The fact that these are so-called private markets doesn't mean that they're not markets. They are highly, highly competitive markets, even litigation finance.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm going to surprise you and say I don't really think that there are real barriers to entry aside from the human capital required. For example, when we started charter school capital, charter school capital just did a couple hundred thousand dollars of receivables in its first year of existence. Today, it does a couple hundred thousand dollars of receivables every business day in what is now a market that we created of hundreds of millions of dollars. So what's going on is the question. So first, there are two parts to that answer. The first part is, what is the size of what I'll call esoterics? And again, that's just because saying non-bid, non-flow, non-market, non-auction, non-brokered, one-of-a-kind orphaned or ignored is such a long phrase. I just had to make up a word for it. So taking a step back and thinking a little bit into deep theory.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“You could dictate the terms. You could ask for all the computers to be nicely scrubbed and cleaned and all the books without any marks in them delivered how you like and you could have a right of return. That's the world of having no competition is almost axiomatic. And so when I was there at JP Morgan, I knew I'd stumbled on something, but I wasn't sure what yet. Mechanizing it was the problem.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“The asset or the value to JP Morgan. That buyer will pay some incredibly low price. JPMorgan will take that price in a one-off transaction and crystallize. For essentially, for having done a favor. And when I saw that, when I saw that there were assets that were being passed among buyers and sellers that were trading hands at prices that had no relationship whatsoever to their intrinsic value due to, let's say, regulatory tax accounting or other rule-based concerns, I realized that there was a much greater world out there than just what is lit up in markets. Now my vision is much better. I mean, Patrick, you and I are talking in a conference room, and everything here is a non-traded asset. The microphones that we're speaking into, these monitors, the books, this table, the cell phones that we have, all the laptops, these are all non-traded assets. If I were a forced seller, you could not only bid the price, you could bid $3 for all everything. This is not a valuation exercise. You don't need to whip out a pen or a pencil.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sexual property that needs to be crystallized, meaning it needs to be sold to take a loss. Maybe JP Morgan somehow acquired it at a higher basis, but needed to get rid of it at a lower basis to crystallize a tax loss that would help out JPMorgan on their taxes. There's nothing else this asset's going to do for them. Problem is they can't sell it. They can't sell it because it contains a tax technology or because it has some kind of intellectual property or provides a signal to strategy in other areas. So they can only sell it to one buyer in a confidential transaction. That sale, which will be an arm's length transaction, and this has nothing to do with JPMorgan, large institutions all over the world face similar sorts of problems. The price that this buyer will pay will not reflect any kind of activity in the market, nor will it reflect anything resembling the intrinsic value.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, sure. And I'll just give you a few examples right off the top. I mean, we've done low income housing in Peru. We've factored receivables at the Vatican. We've financed the government of Iceland and we invented the market for charter school finance in the United States. These are mere examples. But when I first came out of school, I was trained quite broadly in everything from stochastic calculus to law. And I ended up at JP Morgan working for the bank itself on the more exotic assets that's where they wanted to put me. And sometimes, you know, JP Morgan is a sprawling enterprise and in the far reaches of that bank, sometimes they will end up one way or another with assets that a regulator will look at and say, hey, look, I don't want you owning that. Whatever that is. For example, there could be a tax asset, a piece of interest.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Market context where there's just for better or for worse some kind of open outcry bid. And finally you have esoterics and esoterics are those assets for which somebody's bidding off the dollar bill and the student bids 50 or 60 cents for it then looks around the room and realizes nobody else showed up to lecture that day. You are the only bidder on the asset. In order to get real alpha in my opinion and this again I think is robust to criticism because it stems straight from basic microeconomics, you have to avoid a price mechanism and to avoid a price mechanism you have to avoid a market”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. I'm buying music royalties. I'm definitely the one who's going to be able to command the conversation. But in the end, those are also competed assets. You still have the two students in the room driving up the price on the dollar bill to 99 cents or beyond. The alpha is still being squeezed out. If you're seeing superior returns there, those returns are probably more apparent than real. There's exposure to very legitimate risk there. As you move up, disintermediation becomes much harder up this mountain. Cheap pattern seeking agents find it difficult to enter, whether they're computers, people offshored, or just retail investors. Information flow is harder. These will be the high human touch types of activities, M&A, buyouts, and you can even make analogies to certain kinds of human activities as well. These are hard to refine and to market.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“And so that's the least available. And then as you move up the mountain, you'll see things that are, well, they're still traded. And as long as things are traded, a price mechanism is active. Again, you only need two students in that class to make things work. So you'll enter things that are a little less liquid like bonds, things that are off quote unquote off the run, anything where the phrase off the run enters. But frankly, prices are highly efficient in those sectors as well, not a lot of $20 bills lying on the ground. I would say the next level are what are so-called niche assets and what I do is not niche. Niche assets are things that sound cool. They're like rail cars, aircraft leases, music securitizations, drug pharma royalties, tax liens, mechanics liens, litigation finance. These things all sound awesome. At the cocktail party, you know, if you're trying to buy IBM, but I'm”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So basically, the question is, as that 99 cents goes to the dollar bill or really that 99 cents becomes a dollar two or a dollar ten, which markets or which kinds of assets are most susceptible to this, which is just a price mechanism. It's just microeconomics 101. And clearly, the assets that are the most susceptible are the most liquid. So those will be currencies or stocks or mortgages. Anything that is rapidly traded where information is highly refined and instantaneous. In those areas, what I'll call cheap pattern seeking agents, they might be computers, they might be offshored people in India or China, or they might just be people doing things at home will quickly find the right price and therefore the $20 bills lying on the sidewalk really aren't there.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“At it. And pretty soon that dollar bill is going for 99 cents. But what's alpha? Alpha is that magical substance that everybody in the market wants. It's the only thing that matters for an investor. It's the only thing. Every time we use phrases like risk adjusted return, abnormal returns, we're really using code phrases for alpha. Alpha is the difference between price and fair value. So if you even have two bidders in a market, you're squeezing out all the alpha that exists. Even worse, I told you the value was a dollar bill because I'm showing you the dollar bill or the 100. But in the real world, assets have uncertain values. Phenomena like the winner's curse enter and the asset pricing literature is quite”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is an act of hubris for most. So investors are paid very handsomely two and twenty classically in the hedge fund industry to quote unquote beat the market, but investors are ultimately comparison shoppers. They try to buy low and sell high or they try to sell high and buy back low if you're in a very liquid market. And that's tough. And that's tough because of something that Patrick, you and I both learned in our first course of microeconomics, which is a price mechanism. So classically, there'll be a lecture where somebody will bid off a dollar bill if you're really bold, try 100, believe me, the result will be the same. And there's some awkwardness in the classroom. Nobody wants to participate in class. But some kids going to bid 50 cents. Some kids going to bid 60 cents. And you don't need everybody in the class to participate. You just need these two guys to go.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“I actually entered a world of very mysterious assets, assets that I would later call esoteric assets. Those are non-bid, non-flow, non-market, non-auctioned, non-bid. They are typically one-of-a-kind orphaned or ignored. And with that, I'll just tell you why I think really attacking a market or having confidence in the face of a market as an investor”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“In that era, not to date myself in the 90s, the number one thing you would do to graduate with a dissertation would be you would try to show that markets weren't efficient. Of course, they are highly efficient, so you would find the smallest of tremors in the market, the smallest perturbations. We called these anomalies. And I won't tell you I was a poor graduate student. I was paid to attend school, and then we were trading on all the anomalies we could discover as we were delivering seminars on them. But bottom line is when I graduated, I had a healthy respect for markets, both in the way that they could change things for the good. And at that point, there were lots of experiments, for example, with markets in carbon trading or other sorts of purposeful markets to help things, as well as a healthy respect for the fact that if you tried to beat a market, you would generally lose.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Thank you very much for doing this with me. This is going to be a very interesting conversation, largely because I don't know all that much about you and your background. So this will be a couple hours or an hour of discovery for me as much as it is for people listening. A fun place to start would be your overall take on markets. And just that word is an important one for you. But you've got a variety of interesting experiences across sort of the traditional Wall Street circles. But the place that you've ended up is extremely different. It's actually a category called esoteric acid. So by design very different. So I'd first love just to hear your very broad take on the very concept of markets and whether or not you like markets. So I think markets are one of the greatest human institutions ever invented. My personal training was in markets. I received a PhD in economics with a specialty in finance.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“Instead, he searches for what he calls esoteric assets, things without a market, orphaned assets that require high human capital and human touch. We explore several interesting examples from charter school financing to factoring receivables for the Vatican. A stark realization I had during the episode is how big the world's asset base is. Almost all of our attention goes to the most highly refined ones, stocks and bonds, but there is a whole nother world out there. We explore in great detail. The closing sections of this conversation on what Rishi would do if not investing and his answer for the kindest thing that anyone has done for him were among the best answers that I've heard.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess this week is Rishi Ganti, whose resume is bonkers. I'm not sure what to do other than laugh in amazement at his professional credentials, PhD in economics, CFA, CPA, lawyer, speak six languages, and so on. The best part is he isn't lording these credentials over anyone, and in fact casts some shade on the whole idea of credentials in our conversation. He just did it all because he's a learning fiend. Avoid markets at all costs, Essi explains off the bat, the minute there are multiple buyers for anything, prices get efficient very quickly, and therefore opportunity to find alpha shrinks.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
“That I am not yet sure what Frontier will be, other than a means to connect what has become an insane network of smart, interested, and interesting people who can all stand to learn from one another. Aim to bring this universe of learning fiends together and to do so soon. To get involved you can visit investorfieldguide.com forward slash frontier where you'll have the option to sign up for updates and early access or even apply to be part of building Frontier. Whatever this becomes, it's going to accelerate the rate at which we all discover and apply new ideas in investing and beyond. I can't wait to build it together. Now onto the show.”
2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source
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2017-07-18 · Invest Like the Best · Rishi Ganti - Esoteric Assets - [Invest Like the Best, EP.46] · IDENTIFIED FROM THE TRANSCRIPT · source