YouSaid · the spoken record

Scott Bessent

lines on the record: 88
first: 2024-11-04
most recent: 2024-11-04
sittings or episodes: 1
sources: podcast

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“or the British Government had to buy an unlimited number of pounds to keep the pound in a quarter. So it was an asymmetric bet, we could push them up against the wall. And the most they could push us back was 2.5%. And if the corridor broke, we can make whatever in a day we did. So it was really, we think we have the facts on our side. And not unlike the CDS and the Pulson trade, it was an asymmetric risk reward in terms of the downside. Georgia had in the 80s these huge currency gains. And for anyone who wants to follow up, one of the books that changed my investing career, George published a book called The Alchemy of Finance. I think it was 1986. There's one chapter called the Real-Time Experiment. He kept a trading journal.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“May nineteen ninety two, John Major called in election. It was thought he was going to lose. He has a surprise victory. And I love the British system. If you lose, you've got to be out of Downing Street in 24 hours. So everything was packed, but he won. John Major was Tory. Everyone thought labor was going to come in maybe less market friendly. The market took off. The pound strengthened. But the British pound through this agreement called the exchange rate mechanism was tied to the Deutschmark. And this was all the precursor for the euro. So it strengthened then. But then over the summer, the British economy started to weaken. I could see the housing market was weakening. It became clear that the British economy and the German economy, the interest rate profiles were very different, that they weren't compatible in the same interest rate regime. Because of the exchange rate mechanism, the Bank of England”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll do that. So, all of this led to what was maybe the first very famous large macro trade when Soros had pushed against the British pound. I know you're on the ground then. I'd love to hear how that all played out.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Maybe came back to Stan two or three months later and said, like, I'm in charge of this portfolio. It'd be a lot easier if I could hedge with futures. Do you mind if I hedge with, yeah, go ahead, hedge with futures? Then it came back a couple months later. And this is before the euro. I said, you know, there are 19 currencies. And a lot of these little markets move up and down with currencies. Could I trade currencies too? Any thought for a minute? Then he looked at me and said, Yeah, do you want to trade bonds and commodities? I said, yeah, I'll do that. I'm 28 or 29. And he said, great. We'll see if you're still here in a couple months.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“I call it the enough rope principle. So there's this famous sculpture by a French sculpture named Manre, and it's kind of a hangman's noose. And the title is Enough Rope. And Stan just was willing to give people more and more rope. Sometimes it worked, sometimes it didn't. And you knew very quickly, I started out as a stock picker in Europe and then was helpful on the British pound evaluation. contribution was just an observation that the British housing market that mortgages there floated with the base rate, which is their overnight rate. And if the Bank of England raised rates on Wednesday, mortgages went up on Friday. If they were trying to protect the pound, strengthen it by raising rates, the higher they took rates, they would be bankrupt. the voting public. So we had some success with that. And I think I...”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“He didn't stand it. It's a real management lesson. George really looks at the world in a different way and is a market animal. I think the greatest investment he ever made was finding Stan because in 1988, he turned over the portfolio, but was still actively involved from the sidelines. Then the following year when the Berlin Wall came down, he was able to spend more of his time on philanthropy and rebuilding Eastern Europe. Stan really built the team. I got so spoiled working for him. I think the Duquesne employment contract is one page. And it said all compensation is at the discretion of Stanley Freckenmore. And I only know one person in four years who's ever complained about being underpaid.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“The feeling that you are with people who are the best at what they're doing and also the collegiality and the conviviality that they have your back, we had Armenia Fraga who became legendary central banker down in Brazil. And when Armenia would tell you, this is what's happening in Brazil. And if you were investing, say, in a food company that had a big business down in Brazil, or if you had a position in iron ore, then to be able to have absolute confidence in that person and not have to fact check their work, incredible benefit. If you're Michael Jordan, you probably want the shot, but if you're going to pass the Scotty Pippin, that's fine too.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“In your time at Soros, there was a legendary roster of talent that people know about Stan, their Nikraditi, and others that may be less well known. I'm curious what you learned from all the different people you worked with.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you want conviction and you want to be concentrated there might not have a big portfolio, you could end up in cash. That can happen with stock pickers like Seth Cormann. You and I shared it one time the Ted Williams book on hitting for people who don't know who is the greatest baseball hitter of all times at 400 fellow from Sports Illustrated went down to see Ted Williams. And finally the guy said to him, well, how did you do it? He said, I always swung at strikes.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think you could think about it in terms of a discrete set of opportunities? How do the opportunities interact with one another when you and I work together? You and I used to always talk about alternate beta. Someone would say, I've got this great idea in Australia, and then the risk manager would do a correlation and it had a 98% R squared with the S&P. What else is it giving you? Or what's your confidence level? Mike Ebozian talks about getting above the 50th percentile and the confidence level, you know, getting more and more confident in making your position bigger and bigger. George Soros has this famous saying, I just need enough information to make a decision. He does not have analysis paralysis.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where can you get the most bang for the buck? So, if you think oil's going up, if drilling stocks are really beaten down, then maybe it's stocks. If the forward curve is predicting that oil is going to drop over the next three years, then it could be through the futures curve. What's the options market giving you?”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a lot you can do if you're following equities and then have the world as your oyster in terms of instruments and implementation. How did Georgian Stan think about how they were going to run money?”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“That the micro drives the macro. So we can get a huge amount of information from what companies are telling us. We can't predict the PCE deflator better than anybody. We can't have a better model for LEI. But if trucking companies are telling you the business is taking off, then that's very interesting. If Home Depot is telling you that they're having trouble keeping products very interesting if you are hearing from bank CEOs that credit cards are getting sour, you can make a lot of good macro judgments with that.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“We back up for a minute the soros stand dracomer slash Duquesne tradition. Everybody started out as a stock picker. George was a stockpicker. He was at Arnold Bleischroder, and he had a list of 10 stocks. His research process was talking to his clients about his stocks. Somebody convinced him that something was a bad idea, take it off and add something else. And then he expanded into macro. Same thing with Stan. Stan was very young, but he was the head of the research department at PNC Bank in Pittsburgh and decided kind of like my brown brothers asset allocation. He just threw away the asset allocation made matrix and put 40% in oil stocks or something in the 70s. He was also a stock picker. I think macro permeates everything. And my style still did Duquesne style is.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“The next pivot we were actually sitting in the Soros offices I had developed a relationship with the Soros people to stand Drakenmauer asked me to join Soros in 92.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Believe it was January of 91. I think Saddam Hussein finally rolled into Kuwait and the market took off. And things have gotten super cheap. And we'd also taken in a ton of assets, as you know, AUM chases performance. So everyone wanted to be short. I think when I got there, we had 37 million dollars, 38, 13 in the partnership, 25 managed account from Soros. And then when I left, we hit 500 million. At a point, I went into gym and I said, Jim, I can't find anything to short. He said, well, that's what we do. I said, well, then I think I'd rather do something else.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“The value added was could you be in something that could go to zero? Because there were plenty of these situations that went to zero. Maybe in 1990 the S&P was down high teens 20 and we were up 50. If you think about the opportunities that there's the market beta, there's the industry group. And then we had plenty of stocks that went towards zero.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“What was the difference between alpha and beta? So it turned out you joined Jim right at a time where there were some more pain to come in the markets. And then things turned. As you look at that period of time, target-rich opportunities, but also things kind of falling off a cliff. How did you think about the value added?”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Misguided reaction on the other side. So the savings and loans had gone under in 89 and were really 90 and had to be bailed out. The bank regulator, the controller, the currency, fellow named Clark, panicked in 1990 and did this supervisory tightening and told the banks, even if your borrowers are current, if it's a see-through building, you got to write it down to zero. That was really my first go with seeing how bad policy creates good investment opportunities.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“And loan real estate bubble started unraveling. So 89 and 90 were fantastic years, to be short financials. So it was the end of this financial engineering through savings and loans, Drexel Burnham went under, the cherry on the mash of that day was Saddam Hussein rolled into Kuwait. So you had the Iraq Kuwait invasion and cuffing the numbers, but maybe city core point from 32 to 4. And one thing that really stuck with me was a lot of times when there is a bad reaction, you get Equally and opposite.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“There was a lot more opportunity in terms of dispersion. There wasn't the basket trading. There wasn't the concentration in the indices, but it was a lot spicier before the crackdown by the FCC on frauds and things like that. It was a target-rich environment. And there have been a lot of changes. There was the big Reagan tax changes, the Texas oil bust was in the middle of happening. There was this asset appreciation cycle that was led by Mike Milken and all the Drexel companies leveraging up. It was a great time for stockpicking. I joined him in 88 and then the Drexel financed bid for United Airlines fell through. I think we made 10% in a month. And then the savings.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sellers were these shadowy figures and planning stories and just generally had a bad name. And I thought that Jim could become an institutional brand. And I was the first analyst, the third employee.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Mid to lateish 80s, there was kind of this tradition of management breakfast that Goldman Sachs, Morgan Stanley would host a management breakfast for a company. And over those years, I've gotten to be friendly with Jim Chanos, noted short seller also. He and I, I don't believe ever overlapped at Yale, but like with Jim Rogers, we had the Yale connection. I just found that we were very sympathetico in our questions. I would say the difference is that Jim is a pessimist. I am a cautious optimist. It was kind of back to the Jim Rogers mold of just deep dive research and does the story work. I concluded that I thought short selling could become an asset management category. And I thought Jim could be the white shoe brand in it because a lot of the shorts.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“What was good there was we got to do everything. So we were doing the research, we're managing the portfolio, two of us were doing the trading, and we had a big options book two. I went back and took a lot of option pricing theory classes on weekends and started trading options in futures too. So it just made you realize there are a lot of different ways to commit the investment business because they were very concentrated. They wanted to know the management well. They were great and still to this day are great long-term investors. But you could goose the returns with leverage, with options. So it was a fantastic experience.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you start with this sort of broad internship with Jim Rogers, and then you have the relative value, and now you're seeing all kinds of stuff. How did you assimilate all the different things you might be able to do into what the investment approach and what your responsibilities were with the OLENs?”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“From all these CEOs and getting all this great exposure, and also getting great exposure to people like Leon Cooperman, Byron Wayne, Ray Dalio used to come in and Solast his newsletter.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“I went to work for this Saudi family called the Oleans. They were fantastic. The father had come from nothing in Saudi and built an incredible industrial empire in Saudi Arabia based on supplying the oil industry. At that time, a lot of Middle Easterners had a bad reputation for movie stars and models. They were just the opposite. They were interested in meeting finance people and business people and learning about business. It was a fantastic opportunity. I worked for the daughter of the family who I'm still great friends with. We were small team, but we would file 13 Ds on companies, which meant we owned over 5%. There were five of us. I'm 23, 24, 25, and I'm sitting across the table from Armin Hammer. I'm sitting across the table from Lewis Preston, who was at JP Morrigan. I'm sitting across the table.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“That was eye opening for me because it was the first time I ever saw relative performance. I was a neophyte at this, but with Jim and then like the Soros tradition, it was high performance. How much can you make? And this, the big decision for the month, are we going to buy Ford versus GM Citibank versus JP Morgan? It was some good analytics, but it really wasn't my thing.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“nineteen eighty four, investment banking had just taken off. I didn't really want to do one of the two-year analyst programs because by this time I was hooked on the stock market. There was a service called Value Line that used to mail out these gigantic books on earnings. You get a trial subscription for $25. So over the years, I had a trial subscription. One of my roommates had a trail subscription, having known nothing about stocks and markets and currencies, I was hooked on markets. And I really wanted to do investment management. 1984, really only two firms, Brown Brothers, Harriman and Fred Alger, would let you do investment management right out of school. So I went to Brown Brothers.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was just a couple months. We stayed in touch for a while. He taught an investment management class at Columbia Business School. I commuted in my senior year from New Haven and took the class.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Research, research, research. He always said that he was looking for major secular change. It was dig, dig, dig. Can you prove it? What was very helpful with Jim, like he had come out of the 60s and the 70s. So the 60s were the go-go stock years, the story stocks, the 70s, the nifty 50 and shorting. It was this ability to really dig down and do the numbers match the story”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“So Jim Rogers was George Soros' original partner at Quantum Fund. They'd been obliged to first eagle together. George was more the PM. Jim was the research analyst. I think they split up in nineteen eighty one and Jim was managing his own money. So this was just in his family office.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Serendipity. I went to the career advisory office and there was a notice from a yellow alumnus, Jim Rogers. Analyst wanted to do spreadsheets, make lunch, clean the toilet, sofa available to sleep on, please apply. And I applied for that. It was kind of everything I liked. It was very much like being a journalist. You were creating a narrative. You did some research. It also appealed to the quantitative side. So I learned how to do spreadsheets. It was a great experience.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“I have found in my life some of the best things happen after the worst things. This was not a cataclysmic event in my life, but I'd worked on the Yale Daily News when I was at school. And back then, Yale Daily News was an instant ticket to the New York Times, Washington Post, Time magazine. I didn't know whether I wanted to be a journalist or going to computer science, which when I arrived at Yale, it was the year that they switched from punch cards to screens to put in perspective. I ran for editor of the Yale Daily News. I didn't get it. I proceeded to lock myself in my room, come out for classes and meals. Woe was me. That was end of October. I came back in January and thought I should reboot a complete.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Had permeated the system and that there was this new ish form of instrument that could capture these asymmetric returns. That took imagination. We had a very distinguished mortgage manager come into the office. I think he'd actually written the Wiley book on mortgages and tell us what a great buy mortgages were halfway through the crisis. And I think his fund went down 100%. He couldn't imagine that this could happen or that these tranches in the CDOs could be wiped out.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Thanks so much for spreading the word about capital allocators university for investor relations professionals. Please enjoy my conversation with Scott Veset. Scott, great to be with you. Good. Good to see you too. Why don't you take me back to your early experiences as a kid that led you to thinking about finance? Well, in Little River, South Carolina, the only thing you knew about Wall Street was something bad happened in 1929. My dad had a lot of financial ups and downs, he's a real estate investor, boom bust mentality, and he went bust twice. So that makes me think a lot about risk management, allocation, leverage. The other interesting thing about my dad was he had the largest science fiction collection in South Carolina, probably not a high bar. But as a kid, I could point to Alpha Centuria on a map before I could point to Chicago because he'd sit and read these books to me, go outside and look at the stars and one of our neighbors had an observatory. And it was all.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“Conversation covers Scott's investment path, learning research from Jim Rogers, short selling from Jim Chanos, Global Macro Investing from George Soros, and Stan Druckamiller, and twice hanging his own shingle. We discuss high conviction ideas, asymmetric asset selection, position sizing, risk management, a hub and spoke approach, and core challenges of the global macro hedge fund business. I once told Scott that he could read the newspaper six months ahead of time because I'd never encountered someone with his ability to connect dots and imagine investments others hadn't considered. His interest in improving the country's economic picture has led him to shed his publicity shy nature and I'm grateful for the opportunity to share his story.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Scott Bessant, the CEO and Chief Investment Officer of Key Square Group and a renowned global macro investor. Scott's 40-year investment career has included two stints at Soros Fund Management, the first for a decade understand Druckenmiller and the second for five as CIO. In between, he launched a hedge fund, retired, and joined me at Proteg Partners when he learned that retirement wasn't for him. Following his second tour at Soros, Scott started Keysquare with four and a half billion dollars, making it one of the largest hedge fund launches in history. He's been profiled in two best-selling investment books, Steve Drobney's Inside the House of Money and Sebastian Malby's More Money Than God.”
2024-11-04 · Capital Allocators · Scott Bessent - Macro Maven (EP.415) · IDENTIFIED FROM THE TRANSCRIPT · source