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Wes Gray

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75
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2017-07-25
most recent
2017-07-25
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1
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  1. “Yeah, you got to own the pain. You got to own the risk. And it is risk. There's some mispriced in there too, but it's a lot of risk. But that's fine. If you got Horizon, you can bear risk. And so we just build super risky portfolios. And that's just what we do for them. We're a boutique. We're not saying it's for everyone, but that's what we do. And I think you guys do it as well at some level.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Thing blows up in Amazon takes over the world. I'm not discounting that as a real risk. But if you're paying me to deliver you the value premium and presumably that's being wrapped in a broader portfolio set where you're doing some element of efficient frontier portfolio diversification, you want me to have as much active risk as possible because that's what you're paying me to do. And you know, I know as this rhetoric would be like, oh yeah, a lot of that's not activist, that's just sector risk. Well, I'd say, yeah, you show me how to easily and with low brain damage and low cost separate out the value premium from sectors. I don't think you could do it that well. And a perfect example is like the internet bubble. So in 1999, you're going to force me to own some tech stocks that are quote unquote cheap at like 500 times earnings. You know, that's not the value premium. The value premium is buying pain.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “And have a lot of patience, right? Because if everyone in the world has to sector neutralize to placate this institutional mandate, like just if you think about it, are you going to have more or less edge when you have to look more and more like the Vanguard fund? Almost mechanically, if you think of this as the poker game, more and more have to play poker like all the other poker players almost mechanically it destroys any edge or ability to take paint. So we just build portfolios. I'm not saying they're right or wrong. I'm saying for a particular mission, they make a lot of sense. But they're also the worst idea on the planet Earth for probably a vast majority of investors and it's much more appropriate to kind of manage the risk because again our portfolios we don't say you should put everything in like one of these things that has like 50% retailers right now because that's a real risk what if the whole damn”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “So again, we use quantitative tools to capture what we think are important good insights from qualitative investors. You know, Munger has that whole thing about, you know, diversification and if you have an edge, why would you dilute it out? And again, being like to your other point, being different is the way you're going to add value or potentially subtract a ton of value. So I understand the merits in doing like the super sector constrained control for every little thing. And that's cool for a certain buyer. We build products for our own money. I'm in the business of trying to compound my face off for 20, 30 year horizon after fee, after taxes, and I don't frankly care that much about sector risk or volatility or what have you. And I feel like that's the only way that I can capture my edge, which is being crazy.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “If you do it how you and I do it, where I think it's more intellectually honest way to do it, which is much more concentrated and focused in the actual factor, it's just that's the nature of it. It's going to be painful. So it isn't a free lunch, but I think in return for having endure that pain, you get some gain. And I think those are the biome treat, buy armstrong, and hold them long is about my summary of all the research out there for the last 200 years on this thing.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Yeah, I mean, it's going to sound like a beaten drum, and your dad wrote a whole freaking book about it. But we have a saying, buy them cheap, buy them strong, and hold them long. What does that mean? Buy cheap is basically encapsulating idea of value. Buy stuff that the market at that time basically everyone hates and just hold your nose and have a long horizon and then buy strong refers to momentum is you just we know that winners we get winning so do that but the last part is arguably the most important I am cheap buyamstrong dot dot dot and hold em long because everyone in this factor rat race and you know we know and anyone who's studied the data knows that if you're gonna capture those factor premiums it's gonna be insanely painful especially”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “We can also pay you a ton of money. And then, and so I think that's the initial attraction on all these guys. You just can't quantify it that well, but it matters.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Yes, so I know a few of the teams like Millennium and some of these big shops like that. One of the things is they just have great infrastructure. And to be honest, a lot of them aren't Chicago PhDs. A lot of them are just more like hard science types, but you can go to a shop like that, like Millennium Mill and say, hey, here's all the data pipes in the world. Here's all the legal infrastructure in the world. And oh, by the way, we charge whatever, $350. And because our fee structure is so high, we can pay you internally like 0 and 20 or 0 and 30. And everyone's still winning. And the ability to be able to offer someone who's maybe a PhD geek that's got really cool ideas and say, hey, you're almost like a postdoc coming into a science lab. You don't have to go raise, you don't have to go fight for grant money. You can just come in here and do cool stuff. And oh, by the way, because our fee structure is so big.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Competing with supercomputers at the margin. If you're one millionth of a second better than the next PhD guy, that's everything. It's kind of a winner-take-all, essentially. And it's also always changing too. Their markets, unlike what we do, like value. Okay, there's some element of risk, obviously. There's some element that people just hate like retail stocks right now because Amazon's going to kill them. The edge of the bet is they always throw the baby out the bathwater. No amount of technology or brain damage or 500 IQ people is going to change my mind about that. Whereas in their world, it is the case that a smart, like I do think machine learning mainly because you can learn much faster, much more frequency. I think that those technologies can make that better at the margin. But it's always going to be a limited scale opportunity where you're always going to have to be.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Thing is they're literally making microsecond transactions just essentially trying to understand supply and demand better than the next guy to make little small little return. And when he when I asked him, I was like, well, what's your returns you make? He's like, well, we make 30, 40% returns just like Rentech does. But what people don't understand is we're not investors. We are traders. And if I were to capitalize all the brain damage, all my computer systems, the servers, my ROA return on assets is probably like buying S&P, but I have a hell of a lot more fun because this is my passion I like doing. And so I think their game is they're in the true edge of outsmarting the next really smart guy and just being able to understand supply demand better than the next and buying low and selling high is what they do. It's just that's.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Yeah. So, well, a perfect example is one of our guys that seeded our business came at a firm called Gecko. And we have a lot of clients that kind of come through that channel through him. And a lot of them gecko was like the original gangster in Pixie market making, right? Crush the world. They came into that KCG acquisition kind of mesh with a different culture. And then all the original gecko guys for the most part left. And they're now all running their own little shops. And one of our clients who's a guy on Chicago that does this, and these are systems. It's probably got a hundred mil capital max it can take, but they can leverage it, you know, to infinity. And he's got 40 people that are all math physics PhDs, and they're literally all working on one central machine learning algorithm.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Information acquisition, trying to be smart the next guy. I got to build good computers, uncertainty gets resolved immediately and I keep making thousands and thousands of bets. That's extreme quant. We don't play in that game. We don't got any edge. We don't want to. And then on the other extreme is you got people that say, hey, Warren Buffett has a pretty cool idea. Buy cheap stuff that's high quality and has low beta, it turns out too. But his real edge is just patience and ability to sit back and not worry about what everyone else was saying about the world. And I'm not smart enough to be Warren Buffett, tried and failed, but I don't know if I'm smart enough, but I think I can capture the essence of what he's trying to achieve using quantitative tools. And that works for me. And is this meant to say that my model is better than you?”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Yeah, so just like anything, it's good to define the term. And I'm sure you guys get the issue all the time. Like quant can mean anything from what I consider ourselves, and I imagine you guys as well, where we are just long-term investors that like to use quantitative tools to help us make good decisions for the long term and minimize the baggage of being a human. And then there's a whole nother spectrum of quant, which is the Caltech physics PhD building AI machine learning algorithms on basically making markets. And I think it's really important for people to just know when you say quant, what do you mean and what are you trying to achieve? And so I think the applications in the much higher frequency land, because we know a lot of them, like the prop trading world or market making, that's where I think a lot of the biggest brains in the world are super useful because that's a game of super high frequency.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Of mine. And then when you're in the battle and the fight, just follow the model. And you almost got to take a religious bent towards your own kind of scientifically-minded system. So, yeah, I don't do stock pick anymore.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Traditional things that I've been doing for like 10 years. I'm like, oh guys, we got to switch. This is the best opportunity ever. All we got to do is go buy these stubs. We'll make all this money. And so literally we talk to LPs, which was like $3 million, but just our internal money and like, you know, a few rich guys we knew. And we changed the whole system, said screw this quant thing. This is a once-in-a-lifetime. And of course, long story short, we ended up basically getting R2K with like twice the vault and then end up liquidating and transition to business because it had some bigger rich guys call me but and when we back tested what we would have done if we just followed the damn model we obviously would outperform like our own stupid idea so that that was my last straw where I'm like you know what I'm done like it's I'm pure quant now just build a system and the process that you think makes sense when you're in a system two frame”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “That this was the way to do things. So, well, it's another bad story. But I actually launched a hedge fund that was going to be basically kind of what quantitative value does, but long short in September 2008. So I literally launched a hedge fund right when the whole thing was like blowing up. And of course, just by dumb luck, I go in hedged. So, you know, in those months, I'm looking good relatively, but at the time I wasn't doing short on individual security names, I was just using Russell 2000. And of course, because all the naked shorting rules got blown up, even IWN got called in. So I couldn't short anymore. So now I'm long and strong these quant value names, which I was like, oh, this is great. But of course, this isn't now in December. I start going back to the old Bang Gram ways where there's all these biotechs that are selling for less than cash, like all the”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “And I need to focus on systems and not basically fucking everything up. Yeah, I went from the super overconfident and then all the way down to the bottom of the depths. And then luckily I wasn't that rich. I kind of ate my humble pie pretty early. And thank God, because now, you know, having looked back now, I don't do stock picking.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Stockpicking, special situations, did that for years, and kind of also got lucky in the sense that I wasn't lucky starting around like the late 90s because, you know, my dad would call me up, tell me to buy the Janice Global 20 fund every day. This is when Internet Go-Go was going on. So I kind of, I felt confident because I had my swisher suite success. But then I kept not doing as good as the general market, but just by nature being a small cap value player. And as we all know, the story's now been told minus the internet crash, like small cap value, you could have thrown a dart at a wall and made 30 Kagers for 10 years. But that all in poorly because towards the end of it, I kept doing more of the stock picking stuff. And even to this day, I still sit on about a half a million dollar capital loss carry forward. And that's kind of what moved me into, I'm not Warren Buffett.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Yeah, yeah, so first story in the market. Yeah, I mean, I was on a path to total failure because the first stock I bought was Swisher Sweet Cigars. And I remember exactly it was 650 the stock price and I'd been brainwashing like Warren Buffett stuff and Ben Graham so it was all about return on capital, low PE. This was probably in like 98 and at the time I think I even read the value line back in the days of the paper one. It was amazing like huge return on capital, huge return on assets for multiple years, the earnings kept growing. It was super cheap on PE bought at 650 and like literally a month later a buyout for like it was like $9 or $9.50 and I was like, oh, this is so easy man. No wonder Buffet's a billionaire. This is all you got to do. And so that's unfortunately how I started with like a ton of success, which was kind of lucky because then I started getting huge and like.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “You know, Connerman's book, Think It Fast and Slow, the whole system one, system two architecture to brain. I think that defines life in decision making and in the military it's just magnified because all your training, everything you do is set up how do you minimize system one errors and try our best to think in that system two mentality like rational calculated thinking but obviously that gets more and more difficult at the margin when you've got a hundred pounds of shit you're carrying around it's 125 degrees you're tired you're pissed off and the military is just it's all about how do we contain system one errors as best we can and”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Most memorable thing I did growing up there was just climbing mountains and doing crazy things, but it wasn't that cool after the fact.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “It's funny because you probably know this when you grew up, but there was this mountain behind where I lived there at the time it's called Adamsir Ranch. The Coars family bought it. It's called Frost Creek. And the whole thing is like a development now. But there was this mountain behind us. And my brothers and I, we'd always climb up this thing. It was like an epic adventure take all day. Thought it was the best thing ever. And then we went back probably about 10 years. I brought my best friend out there and I was looking for this mountain. And I'm like, man, Henrik, you got to hear about this thing. It was so epic. Like, this is where I did all my toughest things. And of course, we go out there and it's like a hill. Maybe a hill. And it was just amazing when I was a kid, like that was so great in my mind. It was like the most insane, awesome thing you could ever do. And we went back there. We're like, oh, that's pretty lame and doesn't even matter. It wouldn't even count. So unfortunately, that was probably.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Worse, you know. And some people do come in the Marines. I think it does change them. But I was like, I was already brainwashed coming in, basically. I didn't get transformed. I was already weird beforehand, I would say.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Yeah, I've always been like that, man. I grew up in the mountains in Colorado. And so I've always just been into adventure, survival. When I was a kid, we were pretty broke. I didn't really know it at the time, but just I've always been in that mindset of, you know, don't spend money, even if you have it, just always be kind of like a depression baby that was born in 1980. And so I think that kind of culture is just also in the Marine Corps. At some level kind of attracted me to the Marine Corps. So I think Marine Corps doesn't really change you a lot of times, at least in my scenarios. It just attracts whack jobs like myself to come into it. And so then you get a hold fraternity of people that were kind of already self-selected to be like this. And then we all hang out together. And it just”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “Yeah, your Marine Corps is kind of their ethos is do more with less. We're the guys that always get the scraps. We got to be Henry and mean and internal. And I don't know if that's a fair classification. But in general, Marines just, we like to think of ourselves as, you know, kind of survivalist and we can do more with less. So, I mean, I think that's, I don't know if that's true or not because when I was in, we had GWAT funds and they gave you as much money as you wanted and if you want to go shoot 10,000 rounds, as long as you were training, you got it, but still that mentality and that culture of doing more with less and winning at all costs, I think, still permeates Marine Corps versus the bigger, more bureaucratic services for sure.”

    2017-07-25 · Invest Like the Best · Wes Gray - Compound Your Face Off - [Invest Like the Best, EP.47] · IDENTIFIED FROM THE TRANSCRIPT · source