Christopher Joye is well-known as one of Australia’s leading economists, policy advisors and fund managers. He is the Chief Investment Officer & Portfolio Manager at Coolabah Capital Investments.
Christopher founded Coolabah Capital in 2011 and leads the portfolio management effort that has produced one of Australia’s top short-term fixed-interest capabilities. Christopher is also a Contributing Editor with The Australian Financial Review. Christopher previously worked for Goldman Sachs in London and Sydney, the Reserve Bank of Australia, and was the founder of an award‐winning research and investment group, Rismark International. In 2009 The Australian newspaper selected Christopher as one of Australia’s top 10 “Emerging Leaders” in its economic/wealth category. In 2007 Christopher was selected by The Bulletin magazine as one of Australia’s “10 Smartest CEOs” and by BRW Magazine as one of “Australia’s Top 10 Innovators”.
In this episode:
- we discuss what fixed-income investing is
- we go back to some of the basics, to understand investing in bonds
- unpack Chris’ investing philosophy
- we talk about the role of fixed-income in a beginner portfolio
- Chris shares his views on the Australian housing market, the US election, and China’s decoupling from the West
- understand why it is important to know that Xi Jinping is 180cm tall!
- Plus much more
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Bryce: [00:01:28] Welcome to another episode of Equity Mates, a podcast where we help you learn to invest in forty five minutes or less. We break down the world of investing from beginning to dividend so that you can hopefully make some returns. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going, bro? [00:01:42][13.9]
Alec: [00:01:42] I'm very good. Bryce very excited for this episode where we're going to go deep into fixed income, which is a topic area we haven't covered much and we've got one of the best in the business to take us on this journey. [00:01:52][10.5]
Bryce: [00:01:53] Absolutely. It is our pleasure to welcome Christopher Joye to the show. Thanks for joining us, Chris. [00:01:57][4.5]
Christopher: [00:01:58] Thanks for having me, guys. It's a real privilege. [00:02:00][1.7]
Bryce: [00:02:00] So Chris has quite an extensive and incredible résumé. So I'll just go through some of the key highlights here. Firstly, he is the chief investment officer and portfolio manager at Coolibah Capital Investments, which will dig into a bit. He founded Coolibah Capital in 2011 and leads the portfolio management effort there that has produced one of Australia's top short term fixed interest capabilities. Chris is also a contributing editor with the Australian Financial Review and well known as one of Australia's leading economists, policy advisors and fund managers. He's previously worked for Goldman Sachs in London and Sydney, the Reserve Bank of Australia, and was the founder of an award winning research and investment group, Rismark International. In 2009, the Australian newspaper selected Christopher is one of Australia's top 10 emerging leaders in its economic wealth category. In 2007, Chris was selected by the Bulletin magazine as one of Australia's 10 smartest CEOs and by BRW magazine is one of Australia's top 10 innovators. A massive résumé, and we're looking forward to getting stuck into some pretty fascinating conversation. [00:03:07][66.5]
Christopher: [00:03:08] That's good, cause he means so. [00:03:10][1.7]
Alec: [00:03:10] Chris, we like to start with a bit of a game. We call the game overrated or underrated. Well, we'll throw out some different themes and indexes and get your thoughts on them. So we'll get stuck into that now to kick it off. Overrated or underrated, the Nasdaq 100 index [00:03:25][14.9]
Christopher: [00:03:26] review a do I have to say I've it right now. [00:03:28][2.2]
Alec: [00:03:29] You don't have to at all. No, none of you is perfectly acceptable. [00:03:32][3.2]
Christopher: [00:03:33] No. [00:03:33][0.0]
Bryce: [00:03:34] You OK? Overrated or underrated. The concept of index investing. [00:03:37][3.4]
Christopher: [00:03:38] Massively overrated. [00:03:38][0.6]
Bryce: [00:03:39] OK. Any reason why? [00:03:40][1.2]
Christopher: [00:03:41] Well, that's a big topic in and of itself. But I think indexing is good for diversification purposes. But it's also price agnostic investing. So it's completely ignoring fundamentals. And, you know, you can be buying businesses simply because the Ponzi schemes and you've got this self-fulfilling prophecy that is really seriously divorced from its underlying earnings and its intrinsic value. Indexing definitely has a role to play, but I think it's massively overhyped. [00:04:09][28.4]
Alec: [00:04:10] Nice one. So obviously the coronavirus has been the biggest topic for everyone over the last few months. So overrated or underrated, the impact that coronavirus is having and will have on the Australian economy appropriately. [00:04:23][12.2]
Christopher: [00:04:23] Right. [00:04:23][0.0]
Bryce: [00:04:24] OK, so in the next stage down, overrated or underrated, the Australian monetary response to covid-19 [00:04:30][6.1]
Christopher: [00:04:31] probably a little underrated insofar as a lot of people said to me, I'm so confused what's happening in markets like I don't understand why share prices are rising when the economy is cratering. We're in a recession. That's really about the battle that central bank liquidity is having with fundamentals. And so therefore, I would say that the monetary policy reaction function or the impact of quantitative easing is definitely underappreciated in some circles. [00:04:59][27.7]
Alec: [00:05:00] So I'm interested if we move to the US and we get your thoughts on the Fed's response, they're overrated or underrated. What the Fed has done in response to covid-19 definitely underrated. [00:05:09][9.4]
Christopher: [00:05:09] I mean, again, in late February this year, we were arguing we were going to have a big liquidity and solvency crisis. We argued at that time that we needed an extreme QE response from the central banks. They actually disagreed with us in early March, the RBI and said both cut, but we got no QE. And in fact, the Fed ruled out QE on the 3rd of March. And then since that time, we've had the mother of all bond buying programmes and we've had QE in almost every imaginable form, which is really what has been the key driver of markets in the period since. So I think the Fed's interventions are probably underappreciated and underrated in a lot of sectors. [00:05:51][41.4]
Bryce: [00:05:52] So then what are your comments to the whole don't fight the Fed quote that gets thrown around? Overrated, underrated, underrated. [00:06:01][9.3]
Christopher: [00:06:02] I actually bet a billion dollars. I spent about a billion dollars over late February and March on the presumption that we shouldn't fight the Fed or the RBI, for that matter, and that we would get the mother of all Beta, Alex Boutcher main market rallies, and particularly in my market credit rallies as QE crushed credit spreads and fuelled massive. In the values, the bonds that I held, so that was my central hypothesis at the end of February, we thought Covid would be massive liquidity and solvency crisis that would necessitate extreme QE and then that QE would crush credit spreads and would be positive for equity. Peter. So I think a lot of guys got the first half of March, right. So there were some hedge funds that we sure had great returns in March. And I think a lot of them have really struggled over the last three months because they just thought that this would continue to get worse and worse and worse. And as we forecast in March, infections peaked in early April in Western Europe, in Australia or in the US to Flass and quickly. And we actually came out of containment more rapidly than most people expected. And that was a good feel for markets. But obviously now we're juggling, sort of struggling with the spectre of these secondary outbreaks in Victoria and the long first waves in places like Texas and California. [00:07:29][87.2]
Alec: [00:07:30] So we're keen to get more into the fixed income market and what you've sort of been saying a bit later in the interview. But if we move to another asset class, which gets a lot of headlines in Australia, overrated or underrated Australian residential property, [00:07:43][13.5]
Christopher: [00:07:44] I'd probably say appropriately rather. I mean, I think it's the largest source of household wealth in 70 per cent of households on their own house. So it's incredibly important. I think that people often think that we're obsessed with housing in Australia. But I think if you go to most other markets, they talk about bricks and mortar almost as much as we do. So I would say appropriately [00:08:04][19.8]
Bryce: [00:08:05] overrated or underrated emerging markets, [00:08:07][2.3]
Christopher: [00:08:08] no real view, I suspect overrated. I don't have a kind of high conviction view on emerging markets, but I know that in some circles, again, it's a key topic of conversation and people are always warning about the spectre of emerging market blow-outs. But I would argue that much of the time they're not that important. [00:08:25][17.1]
Alec: [00:08:26] Now, last one to round out this game, an asset class that gets a lot of controversial ANSYS, overrated or underrated Bitcoin and cryptocurrency [00:08:34][7.9]
Christopher: [00:08:35] doesn't really have a view. Again, I am not an expert on this at all. I think it's an interesting topic. I do think that if all this money printing by central banks in order to buy government bonds and in order to keep rates low, ultimately over a period of decades later, hyper inflation, what that will mean is that we don't trust traditional currency as a medium of exchange, and that could fuel huge demand for alternative currencies like Bitcoin et al. So I think it's a really interesting topic because I'm just an expert on it. And as you can see already, I don't like to talk about stuff. [00:09:13][37.8]
Alec: [00:09:15] Now, that's fair enough. That's fair enough. So crews will move onto your background. And we always like to start these interviews by hearing the story of people's first investment. We generally find there's a good story or a good lesson that comes out of that. So to kick us off today, can you tell us the story of your first investment? [00:09:34][18.9]
Christopher: [00:09:35] Yeah, and I will emphasise again, I haven't read any of the questions you asked me beforehand. So this is truly a stream of consciousness. It was maybe [00:09:43][8.2]
Bryce: [00:09:44] the easiest question you get. It's going to get harder from that. [00:09:46][2.3]
Christopher: [00:09:46] I guess for any listeners, this is this is very much like I was put it up on the questions. But I say to the guys before the interview, I'm not consciously said to myself, I'm not going to try and take it, involve myself with that. But I think the company was called Coppen to see the Takoradi or Carpenter Pacific. And it was basically a resources company. And my broke uni had tipped me off that he thought this was a great opportunity. It did really well and I made money on it. And as everyone does tell us, a bit of a genius. But frankly, I didn't move beyond that first try very well. I'm probably not that different, but I'm not the sort of person that's just comfortable really doing something seriously, unless I have a profoundly deep understanding of what I'm doing. So I've never been a gambler. You know, when you kids look at school, my mates got the a roll, the dice, and I had friends who were also really singers. That was never me, because I think intrinsically I understood that I didn't have an age. And these resources sort of speculative play, I think was of that ilk. Yes, it was good. Yes. I thought I was pretty smart. But I think on one level I also intuited that I didn't have any competitive advantage. So I was definitely not going to do for me. I was not. I try to from the age of eight and I think the stereotypical listing guru story starts with that sort of genesis that you're born into, this preternatural trading behaviour. And even though we would be the largest trader of Aussie credit locally. Potentially globally, and we're very active, we're trading typically 30 to 50 times a day and typically about 60 to 70, 70 billion dollars a day. Obviously, I am a trader today. I think I came to that position somewhat circuitously and it wasn't necessarily sort of ineluctable or inevitable from data that makes it [00:11:47][120.4]
Bryce: [00:11:47] makes total sense. So, Christine, would you say that you have an investing philosophy? [00:11:51][3.8]
Christopher: [00:11:52] Yeah, absolutely. Just taking a step back. I'm a little bit intellectually antiauthoritarian or a little bit intellectually iconoclastic in the sense that one of my philosophies is always to question the status quo and always assume that no matter how sort of foreign the topic is, bring to bear fresh eyes without prejudice. And I apply really intense intellectual horsepower that you can always unearth new and important insights. And I think that's a bedrock of everything we do today. I love, for example, hiring people from other industries. No background in finance or markets. We have a lot of data scientists in our business. I'd say across my twenty three person team we have 10 engineers, mathematicians, Cheesus and actuaries, and those guys can be highly effective at unlocking investment puzzles without any prior knowledge. So I'm a big believer in coming to a programme and trying to solve it without any extant information. So I guess that's one part of our philosophy. A second part of our philosophy, I guess, is that we believe some markets are efficient. Markets sound. And I was actually at the university. I wrote my dissertation on whether you could systematically exploit marketing inefficiencies and security, actually sent me to Harvard at New York University to present my thesis to effectively the best minds in the academic sense to us at that time on efficient markets called Marty Gruber at New York University Will. Good to find out. Harvard Zikos or Harvard Andre Schleifer at Harvard. And what I learnt through that experience was that is a very good one. You've been looking at this topic for 12 months. I felt that intellectually I could go toe to toe with the best in the world. So that's again, reinforcing the insight that we're all capable of unique insight or unique and original thought if we really dedicate ourselves. Of course. What I also discovered in that analysis was that in the equities market, which is what I was focussing on, they did seem to be organisations that were persistent, systematic weakness, and they did seem to be alfer that could be generated over time. So that market, over the time tools that I studied, it didn't seem to be semi strong form of fishing. That is to say, you could get these consistent winners. And then as I grew over time, I learnt more about the over the kind of bond market. And in my market, there's about a trillion dollars globally of all the investment grade bonds on issue that you can try. So these are bonds issued by the banks, BHP, Woolworths, Coles and so on. And that market's very opaque. So whilst about five hundred billion trades in the secondary market every year, when you buy and sell those bonds, the prices and the volumes and the transactions are not reported anywhere. So I've bought and sold eight point six billion in the last six months. I know the price and volume of my trades. My counterparty can see those trades, but no one else in the market can. So it's a very opaque market. The over the credit market is also a market that's populated by very passive participants. It's not like equities. If you're a really smart guy and you want to make money, generally go to the equities market because you can get the highest returns. But equity fund managers also charge much higher fees than those charged by fixed income investors. So you've got an opaque market that is replete with information asymmetries and also a market that's populated by not necessarily the best invest Bryce in the world. So the competition is not as fierce is what you face in interest rates in currencies and in equities. So my philosophy is that overarching, kind of the overarching thematic disguise is that you can add value through asset selection. You can beat the market over time. An active investing works even though the roles of a passive or index investing. But you need to pick the asset class. Equities, for example, is very efficient. It's extremely hard to get sustained in equities. Not impossible, but it's hot in credit, which is my market. It's a hell of a lot easier [00:16:12][259.5]
Bryce: [00:18:06] That's a fascinating investment philosophy and we're very excited to dig into some of those elements of the credit markets that you just touched on. But if we can take a step back and go through your journey at Colaba, as you said there, your expertise is in fixed interest or credit markets for someone who's new to that topic. Can you start at the beginning and just explain what you mean by fixed interest and credit? [00:18:32][25.6]
Christopher: [00:18:32] Yeah, sure. I mean, there's a number of I guess for those who don't know anything about bull markets, there's a number of different ways you can think about it. So one way would be to think about the typical home and a first time buyer might have a 10 cent deposit. That's the equity. And they might have a 90 per cent loan from CBA. That's the debt. Now, in theory, you could buy and sell those lines. And that's really what bonds are. Bonds are debt instruments. They're loans. And they come in many different shapes and sizes. Another way of looking at it, it is take CBA. Everyone's familiar with the CBA shares on the ASX. But what you probably don't realise is that is only about five per cent of CBH funding. So when you get a home loan from CBA five, Dollars comes from the shareholders. The other 95 Dollars comes from basically people, CBA borrowers. From now, about 60 per cent of that ninety five dollars comes from bank deposits. So when you invest in a bank deposit, you're lending money to the bank and another circa 40 per cent comes from bank bonds. So CBA issues bonds to raise money and then it takes that money and makes loans to households and businesses. Now many of those bonds are tradable. So on the ASX, you sometimes see them. So we have these things called hybrid's. That's about a 40 to 50 billion dollar macaroni and ASX. And they basically like perpetual bonds that rank ahead of shares in the capital structure. They rank behind deposits. So CBA blows up. The depositors get paid at first, then the senior bond holders, then the subordinated bondholders, then the hybrid holders, then the shareholders. And in my business, we're trading all those different securities. So we try the deposits, the same bonds, the subject and the hybrids. And we're looking for mispricing to give you, again, another kind of sense of the return opportunity, which is probably more interesting right now. The RBA cash rate is zero point two five per cent and may be in a savings account at the bank. You might get point five to point one per cent in a day. You might get one per cent in a senior bond with the regional bank B, ACU or Bendigo. Maybe you could earn, say, one point two percent in one of their subordinated bonds from, say, the major banks. Right now you can probably a two point four percent and on a hybrid today, they'll pay you about three point six percent. And then if you buy the bank shares, you'll get a dividend yield and you guys would know more about this money. But Grossetête for franking to get probably high single digits. So that's what we call the capital structure and lowest ranking shares, then hybrids, then subject Insania bonds, then deposits above deposits. We actually have something called a super senior secured bond that the banks issue and this other securities. But it's that world which is actually much bigger than the equity market, if you think. And Sabai, only five percent of its funding comes from equities. Ninety five percent is coming from debt. It's that bond market that I traded. [00:21:32][179.9]
Alec: [00:21:33] It's a fascinating market and one that we haven't really gone through deep in. And it definitely seems like it's as you explained it, it's a lot more opaque. It's not as public as the equities market, which Bryce and I am much more familiar with. [00:21:47][13.7]
Bryce: [00:21:48] Why is that, though? I wonder? Is there a reason for that, Chris? [00:21:50][2.5]
Christopher: [00:21:51] Yeah, there is. It's actually a really good question. And Josh Frydenberg has a position, Jason Solinsky looking at this right now. But it's kind of funny because the Hagenbach is retail, right? You can buy hybrids in Honjo a lot on the ASX. However, in the unlisted bond market or the so-called over the counter OTC bond market, the minimum plasticised is five hundred thousand dollars. And that's kind of what really restricts that market to high net worth and investors. So its ability to trade one hundred dollar parcels, that really looks at retail. Yeah, yeah. [00:22:24][33.1]
Alec: [00:22:24] It it feels a bit backwards in a way, because, as you explained, bonds are higher up the capital structure than equity. And so, you know, in the worst case scenario, they're less risky for the owners of it. And yet for the everyday investor, there's so much harder to access. It feels backwards in a way, totally. [00:22:42][18.3]
Christopher: [00:22:43] I mean, I've actually made that point many times in my column. You can just click plug and read my columns online every Friday or in print on Saturday. Know, I've had stockbrokers said to me it's easier for me to sell Telstra shares, that it is much safer Telstra senior bonds to mums and dads, which is just about as you say. Yeah. [00:23:03][19.8]
Alec: [00:23:03] So, yeah. Chris, you started Coolabah, as you mentioned, because you saw this inefficiency and you saw an ability to deliver Alfaro's deliver differentiated returns in this market. Since you started Coolabah in 2011, have you seen any changes in the Australian bond market? Are you still saying that inefficiency that you identified back in 2011? [00:23:22][19.0]
Christopher: [00:23:23] Yeah, I think it's just as inefficient. It's grown in size, so it's definitely increased dramatically in size. There is definitely more retail participation like today. I just put more than one hundred billion dollars into a KNAB hybrid and that Knab hybrid was an over the counter or unlisted hybrid. And it's only the second time that the banks have issued O.S.S. hybrids, nominations them on the ASX. And so we're getting more recapitalisation. My point would be, I guess that a lot of the investors in that unlisted then hybrid are actually families, you know, smaller institutional businesses like charities, councils and high net worth individuals. And I think that because of the equity volatility that we've seen in the GFC, when is in 50, 60 per cent in March. Twenty 20, when they're off peak to trough 30, 40 per cent because of that, mums and dads are definitely looking for more stable sources of income. Yeah, they're looking for, I think, products that provide returns and that better than today's, but also products that provide returns. That are in that sort of four to six per cent range, so much higher than cash, but potentially lower than equities without the huge swings in valuation or volatility that you see in shares. [00:24:47][83.5]
Alec: [00:24:47] Yeah, it's a funny one. You mention they're the sort of four to six percent returns. It feels like the bond market these days, yields are very low. I think I was writing a stat before this interview that 90 percent of developed market government bonds are currently yielding below one percent. Australian the Australian 10 year bond, I think is eight point nine percent. How is this current market where yields are so low and there's so much central bank activity in this market? How is it trading bonds in today's market? [00:25:19][31.3]
Christopher: [00:25:20] Yes, so it's very interesting, obviously. I mean, I think in terms of the yields you can get, I mentioned that we invested about one hundred million dollars to a Napperby today. Now that's paying four point one per cent. So that's a pretty kind of juicy return. It's investment grade. So it's rated by S&P, triple B minus, which is quite a good writing. And that same security 12 months ago was probably paying about two point seventy three percent. So you're actually getting a better return today than you were getting 12 months ago, back in 2007, that sort of security was paying a lot less in terms of the margin it offers above cash. So was that securities offering a margin of about three point seventy five per cent above cash? Roughly back in 2007, major bank hybrids were paying about one point to five percent of cash. It's a little bit confusing because in my market, when we talk about cash, there are many different cash benchmarks, something called the bank swap Bryce. There's a target cash rate, which is twenty five. Then there is something called the actual RBA cash rate, which is less than twenty five. So it can be a little bit confusing, but the long and short of it is you can still get very attractive yields on instruments to the safer than equities if we move up the capital stack into, say, subordinated bonds issued by the big banks. As I mentioned earlier, you know, major banks subject right now is paying yields of about two point thirty two point four percent or so, again, above the target cash rate. That's sort of locking in two point two per cent above the target cash rate. The question is how liquid and how safe and secure these assets compared to what you guys have used to talking about, which is obviously equities. So one way of thinking about that is to look at worst case drawdowns. And the good thing is we've just had one of those says the movement that we saw in March in terms of its speed and in terms of the what we call credit spreads, which is the return you get paid above cash in order to invest in the bond. So that's how we measure the risk of up on the risk premium that a bond or hybrid pays you remove in spreads was bigger and more dramatic in some of these sectors than we've ever seen before. But on a total return basis, the Aussie shares were down from February through to in March, I think exactly. Twenty one percent if you measure it from 20 February Aussie shares, I think we're down about twenty nine per cent. If you look at the hybrid market, the hybrid market in March was down four and a half percent. So it really provided a huge amount of downside protection in terms of liquidity. In March, we saw as much as or as much as one hundred and twenty million dollars, which stretched out so quickly and then look at currencies since the end of 2015. Interestingly, major bank corporates have substantially outperformed major bank equities with less than a quarter of the return volatility or return variations. So it is true today that in certain sectors of our bond markets, you can get returns or credit spreads that are actually much better than what you could get a year ago and also much better than what you could get in 2007. Notwithstanding, the cash rates are at their lowest level on record. And as you mentioned, government bond yields are also near their lowest levels in recorded history. [00:28:41][201.1]
Alec: [00:28:42] So, Chris, I'm interested in getting quite practical because for Bryce and I looking at equities, knowing what's available and at what price is is quite straightforward. You can basically Google any share price and you can get it automatically. I feel like the four you trading in fixed income, the price discovery process and even just understanding what's being offered to the market is a lot more difficult. It feels like it's a lot more about who you know, and you can pick up the phone and call and figure out who's who's trying to sell what, who's trying to buy what. Can you talk us through what that process is when you're trying to move hundreds of millions of dollars a day, how do you actually figure out where the market is and who's buying and selling? [00:29:22][40.8]
Christopher: [00:29:23] Yeah, that's a really, really bloody good question that I haven't actually been asked really too often. But it's a very important question. So most of the stuff we try to sort of see, we're very active in the. And in that, it's much more straightforward because they're exchange traded and you can see the depth in the markets, we trade with many ASX brokers, we can communicate with them verbally to understand if they have of liquidity outside of the market. And it's a generally more transparent form in the bigger bond market. It really is about who you know, in the sense of who you're on board to trade with. So we're on board with 40 to 50 counterprotest. We trade globally and it's a process of innovatively through the day going to those counterparts and saying where is your bid and offer in the following three, four lines and then understanding the depth through that kind of recursive or iterative process. So it's much more manual, it's much more opaque, and it really is huge liquidity lying in wait, but it's quite a button art and a science tapping into that liquidity. So you need to have those connexions. And also you need to have parties that want to trade with you, that one for liquidity. And sometimes those kind of parties need to go to their clients and go through a price discovery process. So give you some examples. Today, I've sold about 20 million dollars of Saini Bonds and my traders went out to the market and said, where are your markets in these? To Macquarie Bank Cinnabon lines. Twenty fours and the February twenty five. And the market came back to us and I said, well, be an officer here. And we took the two best bids, asked them if they could improve, one improved. And we said, OK, we're happy to try to that level. So we sold that counterparty 20 million. That's kind of the process we undertake. It's much more, I guess, intensive than what you have to do in equities is actually very hard to digitally execute. So the way we consummate these trades is we talking to the pundits on Bloomberg will agree in writing the price and the volume, and then we'll send each other an electronic ticket, something called a voice confirmation or vikan, and that will definitively confirm the details of the transaction, which the counterparty will offer. And it goes through the settlement. It's much easier in the bond market to do or to be passive. So most fund managers in fixed income will run very low intensity, low key portfolios. They'll typically just buy fairly blindly three hundred five hundred thousand dollars. And they'll hold them to maturity and therefore the only return they'll get is the yield on that one. That's not what we do. We're very active. We tend to hold more focussed portfolios of fifty to one hundred securities. We tend to focus on really high, great businesses that have no intrinsic risk of default and businesses that are typically government guaranteed or monopolies or oligopolies and firms that issue very highly rated and liquid securities. So no matter what happens, we can try to them. So again, in March, there was a lot of illiquidity in the corporate bond market. A lot of people had portfolios where they couldn't get beat and they were effectively frozen. It was a huge problem, not just in March and April and May, too, whereas, you know, we traded about a billion dollars of securities in March alone last month. I think we traded one point six billion. So we specialise in liquid securities. And what we're trying to do is not pick up the yield so much. We're happy to accept you, but we want to get capital gains like an equity investors. And the way we generate capital gains is by funding bonds that mispriced. And what that means is both the paying too much interest for their risk. So the analogy would be like, you bet, term deposit. We've all had zero. You take each and every so often you get a special. So whether it's from AIG directive, you bank, but let's say the normal CD rates, that one percent and you bet comes out with a two percent special when you banks wholly owned by NAB, it's guaranteed by NAB. The treaty itself is government guaranteed. Once you bank gets enough money at a two percent rate, it will drop the two percent rate to say one percent the normal rate. And you could trade that term deposit and you bought a bunch of the two percent TDRS. Once they created, wrote and went back to one percent, you could then sell those CDs, the two entities to your next door neighbour on a one and a half percent rate. It became you more than 100 cents on the dollar. So you get a capital gain. And that's what we're doing all day. Every day we're looking for licence prices, looking to identify those capital gain opportunities and looking to generate really high returns from fixed income when yields can be very low. [00:34:12][288.8]
Bryce: [00:34:12] It sounds like there's a whole bunch of moving parts that go on in there. Xome, you know, might be an opportunity for a tech fund to come in and do some serious disruption. Do you ever see that this will become more transparent or do you think this is just the way this market works against us? [00:34:29][16.5]
Christopher: [00:34:29] I mean, we often wonder whether we will get digitisation, whether we will see what is called a trading, which is kind of to on the ASX because there are movements afoot around the world to do more trading. There's definitely been a proliferation of so-called bond trading platforms, but the vast majority of all the weight or size or volume in fixed income, in credit goes through what are called voice channels. So that's got me talking to somebody and then sending them the voice confirmation. And it does seem to be a lot of ingrained resistance to trading. So I think for the foreseeable future it's going to remain as is. What that means, though, importantly, is there are no algos really in credit markets. There are no KPIs or systematic traders in credit markets because it's very, very hard to digitally execute in size. You can digitally credit trading on different platforms to make sure we have something with your broker and you can digitally try to your broker. But not much volume goes through that platform for a variety of reasons. [00:35:31][62.3]
Alec: [00:35:32] So Chris, were interested in understanding. The last few months have been like we've obviously had a number of experts on the show that have told us what they're saying in equity markets and have spoken about the the Fosters bear market in history and then the unbelievable recovery we've seen. We're interested to hear what your experience has been like in the credit markets and in the bond markets. You touched on a little bit before that. You were well positioned when things fell, but then you were also well positioned when things rose. So can you just add a bit of colour to that and tell us what the last few months have been like for your traders at Coolabah and in the Aussie bond market more generally? [00:36:09][36.3]
Christopher: [00:36:09] Yeah, I mean, I can kind of spin it and tell you it was all perfect, but if you like, that wouldn't be the whole truth. So if you look at the last three months, we've we've done spectacularly well, in fact, for about strategies rank in the top 20 in the world across I think twenty five thousand products, according to a called investment, which is one of the biggest in start tracking. So data agencies globally. So we've had fixed income strategies that are ostensibly low risk and low volatility and liquid, crucially, very liquid. That in the three months to 30 June have returned as much as nine point two percent, eight point two percent, six point seven percent, four point seven percent, all the way down to sixty two percent. So the last three months have been spectacular for us, but going back in time, basically in January. We would be risking aggressively saw on it, so four hundred and seventeen million of bonds in the month of January. We run some liquid strategies, we delivered them. We lifted our weighted average credit rating to its highest level ever, which was bonus, and we sold all our corporate bonds. So we actually held no corporate bonds. The only things we held were cash and bonds issued by government guaranteed banks. So obviously the majors, regionals and so on. Coming into February, we had built Covid tracking systems to measure every infection and every fatality globally. So every country in the world very sophisticated, real time data science systems. We also built Covid forecasting models for every country in the world and it's fairly vocal. In late February, I read the IFR covid-19 will basically crush markets. It will precipitate a huge liquidity and solvency crisis. I told the prime minister this, the Treasurer, the RBA, APRA, and we were fairly vigilant in communicating that view from late February, sort of mid March. And the corollary was we felt that fiscal and monetary policy had to provide a bridge through QE and liquidity and stimulus to the economy and to business and to markets to that point where we could get fixin's or somehow deal with the virus, whether it's through antiviral therapeutics or other remedies. So that was our conviction in early March. We were a little early, so I expected massive wholesale QE to come week one or two in March. I was absolutely convinced. So we should probably have been short of credit and hedged more aggressively. In early March, the QE bazookas were sort of unfurled in the second half of March and had exactly what we expected. And I spent about a billion dollars buying bonds in March and we have been selling every month ever since. So much itself was our performance was sort of run of the mill very much in the middle of the road in terms of peace. It's really the message of outperformance we've generated over April, May and June, because I think we were one of the few groups globally that had a very clear vision that QE would crush, spreads aggressively and therefore give rise to substantial capital gains in bond prices and furthermore, that the covid-19 curves would flatten much more quickly than people expected. So it's been actually a really good year. We started the year with about just over three billion of, um, and Stigwood seeing about three point eight billion. So we've had net inflows. We did have some modest redemptions in March, but we had a net inflows overall in March. And I certainly had clients who gave me hundreds of billions, those much to buy assets at crazy prices. So we've got securities bonds and hybrid's many like hundreds, if not thousands, to try to do much, which have generated returns of up to twenty five, twenty six per cent over the next few months. We're not in normal manager. That just runs one fund. We run a lot of customised solutions affordance to manage those accounts like super funds. Who won a talent portfolio with comingling the money. So we run Cypriote mandates to those organisations and I think this is public information. One of our clients is Catholic Super and then the number one ranked super fund in Australia over one, two and three years in Fixed-Income. And again, this is All Public by Coolibah Capital. And I use a group called Adaiah as their primary fixed income solutions. And they were a group that gave us money in March to really capitalise on the totally unprecedented dislocations that we had said. [00:40:43][274.1]
Bryce: [00:40:44] So let's move beyond covid and Chris, you're one of Australia's leading economists, and it sounds like that you've had an unbelievable tracking strategy for covid. What else are you tracking now that you're finding particularly interesting? [00:40:58][13.9]
Christopher: [00:40:59] Yeah, so we've do some real time tracking systems for global trade flows. So this is to look at trade between China and the rest of the world. We've been watching China closely for ten years. I've been writing about China for about ten years. And we are very, very concerned about basically the emergence of what we're calling Cold War 2.0 and actually driving that far today, that recording this on [00:41:23][23.9]
Bryce: [00:41:24] Friday, 10th of July, July 10th of July. [00:41:26][2.1]
Christopher: [00:41:28] I wrote today that I thought the probability of a major conflict between China and us over the next ten years is somewhere between twenty five and 50 per cent. So what we're looking at, we obviously had six China advisors this year to work with us and helping us understand who President Xi Jinping is, what his aspirations and dreams are, and what the likely course of China US relations will look like. Now, one of our hypotheses is that we'll see substantial decoupling. Between China and the West, starting with the US and our real time trade tracking systems are documenting that. So we're seeing trade flows between the US and China substantially decline and we're seeing the US shift its trade to other low cost countries, to countries like Vietnam, Mexico and even Canada. And we think that all national security sensitive industries will remove their supply chains from China. But we also think that other corporate supply chains will shift out of China because of concerns around the rule of law property rights. And we've obviously seen these really new but at the same time a suffocating national security laws imposed on Hong Kong, which is creating a massive problem for the Hong Kong. We have a kind of parallel hypothesis here that we see a massive flight of top talent and capital out of Hong Kong and into countries like Australia, New Zealand and other desirable destinations. We also see we'll see influx of capital and people from mainland China. And interestingly, anecdotally, we're hearing lots of evidence of expat Australians living in the US and Europe who want to return to Australia. So one of our views is a strike would be a big winner. Out of all this, we could risk the mantle of the key financial market share away from Hong Kong. And we've certainly told the government of prime minister, the treasurer, that we think that should ramp up immigration and really try and compete for that top talent and for those fat wallets so that we can bring the best minds in the business and all that moolah into our country. Right. And and interestingly, scum on Facebook have more or less. And that's exactly that. They've announced five year visas for Hong Kong students. And I think they're making all sorts of accommodations to try and compete for the businesses that might be looking at relocating out of Hong Kong. So that I think China US relations is just such a huge topic. President Xi Jinping. Very interesting guy. Sixty six years old. One hundred and eighty Cinnamon's. [00:44:10][162.0]
Alec: [00:44:11] So what [00:44:13][1.8]
Bryce: [00:44:13] bearing does that have on the [00:44:14][1.0]
Christopher: [00:44:16] Rediscuss? This is a guy that I think China is no longer a one party political state. It's a one person political state. She is the strongest lady since Mao, but he's not who you think is. And you can't predict China's behaviour by applying a Western lens or Western calculus. You need to understand who he is. And he's a guy that speaks no English and speaks fluent Russian. He studied Marxism, Leninism University repeatedly in his undergraduate degrees and his doctoral degree. But he's also a guy that lived through the Cultural Revolution in China, where his father was actually. So she's a princeling. His father was vice chair of the Chinese Communist Party, the CCP. He was also propaganda chief and his father was arrested and imprisoned when she was in his teens. His sister was murdered during the Cultural Revolution. She himself was arrested. He was forced to live in a cave and work in a work camp and was kicked out of the CCP. He applied to rejoin rejoin it ten times on the tenth time he was accepted. And he's risen from that extreme adverse leader in the most populous nation in the world and the most powerful leaders. It's Mao. The most downloaded app on Chinese telephones today is something called Xi Jinping Thought, which is a modern analogue to Mao's Red Book. When Mao was leader of China, every household had to have a red book with Mao's sayings in it to really reinforce that indoctrination. So she's absolutely a communist and he wants to impose socialism with Chinese characteristics on, frankly, the rest of the world. Because the problem for the CCP is it needs to eliminate anything it perceives as a threat to its power and longevity. And frankly, every most alternative nation states and certainly any liberal Democratic state is a threat to CCP power. So that's why you're seeing the extraordinary frictions we're observing today with China's had this conflict with India in Kashmir with sixty three casualties. They they've got low intensity conflicts with Vietnam. In South China Sea, there's risks of war over Taiwan with the US huge cyber attacks here in Australia. It doesn't make sense to us because you'd say so why is China trying to isolate and ostracise all of the key trading partners? But for Xi, who's an ideologue who has a manifest sense of his own fatalistic personal destiny, he actually believes that. And he often says in his speeches, struggle is important in order to galvanise internal constituency. So she actively tries to create external crises to shore up popular support for the CCP internal programme. And like Putin in Russia, he's incredibly popular and sees Kinnaman Squiggy. China has been running the world's most aggressive public indoctrination programme to effectively brainwash the populace into believing or embracing CCP principles. So all of this is crucial to markets, because if we have a major conflict between China and the US, it's going to be catastrophic for markets. And my job is to understand the probabilities Ren my job is to understand what will she think? What should you do next? How will Trump or Biden react and what does this mean for my portfolios? And if you don't understand this, if anything that I'm saying sounds alarmist or shocking, then you're basically not a make guy. [00:47:39][202.7]
Alec: [00:47:40] So I'm interested in how some of those macro insights that you guys are developing and you've got you know, you've got your six China experts trying to really understand what's going on in China. How do those macro insights translate into an actual fixed income strategy that you guys are running? If we take like one of the examples around trade flows and the economic decoupling that's happening between the West and China, how does that then translate into your strategies at Coolabah? [00:48:07][27.4]
Christopher: [00:48:08] Yes, that could mean anything. So think about it this way. If we think the Western economies are going to decouple from China and if we think as we do, we're going to have two major global trading blocs as a bloc with China and its bellbird countries and the Western liberal Democratic states. At the same time, we know that China has a huge demographic problem. Currently, there are seven workers per retiree. Within 30 years, there will be two inches per retiree. All of that, combined with other economic analysis that we undertake, suggests that China's probably probably going to end up a multi decade period of relative economic decline. At the same time, there are risks around that distribution of potential futures that involve war with the US. So what does that mean from a portfolio perspective? It basically means we don't want China exposure Bryce. So most of my peers and certainly in most global fixed income portfolios, you have lots of Chinese banks, Chinese developers, you have South Korean banks and South Korean bond issues. You probably have quite a few Japanese banks and Japanese issuers. And I want to try and inculcate and insulate my portfolios from those risks. If I'm running a long, short strategy, I might actually like it short some of those risks to profit from situations where credit spreads could one and the prices will fall. So we do actually run long, short strategies, but it's really about, I think, the essential bedrock of Portfolio Construction's portfolio protection from the first principles point of view, which is understanding the default risks in all of your credits. So what is the probability that the issuer, the bond stops paying interest in CBA and Westpac in a default? Extremely unlikely. But could a Japanese property development firm that's issued in US dollars default on its debt? Happens all the time right now in fixed income portfolios. What normally happens is somebody will get a three hundred five hundred thousand bonds, seek to diversify. But what we discovered in March, April and May, guys with a lot of these credit portfolios is that having five hundred global bonds wasn't diversified at all. Actually, they had a whole lot of correlated default risks. So they had lots of retailers who are under huge commercial office property that's under huge stress that had lots of airlines are under huge stress. A lot of the fixed income funds bought the same year bonds issued by Virgin that blew up and it worthless didn't have airports that were also at risk. They've got bonds issued by lenders that lend to small businesses that have huge stress and that stress manifests as very low liquidity. What that means is in the portfolio, if you're trying to sell some of the bonds to get cash, you can't find a beat. So one of my jobs is to make sure I'm always holding very liquid assets that I can trade in and out of, issued by businesses that are unquestionably strong. And in the case of the current contingency, apropo China businesses that don't have huge dependencies on China. [00:51:04][176.0]
Bryce: [00:51:05] Fascinating. I think we could almost do another two episodes on this topic alone. Just before we close out with a couple of our final questions. Chris, you mentioned there that Jipping is one hundred and eighty centimetres tall. I'm pretty sure Donald Trump is 190 centimetres tall. And I'm interested to know if you're tracking the outcome of the US election. [00:51:24][19.3]
Christopher: [00:51:28] Yeah, we are. We actually have some heavy duty. We've been thinking about doing some heavy duty data science work on the US election. But one of the one the things that gives us pause on that is one of the areas that is very closely and carefully studied quantitatively is obviously polling data and outcomes of elections. We did think that Obama would win the last Australian elections and I think we basically position several hundred million dollars of risk to capitalise on that. We shifted it into a hybrid market because we saw the fracking debate would be resolved. That is to say that Labour wouldn't remove cash refunds on franking credits. And that was a really good try, but that was more sort of a quantum until it was both quantum analysis, combined with fundamental analysis and overarching intuition and instinct. I don't have a strong view on the outcome of the US election at this point in time. And frankly, I don't have a strong view of what it means for markets, whether Biden or Trump wins. And anyone who does have a strong view, I'm almost certain, doesn't know what they're talking about. So you've got this like I think he's almost 80 years old, a guy that allegedly has dementia or something that's hiding away in a basement. That is probably a very benign it's crazy, very benign, possibly benign choice, but that he's not a capricious and mercurial guy who's completely unpredictable at Trump. And then on the other hand, you have Trump, who is a mixed blessing. On the one hand, he's cut taxes again, mostly been very market friendly, but on the other hand, he's just like a bundle of contradictions that is constantly bombing financial markets with the never ending Trump type bombs. So the Twitter mutterings and so on and so forth. So I think and the other thing that's interesting that Trump is he's actually been really geopolitically fascinating because he's actually been very, very good at dealing with China in terms of leading a much stronger and more assertive posture on calling out the issues that the US and the West have with China in some geopolitical circles has been really well received. But on the other hand, he's also been inconsistent. He has been consistent in these deals with Russia over the Crimea. And we really don't know how any of this is going to fit. Some believe that the best friend Xi Jinping will ever have in Washington is Donald Trump. Others believe that Trump would be a very bad outcome for the Chinese and frankly, for all of us. And remember, we haven't talked about the fact that Australia's biggest trading partner is China. And we're one of the few countries in the world that runs a trade surplus with China, which means we sell more to them than they sell to us. So the rest of the world, like most countries, Ren trade deficit with China and therefore import stuff from China. They don't need China as much as China needs them. So if they shift their supply chains out of China, they can go to India, Vietnam, Cambodia, or most likely insource, I think with robotics, automation. And I can see a huge amount of outsourcing and supply chain. So you see the reason he's got the name around make Australia back again as he lets rebuild manufacturing through automation. And we don't need to worry about labour costs because labour is not a big part of the production process and countries like India and China don't have such a big competitive advantage when it's all automated. So, yeah, I think that's where I was when we got somebody. [00:54:40][192.2]
Bryce: [00:54:40] But I like to make Australia make again. [00:54:43][2.3]
Christopher: [00:54:47] That's like saying that I actually have no idea. [00:54:50][3.1]
Alec: [00:54:52] Well, Chris, you mentioned that you predicted the outcome of the twenty nineteen federal election. You're also known for a number of other countries. [00:55:00][7.4]
Christopher: [00:55:00] Just on that note, that's all very faithfully documented in my columns, if you want to go back. Yes. Because I repeatedly called the likelihood that I could provide. But let's let's move on. [00:55:13][12.7]
Alec: [00:55:13] You're also known for a number of other macro forecasting successes. You called the housing boom between 2013 and 17 and then the correction between 17 and 19. So as we get towards the end of the interview, we're interested in. Do you have any other bold predictions or big macro forecasts that you can reveal to us on the show that you think will play out in the rest of twenty, twenty or [00:55:36][23.3]
Bryce: [00:55:37] beyond that haven't been in the AFR? [00:55:38][1.4]
Christopher: [00:55:39] Yeah, sure. Actually, I mean, just to get the track record. Right. So yes, I love the Tencent, but the other some analysts between 20 and 20 think we also were the first to call the bats back in April. Twenty nineteen last year we said we lost him. December the only analyst in the market ahead of you. And that's exactly what happened between April 19 and April 20, 20 plus percent. I guess my one bold and Brave calls I think listeners might be interested in is what will happen to house prices going forward. And I've been fairly stubbornly consistent since February and saying we expect prices to settle on all fall by up to five per cent this short term, three to six months and Covid. And that's going to play to so basically house prices nationally, Bryce here in Australia in January, February, March, April in my zero point four percent in July. So I think 31 percent say that about one point two percent. And that's consistent with the new Afterpay here in the south in Victoria is interesting. I'm not going to put more downward pressure on housing market dynamics in the second biggest city in the country. So that's something to watch. And it is a long six month lockdown for those things. But I think the controversial part of my call is much more sanguine or positive than every other analyst in the market or Quentin. Falls is that once the market stabilise, I believe to happen will continue again. So I've also consistently said I think prices once they stabilise, will rise another 10 to 20 percent. And and I and regulators and myself of that view. And yes, I am still that I'm sticking to my guns on that. I've also regularly said this is not my highest conviction, a record, but certainly every person is trying to think this is going to happen and I'm happy to. It's not really new information. I mean, the housing market has bounced back. Obviously, an auction clearance rates jump up 60 to seven percent. There's been good, healthy auction clearance rates in Sydney and Melbourne. Unfortunately, the lockdown is really going to kybosh that for a period of time for the next six or so weeks in that market. But I think it's becoming coming twenty, twenty one. I think housing will be one of the winners of of covid-19 for several reasons. Firstly, it's tremendously interest rate elastic. And we've seen mortgage rates fall by more than seventy five to one hundred fifty basis points since April. So that's a huge increase in purchasing power. Secondly, I think unemployment will come back down to about six to seven percent and stabilise at a reasonably submental level. Thirdly, I don't want to see massive waves of distressed selling or mortgage foreclosures. I think the banks will be very generous with their forbearance and give people a lot of time to work themselves out of any problems they might face. And then finally, I think you'll see a lot of integration, as we discussed earlier. So population growth as Australia competes in the best price globally. And I think Australia is going to be a key destination of choice. And I think that Chinese students who are studying, studying around the world, they used to associate with us to get a university education. But I don't see any Chinese students going to the US going forward seeking any other markets. Australia stands as potentially beneficial. So I think that augurs well for us. So I like Aussie housing as an investor class. [00:58:58][199.0]
Alec: [00:58:58] Nice one. Well, Chris, we really appreciate your time. We do like to finish the interview with three quick final questions before we jump into those. If people want to read more of your work or follow you online, is there a particular platform or a particular place where they should be going to follow you and your work? [00:59:15][16.7]
Christopher: [00:59:16] Yeah, you can get you on Twitter at sea Carroway. You can be pretty prolific on LinkedIn, right on live. Well, most of my life I call upon Livewell, which is excellent. And then as I mentioned, I also write in the online on Friday or Saturday. Forelady, you can go to our website at Coolabah Capital dot com, Coleby Capital dot com. [00:59:41][25.1]
Alec: [00:59:42] So if people want to learn more about fixed income or follow Chris's insights and get some big, bold predictions as he makes them, you know where to go. So jump into those final three questions. The first one is, do you have any books that you consider must read? [00:59:56][14.3]
Christopher: [00:59:57] So the answer is no. [00:59:58][0.6]
Alec: [00:59:59] Fair enough. [00:59:59][0.2]
Christopher: [01:00:01] Having an opportunity to think about these questions. The new book on Renaissance is really, really good. So this is so the things could be the master of the markets that said, yeah, yeah. And the mathematician and the insanity of the [01:00:15][14.6]
Alec: [01:00:15] man who sold the markets. [01:00:16][0.8]
Christopher: [01:00:17] That's something that was awesome as a really, really interesting book, because I read a lot of quants and we had four in 10. And I think one of the most powerful understandings when running quantitative processes is really appreciating the limitations of human beings running the kind that Covid is always going to be subjective. Yeah, that was awesome. The menace of the markets. Another very, very good book was A Beautiful One, A Beautiful Mind by Sylvia, an essay on John Nash, the guy who developed the Nash equilibrium in game theory that really actually had a big impact on me, that book. And I think I'll probably leave it there for the time being, but I'm not sure I read a massive amount. But I sure I'm struggling to find good non-fiction these days. I read with massive amounts of work and then when I'm on holiday, I don't really have to have holidays. I'm always working on holidays. But if I am sort of out of the office and it is like Christmas, I'm trying to decouple myself a little bit or try and reach some fiction, which tends to be military fiction. But yeah, they probably two interesting books. I'm not going to wow you with my. [01:01:22][65.2]
Alec: [01:01:23] No, no, they're good recommendations. We'll add them to our reading list. The next question we have is what's your go to source for investing or financial information? [01:01:31][8.3]
Christopher: [01:01:32] The question I use a combination. Bloomburg So we pay big bucks for that 10 Bloomberg terminals. But Bloomberg and kind of Sumiko Bloomberg, which is just a bit Bloomberg's really, really good. I also do The Wall Street Journal. So I read that every day. I read the Financial Times every day, and that is good. And then, of course, because we're trading with so many counterparty slowly all the time, they constant. Feeding us their own research and proprietary research, and then I have 11 and five portfolio managers for phase two to a that research intraday all the time, we have a lot of our own internal court systems. But I think the most important thing is just to surveil a range of information. [01:02:17][44.3]
Bryce: [01:02:18] Can't wait to get a Bloomberg to [01:02:19][1.1]
Alec: [01:02:19] pass the dream circus. Final question. If you think back to your early days as an investor when you were buying your first shares in Carpenter Pacific, what advice would you have for your younger self [01:02:32][13.0]
Christopher: [01:02:33] about the future, about life in general? [01:02:35][1.7]
Alec: [01:02:35] Just about investing and life wherever you want to take it? [01:02:38][2.9]
Christopher: [01:02:39] Yeah, I was like I mean, this is a little bit of using credit, but I was lucky enough to grow up in a previous environment and that was a real personal way. On the one hand, it was a blessing that I was kind of like a young lion, since as soon I realised I didn't really know how the world work. And I was very cocooned from that world. And it actually took me most of my 20s to figure out the vagaries of the human condition and how the world works. So if I had my time again or if I could advise my younger self, I spent most of my 20s and focussed on really esoteric academic research or involved in running a business that was engaged in fairly esoteric academic research. And that was great, but I would have started trading earlier. So again, I'm thinking about it here. I would it if I started trading earlier. I think I hate the fact that I'm forty three and probably only got another 20 years of trading left ahead of me. So that would be one lesson. What else. Another lesson is that I just kind of view that you have insiders and outsiders. So in my business everyone's family were insiders. The outsiders is really the market and the market is completely dispassionate, merciless, ruthless, and we are equally ruthless, dispassionate and in a combat in the market, because as an activist, every time I put in a position effectively, I'm saying the market's wrong and I'm right because I think it's mispriced. And so we are a kind of maksym, which is at every point counts. It's kind of like a tag line on our brand. But it is true that we are just relentless, rapacious in trying to grind out every additional basis point and searching for value. And that that process sometimes feels trivial and sometimes might appear to be cosmetic. But that intensity of commitment never bites. And I think that's very, very important. Otherwise, yes, the most important lesson is actually the one we talked about at the start. And this is really profound and that is that I didn't have a lot of intellectual self-confidence, to be totally honest, during my teens. I remember in fourth grade I kept on and I said I got a hundred percent massage exams. I'll believe when I say it was the exam and I didn't have it. And so we'll see tomorrow. And then I said to her every year and I said to my mom, Oh, you know, I really want to see. And she's like, God, I'm too high. Let's be more realistic. And so I didn't have a huge amount of self-confidence intellectually. And I really constantly surprised myself when I kind of was forced into situations where I had to confront problems I need nothing about. I had no expertise, no extant knowledge. And I had every single frickin time there was really original insight. There was innovation. There was aid lying inside. Right. And so I'm a massive believer, just getting the smartest guys I can lay my hands on a functional, harmonious you can work in a cohesive team environment and as a band of brothers or brothers and sisters, just tackling whatever, probably come across and tearing it to pieces and trying to find that inner truth, because that's also like our mission is the search for the truth, what is fair, what is fair value, you know, where these aspirin's going to converge to. And I have much more intellectual confidence now that we can solve pretty much any intractable, seemingly intractable problem. I guess a final observation, which is be intensity of application. So I think I don't know. I would say, to be honest, I said he wasn't the smartest guy. I just thought harder than everybody else and longer than everyone else that kind of looking at a problem. And I think there's an enormous amount to be said about that. Like what? I'm engrossed in a problem. I'm thinking about it like literally 24/7. I'm dreaming about it when I put my head on the pillow at night. I'm thinking about it when I wake in the morning up to at it. And my guys know because they'll get e-mails at 3:00, 4:00 or 5:00 a.m. every other day about problems. It must be really, really good fun to be good. That's something to be said for in addition to having access to really kind of serious intellectual grunt, it's really about the application. You've just got to be. I always know that when I'm trying to solve a problem or if I think about it, I've just done that first few iterations of analysis and you think of the Y there, that's when you're in very dangerous territory because it's that final 20 percent Dollars that can bite you in the arse and that you've got to get back to that. That essential truth is not forthcoming. It's something that is very, very hard to express. [01:07:04][265.5]
Bryce: [01:07:05] Love it, Chris. Some some really great comments there to finish out this interview. And we've really enjoyed sort of the last hour or so covering quite an extensive range of topics. So very much appreciate your time and sharing your experience and knowledge with that audience. It's been great and we absolutely look forward to continuing to follow you in the press and on live wire and wherever else you are. So a big thank you. [01:07:26][20.6]
Christopher: [01:07:26] Thank you, guys. The show's fantastic. I listen to it all the time. Massive admirers of your work. And thank you for having me on. It's a privilege. [01:07:32][5.4]
Alec: [01:07:32] Thanks, Chris. [01:07:32][0.3]
Speaker 5: [01:07:33] Thanks for listening to Equity Mates investing podcast production of Equity Mates Media. Please remember that everything you hear in Equity Mates investment podcast is general advice. Only the content has been prepared without knowing the personal objectives, specific financial circumstances or goals. The host of Equity Mates investment podcast may maintain positions in the companies discussed before considering any investment. Please read the product disclosure statement and consider speaking to a licenced financial professional. [01:07:33][0.0]