Contrarian Market Predictions: BlackRock's Kate Moore Shares

[Music] welcome to the me favor show where the focus is on helping you grow and preserve your wealth join us as we discuss the craft of investing and uncover new and profitable ideas all to help you grow wealthier and wiser better investing Starts Here me bber is the co-founder and chief investment officer at Cambria Investment Management due to Industry regulations he will not discuss any of Camry's funds on this podcast all opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of camber investment or its Affiliates for more information

visit camria investments.com this episode is sponsored by our friends at y charts advisers if you feel like your client conversations are falling flat y charts has got your back with the latest release of their top 10 visuals resource deck every quarter y charts Updates this handy slide Deck with fresh data and visuals to help advisers easily explain complex investing topics to clients and Prospects it covers everything from the value of long-term Investments to illustrating how different withdrawal scenarios can impact a client's portfolio over time my personal favorite chart is the asset class performance by year

going back to 2013 click the link in the show notes to get your copy of Y charts goto client communication Aid to level up your conversations actively engage clients and educate them about their financial goals and if you somehow haven't signed up yet new ycharts users can get 20% off your initial ycharts profession Prof subscription when you start your free y charts trial and tell them I sent you new customers only happy summertime everybody we got an awesome show today our returning guest is black rocks Kate Moore Kate's a member of the global allocation investment

team and head of thematic strategy Kate welcome back to the show yeah thanks me great to be here happy summer we find you back in the mountains that's right return to the mountains after a long stretch in New York and I'm going be very excited actually to get some fresh air and some hiking in we last chatted with you Feb 23 so a little over a year year and a half ago one of the favorite quest questions we ask our guests near the end is is a view you hold that's non-consensus that most vast majority

75% of your peers would disagree with and you said at the time the US economy is going to adjust to higher rates without getting anywhere close to recession don't bet against us corporate dynamism you were right or sound sounds like you were right walk us through what's been going on the last year year and a half and if people come around to Kate's view I feel pretty good about that call actually and still feel pretty good about the call about not imminently entering a recession I think one of the problems people have is they look

at all this economic data that's often kind of backward looking or they'll look at surveys that are not really that Broad and they'll make an assessment of the economy and I think the real key to getting the economy right is miring all of that Mac data with everything that companies are telling us and whenever you have this kind of Disconnect where like the economic data looks just okay but companies are saying hey my business looks pretty good and I expect to spend more in the future and here's my area of investment you say like okay

well that disconnect between what the economists are saying what companies are saying was a real investing and trading opportunity so we've been pretty constructive on the economy throughout 23 we were that was a a good call and uh going into 24 even though we start to see some fractures forming throughout the spring and people are getting a little bit more worried about activity in the back half of the year it's not keeping me up at nightm but I am conscious that the economy is running on a multiple different speeds and it's pretty hard to craft

policy around that what do we look like today what's the macro Equity investor perspective here in summertime 24 what's the world look like to you well we've coming in kind of hot to the summer of for here right where we've had exceptionally strong Equity returns not just over the last 6 months but really over the last 9 to 10 months there's been a a lot of concentration in terms of the equity Market leadership we know that I'm sure we'll talk about Market breath at some point and there has been a lot of concern uh particularly

around the fractures in the consumer thinking about how the market reacted or what the discussion and the sort of the zeit was as companies reported first quarter earnings there was a few companies that talked about the low-end consumer showing cracks or people trading down in terms of their purchases and spending and people wanted to extrapolate that to the entire economy without recognizing that certain segments were more challenged than others and by the way it turned out not just a segment but it was certain categories of spend were challenged more than others right now we're seeing

that continue even as the overall economy looks pretty strong and of course the Libor Market looks really healthy chair Powell and all the FED speakers going on about how the labor Market's adjusting appropriately and we've had a lot of people discuss sort of like the Slowdown and hiring can we I just remind everyone we added another 200,000 jobs when we're at or close to Full Employment last month it doesn't feel like a huge slowdown it feels like a very firm labor market at a time when prices are starting to ease and disinflationary pressures look pretty

positive so I feel good about the economy right now even though it is once again coming into Vogue to talk about where the weakness is it seems like the expectation now is that the FED is pricing in a cut this fall is that your view and how important is it that we get some easing here in the the back half of 24 we are in the September seems likely Camp as the first cut but even more than whether or not we get two cuts in 24 the thing I'm really sort of wrestling with is like

what is the path of this rate easing cycle look like is it going to be 200 basis points or just 100 basis points If the Fed doesn't feel confident that they can continue to move let's say at a 25 basis point clips for a bunch of meetings in a row it doesn't make a ton of sense it's not going to really move the needle and a somewhat controversial opinion or something that people don't love to talk about is the fact that there segments of the economy both large companies and wealthier consumers that are really benefiting

from this high rate environment so let me just say something about the large companies I mean I think we all know that they're much less sensitive to interest rates than they have been in the past they've locked in low rates they've termed out their debt their effective interest cost is like very low but they also are sitting on high cash balances and these high cash balances if they're not deploying that Capital right away on capex or m&a or spending on R&D or increasing wages for their workers is like earning them money this is environment a

lot of people have lived through or at least a lot of people on Wall Street you have to been around for a little bit longer so these large companies continue to do well in a high rate environment and higher end consumers let say the top 40% the top two quintiles of earners are also in that same situation where their asset owners asset prices have been going up they have investment accounts investment counts going up and they have cash and that cash is earning between four and 5% just sitting in a money market fund right now

with no risk so perversely this higher rate environment is actually making big segments of the economy on the corporate and consumer side wealthy that that 5% rate of return on the balance sheet is no longer trivial that's a big Delta from zero a couple years ago you already alluded to so let's go there the concentration and I feel like this is probably well discussed in the media like people realize that you have some concentration of some of these big names Nvidia really being the the poster child for this but what's your thoughts on the market

are we seeing any breath signs positive or negative yeah so just to kind of level set here the equated S&P is up less than 4% at this moment in time and the S&P is up close to 18% so that's a huge spread and it's a spread that people have been saying has to reverse but let's go back to the start of this year because there were great calls at the beginning of I mean not great from a being correct perspective but a great number of calls at the beginning of 24 for rotation out of the

mega cap leaders and into lagered sectors and stocks and I was like sitting there going like where are people getting this idea you have to bet on fundamentals and if smaller companies who or maybe more in sensitive or who are at a place in the supply chain where they don't really have pricing power themselves or sectors that are either constrained by inflation constrained by rates or are not seeing a huge amount of of of Revenue growth like we don't just rotate into them for the sake of rotating but people especially the cell side was like

trying to make a call and trying to get people to do something new I feel less stressed about the leadership in 2024 and the concentration because those companies that are leading from a price performance are also leading from a fundamental perspective these are companies that are putting up big Revenue numbers also delivering on the bottom line in terms of earnings they are companies that have huge amounts of free cash generation and even more importantly most of these companies are less economically sensitive again I don't think the economy is going away but we're kind of in

secular spending and secular investment uh environments for huge parts of tech and Tech adjacent Industries so the companies that are winning are strong companies these are not just a whole bunch of crowded trades where you've seen speculative action I guess that means I'm a little bit less stressed about leadership in 24 you have a pulse a little bit on earnings and and what these companies are conveying is Q2 any insights you can pass along for where we are here yeah I've got a bunch of thoughts on on second quarter earnings in general and then I'll

talk a little bit at some point around a tech trip just a whole bunch of Black Rock investors just did where we kind of really dug into the base and the growth cases for a bunch of these companies that are leading so let's talk about second quarter earnings because we're just here on the cusp of reporting and kind of the Baseline is consensus is around 7 to 8% EPS growth for the second quarter that's an acceleration from the first quarter so pretty good news there and I think one of the things that makes me constructive

on earning season is that number one we have had very few negative pre-announcements going into this earning season oftentimes companies want to like get out the dirty laundry right away they come out they just want to puke it out that's not happened at all in fact there's been these very few negative pre-announcements and actually some really positive pre-announcements and that's a improvement over recent quarters I think if there was really bad news to be had companies would have shared some of it ahead of time the second thing that leaves me constructive for overall earning season

is I pay very close attention to earnings revision ratios and for all of you guys that are like not in the Weeds on this earnings rision ratios are just the number of upgrades to the number of downgrades you kind of calculated by the fusion index it doesn't tell you the magnitude of upgrades versus downgrades but it gives you a sense for overall direction like are people more constructive on the earnings are they coming less and earnings revision ratios actually around the world not just for the US have been quite strong not just over the trailing

three months but over the one month as we go into earning season in no place is that more present than in technology where earning sentiment has continued to improve going into reporting in fact the one month earnings revision ratio for technology stocks is over two that means more than two upgrades for every downgrade that is actually pretty unusual and like let's be super clear that is not sustainable over the long term but it does tell you that all of the good news may not already be priced in from an earnings perspective if we continue to

see these analysts upgrading how much of this is isolated to the really big firms are you seeing this in sort of some of the mid and small caps too and the reason I ask is if you look at like percentage of stocks outperforming the S&P this year it's one of the lowest you can come across and you mentioned Eco weight still in positive territory I think small caps are down on the year still and so as we think about kind of the mid and small are they performing well on the corporate level but the stocks

are lagging or they just not look as shiny on the kind of earning side too how far do you guys go down in the cap structure I know you guys got a lot more commas in your a so you're probably not dipping into these tiny companies but midcaps maybe yeah I do invest in midcaps sometimes in the global allocation fund which I help the M we have to do it sometimes baskets because our fund is sort of large but I do pay very close attention to small caps and thanks for calling me out on that

me because it's true it's a really different story from both an earnings and a price performance perspective small caps were another place that the street really wanted to get excited about going into 2024 especially because there were these nent signs or at least nent to the people who were recessionista in 2023 these signs that perhaps the economy was in better footing than they had expected okay fine so maybe that's a rotation into small caps but they were ignoring some very big and important things I mentioned before the debt profile for large cap companies well the

debt profile for small cap companies could not look more different not only is a significant portion floating rate but a lot of that is bank loans and those bank loans have become scarcer in Supply so we're not just talking about policy rates plus it is also whether or not Banks feel like loaning lending money to these smaller companies so that's one consideration another big challenge with the small companies is they tend to be more single industry or single business players they tend to be less Diversified and that may be great and if you're trying to

isolate a specific idea but it's much more challenging when you're talking about a multipe us and global economy where a big Diversified multinational is going to have many engines running and engines running at different speeds so they tend to smooth the cycle a little bit more and then I think critically these smaller companies generally are less profitable so I talked about how the large companies have these cash balances that are really helpful for them the small companies don't and the big thing that makes me feel that large is going to continue to outperform small Meb

is that the large companies are investing very heavily in software Systems and Technology to improve their efficiency and productivity and we see this from a whole bunch of surveys one I like to highlight is a series of questions coming out of the Richmond fed CFO survey they ask all these CFOs across public and private companies are you spending on technology what does it look like and there is like it's A Tale of Two Cities when it comes to small and large all these large companies have been putting huge amounts of money to work and small

companies have been stalling on that strategy longer term I think that's going to be a really significant challenge for their profitability and their competitiveness maybe that means we'll we'll see more takeouts in m&a but in the near term the fundamentals from a rates perspective from a business perspective and I think from a technology investment perspective just don't look great for the small caps on the whole another Point too is on average much higher percentage of small caps are unprofitable these companies don't make money versus the large ones which is one of the reasons they're small

caps of course because you get a lot of Biotech and other stuff in there but just to put a performance pin on this and this can obviously change very quickly but I did a tweet this week where saying 2024 is on Pace to eclipse the record for single year S&P outperformance over equal weight and that 1998 was the current record but that only goes back to the 1970s but if you use small cap as a proxy for sort of looking like equal weight basically the Giant versus breaking the market cap you you can take that

back 100 years and uh 98 was the winner there too S&P outperformed small caps by 26% 20124 currently would be right around number three after 1929 but again this is only 6 months in so who knows what's going to happen the rest of the year as always will be fun to watch you see people on Twitter and sentiment I know you love to look at sentiment talking about inflation and somebody was losing their mind over a $25 Five Guys burgers fries and drink meal online is that having any effects on either end lowend high-end in

between neither yeah so the one thing that every consumer segment loves to complain about and you've just tapped into this is food prices and food prices because it is often our most frequent purchase is food food at home food away from home and we're really conscious although my big gripe is the car wash in town here raise their prices by 20% and no longer offers wash booklets so uh and everyone's just paying it because our cars get dirty in the mountains but on the food side I think this is really important because it plays a

disproportionate role in consumer sentiment and that matters even more than normal because this is an election year so there have been lots and lots of surveys about feelings around the economy and we've seen all these essays given how strong the labor market is given how strong job growth has been and wages are keeping up with inflation at this point in some cases exceeding so we're getting real income growth why does everyone feel so terrible and when you boil it down most people feel terrible because of their high frequency household purchases disproportionately food and I was

having this conversation with an economist friend of mine and I said to him like why don't they see that there has been inflationary Trends across all these food segments and he said Kate we need to get out of our own way we think on a year-over-year basis yeah okay prices are not growing at the same rate that they did in the summer of 23 or in the peaky area of 22 but everyone's benchmarking against the last low price they remember which might be pre pandemic and this is really interesting and I had to really reframe

my thinking about this which is like it's not the path that prices for food have been on more recently it is the like sort of starting point for prices today relative to where they were four or five years ago maybe and that's leading to like a sentiment drag and I think it's very popular to point out these increases in food away from home for example one thing I will say and there was uh some interesting data that a bunch of political surveys put out in the middle of spring and effectively what they showed is the

people who feel least positive around the economy were by and large women and this is regardless of their political affiliation whether they identified as Republicans Or democrats or Independents when you break down the segment it was largely women and women make up to 3/4 sometimes 80% of household purchases and perhaps are even more sensitive to the changes in food prices and that's having an impact on how they see the overall economy even even if many other things are going well so I'm watching um how people talk about food prices going into the election I think

that will be a factor in how they vote not just at the presidential level but down ballot there's two things that I think you mentioned that are really interesting the one is all the investment world thinks in rate of change all right inflation's 3% that's not bad right it's historical however what you mentioned is if you had a couple years just hypothetically say if it was at 10% just cuz we're back down at three it doesn't go back to where it was right listeners like if you think 10% 10% you have this Plateau now like

you've gone up a bunch from where it was and even though the rate of change is slowed you're still much higher and so there was a a tweet that became pretty viral where it was a man who tried to reorder some groceries from 3 years ago it was like the same basket and then he measured how much the price went up and of course the reveal is a lot so this is a to-do list listeners we'll try this for this episode when it comes out go find your instacart or I don't know what Amazon probably

not great for groceries but curious to see if you could reorder the same basket what the prices would be but this is like recency bias too we have to think about so our sentiment is most impacted by our most recent experience instead of sort of the collective experience and the recent experience today when we think about interest rates just like straight interest rates is like wow they're high but relative to my nearly five decade long life they're not that high and prices for loans and prices for mortgages are not that outrageous in the grand scheme

of things but all we remember is we had a decade or more of almost 0% rates and pre money and today it costs more and so there's a lot of angst around that instead of putting things in a broader historical context I love the financial history books and one in particular that we we talk a lot about was called the Great Depression of diary which is fun because that's a totally different environment than all of us have grown up in even our grandparents at this point are probably aging out of that experience and so you

walk through some of the thoughts and how people thought about it in real time is fascinating so even same thing like most of the younger crowd wasn't around in the 70s I wasn't so you kind of got to learn by osmosis in reading about it rather than your own personal experience and I think that's also why travel is so great and talking to people from other countries who have experienced things like hyperinflation or other things like bare markets we got 15 years of romping and stomping but you go chat with friends in Latin America and

Asia and other places they have a little different perspective than what you may have and then not only across time and across geography that's right I'd say my merging Market investor friends and I started my career being an Emerging Markets investor maybe the first 10 years or so they all like to say it's about time the rest of you woke up to the Dynamics that we've become used to higher inflation policy that's not perfectly predictable and forecast years in advance in some cases like political turmoil and significant changes in the volatility of a market so

everyone just get back to normal Em's been living it while DM has not been we B around a little bit but the that's the nature of my conversations and you mentioned a couple great tidbits as we're going back and forth so we're going to zigzag a little bit em you mentioned one of the trends with the US market cap we creaming everything it's not just creaming mid and small cap historically over the last 15 years it's been creaming foreign and emerging if that's even something anyone talks about anymore one of my favorite topics to talk

about though and so you've been racking up any frequent flyer miles traveling around the world anymore looking at em or do you keep a pulse on it and if so your old friends in that world any conversations about how things are doing there I know it's so dominated by China but you see India be ascendant they're having kind of a romping stomping bull market what are your thoughts yeah India is having a great run and actually India is a place we are really constructive on to this to the extent I've been romping and stomping it's

been to India of late meeting with both companies policy makers one of the challenges we have with the Indian market is that you don't have the depth and liquidity that you have say in European market but the potential is almost to the Moon both in terms of the consumer side there's a huge amount of Technology investment we see an enormous amount of potential growth there so while the number of companies that we may be invested in may not be the largest it is a place that we're putting more resources from like a headcount perspective as

well as a mind share perspective and I expect India to be a significantly larger part of our portfolio over the next couple years outside of that there are lots of places in Asia ex China that have interesting companies that are geared to the AI and Technology supply chain that we really want to continue to add to our portfolio so I would say it's like stuff across the semiconductor sector it's stuff within software there are companies in Japan for example not em but Asia that are very advanced in Industrial Automation which we see as being a

strong secular theme for the balance of the next couple years tied quite closely to that de globalization and change in supply chain and trying to increase efficiency and productivity themes so there's a lot to do outside of the US I think you have to be more stock specific and theme specific rather than just buying a broad Market it's also worth noting that's how I feel about Europe which is there are some great companies they're also very well owned and trade at a huge premium to the rest of the market but you have to be selective

so instead of just answering emab I just kind of went around the world for you but hopefully that gives you a sense for how we're approaching it you have probably the first slide deck I've ever seen that references inder's game which is an awesome book I haven't seen the movie movie because it kind of got some rough reviews but maybe we'll queue it up Incredible Book what were you talking about do you even remember I think it was about AI Tech swarms swallows birds well first I mean I'm like an obsessive sci-fi reader and have

been for a couple decades now so I've read Ender Game a couple times I also did not see the movie I find most of these movies really disappointing like also I would put this in the category three body problem I mean that is like an outstanding book I hear the series is pretty good but I just can't do it because I already have a vision of what that should be like have you read three body problem well there's two there's a Chinese series and an American series and we watched a couple of the American and

it was tough honestly but apparently the Chinese one is better but I'm with you it a little harder book than inders game inders is a lot easier to read than three body problem a little less physics yeah but Dune hey Dune to I thought was pretty spectacular to watch on the big screen I agree I'd say these new Dunes are coming out pretty well uh a little bit dark just exactly as the book should be the reference in there to Ender Game was around the hive mind which people are afraid of right this idea of

everyone having a kind of a group think and there's one stream that that pervades everyone's thoughts but I think there's real benefit into getting people together and what I'm calling sort of swarming a research project now we see programmers do this kind of stuff all the time they will take a whole bunch of different programming teams and redirect their energies to a project that may not be core to their day work in order for them to get a fresh perspective in order to supplement and check code and things like that then they can kind of

go back one of the challenges I'm seeing in the investment business in general is that people get really siloed they stick in their Lane and they don't tend to think in the cross-section so I'm trying to encourage the team to do things a little bit differently we see a really interesting problem or idea something that might span a couple different sectors or geographies or may not just sit in one person's sphere of expertise to bring people together to Kind Of Swarm on the idea let me just give you an example so there are companies that

have a couple different business lines you might have a company that has both a software and a semis exposure and then one analyst is like well I'm a semi person but it's not a pure play or the software person say it's I'm a software person but it's not a pure play both of those people should look at the company as well as say a company a person who always looks at Industrials for example because they may have a fresh perspective so much of the like Baseline common knowledge is now available to us through AI tools

we can get it so quickly that the value is in how do you think strategically what questions do you ask how do you challenge core assumptions in that business and so bringing people people from outside of their Lanes to approach and dissect and really diligence a new idea I think is super valuable it is not trying to get us all in the same space at the same time but take our diversity of our approaches and our thoughts to really attack a problem and the more that we leverage AI tools for the Baseline knowledge the more

that we can create people who can think in the cross-section and those are the people I think who are going to survive in our business easy to say and I feel like that's attractive for all of us and then yet when we go on Twitter or we want to research a stock that we own or a team that we like you're looking for confirming evidence I'm not reading articles hoping to find out why the Broncos are going to be bad this year or if I own Mega cap US Stocks most people don't spend their time

doing that do you have any suggestions like how to do that how to get out of our comfort level because it's harder and awkward and not as much fun any suggestions I would say not only do people find it awkward but they're afraid if they do that they'll have a harder time demonstrating value and it'll be harder to kind of Link their contribution and everyone of course wants to say me me me this is what I did this is how you should pay me so here's what I do and this is an exercise I ask

people uh that work with me to do write down all of your priors let's get all your biases out I'll talk I can talk about some of mine I know that I have a bias against small caps and some of it's Justified but I have to keep on revisiting why I have that bias or I have a bias to be concerned about Market breath in parts of emerging markets that are very concentrated in resources and Banks and so all these sorts of things but write down what are all your Baseline go-to structural thoughts and then

you have to if you're going to be intellectually honest you want to continue to grow you want to be the Strategic thinker and you want to continue to be relevant you need to really challenge each of those on a regular basis I have some pretty strong thoughts maybe around parts of politics or policy and like me I go out of my way to read commentators and thinkers who see the world differently than I do and try engage them in conversation and it's really important because you don't know where your weak spots are until you start

to have these conversations so I think owning what you know owning what your bias is and then making a deliberate plan to at least try and challenge some of those biases is how you get to be a strategic thinker my number one quote non-market related over the last two years and sorry podcast listeners because you've heard it a few times from Adam Grant where he says the hmark of an open mind is refusing to let your ideas become your identity and I think it's true with markets too because so many folks they're a dividend guy

or a hey I'm a mining gal I I love natural resources whatever it may be and you get attached to these asset classes you get attached to the Investments and I think it's hard so look I look I love Adam Grant and I feel like I screenshot most of his posts to save them into my my little archive but I also love syon synak he's a great thinker and maybe I'll share with you stuff afterwards um he does some great talks and anyway he has this quote and I have a posted of it up on

my monitor and it says play it safe and you'll always end up with mediocrity and that's what I think about this in terms of being flexible about the way you approach an investment idea or your framework which is if we play it safe and just stay in our lanes all the time then we're going to come up with maybe just the best idea in the small pool of things that we look at and that may not be the pool we should be playing in at all I also want to encourage analysts to sort of say

hey maybe I've been covering consumer staples for my whole life and I know all of these companies inside out but are those companies going to really generate the returns the cash flow and grow the way that some of the AI and Tech adjacent stuff will grow I don't think so don't just play it safe because that's what you know you're going to end up with mediocrity the mediocrity like mediocre portfolio of companies that are not growing but maybe the best in that small pool that you're fishing in so challenge yourself yeah we'll add uh some

Simons TED talks and stuff to the show notes listeners so go check those out yeah he's great what else is on your brain what are you thinking about anything in particular there are a couple things that I am nervous about and I'm sort of watching number one is and I don't have a specific Catalyst for it in the near term and it's frankly not my Baseline at all a really sharp momentum reversal would be pretty painful at this point so I'm keeping my eyes peeled as it were for what some of the risks whether it's

geopolitical or disappointments when it comes to earnings as companies are reporting second quarter bad news and talking about taking down their forward guidance anything that could shake confidence a little bit and lead to a momentum reversal because I think that would be a significant pain trade not just for us me particularly but for big parts of the market you could see fast money be risking very fast even faster than normal in that environment in general terms you say like okay a 5 to 8% pullback is not so bad we haven't had anything like that since

late 2023 but we have to be conscious of what might cause that and look volatility is really low it stayed really low volatility out into the third quarter into fourth quarter still looks really low so I'm watching that really closely that's kind of one of the things that keeps me up at night like what could be hiding in the corners that I'm missing uh that could lead to a momentum unwind even even if that's not my base case yeah as a Tren Faller I'm always in agreement with you there and it seems like a lot

of the traditional at least with like the fixed income World which we haven't talked much about a lot of the spreads are pretty tight too and it's not like that you have these giant spreads that may compensate for some of these markets it seems like they're pretty slim this is an odd question so you're going to have to put on your touque your thinking cap as you're walking around Jenny Lake let's say you and Rick reader cruising around the lake chatting about markets what do you guys disagree about is there anything in particular if you

guys are chatting or if there's anything non-consensus that you're chatting with your team that the Kate's thinking about well I think one of the debates we have we we touched on a little bit earlier which is crowdedness in the market and you mentioned earlier I pay a ton of attention to sentiment and technicals that's a big part of my process not just in timing entry and exit points but thinking about how to size different opportunities and so you look at someone the mega cap names and the in particular the AI related names and they do

feel fairly well- owned and yet my Baseline expectation given all the meetings I just had with them the week before last is that the news is still going to be good for some time in terms of Revenue growth broadening of customers Rick does worry sometimes about things getting a little crowded and so that is an area we constantly talk about I think another area is I think there's going to be great I mean this is maybe not something Rick and I disagree on but this is an area that I'm kind of focused on that I

would talk to him about I think there's going to be great opportunity to really pick winners and losers as we get more firm use cases and work streams out of AI for all these different Industries yeah so this is not a disagreement but we continue to figure out trying to figure out which are the names that get us there because I me men before that large companies are spending more on the technology on the software on things that enhance productivity things that increase their efficiency also that reduce their overall head counts I mean that's a

big one and that's going to be loow hanging fruit but those companies that really own or really have control of unique and proprietary data sources are going to move Head and Shoulders above their competition and their peer group and the ones who figure out how to handle and use AI tools with those data sources are going to be in a completely different universe so we think a lot about we kind of talk a lot about how do we think about concentration risk do we want to lean in these companies even more than we do when

will they really pull away in a meaningful way what does that mean for consolidation industry and for m&a and Capital Market activity that's another area we talk a lot about so those are some of the things but Rick and I also are share a massive love for golf I'm sure we would be talking about that as well well I'll hit you up for some tips later because I'm terrible on the AI side I haven't implemented it a ton in my personal life it's been more of a curiosity we've played around a lot with the content

world lmms but our producer Colby implemented there's a company called podcast AI which listeners if you're a podcast host go check it out because tell Meb sent you maybe they'll send you a hat but he's like implemented this and it cut our costs by some ginormous amount and also it just did 80% of things that we were doing before that were manual and headache producing so I imagine that's a very small microcosm of what everyone else at Corporate America is experiencing as you were talking about some of the concentration one of the things I was

noodling this past week I was chatting with someone and people would love to talk about the cu's and they talk about NASDAQ as a tech fund as the q's being a tech fund and I said well hold on like if you actually understand the methodology of how the cues invest like it's not a tech fund and if you actually ask most people who probably invest in the cues or even financial advisers what the cu's are I think they would probably get it wrong because you have a handful of stocks in there that aren't tech stocks

like Costco which you mentioned is a top 10 holding of the cues and I was noodling the other day and I haven't spend any time researching it but it's on my to-do list of trying to isolate all the stocks that are in the cu's that aren't Tech and see how much like the flows are kind of dragging them along in some of this Market concentrated flow exposure to where is Costco and Pepsi and some of these other companies that are not traditional tech companies are the flows pushing them to an area they're not normally not

supposed to be but just not normally would be associated with they're getting kind of spill over I don't know I don't have any conclusion it's more of a things that make you go hm well I did something I want to respond to something you said in the beginning which is about how you're using Tech tools and AI Tools in your personal life so I'm not sure if you have used perplexity so I've got perplexity on everything now and I will tell you I had a little problem with my dog the other day she ingested something

she shouldn't have golden retrievers what are you going to do and so my best friend is vetenarian and so on the phone with her I tested I asked her a bunch of questions she's been a practicing vet for 25 years and I tested perplexity for answers and I was getting almost exact I mean I'm going to go with everything that Emmy says but almost everything um versus what I was getting from some of the other AI tools which was like a little bit more hodge podge and kind of mix up I've gotten to a point

where I can do Baseline research on something so fast I mean I'll been in corporate meetings where I may not be like super in depth on that company and I don't know a ton and they'll use a phrase and instead of looking like an idiot I just plug that in as I'm taking notes on my iPad and boom I immediately understand and and can connect the dots can you imagine 10 years ago a Google search wouldn't get me what I needed 15 years ago when I started my career I think the path of understanding and

of learning is changed so dramatically and for what it's worth I think that's going to mean that eventually we need less people in some of these basic research roles because this is goes back to that swarm idea and thinking in the cross-section and challenging yourself outside of your lane uh because we're going to be able to you know get that Baseline information so much faster it's exciting I'm looking forward to it I was on the flight back from Japan I was using perplexity as an experiment where I'm trying to write like a little coffee table

book that with you look at the longterm return of US stocks right that famous chart and all the crisis events that have happened I'm trying to write a little coffee table book where it goes back to 1900 shows the crisis event of the Year globally and then how the global stock market did over the next one five 10 years whatever 20 years demonstrating hey even though Pearl Harbor happened Boxer Rebellion happened whatever it was you still ended up in a good place by investing but I was like you know what I really don't want to

write this book because it's a lot of work like I don't know anything about the Boxer Rebellion I don't know anything about this damn collapsing and Spanish flu but I'm like perplexity does so like within an hour I got the prompt dialed in and I wrote 10 chapters well I wrote I it wrote 10 chapters in like an hour and I was like oh this is really going to be a lot of fun and interesting so we need a name for the book listeners if you got a good name hit me up right now we

got crisis investing which doesn't sound that good stocks for the long Run's already taken so if you guys have any good titles hit me up I'll send you a free hat but yeah also listeners if you have any particularly wonderful AI suggestions on how to implement some of the stuff you can either leave them on the YouTube comments or or send them to me I'm I'm curious to hear Kate what else you mentioned you're an Avid Reader what's on your bookshelf right now anything good and particularly wonderful well I'm reading a series that falls more

into the fantasy then sci-fi category at this moment and that series is about kind of a riff on Middle Eastern mythology and I have to say it's super fascinating there's nothing better than like after spending an entire day staring at screens and looking at numbers than to get really really deep into this stuff the author is This Woman's essay chakra B the first story is city of brass and the second is kingdom of copper it's a short stories book or it's a oh unfortunately these are like 800 pages each um but there but it's a

it's kind of like an epic but it brings in a lot of this Middle Eastern mythology which you know is a is a new genre for me anyway I'm loving that and I just finished Peter aa's outlive which was incredibly impactful for me I had some pretty bad health issues last year with breast cancer and I've been thinking a lot about how I want to live the second half of my life and I've always been an athlete but there's so much more I can and should be doing in order to live the best and most

athletic version of Kate's life for the next 40 50 years deadlifts right what what else does he say deadlifts that's a big one definitely doing all of the weightlift and training stuff which was C of kind of in my scope but I think one of the things that I love that he talks about is the importance of community and the importance of connection and the emotional well-being and how critical that is for all the parts of your physical well-being as well so uh it's kind of a call to action spend even more time with my

friends well you got the lifestyle DED in being in Jackson Hall in the summertime magical place get ahead down to the mang Mose and and spend some time with some friends that sounds like a nice summertime Kate it's been a blessing thanks so much for joining us today yeah thanks so much for having me Meb and hope you get out and enjoy some fresh air this summer as well podcast listeners will post show notes to today's conversation at mefa.org podcast if you love the show if you hate it shoot us feedback at the mebf show.com

we love to read the reviews please review us on iTunes and subscribe the show anywhere good podcasts are found thanks for listening friends and good investing [Applause]