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Ex-Banquero Privado: Qué Hacer con tu Dinero Ahora que la Bolsa Está Cara — Transcript

by Javi Linares · 13,769 words · 2,061 segments · language en · Watch on YouTube

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0:00How are you seeing this year? Earnings
0:02have certainly grown a lot, but so have
0:04earnings expectations. How are you
0:06seeing it?
0:06Expectations are very high. If those
0:10expectations are met, the market holds
0:13up, but for investors looking to join
0:15now, perhaps that risk-return profile
0:18—capex investments will be very
0:20intensive. Many are talking about
0:23600,000 to 700,000 million for next
0:25year. That is just an outrageous amount
0:27. Really, in 2008 there was almost no
0:29shelter, so to speak, right? No, it's
0:31like I made a reservation for an
0:33apartment, but three months have passed
0:34and someone else has already come and
0:36offered me double what I paid. So, of
0:37course, with some returns, you seemed
0:38to be the fool, right? The one who
0:40talked about financial products, the
0:41one who talked about preserving, the
0:43one who talked about prudence.
0:44How do you see the Ibex? It has had
0:46three quite good years. The chances of
0:48disappointment today for me are now
0:50greater than those of a positive
0:52surprise. I believe that right now, it
0:53is a market that is expensive.
0:55What do you look at when investing in
0:56fixed income when you do it with
0:58managers or funds?
0:59The first thing we look at is what
1:02What role do you give to gold in
1:04conservative portfolios or in different
1:07portfolios?
1:08And this might be a bit controversial,
1:10what I'm about to say, but it has taken
1:11on a role as a speculative asset that
1:12we are not comfortable with. This
1:15business of ours, not just the
1:16financial markets, it’s not about
1:18being right, it’s about making money.
1:20Your study and your analysis might be
1:22wonderful and great, but if the market
1:24isn't buying it, don't be stubborn. Hey
1:28, sorry for interrupting you. As you
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2:22and invest for their future. Welcome to
2:24a new episode of Invest. We have a
2:26program veteran here today. With us
2:28today is Ignasi Vega. Ignasi, thank you
2:30so much for coming.
2:31Thank you so much for inviting me. As
2:32always, it’s a pleasure to be here.
2:35Well, Ignasi is a private banker and
2:37has been in charge of the wealth
2:38division for many years at some of the
2:41leading international banks, advising
2:43high-net-worth clients on how to guide
2:45their finances and manage their money.
2:48And the truth is that all the
2:49conversations we've had on Invest have
2:51resonated a lot; the audience has also
2:53made them some of the most-watched
2:54episodes, and it's a pleasure to have
2:56you back here today. So, in the last
2:59episode, just a year ago, we started by
3:01talking about how you were beginning to
3:03see a certain bubbly component in the
3:06American market. You mentioned that we
3:09weren't in a bubble, but you could
3:11start to feel a certain euphoria in the
3:13air and certain valuations that precede
3:15the formation of a bubble, right? I
3:18wanted to start this episode by asking
3:20you how you are seeing the American
3:22market this year, primarily? Because
3:24earnings have certainly grown a lot.
3:28But so have earnings expectations, and
3:30the P/E ratio—the price over earnings
3:31—and the forward P/E takes into
3:33account what the market expects will
3:35happen, right? So, with it being
3:37supported so far, how are you seeing it
3:39? Last year we were talking, right? And
3:42I remember thinking about it before
3:44coming here; at that time you already
3:46saw, well, some signs, although really,
3:48and I think we conveyed it that way,
3:50right? The situation was one to be
3:53comfortable with, right? To be
3:56comfortable having that type of
3:58investment in clients 'portfolios. Well
4:02, a year has passed, valuations have
4:04grown, and as you rightly say, profits
4:06and results have also grown, even in
4:08some cases with margin expansion, which
4:10is robust, which is a good sign, right?
4:13That doesn't mean that we aren't still
4:16being cautious, and I might even say, a
4:18little more cautious. The market, I
4:21think it is becoming, we believe it is
4:24becoming more demanding with valuations
4:26; and if we carefully analyze some of
4:28the results of the companies,
4:30ultimately those most linked to the
4:32sectors we were discussing at the time,
4:34um...the results have been very good,
4:36but valuations haven't run up much,
4:38right? In other words, those results
4:42haven't translated into very aggressive
4:44gains, right? Or very striking ones,
4:48rather, as we saw in previous years.
4:52Ultimately, what this is indicating to
4:55us is that we are not in a bubble. This
4:58, I think we can say openly again, or
5:00at least not a bubble like the ones
5:02we've had in the past, right? Which we
5:05also discussed last year. But these
5:08valuations do now demand certain
5:10results, and guidance, above all, right
5:13? A forecast of future results, as you
5:16rightly said, that are starting to be
5:19at levels that are, well, perhaps a bit
5:22asymmetric, right? in terms of risk.
5:25That is to say, expectations are very
5:28high. If those expectations are met,
5:31the market holds up and valuations
5:34continue to grow. But the day those re
5:37—those results, excuse me, don't
5:40exist or don't meet those very
5:42demanding expectations, well, we think
5:45there could be a correction. Mind you,
5:48up to a point it could be healthy and
5:51necessary, but for investors looking to
5:53join now, perhaps that risk-return
5:56profile, from our point of view, now
5:58forces us to be much more cautious than
6:01we would have been, or than what we
6:04conveyed, I think, right? A year ago
6:07regarding the sector, the US stock
6:09market in general, but obviously, in
6:12the end, the technology sector, which
6:15carries the most weight in the main
6:17indices.
6:18In the end, I think there is a phrase,
6:20right? That is being used a lot, which
6:22is the "earnings bubble," right? They
6:25say that, of course, it's what you
6:27explain: profits have grown a lot, they
6:28have managed to grow at the pace of
6:30expectations, but is it sustainable for
6:32them to keep growing so much, right?
6:34When one analyzes the business model of
6:36the Magnificent Seven, well, you
6:38realize that until very recently they
6:40weren't capital-intensive and now they
6:42are starting to be capital-intensive,
6:44right? How is this vision or sentiment
6:47on the part of the market evolving? Do
6:51you think they will stop having as much
6:52free cash flow, that all these CAPEX
6:54investments will be necessary and that
6:55this will affect the market, or is it
6:57that they don't believe they will find
6:59the profits in the timeframe they
7:00expect, or how are you seeing it? How
7:02are you experiencing it? I think it's
7:04exactly like that, meaning these
7:06investments these companies are going
7:09to make in the capex you mentioned
7:11don't necessarily have to be bad, right
7:14? But it will obviously change their
7:17results because of this. And so we
7:21cannot expect the same thing we've had
7:23until now when we are going to have a
7:26process of investment and spending in
7:28those companies, and therefore a
7:31different free cash flow. So we return
7:33to what we said before, is that
7:36necessarily bad, right? In the short
7:39term, looking only at company
7:41valuations, for an investor entering
7:43that sector now, it could be or it
7:46could make it less advisable or make an
7:48investment more painful if we do it now
7:51. It could be. Why? Because the
7:54expectations are not, I mean, they are
7:57not clear. No, we don't know yet. We
7:59are talking about a new environment,
8:02about understanding businesses. I mean,
8:05it is being a revolution. I think
8:07nobody questions this. It's a bit, if
8:10you want, we can link it a bit to the
8:12parallel with the dot-com era, right?
8:14Of the internet, right? One of the
8:16advantages of being old is that, right?
8:17That I was there, right? And I remember
8:20, I was much younger, but I remember,
8:22and that was a paradigm shift and it
8:24was, and it was unquestionable, but
8:26that doesn't mean a bubble wasn't
8:28generated, that many things fell by the
8:30wayside, et cetera, et cetera, right?
8:33Well, now we are also going to have
8:35this paradigm shift, but we have that
8:37unknown, right? I mean this parallel,
8:39uh, if you want we can comment later on
8:41the parallel regarding the bubble,
8:43formation, signals, etc. But regarding
8:45this, we can certainly put it on equal
8:48footing, right? There is going to be a
8:51change in the way companies work and
8:53operate, and not just technology
8:55companies, but many other companies and
8:58many other types of services, etc. So,
9:00of course, it’s not yet clear to us
9:03how this will translate into profits
9:05for those companies, but what we do
9:07know for certain is that these
9:09investments in capital expenditure will
9:12be historically intensive. We’re
9:15talking about figures, people are
9:17saying 600,000 to 700,000 million for
9:20next year. I mean, that is just
9:22outrageous. It’s something we’ve
9:24simply never encountered before at
9:27these levels. So, clearly, whether the
9:31returns on that will meet expectations
9:33given the level of demand the market is
9:36placing on those companies is what, I
9:39think, gives us the most doubt now or
9:41makes us more cautious about whether
9:44they can actually deliver. Well, I
9:47suppose it’s possible, right? No, I
9:49don’t think anyone is in a position
9:51right now, or has the information to
9:53say yes or no, but that it raises
9:55reasonable doubts, we certainly believe
9:57so.
9:58The flow of capital, right? It seems it
10:00went to the Magnificent Seven in
10:02previous years, though not as much this
10:03past year. In fact, the Magnificent
10:06Seven’s P/E ratio relative to the S&P
10:09500 is at a decade low, and now capital
10:11seems to be flowing more toward chips
10:13and memory. Where do you think that
10:16capital will continue to flow for the
10:17rest of the year and into the beginning
10:19of 2027? Look, I think we still have a
10:23few months where we’ll continue to
10:25move toward this area; but I do think
10:28the memory and semiconductor space is
10:30starting to be a little, I don’t know
10:33if I’d call it collapsed, but it’s
10:35becoming increasingly challenging to
10:38make a good capital allocation in these
10:40sectors. Energy is a sector that,
10:44ultimately, well, it’s true that it
10:46also has tailwinds logically because of
10:48all this, because of all this theme we
10:50were just talking about. But I think it
10:54will continue to move in that direction
10:56, and for 2027, well, we believe or
10:59hope that there will also be a flow of
11:01capital toward sectors that are, well,
11:04a little more boring, a little more
11:07conventional, if you like, but that
11:09have been left behind a bit. Where
11:13valuations aren’t as demanding and,
11:16in the end, perhaps they are more
11:18boring, well, less sexy businesses,
11:21right? As we say now, but with greater
11:25visibility. And I think that perhaps in
11:28the coming...I don't see it as
11:31immediate, eh, but I think that in the
11:33next few quarters, maybe a semester,
11:36even more, I would say that perhaps we
11:38should see that flow so that the market
11:41balances out a little bit, and, and so
11:44that growth is healthier, right? And so
11:46we stop putting so much pressure,
11:48demanding so much from this part of the
11:50market, which is true is where the
11:52engine of innovation, growth, etc., is.
11:55But hey, listen, let's not forget that
11:58there are good companies with good
12:01numbers, with good dividend yields,
12:05good P/Es, not so demanding, reasonable
12:08. And hey, well, allocating capital
12:10there, we think it can be a good idea
12:13in the medium term.
12:14In the end, it's a bit of a rotation
12:16between growth and value, perhaps,
12:17right? That is what we are talking
12:18about.
12:19Yes, yes, to put it that way, but we
12:21would say that, right? Maybe it doesn't
12:24even have to be pure value, right?,
12:26which is so demanding with the price to
12:29buy. Perhaps we could talk more about
12:31quality, right?,which is what we call
12:33the old GARP, right? Growth at a
12:35reasonable price, right? Growth, but at
12:38reasonable prices, right? Paying very
12:40high multiples. We are going to feel
12:43comfortable in the coming, in the
12:45coming quarters in that environment,
12:48without completely forgetting,
12:50obviously, technology, but yes,
12:52balancing the weights a little more.
12:55What type of companies or what maturity
12:57in the companies do you look for when
12:58you study quality companies, which you
13:00think will start to shine more now?
13:03Well, one of the factors that we like
13:06the most is entry barriers, right? The
13:09famous moats. We think that gives you
13:12an edge, an important competitive
13:14advantage, that it has good growth.
13:18Above all, beyond the growth figure
13:20being very spectacular, that it be
13:22recurring, that it be capable of
13:24maintaining it, eh, sustained over time
13:26and, well, and in the end that they be
13:29businesses, man, as much as possible,
13:31right? That we can all understand them
13:34easily, that we are capable of
13:36explaining it like that to the
13:38investors, to the clients, and. And we
13:41are going to be looking for this type
13:44of, this type of investments via ETFs,
13:46funds, or making direct investments in
13:49companies if the case arises, but. But
13:52we are going to lean more toward this
13:54profile of companies, sectors, I don't
13:56know, maybe like healthcare itself;
13:58those could be sectors that might start
14:00to be interesting. There are sectors
14:03that, even though they seem to be
14:06closely related to technology, like
14:08biotechnology itself, medical
14:10technology, and so on, have lagged
14:13significantly this year, these last few
14:15quarters, and we don't see a clear
14:18reason for it either, right? Threats to
14:20software from AI, but well, some
14:22justifications have been given that
14:24seem just like that, more like excuses
14:26than actual reasons why it makes sense
14:28for those sectors to have fallen so far
14:30behind. We are analyzing this part of
14:33the market quite a bit to look for
14:36opportunities and, ultimately, drivers
14:39for portfolio diversification and
14:42performance engines.
14:43It usually coincides in other bearish
14:46cycles, or when bearish cycles begin or
14:48a bullish cycle starts to end, how the
14:51different sectors or the different
14:53types of companies perform. I mean, for
14:55example, in the year 2002 or 2001, when
14:58the tech bubble burst, the market
15:00behaved in a similar way to when they
15:03burst in 2008 or in other previous
15:05market cycles.
15:06Every bubble, as we might say, has its
15:08own environment and has its own
15:10circumstances. There are indeed assets
15:12that act as a refuge, right?
15:15Non-cyclical assets are the ones that
15:18always tend to serve as a refuge in
15:21these environments, right? Because, for
15:25example, between 2000 and 2008, to
15:27mention the last two bubbles, which are
15:29the most recent ones and also the ones
15:31I remember best because I was already
15:34professionally in this. Of course, in
15:37one, the tech sector bursts with very
15:40high valuations, with very high
15:42expectations for companies that really
15:45weren't making money yet, and they did
15:47have revenue, but well, in a certain
15:50way, right? And not all of them, nor
15:54were they as clear as tech companies
15:57are now. On the other hand, in 2008 we
16:01came from an over-leveraging of the
16:04system in general because, well, there
16:07was an excess of credit, bank leverage,
16:10especially on the investment banking
16:12side, and that makes the collapse more
16:15systemic than in 2000, right? In 2000
16:18it was very focused on technology, so
16:21then you have traditional sectors that
16:23act very much as a refuge. Really, in
16:272008, especially in the early stages
16:30after the collapse of Lehman, wow,
16:32there was almost nowhere you could say
16:35was a refuge, right? The refuge was,
16:38well, going into assets, going into
16:40fixed income, which is what
16:41conventionally has always happened. And
16:43so yes, there were good opportunities
16:46there, because of course, credit was so
16:49tight that bonds from good companies in
16:52sectors like utilities or non-cyclical
16:55sectors, with very high earnings
16:57visibility, which gives you a high
17:00guarantee that they will return your
17:02capital, well, because of the credit
17:05stress they were at very attractive
17:08yields, right? In other words, bond
17:10prices had fallen significantly. So you
17:11had a clear refuge to go into there,
17:14but in terms of equities, well, of
17:17course there were companies that fell
17:20less, but obviously the doubt spread
17:23practically over the whole system,
17:26right? And that made it so that, even
17:30though the year 2000 is very striking
17:32because valuations were very high in
17:33the tech sector and the correction was
17:35very sharp. In that sense, I think 2008
17:41was tougher because it really hit the
17:44foundations of what financial markets
17:48were, and well, they were very tense
17:51weeks.
17:54Yes, I think people don't really grasp
17:56the severity of the situation in 2008,
17:58right? Because sometimes I get a lot of
18:01questions like, "Javi, do you think a
18:02crash like 2008 could happen?" I mean,
18:05sure, a black swan could happen that we
18:08haven't foreseen, but really, what was
18:10experienced in 2008
18:13was huge, and when you compare the
18:14current situation with that of 2002 or
18:162000, the valuations are not there yet.
18:19When you look at the current bull
18:21market we see in tech and compare it to
18:242000, it's not even similar, or to what
18:26happened in Japan with the financial
18:29sector, right? So, it doesn't seem like
18:32such a sharp crash could come now. I
18:34mean, there can certainly be
18:35corrections, right? There can certainly
18:38be drops in what the market demands of
18:40these types of companies, but something
18:42like 2000 or 2008 isn't something that
18:44happens that often in the market, right
18:46?
18:47No, I quite agree with you, and I hope
18:50I don't have to eat these words a year
18:53from now. I certainly hope I don't have
18:55to eat these ones, for sure. That is
18:57really the case. I mean, the valuations
18:59in the tech sector in 2000, the P/E
19:02ratios were much higher. Now I'm
19:05speaking from memory, eh, but I don't
19:07know, I think we were perhaps talking
19:09about average P/E ratios of 35 to 80
19:11for the NASDAQ or the sector's most
19:13important companies at that time. We
19:16are nowhere near that now, not by a
19:18long shot. We are at very demanding P/E
19:20ratios, but nowhere near those
19:22valuations. And in 2008, we had
19:24leverage ratios in the banks,
19:26especially in the investment banking
19:29side, but also in commercial banking,
19:32because in the end, the effect of the
19:34American mortgage crisis was widespread
19:37; it started on Wall Street, right? But
19:42it reached even the last regional bank
19:44in the most remote county in the
19:46Southern states, right? So, I want to
19:52think that banking supervisory entities
19:55did their homework back then, at least
19:59that's what we were told, with the
20:02Basel rules, etc., and that today, at
20:05least on the banking side, we can't see
20:08......leverage of that level, and in
20:11the end that, well, clearly prevents
20:15you from reaching these levels of
20:18expansion, I don't know if artificial,
20:22but in any case excessive, which later
20:25makes the contraction have to be much,
20:28much harder and much more painful,
20:31right? And in that sense, I think we
20:34won't see anything like that, not from
20:36one side or the other. The thing is,
20:39you also pointed out something very
20:41well, which is that we could have a
20:42black swan we don't expect, and that's
20:44usually how it is; I mean, crises never
20:46come from the ones we've already lived
20:47through, because we prepare for those,
20:49right? I mean, we aren't that
20:51masochistic, right? And therefore, well
20:53, unlike the dot-com valuations where
20:55at that moment we bought into the "this
20:57time is different" and all that, and we
21:00could buy at those valuations because
21:02it would go on forever, well, now we
21:04don't, now we're starting to worry,
21:06right? As I said before, right? A year
21:09ago we were already talking about this,
21:11when multiples weren't even that
21:13demanding yet. As for the banks, well,
21:15it’s the same: they’ve done their
21:18homework to prevent banks from reaching
21:20those levels of leverage and, for now,
21:23for now—because we know memory is
21:25short and people forget—the financial
21:27sector will pressure politicians to
21:29allow them to be a bit more expansive,
21:32with the excuse that it helps growth,
21:34and so on. Well, and it is true, it’s
21:36not just an excuse, you know? But in
21:37the end, we have to find a good balance
21:39, and I don't expect it from there
21:41either, right? So, I would really tell
21:44you, right? I also think that’s why I
21:46said before, I don’t believe we are
21:47in a bubble. Why? Because I don't think
21:51we have to see a correction of 50 or 60
21:53%like the ones we saw in those events
21:56we talked about, right? But of course,
22:00the market could correct by 20 or 30%,
22:03which, well, within a long-term bullish
22:06trend—if we really look back and even
22:09look at it technically, right? We will
22:12see that a 20%correction within a
22:14fundamentally bullish trend shouldn't
22:17really worry us. But of course, if it
22:20happens now and there’s a 25 or 30%
22:22correction, you can tell them whatever
22:24tall tales you want, but they’ll say,
22:26"Yeah, yeah, but my portfolio is down
22:27this much, right?" So, that’s why I
22:31said before: more prudence, be more
22:33selective, but taking these factors
22:36into account, aside from, as you
22:38correctly said, the fact that something
22:41could come up that none of us have on
22:43the table right now, and maybe a year
22:46from now, it will be the topic we're
22:48talking about, right?
22:50I just read the book "What It Takes" by
22:51the founder of Blackstone these past
22:53few weeks, which is very good and I
22:54recommend it to everyone. It tells the
22:56story of how he founded Blackstone and
22:58how he has experienced the different
22:59episodes in the financial sector since
23:011980. And he said that he was about to
23:04close one of the biggest real estate
23:06deals in Spain back in 2007-2008. He
23:10arrived in Madrid and one of his
23:12analysts told him, "Look, they are
23:14building more apartments throughout
23:16eastern and southern Spain than there
23:18are retirees in all of Germany, Ireland
23:20, and the United Kingdom." In other
23:23words, even if everyone came to live in
23:25Spain, you couldn't sell enough, right?
23:28So, they canceled the deal and dodged a
23:30bullet by very little, because shortly
23:32after, the subprime crisis exploded,
23:34destroying real estate all over the
23:36world and all that. So, you were
23:39already working in banking at that time
23:40, you were already in private banking,
23:42or were you in a commercial bank? Were
23:45there signs from the clients, the bank
23:46itself, or the employees that you
23:48sensed this could happen? Were the
23:51conversations with clients at that time
23:52regarding risk appetite different from
23:54what they are today, or do clients more
23:56or less always have the same risk
23:57appetite? That period caught me at UBS,
24:00the Swiss bank, which was also a bit of
24:03a canary in the coal mine for the
24:05subprime crisis, right? It’s true
24:08that there were first, well, two
24:10investment bank funds that were the
24:13first to sound the alarm, but by the
24:15summer of 2007, when here in Spain we
24:18were still saying "this never ends,""
24:20bricks never go down," blah, blah, blah
24:23. With the same discourse that we know
24:26all too well. And a very large
24:29provision had to be made due to the
24:31American subprime crisis, if I recall
24:34correctly, I believe it was 100 billion
24:37dollars, and, well, it cost the bank's
24:39CEO their job, etc., right? And well,
24:43for us, for such a conservative and
24:46traditional bank as it was, and I
24:48imagine it still is, right? At least in
24:52this aspect, right? That was, that was
24:54shocking, right? But of course, that
24:56was the input we were getting from the
24:58bank, right? From Switzerland and from
25:00the American side of the business from
25:02the top. And on the other hand, you had
25:05the dialogue with your clients, who
25:07were clients in the Spanish environment
25:09, where many of the liquidity events we
25:11handled came precisely from the real
25:13estate sector: people selling land or
25:16developers who were making a lot of
25:18money because projects were still
25:20selling, and so on and so forth. So, of
25:22course, giving them the speech of "be
25:25careful with real estate," when you
25:27were still finishing—we know now that
25:30at that time you were at the end of the
25:32sector's rise—which still had a
25:34little bit further to go in Spain,
25:36right? But, you know, it was starting
25:40to take its final gasps, but still, at
25:42its peak, it was like, watch out for
25:45this sector, watch out for
25:46over-leveraging, and so on, right? And
25:49that was, and that was complicated. And
25:52what's more, at that time all the
25:55savings banks still existed in Spain,
25:57which today no longer exist, including
26:00a multitude of local and regional
26:02savings banks, which were very active
26:04back then and were practically
26:06developers. That was, that was the
26:09problem, right? I mean, they would ally
26:11themselves with construction companies,
26:14finance their land, and if necessary,
26:15they would partner up, anyway, you know
26:17? I mean, credit, money to build, so
26:21that this wave could continue, which in
26:25the end, of course, was bringing
26:28profits to all parties, right? So, that
26:32was complex because, on one hand, there
26:34were those alarm bells, and what you
26:36mentioned—which I found very funny
26:39that you said in the book—because we
26:41were saying it too, right? Well, the
26:44argument was that Spain is going to be
26:47the Florida of Europe and therefore...
26:52it's not overbuilding because people
26:54are going to come here to retire, the
26:56Germans, the Danes, the Belgians, the
26:57French, and so on, right? UBS, which
27:01messed up significantly on some things,
27:04right? as I was just telling you, but
27:07they have powerful research departments
27:09with very good people, and they gave us
27:11a report that basically said something
27:13very similar to this, right? Meaning,
27:17even if 70 or 80%of all people over 65
27:21in Europe come to Spain, not everything
27:24that is planned is going to sell.
27:29Luckily, not everything was built,
27:30because many things fell by the wayside
27:32or were left half-finished. But
27:35that’s what was planned at the time,
27:36right? So, well, we reasonably took
27:39this as an alarm bell and said, "Hey,
27:41maybe we're going a bit, a bit too far,
27:43right?" But it was very difficult to
27:47fight against that argument at a time
27:49when anyone would say, "Hey, I just put
27:51a deposit down on an apartment, and
27:53three months later, someone came and
27:55offered me double what I paid." So,
27:58damn, of course, with those returns,
28:00you felt like a fool if you didn't,
28:01right? whoever talked about financial
28:04products, whoever talked about
28:05preserving, whoever talked about
28:07prudence in a scenario of exuberance
28:09like there was at that time, like there
28:11was at that time in Spain. And the
28:14truth is that it was a complicated time
28:17in that sense, and besides, when
28:19everything blew up, it didn't give you
28:21any satisfaction either, right? Because
28:25deep down it was pain for your clients,
28:27it was having to reduce company balance
28:29sheets, balance sheets of the
28:31portfolios themselves, those that were
28:33leveraged, and so on, because credit
28:35suddenly dried up and economic activity
28:37was paralyzed in a drastic and harsh
28:40way, right? And therefore it's not like
28:44you say, "Well, I had the satisfaction
28:46that we had told them so, we had been
28:48right," but it didn't bring us any
28:50major benefits either, did it?
28:54Therefore, it was not a good time, and
28:56as you very well pointed out, it is
28:59true that it was a long time ago, about
29:0118 years, in September of the Lehman
29:04bankruptcy, right? And it's a long time
29:07, but man, those of us who were there,
29:09those who lived through it, I'm sure
29:12that anyone you ask, damn, they
29:14remember it perfectly, eh? You know,
29:17just like I remember where I was when
29:19the Twin Towers fell, I remember
29:22perfectly the day of the Lehman
29:24bankruptcy, because we already had ugly
29:26signs before, during, before the summer
29:29, during the summer, but that was the
29:31moment to say: "Okay, that's it,
29:33there's no turning back," right? I mean
29:36, until then we had the hope of, well,
29:39let's see if this gets back on track
29:41somehow, and that was the moment of,
29:44well, here we have to reset and start
29:46over somehow. We didn't know how, but
29:48of course, this was never going to be
29:50the same again.
29:51Yes, yes. It's just that Steve
29:53Schwarzman, the founder of Blackstone,
29:54said that at those moments there was a
29:56real fear of a total collapse of the
29:57system. And it wasn't just that,
30:01because it coincided with, well, the
30:03bankruptcy of some banks, and that
30:05regulators forced you to mark-to-market
30:07bond portfolios and funds at a time
30:09when they were worth nothing; when,
30:11perhaps, if you had held on for two or
30:13three years...
30:15those portfolios would have started to
30:16float again. Everything came together,
30:18and until the regulator and the Fed
30:20stepped in with bank reserves and
30:21started the first quantitative easing,
30:23there was fear that the entire system
30:25would collapse. So, luckily, it seems
30:28we are not at a similar point,
30:30right? I I don't think so. Uh, that's
30:33why I say, I have, I think, the
30:35certainty, we could say, that thanks to
30:38, well, everything that happened
30:40afterwards and that those lessons were
30:42learned, right now I believe we are
30:44very far from reaching a level of
30:46leverage on that side, at least on the
30:49side of the financial system, to be
30:51able to experience something similar to
30:53what we saw back then. Yes, because
30:56clearly, the ones that have leveraged
30:57are the states, right? Debt has moved
30:59out of the private sector, but it has
31:01shifted to the state side. Just a few
31:03weeks ago, Kevin W.S. was appointed
31:05president of the Fed. Kevin W.S. was
31:08the youngest governor to be elected to
31:10the Federal Reserve in 2000—I don't
31:12remember if it was 2007, right in the
31:14middle of the hurricane. And in 2011,
31:17when the Fed started the second
31:18stimulus package of Quantitative Easing
31:20, he left his post saying he thought it
31:22was no longer necessary, that it was
31:24doping the markets when they were
31:25already recovering and somewhat
31:27altering the natural course of the
31:28economy, right, and of the capitalist
31:30system. So, how have you viewed the
31:33appointment of Kevin W.S.? What effect
31:35do you think having a Fed president who
31:37has openly shown himself against this
31:39expansion of bank reserves and also
31:41somewhat critical of the states' such
31:42large deficits could have on the
31:44markets? Correct. It was a bit
31:46surprising, right? When speculation
31:49began that it was going to be him,
31:51precisely because of that "hawk"
31:52reputation he has, and certainly
31:54well-earned until now, right? I mean,
31:57it's not debatable, I think, in that
31:59sense, at least his points of view up
32:02until now that he has held the new
32:04position since May. He has surprised me
32:07so far by wanting to maintain a fairly
32:09low profile. No, in the speeches he has
32:12given, he has made it clear, I mean, he
32:14has maintained a hawkish profile, let's
32:15say, right? Uh, but not overly so,
32:19right? Obviously, we are not going to
32:22ignore the political pressure he will
32:24face from the White House. We have the
32:26midterms in November. Uh, well, at
32:29least I believe that during these next
32:31few meetings, right?,until the midterms
32:34, I think he’s going to be prudent
32:36and will try to do something fairly
32:38neutral, something, I think, quite
32:40similar to what Powell would have done.
32:43Uh, I don’t think we’re going to
32:44see any major differences up until that
32:46point. Um, but well, I think it’s
32:50good, I think a profile like his is
32:52good for the independence it signals
32:55for the Federal Reserve. Personally,
32:58and here I’m not even speaking about
33:01our structure as such, because this is
33:04a very personal opinion, but I am
33:06uncomfortable with, I dislike this
33:09political interference in entities like
33:12the Federal Reserve or as it should
33:14also be for the ECB, right? And
33:18certainly, whether it’s because of
33:20the animosity Powell faced or whatever,
33:22this struggle that Trump and Powell
33:24have had in this, since he’s been in
33:26his second term, I think it’s not
33:28good; it’s not good for the system,
33:30it’s not good for the Fed’s
33:32credibility, nor, in general, for the
33:34credibility of the system, right? Of
33:37the market itself. I believe that with
33:39Warsh this will undoubtedly improve and
33:44also well, I think that reasonably,
33:47within that more hawkish profile, if he
33:50ultimately determines that it’s
33:53necessary to lower rates because
33:55inflation is already under control, or
33:58at least not raise them. Uh, which I
34:03think at the level they are at in the
34:05United States, given how inflation is
34:07right now and the employment rate as
34:08well, obviously, even though there
34:10might have been some slightly more
34:11negative data, right? But ultimately
34:15the American employment rate,
34:16employment in the United States is
34:18robust, it’s healthy for now, which
34:20doesn’t mean that in a few months it
34:21couldn’t take a turn. The American
34:24labor market is very flexible and this
34:26means it can change in both directions
34:28very quickly, right? But for the moment
34:31, I think it’s reasonably robust.
34:33Inflation, while not alarming, is not
34:37completely subdued either. So, I think
34:41that for now his moves are, from my
34:43point of view and I insist, the
34:45appropriate and expected ones, right?
34:49Well, he has a challenge, Warsh, the
34:52one he would have faced or any central
34:55banker nowadays. They have a challenge
34:58that is not easy at all; they must
35:01continue reducing balance sheets, and
35:04this is very complicated in an
35:06environment where markets have become
35:09accustomed to having these stimuli, and
35:12at any moment that it seems momentum is
35:15fading, the central banks step back in.
35:18And, in the end, this stems from an
35:21extraordinary situation that occurred a
35:23few years ago where quantitative easing
35:26was necessary at the time, which I
35:28believe is indisputable; perhaps what
35:31is more debatable, right? As War said,
35:34if in 2011 it was necessary again, or
35:36maybe the economy could have moved
35:38forward on its own by then...But in any
35:40case, then comes COVID, which I think
35:43caught them off guard just as they were
35:45starting to reduce balance sheets, and
35:47yet, the central banks had an
35:49obligation at that moment. That part is
35:52certainly indisputable. I think we can
35:54question whether we should have started
35:57draining liquidity or not, or perhaps
36:00taken advantage of the year '22, which
36:02was already a tough market year due to
36:05rate hikes, to be even more aggressive,
36:08right? But well, that is complicated
36:11because in the end, that also has an
36:13impact on the real economy, on
36:15companies, and on people, right? But
36:19the challenge for me, for central banks
36:22in general, looking a few years ahead,
36:24is this. And that is certainly not
36:27obvious at all, is it? That is the
36:30bubble that, well, I wouldn't say no
36:32one talks about because it is discussed
36:35, obviously, but perhaps it gets less
36:38media attention; yet state debt is what
36:40starts to stand out when you look at it
36:43with some perspective. Damn, we've been
36:46like this for many years now. And we go
36:48up very fast and come down very slowly,
36:50right? And if, on top of that, we have
36:53a 2020 where we have to look upward
36:55again, wow. So, well, structurally this
36:59has to be addressed eventually; because
37:02, of course, this has political costs
37:04and other consequences that are not so
37:07simple to face, and in the end, central
37:10bankers have the margin they have, but
37:12they don't have total freedom to make
37:15decisions in that regard. They have
37:19mandates to fulfill and must be
37:20governed more by those. Yes, in the end
37:24, currently, the wealth effect of the S
37:27&P 500 with 401k plans and retirement
37:29funds, where 60-70%of Americans have
37:31assets invested, means that, clearly, a
37:3330%drop in the S&P 500 today generates
37:35a much greater negative wealth effect
37:38than it did before, when fewer people
37:40were investing in the stock market,
37:42right? So, between that and the
37:45national deficits, which in the U.S.
37:48are at 6-7%and not going down, it's
37:50true that the Fed Chair has a
37:53considerably difficult role. I wanted
37:56to ask you, Ignasi, about the IPO, the,
37:58uh, the stock market debut of SpaceX,
37:59right? We saw that it was the biggest
38:02IPO in history, surpassing Saudi Aramco
38:04, which was the previous one, more than
38:05a trillion, it launched with very few
38:07free-float shares, which for those who
38:08don't know what that is, are the shares
38:10of the company that are traded. The
38:12rest is, well, in the hands of founders
38:14, employees, or people who cannot sell
38:16yet, right? And that free float will be
38:18released, it will be expanded, I think
38:20up to 40%within a year, it seems to me.
38:23So, indices like the Nasdaq included it
38:25in the index, but only in relation to
38:27the free float that is available. So,
38:29despite having a trillion, I think it
38:31occupied less than 1%in the rank, in
38:33the index, which is not very high. The
38:35effect of the IPO was a 20%rise in the
38:37first few days and now it is already
38:39below the offering price. Today it was
38:40just going up a bit. I wanted to ask
38:43you, how were you viewing the SpaceX
38:46IPO? There are people who say this,
38:49right? That, ugh, this SpaceX IPO has
38:51to do with bubbles, but really people
38:53also complain that there are hardly any
38:55IPOs. So, how are you seeing it? This
38:58was a topic, also, of course, as it was
39:00very public and such, it was, well,
39:02very recurring, right? In, well, with
39:04clients, etc., even, well, this, right?
39:08With those who usually aren't so up to
39:10date with the markets and such, right?
39:12And yet they would talk to you because,
39:14well, because the company itself is
39:16dedicated to something that draws
39:17attention and, besides, Elon Musk is
39:18behind it, who is a very high-profile
39:20guy and such, right? But I haven't
39:23mentioned this, man, analyzing the
39:25components of that IPO, when we started
39:28looking at it and so on, well, we
39:30started seeing things that didn't make
39:33us feel comfortable, right? Well, this,
39:37right? Including it so quickly in the
39:40index when, historically, we usually
39:42talk about much longer time periods. Um
39:45, lockups for employees are usually the
39:47period in which they cannot sell, right
39:50, after an IPO. Uh, I don't know how it
39:53ended up, but when I started looking at
39:54it at the beginning, they were talking
39:56about the first official earnings
39:57presentation,
39:58Yes, this coming week I think part of
40:00it starts to unlock, not all, but a
40:02part.
40:02Exactly. Yeah, of course, this isn't
40:04usually the case either; they are
40:05usually given much longer lockup
40:07periods, right? 6 months, even 12. Well
40:11, all this didn't make us feel very
40:13comfortable, right? And in fact, we
40:17aren't particularly active in stock
40:19picking, but some client asked us about
40:21it, so we gave them a specific
40:23recommendation, though it was very
40:25limited, right? Hey, go in, but set an
40:29exit price immediately because, well,
40:32we kind of expected what ended up
40:35happening, right? A very significant
40:39initial euphoria because it's true that
40:42the supply was very limited, while the
40:44media impact of the news was high. So,
40:48globally, it was easy for a bottleneck
40:50to form there, but I also think many
40:52people were thinking along the lines of
40:55this same recommendation we made, right
40:57? Hey, I'll jump in, grab a quick
41:01profit, 15, 20, 10, whatever I can, a
41:0425, and I'll back out and we'll see
41:07later, right? If, when the company
41:11starts to stabilize, and the lockups,
41:14let's see the insiders, how many sell,
41:16how many don't, in what proportion,
41:18etc. Well, and let's start seeing the
41:21materialization of all these very
41:23ambitious plans of SpaceX, right? It
41:26was also speculated at the time, right?
41:28I haven't heard it in days, but back
41:30then, or even that they are stories
41:31meant precisely to heat up the launch,
41:33right? No, but it's going to absorb
41:35Tesla, all of Musk's companies are
41:38going to be integrated under the
41:40umbrella of SpaceX, etc. Sure, that
41:42creates very, very high expectations,
41:44but in the end, it's also a lot of
41:46narrative, right? So, let's look at the
41:49data, right? Beyond the narrative,
41:51let's see if this is really the case.
41:54We can analyze it a little bit better.
41:56Well, this isn't it, what's behind it,
41:58beyond that expectation, you won't be
42:00able to analyze it clearly, and that
42:02already has a component, well, more of
42:04that, right? Of long-term or
42:06medium-term growth expectations, but
42:09well, seeing if that valuation is
42:11really reasonable, it seemed to us from
42:14the start a very demanding valuation,
42:16not just demanding, but very, very
42:19demanding at the price it was coming
42:21out at. I really like the SpaceX IPO to
42:26explain an options strategy that is
42:28very useful for hedging a position you
42:31hold but cannot sell yet, right? And
42:35this happens a lot with executives at
42:36multinationals who have a large part of
42:38their wealth tied to the company they
42:40work for, but maybe they can't sell for
42:414 years, or employees of a company that
42:43has gone public and they can't sell for
42:45another year, right? Could you explain
42:49how, with call options or put options,
42:52you can protect yourself to guarantee a
42:54future selling price for an option that
42:57is currently trading above what you
42:59think it's worth, and you want to
43:01guarantee a price higher than, or not
43:04higher, but you want to guarantee a
43:06certain price?
43:08to hold that price. Well, I am not an
43:11options specialist, let me state that
43:14first, but in that case, I think what I
43:16would do is a collar; I would finance
43:19the purchase of puts by selling call
43:21options, and with that, I would limit
43:23that margin. It wouldn't have a cost
43:27because with the amount I collect from
43:30selling those options, I finance the
43:32ones that set my price floor against a
43:35decline. It's like making a custom
43:38structured product for yourself, but in
43:42this case, also limiting your upside,
43:46right? It is true that this is used for
43:49executives when they have stock options
43:52, but they have a lock-up period, as we
43:55were saying before, during which they
43:58cannot sell them, and I think that
44:01basically, with that strategy, it would
44:04serve to ensure, to ensure that price.
44:08It's interesting, isn't it? Because you
44:10can also just sell calls and buy puts,
44:12you pay the premium, but you also
44:13guarantee you can sell, right?,at a set
44:15price down the road. And wow, there are
44:18a lot of people in the United States
44:19who came out saying, "Well, look, I had
44:21a good salary," because in the U.S. you
44:22get paid very well, but you also spend
44:24a lot of money, especially if you live
44:25in San Francisco and places like that,
44:27where these companies are headquartered
44:28. And there were people who didn't have
44:31many savings, but suddenly they had 7
44:32million in the value of SpaceX shares,
44:34but they couldn't sell them yet, right?
44:36So, many financial advisors over there
44:39in the U.S. came out explaining that
44:41many of their clients were executing
44:43these types of strategies to protect
44:45that wealth, right?,out of fear that
44:48I think, and this is just my opinion,
44:50from a manager's point of view, that
44:52shouldn't be very well looked upon,
44:54right? Because, of course, you should
44:57have confidence that your company's
44:59shares are going to increase in value,
45:01right? Therefore, in 2 years, when I
45:04can sell them, my options will be worth
45:06even more than what they are worth now.
45:09But let's see, from the point of view
45:11of an employee, maybe in the SpaceX
45:13case we're talking about, well, I don't
45:15know, programmers, people who at the
45:16time bet on a project that is still a
45:18startup, right? When they started with
45:21this project of sending rockets into
45:23space, right? Which is easy to say, but
45:25it's not at all obvious, not just
45:27sending them, but recovering them,
45:29right? This is the most spectacular
45:32part, at least from my point of view,
45:34and the things that the SpaceX team has
45:36achieved, well, it seems reasonable to
45:38me that someone would use a strategy
45:40like that, and it's also true, it
45:42neutralizes you, right? Because, of
45:45course, selling those call options
45:46means that if the price goes up, you're
45:48going to miss out on the whole rally,
45:50right? But it limits your downside, as
45:53you were saying, by buying those puts
45:55that will allow you to sell at that
45:57price within the time horizon that you
45:59choose.
46:02Changing the subject and getting a
46:03little more down to earth, to what's
46:04closer to us here, how do you see the
46:06Ibex? It’s had 3 pretty good years,
46:08but well, since the great financial
46:10crisis, it had really suffered a great
46:12deal. Nobody wanted to know anything
46:15about the Ibex, banks were on the floor
46:16, and most of the IBEX 35 stocks were
46:18too. And now it’s had some very good
46:20years, right? We talked in the last
46:22podcast about the effect of the rate
46:23hikes that had also come, had come to
46:25the banking sector.
46:26Yes,
46:27but well, it seems it doesn't stop
46:29there, that this last year has been
46:30very good and I wanted to know what
46:32potential you see for it and what
46:34tailwinds it might still have so that
46:36it continues to have good prospects, or
46:37if on the contrary, it’s time to take
46:39profits and perhaps diversify. We are
46:43not very heavily invested in the Ibex,
46:45and it is true that, in the end, the
46:47funds we’ve had in the Ibex we’ve
46:49had in technology in the United States
46:51and so on, so it hasn't worked out
46:53poorly for us either, right? But it is
46:56true that, in the end, because of
46:57proximity, right? With clients and such
46:59, of course, the Ibex appears on the
47:01front pages, right? In the Spanish
47:04financial press, well, even in the
47:05non-financial ones, right? Because it
47:09has hit record highs and such, and you
47:11do get that point, right?,of "wow, why
47:13don't we look at it?" No, the tailwinds
47:16for the IBEX, I won't tell you that
47:18they’ve ended, but I do think they
47:19are starting to run out, in the end. Um
47:22, I suppose we talked about it last
47:24year, I honestly don't remember, but of
47:27course, the banking sector was what
47:29basically drove the Ibex, well, some
47:31tourism too, eh, hotel chains, etc. Eh,
47:33and this helped it, right? The banks
47:37didn't pass that rate hike on to the
47:39saver; they passed on as little as they
47:41could, right? To the smallest extent
47:45possible, and that allowed them, well,
47:47a '22, a '23, and even a '24 with very
47:50solid results, right? Those of '25 have
47:53continued to be very good for banking,
47:56but we no longer see the growth we had
47:58seen before, right? And here we return
48:00a bit, if you like, to the reflection
48:02we made with the tech companies, right?
48:04That is to say, the possibilities of
48:07disappointing today are, for me,
48:09already greater than those of
48:11surprising positively. So, I think it
48:14is now a market that is too expensive
48:16to get into. If you are invested, well,
48:19it depends on whether you are in the
48:21index or depending on which stocks,
48:22well, we would have to see. And as for
48:27taking profits now. Well, if you got in
48:31at the right time, meaning you did
48:33better than us, as we didn't do it in
48:36'21 or '22 and you bet on the Ibex
48:38there, well, I wouldn't be
48:40uncomfortable taking profits now either
48:43, eh? But let me say, as I've indicated
48:46, that it's not a bet that we have made
48:48, and therefore our clients are not
48:50invested there, right? And beyond the
48:52fact that we always say, right? That
48:54these aren't investment recommendations
48:56and such. In this case, it's even more
48:59so, right? Because it's almost more of
49:01an opinion than it really is an
49:03investment recommendation. Yes, we
49:06believe that the tailwinds have been
49:09supporting it, they could continue to
49:12push it for a while, but well, in the
49:15end, it has already covered that gap it
49:18had, right? That differential with
49:21other markets, and now in that sense,
49:23it's not as attractive either in terms
49:25of valuation, right? And evidently,
49:28although it's not the short-term
49:31expectation, if there were more rate
49:34cuts in Europe, even though levels are
49:37now, well, reasonably comfortable, the
49:40banking sector could suffer; at least,
49:44I'm not saying a drastic correction,
49:47but perhaps cleaning up some of these
49:50growth levels from recent years.
49:54Changing assets, changing the subject,
49:56because we almost always talk about
49:57equities because it's the sexiest, the
49:59most attractive, and what interests
50:00people the most. And moving to fixed
50:04income, which is really the asset that
50:05moves the most money in the world, even
50:07more than equities, I wanted to ask you
50:09about the selection of fixed income
50:10investment funds, right? The SPIVA
50:13report, which shows the performance of
50:15managers against the indices, shows
50:17that in equities, 90-something percent
50:19fail to beat the index systematically.
50:23But in fixed income, there are many
50:24more managers who manage to generate
50:26alpha relative to the indices and
50:28obtain more return with less volatility
50:30, right? So,
50:32What do you look at when investing in
50:34fixed income when you do it through
50:36managers or funds? And what firms are
50:39most worth looking at when searching
50:41for fixed-income investment options?
50:44Well, the first thing we look at is
50:47whether the manager's philosophy
50:49regarding asset type and, above all,
50:52duration aligns with our own. For
50:56instance, we are currently comfortable
50:59with short to medium durations—not
51:03aggressively short, but not excessively
51:06long either—because we believe that
51:10in medium-term maturities, the carry
51:13compensates for the price risk. Due to
51:18sensitivity to the yield curve, in case
51:20long-term rates move, which is
51:22ultimately what hurts you when you're
51:25invested in long-term fixed income. So,
51:30once this initial selection is made,
51:33well, there are firms like, for example
51:38, MAN. It is a firm we like a lot for
51:40fixed income because, well, within
51:45their range, they have active managers
51:49who consistently—excuse me—beat
51:51their benchmarks, because in fixed
51:54income, I would say only about 30%of
51:57managers systematically beat their
52:00indices. Because, of course, it is much
52:04more important to be able to play with
52:07durations, and you have the duration
52:11component, but you also have the credit
52:14quality component. So, by playing with
52:18these two variables, I won't say it's
52:21easy, but it is easier, right? To
52:25achieve higher returns in a more or
52:28less consistent way by assuming a
52:31little more risk than the index. If you
52:35also add enough diversification to
52:38protect you from potential defaults, or
52:40a slightly riskier decision you might
52:42have made regarding credit quality that
52:45, even if you managed duration well,
52:47may have caught you. Well, this is what
52:51allows it to be consistent, right? So
52:54our process is a bit like this, along
52:56with other historic firms. PIMCO, we
52:59like Invesco. Well, there are many that
53:02do it well. Some handle certain sectors
53:06better. Candriam has an emerging
53:08markets management side that also does
53:10well, although as I say, MAN does too.
53:13Hm. Well, PIMCO has historically been
53:16one of the largest fixed-income
53:18managers globally. Well, you have
53:21people there who have a lot of
53:24experience, who have been doing this
53:26for many years and know how to navigate
53:29environments of interest rate trend
53:32shifts and yield curve movements, and
53:34they are capable of generating returns
53:37above the market in a part that is also
53:40structurally very important in
53:42portfolios. In the end, as you say, we
53:45spend more time talking about the
53:48equity side, but especially for
53:50conservative and balanced profiles,
53:52what will give you consistent returns
53:54is the fixed income side, right? And
53:58you have to be selective, as we have
54:00discussed before. You know that we are
54:04quite in favor of active management,
54:07but in this leg undoubtedly, whereas in
54:10the equity or sectoral side, we don't
54:13mind at all using passive management
54:16instruments because they are more agile
54:19, they have other advantages, costs, et
54:22cetera. In the active management part,
54:26where you are usually on longer terms,
54:29you don't manage that specific part
54:32quite as actively, if you'll pardon the
54:34redundancy. We are comfortable with
54:38managers who consistently beat the
54:41market and provide alpha, and therefore
54:43, well, the cost issue as I always say
54:46is relative, isn't it? This gentleman
54:50costs me three times as much as his ETF
54:52, but he beats the index every year
54:54despite that cost, because that cost is
54:56already deducted from his return, well
54:59hey, he earns his commission, right?
55:02What can I tell you?
55:03Right? How did you experience 2022?
55:06Because 2022 was a year in which both
55:08equities and fixed income fell. It was
55:10the worst historical year for 60/40
55:12portfolios. And of course, we were
55:15coming from zero rates and you saw many
55:17fixed income index funds
55:20and well, you know? The weighted coupon
55:22of the portfolio was very low and any
55:24rate hike was going to affect it
55:26greatly because the value of those
55:27bonds was going to plummet. In 2022 we
55:31cushioned the blow quite well because
55:34we moved very quickly to money markets,
55:36to very, very short durations, I mean
55:39directly to money markets or to
55:41ultra-short fixed income. Well, because
55:46within the uncertainty that the new
55:48situation generated, what was clear was
55:51that you were going to have inflation
55:53and that you were coming from a very
55:56loose rate scenario, and therefore,
55:58rates were going to rise no matter what
56:00, right? Uh, the speed of the hike
56:03surprised us. I’m not going to tell
56:07you otherwise, because if I do, clients
56:09will write in to call me out on it,
56:11right? And that, regarding the equity
56:14side, it’s true that it hit us
56:16perhaps harder than we expected, right?
56:19But I think we came through quite
56:21respectably, precisely because the
56:24fixed income side didn't affect us.
56:26Which is what happened instead to the
56:29majority of investors who, well,
56:31weren't as fast or agile, or
56:33institutions that perhaps expected even
56:36less that the hike would be as vertical
56:39and aggressive as it was, right? I’m
56:42speaking from memory now, but I don’t
56:44know if rates in Europe went from zero
56:46to four in, I don't know, eight, six,
56:48no, months, I don't remember, but in
56:50less than a year for sure, right? This
56:52was something that had never been seen
56:53before with the euro.
56:54It was, and for the dollar, it was also
56:56the most aggressive hike in history. So
56:58, obviously, this was a very strong
57:00impact on the equity side, which you
57:02could perhaps foresee a bit more, but
57:04it was even worse for fixed income,
57:07because a rate hike like that, if it
57:09catches you with durations of 10, I’m
57:11telling you, 15 or 20 years...Well, we
57:14saw drops in long-term fixed income
57:16funds of 20%. And you were coming from
57:20a bunch of years where long-term rates
57:22were, perhaps, at two percent. So, of
57:26course, compensating for a 20%drop when
57:29you’ve been at those yields for a
57:31long time, well, it’s basically
57:33impossible; you’re going to have to
57:36go into much riskier assets to recover
57:38it. And it's true that later, with the
57:42drop in rates, they also ran up, right?
57:46But that part, honestly, we navigated
57:50well. Well, because we simply moved to
57:54liquidity, since the profit outlook for
57:57that fixed income part, however little
57:59duration it had, was zero. It was
58:02impossible for the carry to compensate
58:04for the price drop, so we had the
58:05ammunition, right? As I like to say, so
58:08that when the market had corrected, we
58:10would be able to strike, right? Because
58:13the worst thing that can happen to you
58:15if you don't move is that, of course,
58:17your fixed income has fallen, your
58:18equity has fallen, but you start to see
58:20attractive valuations. In both parts,
58:23but of course, you say, "Okay, now, how
58:26do I take advantage to buy?" Well,
58:29clearly you have to take the loss one
58:31way or another. If you have a portion
58:34in liquidity, even if your equity
58:36portion has also fallen, well, you say,
58:37"Hey, I'll take advantage of this
58:38liquidity." I'm buying at more
58:42attractive valuations now, even if I
58:45might be taking more risk than my
58:47profile normally has, but this will
58:50allow me to recover from the correction
58:52sooner, and basically that was what
58:55happened to us. But well, for whatever
58:59circumstances, we made that decision to
59:02move the entire, let's say,
59:04conservative portion into liquidity. A
59:07bit like what I was telling you before;
59:09I mean, the return you were getting at
59:11that time in fixed income didn't pay
59:13for the risk we were taking in case
59:15rates rose sharply, unless you were in
59:17super long durations, but of course,
59:18then the downside risk was also much
59:20greater. In any case, the risk-reward
59:23ratio didn't compensate you, did it?
59:25And with the slightest rise in rates,
59:27the money markets—since we had come
59:29from years of negative rates in money
59:31markets, which now it seems we've
59:32forgotten, right? Because we've had
59:35years of money markets at four and
59:37three, and this year they will surely
59:39be around two, or two and a bit, or
59:41just two, right? But we were coming
59:43from negative, so you say, "Wow, am I
59:45going now into an asset that, when you
59:47explained it to a client over the last
59:49three or four years, has lost money?" I
59:51mean, it's had a practically flat curve
59:53, right? No jagged edges, but negative,
59:57right? But at that moment, we thought
1:00:01it was the intelligent and the prudent
1:00:03thing to do, and well, it can always be
1:00:05done better, obviously, but we are
1:00:08happy with that. That's how it is. When
1:00:12someone is approaching retirement and
1:00:13wants to start living off part of their
1:00:15investments, and perhaps had a, let's
1:00:17say, quite high risk profile where a
1:00:19very, very large percentage of their
1:00:21portfolio was in equities, but they
1:00:23know that in 5, 6, or 10 years they
1:00:25want to change that risk profile. How
1:00:28is that portfolio de-escalation handled
1:00:30? Is it done all at once? Is it done
1:00:32little by little by altering the
1:00:33percentages? No, ideally, if you have
1:00:36worked on a good plan—which is what
1:00:39we like to do, especially when we take
1:00:41on a client at an age where they are
1:00:44still in the wealth-building phase,
1:00:47which is when you can best set goals—
1:00:49we try to make it a gradual
1:00:51de-escalation. Obviously, the market
1:00:54will then dictate things because we go
1:00:57back to this: if you encounter a '22
1:00:59and, at that exact moment, you were
1:01:01scaling down, but you find yourself
1:01:03with liquidity and there are assets
1:01:05that you really see are, wow, very
1:01:07attractive in price and so on...well,
1:01:09maybe you will take advantage and
1:01:11tactically make a move, right? But
1:01:14strategically, the sensible and correct
1:01:19thing, at least from our point of view,
1:01:22is to do it gradually and follow that
1:01:25plan, right? To say, "Hey, if in the
1:01:27end I want to reach this date here with
1:01:29this balance, right? That this balance
1:01:31is what will allow me to be all these
1:01:34years maintaining my lifestyle, blah,
1:01:36blah. Um, when the Excel spreadsheet
1:01:40marks for us," Hey, from here on we
1:01:43have to start reducing because extreme
1:01:46volatility events could catch us
1:01:48exactly when we have to start, "that is
1:01:52, when I stop earning income, right?
1:01:56I'm not even talking about increasing
1:01:58the portfolio, but that I stop earning
1:02:01to maintain my status, my lifestyle,
1:02:03and I'm going to have to start drawing
1:02:05from the portfolio. Of course, it is
1:02:09very important that the portfolio
1:02:11reaches that moment with the snapshot I
1:02:13set for myself 10, 15, or 20 years ago
1:02:16if possible, right? So, there you have
1:02:19to be, well, more and more prudent, so
1:02:22that if a Ukraine, or whatever, happens
1:02:25, it doesn't catch us in a scenario
1:02:28that could disrupt our portfolios. So,
1:02:32in that regard, I do think one has to
1:02:35be very disciplined.
1:02:36Yes, because in the end, if you have a
1:02:38good management position or a company
1:02:41that's doing well, and that you're
1:02:43going to sell or that will stop
1:02:44generating income because you're
1:02:46retiring, it can happen that your
1:02:48maximum pension is around € 3,000,
1:02:50while your cost of living is much
1:02:52higher, maybe € 8,000 or € 10,000,
1:02:54right? How do you structure an
1:02:57investment portfolio to bridge that gap
1:02:58between retirement income and the cost
1:03:00of living a person might have? Well,
1:03:04going back to what we said before, if
1:03:06you've done your homework—which is
1:03:09what wealth planning tools are for—
1:03:11you must have adjusted what you’re
1:03:14spending, obviously, to an inflation
1:03:16level, well, whatever it is, x,
1:03:18whatever you decide: 2.5%, 3%, 2%, or
1:03:21you take the last 20 years and
1:03:23calculate an average, and so on. That
1:03:26variable is more debatable, but
1:03:29ultimately, it will fluctuate between
1:03:322.5%, 3.5%, or 3%, 4%at most. I don’t
1:03:35think there’s a need to set it above
1:03:373.5%. But with this, you say," Well,
1:03:40look, I’m now, let's just make it up,
1:03:42right? 40, 45, or 50 years old and I
1:03:45have this level of expenses, when I’m
1:03:4865, and I’ll only have those €
1:03:503,000, adjusted for whatever it is at
1:03:53that time, I’m going to need to cover
1:03:56that gap. "So, we always recommend
1:03:58doing it backward, or rather, starting
1:04:01from the other end, right? Meaning,
1:04:03what do I need to maintain, assuming a
1:04:05life expectancy of 90 years, for
1:04:07example, okay? In other words, what
1:04:09pool of money will I need to cover that
1:04:11difference between my pension and my
1:04:13current expenses? And once I have that
1:04:16pool, I look at my current income, my
1:04:18current portfolio, and I run the
1:04:20numbers. How much do I need to save?
1:04:23What return do I need my portfolio to
1:04:25provide each year? Taking into account
1:04:29that in the final years I shouldn't
1:04:31take on as much risk, as you pointed
1:04:34out earlier, and that will give me a
1:04:36formula that might be unattainable.
1:04:39That’s what I always tell clients.
1:04:41Listen, the picture we get might be
1:04:43that you need to save 50%of your salary
1:04:46—I'm exaggerating, of course, but to
1:04:48put it in context. And you have to get
1:04:52a 15%annual return. Hey, well, that's
1:04:54not realistic. I mean, we have to do
1:04:57something. I mean, either you lower
1:04:59your expectations for your retirement
1:05:02or you look for additional income,
1:05:04right? But you can't really do magic
1:05:06with the numbers—well, a little bit,
1:05:08but not that much, right? Up to a point
1:05:11, you usually end up with reasonable
1:05:13scenarios, right? Well, sometimes you
1:05:17get positive surprises. I've come
1:05:20across cases of people who, well,
1:05:22because they have good savings. They
1:05:26have a good portfolio, better said, and
1:05:28a good savings capacity, and they don't
1:05:30have an overly—well, exuberant
1:05:31lifestyle, I don't know how to say it.
1:05:35Wow, it’s not necessary to be as
1:05:36aggressive as I thought, right? With
1:05:39this portfolio, I can afford, hey, to
1:05:41have a nice, quiet portfolio, or
1:05:43conversely, maybe I’ll allow myself
1:05:46to be a bit more ambitious with my
1:05:48retirement project because my savings
1:05:50and my portfolio allow it. Sometimes
1:05:55you find that you say, well, we can get
1:05:57there, but it will force us to take on
1:06:00some risks, especially in the first 10
1:06:02years leading up to that retirement,
1:06:05right? Until we grow that wealth,
1:06:09because otherwise, we won't get to have
1:06:11the nest egg we want to have at the
1:06:14time of retirement. But we always
1:06:18recommend doing it this way—that is,
1:06:20writing your wish list first, and based
1:06:23on that wish list, well, let's see what
1:06:25numbers we get and whether those
1:06:27numbers are achievable or adaptable to
1:06:30the client's situation.
1:06:33And once the retirement age arrives and
1:06:35we've hit that dream number, we've
1:06:37arrived stable, how do you start
1:06:38converting that into income for the
1:06:40client? What type of portfolio do you
1:06:42choose there? Well, there we usually
1:06:44look for more yield-focused portfolios,
1:06:46or depending on the portfolio structure
1:06:48, whether you have a need or not to...
1:06:53Sure, there are two scenarios there,
1:06:54right? It depends on what you want and
1:06:57the assets you have. One is: I want to
1:06:59reach that life expectancy and maintain
1:07:02the assets, and therefore I will live
1:07:05only on the returns. I can add a little
1:07:09more volatility to the assets because,
1:07:11deep down, if the goal of those assets
1:07:13is a legacy, right? It’s passing it
1:07:16on to the next generation. What will
1:07:18maximize things for that client is
1:07:20getting the returns they want, because
1:07:23then the person who inherits them will
1:07:25have time again to, well, if for
1:07:27example we do—we would never do it
1:07:29100%, eh—but let's assume we do a
1:07:32dividend strategy, we pick companies
1:07:34that pay us, right? Dividend Kings or
1:07:37dividend aristocrats and such, those
1:07:39companies that for a certain number of
1:07:41years have been able to keep paying a
1:07:43dividend equal to or higher than the
1:07:44previous year. Eh, which doesn't
1:07:47necessarily mean the dividends are very
1:07:49high—usually they aren't—but they
1:07:51are very solid and very constant, right
1:07:53? With those dividends, we obtain
1:07:55sufficient income. Well, it doesn't
1:07:57really matter to us whether the stock
1:07:59fluctuates or not. When the person who
1:08:01inherits that wealth arrives, well,
1:08:04they will decide what choices to make,
1:08:06but in any case, they will have time to
1:08:09turn things around if there is a
1:08:11temporary negative market situation at
1:08:14that moment. If, if your goal is, let's
1:08:18say, if to meet your income target you
1:08:21need to start eating into that wealth,
1:08:24then you have to be more conservative,
1:08:27because you will have to sell off parts
1:08:30of that portfolio and you'll need that
1:08:33part to be at least a little bit more
1:08:36insulated from the market, right?
1:08:39Meaning, more immune to market
1:08:41fluctuations, because maybe you need to
1:08:44sell—depending on the situation, I
1:08:47don't know, every quarter, every
1:08:49semester, or once a year—to have that
1:08:52income that allows you to supplement
1:08:55your retirement, but obviously you
1:08:57shift to a much more conservative
1:08:59management style, focused on income and
1:09:04seeking things that guarantee or
1:09:06reasonably ensure the stability of
1:09:08those returns. If it's in fixed income,
1:09:12well, you won't do anything strange
1:09:15regarding credit quality. But on the
1:09:19other hand, if we go back to the same
1:09:21example as before, if you don't have to
1:09:23eat into that wealth, you can play with
1:09:25longer duration, because if you go into
1:09:28direct bonds, well, the price of the
1:09:30bond will fluctuate, but as long as it
1:09:32keeps paying that fixed income, which
1:09:34is where it comes from, you'll be
1:09:36comfortable because you'll have the
1:09:38income you were looking for. And well,
1:09:41if the person who inherits them finds
1:09:43that at that moment the bonds are at 80
1:09:44because they've dropped 20 or to 70,
1:09:46well, hey, they just shouldn't sell
1:09:47them, right? Obviously, and just wait
1:09:50for them to recover their price. They
1:09:52will still continue to have the, the
1:09:54income.
1:09:55What role do you give gold in
1:09:57conservative portfolios or in different
1:09:59types of portfolios? Gold, which I
1:10:02think we also discussed last year, gold
1:10:05has become an asset that we like, we
1:10:07talked about it, we held it, and also,
1:10:10well, this part we were talking about
1:10:12earlier, right? Regarding the debt,
1:10:15monetary inflation, and so on, well, it
1:10:18remains a counterpoint. But gold, since
1:10:22—and it was shortly after we spoke, I
1:10:24don't remember the date—it started to
1:10:26have a strong rally, maybe it was
1:10:28already beginning, right?,when we
1:10:30discussed it. But from our point of
1:10:34view, and this might perhaps be a bit
1:10:36controversial, what I'm about to say,
1:10:38it has taken on the role of a
1:10:39speculative asset that we aren't
1:10:41comfortable with, okay? Which doesn't
1:10:43mean we don't hold it, eh. We have gold
1:10:46, we have silver, and, at the time, we
1:10:48reduced our positions because silver,
1:10:50above all, ran up a lot. But wow, this
1:10:54boom it had, this explosion it had, we
1:10:56think it had a very speculative
1:10:58component, very much like this, right?
1:11:02People started talking about everything
1:11:03. Information travels very fast now and
1:11:06this causes these, I don't like calling
1:11:09them mini-bubbles, but it's a bit like
1:11:11that, right? Of, uh, so, wow, sure,
1:11:14there was a moment when we said, this
1:11:17isn't normal in assets like these,
1:11:19right? Whether it's more industrial
1:11:22demand or such, we know that in the
1:11:24markets we are always the best at
1:11:25finding justifications for everything,
1:11:27right? But in the end, common sense was
1:11:30telling you," No, no, this, wow, no,
1:11:32this can't be. "And it's that we go
1:11:34back to what we were saying before,
1:11:35that it isn't even, it isn't even good,
1:11:36right? It isn't even healthy. For us,
1:11:39gold has to be something else. We like
1:11:42gold to be in portfolios without
1:11:44overdoing it, which is, for example,
1:11:47what happened to us in some cases in
1:11:49'25, right? The price had run up so
1:11:52much that it had increased the weight
1:11:54you are comfortable with in the
1:11:55portfolio, because in the end, it is an
1:11:57asset that also has an opportunity cost
1:11:59, depending on the situation, right?
1:12:01And now we are coming off some very
1:12:04positive years, but if we go back a
1:12:06little with the gold chart, right? I
1:12:10had people telling me," No, no, for the
1:12:11last 20 years it's the asset, whatever,
1:12:13"yeah, but if you remove the last two,
1:12:14you know? So this is a bit of a tricky
1:12:17piece of data, right? I mean, sure,
1:12:20you're picking this peak and looking
1:12:21back, but there are people who have
1:12:23been in gold for many years and gold
1:12:24ends up giving you nothing. Gold has a
1:12:27positive side, but it has a negative
1:12:29side. Gold doesn't pay coupons, it
1:12:31doesn't pay dividends, it just depends
1:12:33on what the price does. If the price
1:12:35stays stable compared to other
1:12:37financial assets, or even tangible
1:12:39assets like real estate, which actually
1:12:41generate returns for you, it doesn't
1:12:43have them. You have to have it in your
1:12:46portfolios. And we, taking into account
1:12:49what we were talking about earlier
1:12:51regarding debt, continue to think that
1:12:53it is positive to have it in a
1:12:54well-diversified portfolio, but in the
1:12:56right measure. But in the right measure
1:13:00, and surely another moment will come
1:13:03now to be perhaps a little bit more,
1:13:06well, to be more comfortable with
1:13:08positions in gold and precious metals
1:13:11in general. Uh, but this behavior it
1:13:15had there made us, not walk away, but
1:13:18say, wow, this isn't behaving as it has
1:13:23historically, and therefore the
1:13:26consideration within our portfolios
1:13:29also has to adapt to that new status.
1:13:34At what percentage do you think gold
1:13:35subtracts more than it adds to the
1:13:37total portfolio percentage? Wow, this
1:13:40is very, uh, but I think above 10%. I
1:13:45think that in the long run it will
1:13:47surely end up subtracting more than...
1:13:50than...
1:13:51I think it is very important to have
1:13:53the percentages clear in one's head
1:13:54when investing because of what you say,
1:13:56right? Because sometimes assets run a
1:13:58lot and it is good to take profits. In
1:14:01the end, people sometimes, to avoid
1:14:02paying taxes, let a position run too
1:14:04much, it alters the composition of
1:14:05their wealth, and then you could even
1:14:07avoid a fall because sometimes that
1:14:09rebalancing allows you to sell at a
1:14:10market high and buy another asset that
1:14:12is about to rise, right? So I think
1:14:14there is a lot of bias, right? There,
1:14:17of trying to get it to go to the moon
1:14:18and of not touching the portfolio and
1:14:20of not paying taxes when sometimes it
1:14:22might pay off.
1:14:23Yes. And also, regarding the point you
1:14:25make about taxes, many times, uh, in my
1:14:27experience, I will have to pay. Well,
1:14:29yeah, damn, if you're paying, it means
1:14:31you've won, let's not forget that. And
1:14:33above all, because in the end, if you
1:14:35don't, that money you're about to give
1:14:37the taxman is going to be lost in price
1:14:39eventually, because if the asset
1:14:40corrects, you'll end up the same, and
1:14:42then if you sell, you'll sell lower and
1:14:44you'll still pay, right? You'll pay
1:14:46less in proportion, the same, but in
1:14:49absolute terms less, logically. Eh, but
1:14:51of course, you will have lost, you will
1:14:53have lost that opportunity, right? Yes,
1:14:57it's true that that's a point,
1:15:00especially when an asset has rallies as
1:15:03significant as those gold and silver
1:15:05have had in the past, I think it's
1:15:08important to have the, well, the
1:15:10discipline to say:" Hey, it's difficult
1:15:13, right? "" Because normally, when
1:15:17assets are hot, are in fashion, and so
1:15:19on, and you get inputs that no, gold,
1:15:22and you start seeing gold at 10,000 and
1:15:24so on, and damn, silver at 200, and
1:15:27yeah, yeah, hey, but I bought silver at
1:15:3040 and it's at 100, right? "Hey, well,
1:15:33that's enough, I'm not saying let's get
1:15:35out, but let's go back to the weight
1:15:37where we were comfortable before, right
1:15:39? And for which we bet on making this
1:15:43investment, and let's use those returns
1:15:46, those capital gains, to make another
1:15:48asset allocation.
1:15:50What is more powerful? What is harder
1:15:52for people? Selling at a profit or
1:15:54holding onto losses when it perhaps
1:15:56makes no sense anymore to cling to that
1:15:58burning nail
1:16:00and recover the money with another type
1:16:02of asset? I think it's changing a
1:16:05little bit, but in my experience,
1:16:08without a doubt, it is much harder to
1:16:10sell at a loss than to sell at a profit
1:16:13. I mean, it's harder to let profits
1:16:17run than, no, wait, sorry, it's harder
1:16:20to cut losses than to let the profit
1:16:23run. In the end, it's true that when
1:16:26you sell something at a loss, you are
1:16:28realizing a loss, while if you don't
1:16:29sell it, right? That's a very typical
1:16:32phrase, and it's true because that's
1:16:33how it is. It's just that if I don't
1:16:35sell, I don't lose. It's true, until
1:16:37you sell, you don't realize the loss,
1:16:39right? But sometimes we forget the
1:16:41factor of depending on what level of
1:16:43losses, eh? But there are certain
1:16:45levels of losses that I believe should
1:16:48not be accepted for this simple reason,
1:16:50often forgotten, right? That I don't
1:16:52just have to recover what I lost to get
1:16:54back to where I was, right? If I have
1:16:57100 and I lose 50%, it turns into 100%.
1:17:02And wow, gaining 100%doesn't happen
1:17:05very often. Luckily, neither does
1:17:07losing 50%, right? But, but sometimes
1:17:09it does happen. So, don't wait until
1:17:11you have a 50%loss, well, beyond the
1:17:15fact that you may have done a lot of
1:17:17analysis, or that you are very
1:17:19convinced of a certain investment or
1:17:21whatever, in the end, the market is the
1:17:22one that's right, right? There is a
1:17:25phrase I like a lot that was explained
1:17:27to me many years ago, and that I've
1:17:29surely told you sometime, and maybe
1:17:31here too, I don't recall, right? But it
1:17:33was explained to me very early on when
1:17:35I started working in this, right? Which
1:17:37is that this business of ours, right?
1:17:40The financial markets, via advice,
1:17:42management, whatever, right? This isn't
1:17:44about being right, it's about making
1:17:46money, you know? So, if your study and
1:17:48analysis might be great and wonderful,
1:17:51but the market isn't buying it, don't
1:17:54be stubborn, right? Hey, maybe you'll
1:17:57have your moment, surely you'll have
1:17:59your moment and your analysis was good,
1:18:02but right now, the market isn't valuing
1:18:05it. So hey, back out, look for another
1:18:08asset; a 10%drop is recovered with an
1:18:1111%and change gain. A 20%drop is
1:18:14recovered with a 25%gain too. Well, now
1:18:16we are talking about things that are
1:18:18more symmetrical and, above all, more
1:18:20manageable, right? A 20%drop is a hard
1:18:22blow, but hey, gaining 25%with an asset
1:18:25over a year or a year and a half,
1:18:28that's not a fantasy, it's something
1:18:31achievable and reasonable. Therefore,
1:18:34take care, be careful, be careful of
1:18:36this. But unfortunately, we are
1:18:39programmed for the, for the opposite,
1:18:41right? I mean, it's the same thing as
1:18:43when there's panic, those are buying
1:18:46moments, right? And that is what is
1:18:48hardest for people, right? Why? because
1:18:50you have negative headlines, news, you
1:18:53know, war, collapse, stock market crash
1:18:56, and that's also what sells, right? At
1:18:59the media level. Well, those are the
1:19:01moments to bet on the market, on good
1:19:04assets, because the market doesn't
1:19:06discriminate at those times, everything
1:19:09falls. Hey, the assets you like, take
1:19:11the opportunity to buy them at that
1:19:13moment. And precisely in moments of
1:19:15euphoria, right? Like we were saying a
1:19:17moment ago when it's at 10,000 or
1:19:19whatever. Wow, maybe, hey, this is as
1:19:21far as it goes, right? I mean, it's
1:19:24been so profitable and we've earned
1:19:26what we were supposed to. Well, that's
1:19:29it. And if it keeps going up, well, hey
1:19:31, we'll have been wrong, but may all
1:19:35our mistakes be like that. Yes, there's
1:19:38a phrase by Ray Dalio that he said very
1:19:40recently that I loved, and it said that
1:19:42when you see your asset denominated in
1:19:44euros or dollars, but it's still in the
1:19:46market, that is not real wealth.
1:19:49Because the problem with financial
1:19:51assets is that, when people want to
1:19:53realize that gain, if there happens to
1:19:55be a big market correction, everyone
1:19:57tries to get out at the same time and
1:19:59the price you had referenced never
1:20:01exists again; because what is truly
1:20:03real wealth at that moment is what is
1:20:05not invested. What is invested
1:20:08fluctuates a lot in price at that
1:20:09moment because of supply and demand; in
1:20:11a moment of panic, there can be much
1:20:13more supply than demand than would fit
1:20:15in a normal situation, right? So you
1:20:17understand that concept
1:20:19and it takes away a bit of the fear of
1:20:21realizing gains or even realizing
1:20:22losses and putting them into other
1:20:24assets, right? Because you realize it's
1:20:26not yours until you take that gain or
1:20:28that loss.
1:20:29Exactly.
1:20:30And you have to know how to do it in
1:20:31time,
1:20:31because just as a loss isn't real, as
1:20:33you say so well, neither is a gain.
1:20:35Well, then at that moment you see that
1:20:37little number there, right? But if you
1:20:39don't realize it, it's not yours,
1:20:41because this can even happen, right?
1:20:44That an event happens, putting it in an
1:20:47extreme case like 9/11, and you
1:20:49literally can't even sell. It's no
1:20:53longer a matter of supply or demand,
1:20:54it's that you can't even sell, right?
1:20:57So there were a few hours where it was
1:20:58impossible to trade and obviously when
1:21:00it could be traded, the prices were,
1:21:02well, I don't even want to tell you,
1:21:03right? a world away from what they were
1:21:06just the day before. Well, it's an
1:21:09event that we hope and wish never
1:21:11happens again, but it did actually
1:21:13occur. Well, that was wealth that
1:21:16really wasn't wasn't real, and that
1:21:19applies just as much to losses as it
1:21:21does to gains, right? But instead, it
1:21:24seems like psychologically, since
1:21:27profit gives us comfort, we take it as
1:21:29consolidated, while we get the feeling
1:21:31that as long as we don't lock in a loss
1:21:34, we don't really have it. And that,
1:21:38well, that's one of the most negative
1:21:41biases for the retail investor,
1:21:43especially when you start when you
1:21:46start investing. It is much harder for
1:21:50you to let your profits run than it is
1:21:52to cut your losses quickly.
1:21:55Great, Inasi, well, I think it's been a
1:21:56magnificent talk. I believe the
1:21:58audience will take away many lessons,
1:22:00insights, and perspectives to form
1:22:02their own opinions. I always say it:
1:22:04let them listen to us, but then have
1:22:05them reason, consult other sources, and
1:22:07that is when they can create their own
1:22:09framework of autonomous thought. So
1:22:11thank you very much for stopping by
1:22:12here again. We will leave your contact
1:22:15and your information below so that
1:22:17people who want to know more about you
1:22:18can look you up, and you know this is
1:22:20your home, so we hope to see you
1:22:21another time.
1:22:23I hope so. It has been a pleasure as
1:22:25always, and we hope it has been
1:22:26interesting.

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