Our wide ranging conversation with Som Seif, CEO, Purpose Investments and Greg Taylor, CIO, Purpose Investments. We begin by revisiting those intense moments in the days leading to the March 2020 bottom following this year's COVID-19 lockdown. Seif and Taylor open up about what they were thinking, and what their frame of mind was, in what was a critical time for all. Taylor shares his view that 'passive' investors running for the exits put outsized pressure on the entire market structure, and may have created some interesting buying opportunities. We talk about some of the behaviours and events that shaped markets during the summer, what's concerning, and what's looking both bearish and bullish for the period ahead.
Full Transcript:
Pierre Daillie: [00:00:24] Hello, and welcome to another episode of the Insight is Capital Podcast. I'm Pierre Daillie, Managing Editor of AdvisorAnalyst.com. Our special guests are Som Seif and Greg Taylor of Purpose Investments.
Som Seif is the Founder and CEO of Purpose Investments, which he formed following the sale of Claymore to BlackRock in March of 2012.
This year Purpose Investments crossed over $9 billion in assets under administration and runs 47 funds and ETFs.
Som started Claymore in Canada in January of 2005 and was the Former President and Chief Executive Officer leading the implementation of the company's business development and corporate strategies.
Over the seven years of its operation, Claymore grew to $8 billion in assets and established itself as a Canadian leader in bringing intelligent low-cost exchange, traded funds to investors through its family of 34 exchange traded funds across broad asset classes prior to Claymore, Som was an investment banker with RBC capital markets where he worked since 1999.
He played a key role in developing the structured products group at RBC Capital Markets in both Canada and the U S where he structured and raised capital for both Canadian and US asset managers.
Som is a chartered financial analyst. Has a Bachelor of Applied Science with an emphasis on industrial and systems engineering from the University of Toronto. Som has a strong commitment to community and is currently vice chair of the Sunnybrook hospital foundation, board chair of the Art Gallery of Ontario corporate development committee.
A member of the Art Gallery of Ontario's Foundation, board and University of Toronto Mechanical and Industrial Engineering Advisory Board.
Greg Taylor is the Chief Investment Officer of Purpose Investments, a data-driven manager with a focus on managing risk through active-trading strategies, Greg specializes in finding and exploiting pockets of volatility in the market to drive returns. He spent more than 15 years managing pension and mutual fund assets at Aurion Capital Management. He also held a role of senior portfolio manager at Front Street Capital and LOGiQ Asset Management before coming to Purpose Investments.
Greg serves on the investment committee for the MS Society of Canada andĀ advises the finance programās portfolio management course at Bishopās University. He has won numerous Brendan Wood International āTopGunā awards and is a regular host and guest on BNN Bloomberg and Torontoās all-news radio station, 680News. Greg is a CFA Charterholder and has a BBA in Finance from Bishopās University.
Without further ado, my conversation with Som Seif and Greg Taylor.
Welcome Som. Welcome Greg. Welcome to the show. I'm really excited about this conversation with you guys.
Som Seif: [00:02:56] It's great to be here, and hope you're doing well and, and staying strong...
Pierre Daillie: [00:03:01] Thank you, thank you. Som you as well.
It feels like an eternity. Since we last spoke. This year has been, it's been so surreal and his last six months have been so much like, like one big blob of time. It's really great to have you both.
Greg Taylor: [00:03:17] Thanks very much.
Pierre Daillie: [00:03:18] by now we've had, we've had a fair bit of time to reflect on what's happened this year with COVID, with the pandemic with markets.
I want to take you guys back to those three weeks in March, when equity markets were crashing, when credit markets were freezing, the economy was shutting down and, people were being told to stay at home don't come to work.
Everything was really coming to a grinding halt and before the Fed and the central banks and governments decided that, there would be a stimulus. Take us back to what you were thinking at that moment in time to what you were going through.
Som Seif: [00:03:58] And what I'd say is, it feels like an eternity ago first off, but, what, what a scary moment. Yeah, I guess, I guess, you know, what the best way to describe it is, you know, I went through in building my first company Claymore, I went through, of course, the financial crisis and, at a different time and different structure, but the financial crisis felt like. It came about in, a period of time; like you felt it in smaller waves, but of course, on the grand scheme of thing was such a massive impact to our industry, to our customers, to our markets in so many ways.
But there was a moment when I was on a plane on a Sunday night. and I was taking off and, I'm sorry, I just landed. And I looked at my Blackberry and, and it was the bankruptcy of Lehman Brothers. And I, it, it felt at that moment. Wow. Okay. What does this mean? But yet it wasn't personal.
It wasn't yet it wasn't going to impact me in my business directly. So on Monday morning I was going to go to work and yes, the markets were taught, but my people were going to be fine, and we were going to have to think through it. We had time to think, and you could see a week, two weeks, three weeks or four weeks ahead and see the impact of these things.
But, yeah, in the moment, if I take that same moment, And I think about the impact of kind of this situation where you look at; there was a bunch of seminal moments in COVID that we're creeping up and then there was the moment. And for me, it was actually interesting, when the NBA actually announced that they were going to shut down.
Yeah. That was the moment when I realized this is going to impact tomorrow. All of us. And it was, you didn't have the time to step back and say, okay. let's think about this, team. Let's get together on Tuesday and talk through this. It was No(!), tomorrow, we are all going to be impacted. And so what are we doing tomorrow?
And that feeling. stayed with us for the next, as for the next four or five weeks. So through the middle of March, you know what I always said, it was like you were standing, staring into a fog. And you couldn't even see your feet in front. You couldn't see if the step in front of you was going to land on pavement or you were going to step into an abyss.
And so it was that you couldn't even see, look, one step forward one hour for one day forward. Whereas in the financial crisis, you had some time you had the ability it was slowly coming in. So I think that was the biggest impact for us is running a business, running, the, not just, the markets themselves, but just the uncertainty and, Greg and I talk about this, but if you go back to March 20th.
And if you were sitting there running your business, and of course, between mid-February and March 20th, you had this massive violent decline in the market. I'm trying to think peak to trough there. Greg was it 37%? I think it was on March 20th. I think March 20th was a very low, that was if I recall March 20th. Yep.
If you looked into it as a leader, you were running your business. And of course, 37% decline, the market's happened all the time, but it was the violence of it, And the trajectory. Because if on March 20th you said, okay, let's extrapolate forward. And you said, if this continues, we're down 60%, in another 20 days.
That's when you were you're going ā you're running a business, you're running markets. And you're thinking about insolvency of like how your business runs and people are going to be worried. You're also managing, do people have not only a job, are they going to be okay and health wise and your family and your personal life, it was intense.
Pierre Daillie: [00:07:37] Yeah, the Holy shit moment.
Som Seif: [00:07:39] it's Holy shit. But you don't have time to think about it. You just have to go. And what ultimately came down to was. With all of these moving variables and all these uncertainties, you had to make decisions and you had to make decisions with uncertainty of how, the next day, the next hour, we're going to look, but you had to make the decisions.
And whether that's as an investor, whether that's as a portfolio manager on behalf of other investors, or whether that's as a leader, as a business owner, you have to make decisions. And that's ultimately what you learn through this one.
Greg Taylor: [00:08:10] And if I can just build on that, I completely agree with everything Som said; it was the parallels with the global financial crisis are really real, just in the timing of how this hit. The other thing that, and with this, is just the whole demand shock, but we've never had to really see it whole global economy shut down before, and there's so much uncertainty and no one knew how that would react and what, how things would happen when you reopened, which we're still working on right now.
And then when you combine that with suddenly all the trading desks had to move from a work from home environment. So we had so much uncertainly with everyone in a new operating and it compounded to trying to figure out what's going to go on. and the other backdrop that I think is really interesting, just seeing how fast the market drop was that we also went into this with so much money in passive investing.
And I think that was a factor, which really was it became apparent as the speed of the drop happened. As everyone was hitting, sell on all these ETFs and all the ETFs had to sell the underlying securities. And at the end of the day, it created an interesting stock picking opportunity, but all came out in hindsight.
So there are a lot of contributing factors to make the speed of the drop in March, something that's really unique. And it's going to bear a lot of research going forward.
Pierre Daillie: [00:09:17] Yeah, itās easier said than done, right? you're not sitting there March 23rd thinking I'm going to pull the trigger and start buying because you really don't know what's coming next.
How much farther is this drop? Like you said, Som. What to do? Do I just go to cash? so what followed, what did you wind up doing from that point on, where were you donāt know, it's opaque, everythingās red, but you're looking, you're trying to try to see the way forward.
what did you do? Because I think anybody who could have gone back in time, and if anybody had said to you. Som, Greg, this March, something terrible is going to happen. The economy is going to shut down. The markets are going to crash.
There's this epidemic coming. This pandemic is spreading around the world. Even if you had that information in your hands beforehand, what could you have possibly done with that? That would have been the correct thing to do. Cause if you, we all know now in hindsight cash was the worst possible thing you could have done.
And now in hindsight, staying invested was the best thing you could have done. so where was the in between?
Som Seif: [00:10:18] So first off, I think this is a, it's a really important question. I think to Greg's point though, it's oftentimes in hindsight, you can. analyze decisioning and analyze how to best position and how you should have either could have made better decisions or whatever B, because you have a hundred percent clarity.
The reality is as an investor or again, as a business leader, as an individual, like in life. If you put yourself at yourself up such that you're forced to make, the hard decisions in moments with opaqueness and lack of clarity, you're actually for yourself in a really difficult place. So if I just focus on portfolio management as a decision, what would you do?
You have to have made the decision of how to react to this type of thing through thinking about it well in advance. Yeah. and it's something that, you know, look at Purpose. When I started this company, my core vision was managing to downside risks, managing to risk and thinking about risk is the most important thing you can do.
And, we have great market upsides, but we have as many market downsides and in the moments of downside itās too late, oftentimes to be making decisions because you don't know when the bottom is, you don't know when you know how further it could go or whatever it be.
So what you have to have set out is one ensuring that you have thought through what your tolerance and risk prop process and things like that you're looking for. And then balance that with the types of portfolio, construction and goals that you have with returns. And then two is. Ensuring that you have done your risk rigor, in advance.
And so that when you come to this moment, hopefully if the markets are down 37% and could go down another year, 30%, you aren't anywhere close to being down 30% as a portfolio, as an individual. Cause you've already prepared for it. Now, again, the tradeoff of that is that you have to be willing when the market was rip roaring.
Uh, you know, Greg, what was 2019 is return in the markets?
Greg Taylor: [00:12:17] Over 20%.
Som Seif: [00:12:19] So when the market was up 20%, you have to have a tradeoff decision back then. You had to say, I'm willing to give up some of that return so that when that next event happens, whatever that'd be pandemic or just financial crisis, leveraging the system, wherever be we've already played that trade off decision.
But if you're in middle of March making that decision, you're going to make the wrong decision most often than not because the right decision is to not do anything.
The right decision is to not do anything. And in fact, decision is to have a 10-year horizon and think, Hey, you know what things are on sale?
I think Greg, you coined the amazing phrase at that point. I think you've heard it from others, but I'll put it in I'll say you did it. So we'll trademark it, which was that, you know, the markets are the only place where when things go on sale, people go running from the store. Right. You know, and the problem is, is that actually when things go on sale, you should be running to the store.
And that's unfortunately, when people are panicking, they're making the wrong decision. And I think that's like Pierre, I hate this because it's like, it's not the, I don't, I really don't. I want to make, come across as the told you. but this is if we're in the moment you've made you've you're too late.
The decision has to be made many, many periods in advance to prepare for this event. Risk was real. We ignored it and we forgot about it in 2019 and frankly for the last 10 years.
Greg Taylor: [00:13:33] Yeah. that you can have all your eggs in one basket, because as much as everything did act the same in our few days of March, you have to have a diversified portfolio and you can't be all in one thing because that really can't hurt you over time.
And you don't want to get caught up trying to make these decisions at the wrong time. and get forced to sell when you really don't want to.
Pierre Daillie: [00:13:52] Yeah. it's one of those things where, I think we all expected, at some point there was going to be a correction of some kind, a bear market of some kind.
I don't think we anticipated that it was going to be this kind of bear market situation. what made it evident now? I mean, looking in hindsight one of the best performing portfolios is just the simple, quarter in stocks, quarter in bonds, quarter in gold quarter in cash.
And cash was the worst of the four assets, but that basic portfolio has had its best performance in the quarter. What I wanted to try and capture was the mood of the moment that, both of you being, founders of asset management firms, what that felt like to you and how you overcame the initial fears that come with that?
Greg Taylor: [00:14:39] If I can start one of the things that I think caught most people off guard is just when you're looking at the sell off and what's going on and you see all the macro events and the lockdowns, the biggest fear that you have is that something won't be done to help it.
And I think everyone had the global financial crisis in the back of their minds when, when we had a Lehman fail and the governments were slow to react and central banks really didn't take their time to actually respond. I think what that was the biggest fear is that would be a repeat of that scenario.
The good news is that in this year it didn't happen at all. And it's almost to their credit, the central banks and the governments got together and were more proactive, throwing as much money at it as possible, trying to get everything to work and. And I think this is something we're going to live with for a number of years, because the amount of money printing in the stimulus has gone to the system.
And the low interest rates are something that can't be unwound that quickly. but no one saw that in hindsight, government is going to be this proactive. And that's the one variable that I think a lot of people didn't know, or didn't see coming when we saw the initial downdraft in March, that if you knew in perfect hindsight that the governments and central banks would do everything in their power to get it to go, then that's when you get the scenario where you get inflation, you get gold going, you get equities going, you get valance working because there's so much liquidity in the system.
It has to go somewhere and it's inflating all assets. And that's the biggest wildcard that I think the one piece of information that everyone would have liked to learn that hindsight.
Som Seif: [00:16:00] Yeah. I mean, I mean, frankly, I think it's really hard to have predicted the portfolio that you just structured. I think a lot of people, there are gold bugs and they, they are, people who have lots of money in gold and, they have their own reasonings and some people do it, as a, as, 20, 30, 50, some people, I'm sure have 70, 80% of their wealth and gold, if not more. the reality is that, having 25% of your money in gold,
Pierre Daillie: [00:16:28] I saw, I'm sorry to interrupt you. I just used that. It was just too, you know,
Som Seif: [00:16:34] I want to reference it because as you say, the optimal return, if you look at any year in history and you looked at what was the optimal portfolio, most people don't call that portfolio.
And there's great. As in our industry, we should always have these charts that but one of the tables that you see a lot of is that one where it's just, what's the top performing asset class at the bottom of the class in every year. And you can see the randomness of every year. It's, very hard.
But the one thing it tells you is that diversification and broad diversification matters and asset diversification, factor diversification, things like that. And why that's important is that I think if you put up against most portfolios right now, just a well-diversified multifactor strategy approach to interest rate duration, all of it factors of quality value in equities, Growth you had, kind of cyclicals and, you had, structural exposures to commodities and alternatives and things of that, all of the portfolio and well-structured, and truly diversified, you would done perfectly well, and that's really what matters. but if the reason is because of what Greg said, even if you could, as forecasted that the central banks and the government was going to be active and engaged and you looked at '08 and said, Oh, there's no way they're not going to throw stimulus at economy.
There's no way that they're going to just select this sort of go on. You would never have been able to assess the magnitude of what they did. And so the surprise would have been, not that they participated and helped, but that they did it at probably five times the size of people would have expected.
And the breadth both at the central bank level, in buying assets, across the board and at the individual level and the business level through capital injections, liquidity to the economy, all of that. Was done in such magnitude now. And I think Greg correct me if I'm wrong. If you go back, I don't know what the magnitude now would be.
I remember at the moment it was like the first stimulus bill, that the U.S. put in place was actually at the same magnitude that they did over 18 months, the financial crisis with the central banks and things like that. So in. A week, they did as much as they did over 18 months with this, with the financial crisis.
So that's, that was quite amazing. And so the only way you can look at that and say, Oh, I selected that was to have made a call a bet. And so the outcome is, seems fake, frankly, I think for all of us as investors, it seems fake. We're getting you say, wow, like this is great. March 31st markets recover, a couple of percent about whatever, a 10-percentage point from the ultimate lows.
And most people thought, okay, we're still got a lot of hurt ahead of us. Very few people felt that we hit the low on March 20th. there's a lot of people, smart people calling a new low that we have held and a lot of people I'm sure use that small little recovery on March 31st to sell out of positions in their markets and went into cash oriented diversify.
And of course, what we've seen subsequently over the last six months has been a pretty unbelievable bull run in equities.
Pierre Daillie: [00:19:39] It sure has.
Som Seif: [00:19:40] I'd say look, I mean, I think we'll as a society. I know that it's become quite cool. and yeah and such to joke with your friends about, "Ahhh 2020 has been the worst year on record. I wish it never happened," or, how can we take a sleeping pill to wake up on the 21st to 2021 and people like, look at it and that's such disdain and they're right. There's a lot of people who are hurting. There's a lot of people who had a very difficult, period of their lives, and nothing to take away from it.
But I actually think for society. we'll look back on 2020 and many people I think will look at it and say, wow. It really changed our lives. It changed the way we live. It changed the way we think change the, our perspectives. and I try to take the positives from the negatives all the time.
And I think that as individuals, if we don't learn individually really from this, if we don't figure out how to take some positives out of it, then I think, I think it shame on this. And, I think there's, I think there's a lot to learn and. we'll get back to the routines that we like and the ones that we're used to, the ones that we've grown up, all, but this is, it's a different routine and it's like that uncomfortable feeling of having to change your lifestyle, so I think it's a question of now looking back and say, okay, what do we like? Cause I'm sure for a lot of people who got to spend time with their families more get to spend time, with themselves more, I think that they'll probably look back at it and say that, wow, like that was actually quite an interesting experience.
Greg Taylor: [00:20:58] I think on top of that, it's just how much has showing the technology can help. And I think it was pulled forward technology and change years. there were already trends going on in the background, like everyone was switching online, shopping more to home delivery and all that stuff suddenly got compressed and was suddenly here within two weeks, this was something that's supposed to happen in five years. And I think that's why w one of the biggest changes of rubber that's going to last, what society, and I think everyone has to adapt and to change to that. And, I think there's a lot of good that's come out of this. Technology has been great for innovation and productivity.
And I don't think we could have done this 20 years ago when technology wasn't even close to this, it would have been an entirely different experience. We had to go suddenly work from home in the early nineties or that nothing would have happened. They would have to go back to 2009-2008. And think about a work-at-home structure then, the internet was not set up for the bandwidth.
Pierre Daillie: [00:21:50] Absolutely not.
Som Seif: [00:21:53] There's an, and so reality is this is a. this happened in a time when actually society was able to absorb it relatively well and not impact productivity as much as it would have if it was a decade earlier. Absolutely.
Greg Taylor: [00:22:07] and the whole retail experience, the amount of times Amazon delivers at my house would not have happened five, 10 years ago.
And we would have had to go out to the store that often, and that changes the IMX D when does that increase the spread of infection and how things happen? I there's so much change in the technology that I think has been great for society. And that's going to be one of these lasting effects that I think it's going to be hard to go back to it.
Pierre Daillie: [00:22:27] Yeah, I'm curious to know what your thoughts are on the economy itself, because we know like the stock market has really separated from the economy. there's a lot of unemployment. There's a lot of people who are facing permanent unemployment. W, what are your thoughts on that? there's such a massive number or of people who are still relying on, government support, fiscal stimulus, paycheck protection, where do you see that concluding?
Is that something that's going to go on indefinitely for the time being, or is that something that at some point the is going to stop?
Som Seif: [00:23:03] I think it's actually, Pierre, the biggest challenge that we all face right now and we look forward and I think it's what, what worries me virtually is that, so I'll put it in context of a few things. So right now things, look relatively good. if you ask the average person, how was, how bad was a lockdown, unless you were a small business owner or a business owner in general, or in, even if you were in the hospitality industry and you got terminated, for, most people would say the lockdowns are pretty easy.
it wasn't a bad thing. government stepped in and my income was equal to, or like most, in many cases better than it was before I'd ex gosh, things were relatively easy. And the difficult that the difficulty of this, what would have been, if you had to, of course, high, double digit, high, teens, unemployment and things like that was offset by really strong government support and sponsorship.
Now, a lot of pockets that were ignored or hurt, small businesses. I think, we're meaningfully, under supported, like really, if you're a small business owner, you had a, you've had a terrible. Experience and in many cases, and I feel awful that small business owner, I feel awful about them because I think the government really did a poor job on this.
but that's it. so if you look at the moment in time, there was excess liquidity, a great stat that I share with the guys was that one of the bank CEO shared with me was that. they estimated that if the whole on the consumer level at the individual level in Canada was about $35 billion created by, the pandemic, The government through $55 billion at the problem at vigils right directly into the individual fans. And so what that meant that there was actually excess $20 billion in the system. That, what is the result of that is we're seeing that credit cards pay down ridiculously. you've seen massive, non-long-term debt.
You've seen savings rates go up like massive amount of capital. People are putting deposits and cash and savings. you've seen consumer spending like. some of the e-commerce giants and a lot of divisions are having massive sales, target growth. Like how does target do so well, how does home Depot do people have a lot of money and they're spending it. And so the reality is that for most people, this has looked like pretty easy. Itās okay, it's a pandemic, and it's been fine. The hurt comes, frankly, the fictitious part of it, the government doesn't keep doing this and they can't keep doing, it's not sustainable at some point we're going to have to stop.
And you know what the problem is that there, if you ask there's an, there was an assumption that all of those people that were terminated we'll get right into their jobs. Like when a small business starts up again, they'll get their job back. Or when people start traveling again, people will go back to, the, all the airlines will hire again.
But that's not the case that there's these aren't just temporary layoffs. And so there is a steady state, real, structural unemployment rate in the system that will stay there and we will be permanent. And many of those temporary job losses will become permanent. And my concern, I think we talked about this all the time.
We're actually, if you think about what the steady state unemployment rate in Canada would likely be in the United States, it'll likely be in the high single digits, long term today, like this and that's recessionary so we are, we go from the pandemic, to the real recession and that's going to be driven by, okay.
Assuming they can't spend a bet is over leveraged and, that isn't supported and doesn't have a job. And I think we're going to have a real challenge there. And so I'm concerned about it. And I think we haven't really priced that as effectively into, the economy and into the markets.
Greg Taylor: [00:26:38] Yeah, I agree. We're in this kind of this Pollyanna state where we haven't really seen what the real economy is yet, and we're getting all the sequences. That's saying it's the greatest recovery ever often the quickest bear market. And it's fake at the end of the day. And I think that's what really, we haven't gotten our heads around yet because Sumās right. This isn't sustainable. You, these programs have to end at some point and once they take the training wheels off the bike, is it something that the economy can keep going? And that's what you hope it is. but it still feels like it's way too early to tell it's too fragile. and there's so much uncertainty for the second half of this year, and that's why I think that's going to start creeping into the economic number or consumer spending. And that's really what I think what we're going to find out in 2020 and 2021. I think that could be the real risk for more volatility.
Pierre Daillie: [00:27:23] Yeah. it's odd, you know, you look at, I mean, look at what happened with Tesla stock, never mind the fact that it's up, hundreds of percent during the last six months.
That's one thing, how do you explain the company's valuation? it's been a terrific stock to own, and itās a, it's an exciting company to talk about, but Toyota sells millions more vehicles a month. Tesla just sold its first millionth vehicle this year.
How do you reconcile those differences? If you look at Apple stock, for example, Apple stock for a moment before it pulled back this week, was worth more than the entire Russell 2000. It was worth more briefly than the FTSE 100, So if you just look at the top 10 names, most people maybe aren't, fluent in what the biggest British companies are, but, AstraZeneca, GlaxoSmithKline, Royal Dutch Petroleum, BP, Unilever. those are all household names. How is Apple worth more than the entire top 100 businesses in the UK?
How do you reconcile that against what's happening in the economy? They're the beneficiaries of the pandemic. But are they really to that extent? Are those valuations justifiable or are we in for at some point a, reversion to the mean in terms of what these stocks should be worth versus the rest of the market?
Greg Taylor: [00:28:45] I definitely think there's a lot of risk in these mania stocks. And that's partly a function of just what happened in the market that we've, we finally got the cult of equities back. It hasn't been around for a number of years that no one really talked about their day trading or their portfolios.
They've all talked to the real estate. And we finally got people back in the stock market and the amount of retail participation amount of day trading, which. You want to encourage that the retail investment in stock market, but it got to extreme again. And that's where you're getting a lot of the parallels to the.com crisis and the mania around certain different companies, and Tesla's probably the one that fits the bill the most. That's, it's a good concept company, some great technology, but the valuation doesn't make any sense at all. And we'll have to see what happens there when the bracketing comes to that stock. Cause it has it has dropped since the split, but even just talking about split that I've never seen a company before, both Apple and Tesla, rally significantly on the announced amounts. And they're splitting up one that has no implications to the valuation of the company. But then castle is upstairs, only 5% in August on that announcement.
And Apple's up 25%. And then that just doesnāt, make any economic sense at all. But when you look at Apple though, Apple is a different common company than Tesla for sure. It's a real company has got real businesses. and I don't think it's because of risk of collapsing as much as Tesla would in a certain scenario.
The stat that I saw a few days ago, which I thought was interesting is Apple pays a very small dividends, but the dividend yield on it is 0.7, which is basically equal to the U S 10-year bond right now. When you compare balance sheets, I liked the Apple balance sheet a little better than the us government right now.
So you can argue that when you're looking at it from a dividend yield point of view, Apple's not that mispriced. so I think there's two different markets are the two big media stocks right now, but. But it's very different than the.com crisis.
Pierre Daillie: [00:30:28] Yeah. I wasn't suggesting that Apple isn't, the business that it is, itās a phenomenal business. It's so far out there in terms of a valuation, it completely left Microsoft and Amazon behind.
Som Seif: [00:30:40] I think we get caught up, as investors thinking about these kinds of peripheral names, like these things that are happening, like Tesla and stuff and we all know it's not real. and it's not to say that it's not great company and it couldn't be a great company.
Like Tesla may one day justify people making the bet that they did today. They may like, I am, as I said to the guys, you look at, the, if you could forecast out, decisioning, a probability tree of outcomes for Tesla, that the range of outcomes from. building a business that is very small to a building, a business that is 10 times bigger than, its market cap today suggests is in front of you.
It's there. they could do something revolutionary and they also could do something terrible. The company almost went bankrupt, you know, even two years ago. Right. It gets, it's quite amazing. When you think about the story. But, that's not really the story. Tesla's just a story.
And when you have companies that trade off of the narrative, the story, not off fundamentals, you can't hardly ever justify things that way. So putting Tesla aside. I think the thing that's really quite amazing. Look, fundamentally, as, as Greg talked about earlier, there is a shift happening today into, call it offline to online that is happening and it's, it was happening in the background before it accelerated by two, three years.
So if you had a discounted cashflow assumption of these businesses, and the size of the addressable universe, before COVID you've just taken two years out of that and discounting you know, be it more aggressively and potentially even increasing growth rates of those of that offline to online.
And so much of the reasoning, why Amazon and Apple and Google, and just under your Facebook, Microsoft have become so powerful. It's already becomes a large end and are the winners is because they power is so big. it never in the history. Of any industry have certain companies had so much power.
And so they at a time when they're, they're, I know there's a lot of talk about, government intervention regulations, things like that, but in the absence of action, really something happening, these companies are just becoming more and more powerful and Apple exude a massive amount of cap power.
So the reality is, and then frankly, I don't think they're going to be a big focus of the, any anti-trust lawsuits and things like that. I think others would get first focused on it. So Apple is just going to get stronger at a time when the backdrop for their services. Are very accelerant. So I think that's the first thing that's really important to me.
I have to understand that now, who knows I was going to play out. There's a lot of risks still, but I think whatever someone is trading in a big PE, but I want to say one thing about this. Like the market is looking to growth and they're looking for growth and, in the eye, and they've been doing this for the last decade, really in the absence of true economic growth, they searched for growth and they're paying up for growth.
And that's what they're doing because they assume that. Lots of companies that are not growing. They get those cheap any time today, let's just go pay up for growth. But the problem, what we've seen really, and then this isn't retail, yes, there's a lot of stuff showing how the retail investors getting more active.
And, but this, when you get to this scale, it's real money. It's big money that is driving these movements. You can't get Tesla to $400 billion market cap without real money like it's not retail. But it would say. If you think about the venture market is based on probabilities, and spreading across a handful of companies that you think are going to truly make you a hundred times your return, big, multiple on your number.
And you spread it out enough with a high probability based on your, quality of your efforts, that you have a very big barbell outcome, as So if I pick 10 companies in the venture world, my hope is that one or two of them are going to make me a hundred times money or more.
And a bunch of them are going to give me back my money. And then a bunch of them are going to be zeros, but one or two of them making me a hundred times my money. Offsets against all the other ones to get me a phenomenal return on my capital. Now you look at what's happening in the tech world and we say, and Greg and I would look at and say Jesus, like the software space is trading.
All of these things are trading at 40 times revenue. This doesn't make any sense, but that's what they're saying. the world of venture has come into the text. And they're saying that not every one of these guys deserves 40 times revenue. But one or two of them do. And if I buy enough of them, the one or two of them are going to make me 50 times my money or thirty times my money, In terms of money. And the other ones are going to make me 50 cents on the dollar or 30 cents of the dollar or 20 cents on the dollar. But the ones that made me 50 times or 30 times my money offset against the downside, such that, yeah, we made a better return than just buying the S & P 500. That's what they're betting on.
And yes, not every company deserves 40 times revenues. Maybe Shopify does, I don't know, based on their trajectory of growth rates, maybe the time does, but not everyone does. Tesla. Definitely doesn't deserve the market cap. if you look at it in the context, but maybe it will, but Nicola does every yeah.
Electric electronic vehicle business. no. So that's about me just bedding, like a venture capitalist. And that's not really good for everyone else. this isn't the right way to invest. And the big question is as an investor, why are you doing this? If you're speculating, then yeah. You can go do that.
But there's a reason why not everyone invests like venture capital, because it's not really the right type of risk profile for most people.
Greg Taylor: [00:36:18] The amount of risk and different speculative pockets has gotten too extreme. And I think that's where if you want to be bullish on the market right here, the ideal scenario now is we get some sort of rotation you need to, there's so much money in the system and it's, it's, it's got to go somewhere. It's not going to the bond market and other areas right now.
So I think if you want to be bullish on equities, it's really, you want to get that rotation away from these, these hot valuations in the tech sectors. And rotate to some of the lagging sectors, which are still alive, good value there. There's still a lot of good dividends being paid. And I think that's really what we need to carry the market higher.
If we're going to go back to all I'm highs and to keep having a positive 20, 21, they can't be the same leadership stocks they've done their job. They've gotten us this far. It's got to rotate to other areas where the realist chief valuations, whether it's M and a potential where there's. There's margin expansion, where these companies can turn around and I think that's going to be the game.
And that's why, and we're moving into a stock pickers market, more than anything else you don't want to just passively buy the index. You want to do some bottoms up analysis. You want to find good companies that are trading at attractive valuations, have room to grow their earnings and create creating real value.
And I think that's the move we're going into because there's so much liquidity out there. I don't think there's going to be a massive crash by any stretch, but I think we can get a rotation that some of these other names.
Pierre Daillie: [00:37:34] To bring it to a point that's not investing. That is speculation, but the bottom line is that when these stocks are growing on multiple expansion, the way these companies have, it's very distracting. Isn't it? it's very distracting, for investors who have been set on their correct path of having, designed portfolios that are optimized for risk, for their risk profile that are, these things are distractions.
Like why don't I own more Tesla. People are looking at these while they're looking at their well-designed portfolios. and then thinking, I wish I had, this is where mistakes happen, right? This is, this is where, where people go ahead and, and they abandoned their plans and so that happens when things are negative, like in March, and it also happens when things are so positive...
Som Seif: [00:38:18] Behavioural challenge, challenges of individuals is both on the upside and the downside, no question and, see it and to see it in such a rapid, extreme, hot, cold in this, six, seven month period has been quite interesting to watch.
it's a behavioral scientists dream to sit and watch and analyze right. But I would say, to your point, I think that's just noise. and I go back to what I said earlier around how to plan. This is no different than, on the downside. How do you make the right decision?
It's on the same, the upside it's you got to have planned this well in advance. There's a little bit of it noise of this falling into the market exposures, like the S & P 500, which is of course, the average stock is underperforming the index because of that. But if you're in broadly diversified portfolios, all the rest of it you're being weighted up by some of these high growth names and higher value names, but you're also participating in a lot of the value names and things like that have still continued to be beaten up. you look at the markets, the market index, those are positive, but the banks are still down 10, 12, 15% from their highs, So there's still lots of names that are well below what they were prior to COVID. I want to step back to something that Greg said also, I want to just talk about.
That venture concept that is being played out in the growthier parts of the pockets is absolutely, it's one way to play that, that way of thinking. And in fact, it's probably the right way to play a Shopify today or a bunch of those kinds of names, because I don't know. If Shopify is going to truly justify its 40 times revenues.
If I bought 10 companies that were doing really important things and maybe together a two or three of them would, and I like Shopify. I love the company. You talked about loving Tesla, you love, some of these things. I love the company. I love Apple, all these things. The question is how do I play this and difficult to play that as a single stock.
Maybe that's the best way to do it, but I want to flip to the other side of this, which is all of the names that in fact are beaten up. The COVID portfolio like the companies that have truly been impacted, like the airlines, the transportation, the travel, leisure, real estate, things like that have really been impacted negatively by COVID.
That idea of just buying all of them would be the dumbest thing you can do buying the buying 10 of them and saying, Oh, why don't, two of them are going to make me a lot of money and eight of them are not, it actually is a dumb thing because the problem right now is, a few of them may actually be awesome bets.
Pierre Daillie: [00:40:40] I thought you were going to say it wouldn't be the dumbest thing to do.
Som Seif: [00:40:45] I was going to say, this is a time to be a great fundamental asset investor and whether you're an equity investor or a debt investor, and what you have to do think about is your term. So if you think about airlines for a moment, and you think about cruise companies, you think about hotel companies and all these other things, and you say to yourself, Okay.
What's changed. And who are the one or two companies that truly are going to win ? Like people will fly again. They're not, they may not fly next month, the next six months, but people are going to get on planes again. People want to get on cruise ships again? Cause I don't like cruise ships, but there are people who love cruise ships.
Pierre Daillie: [00:41:25] I second that. You're right. And
Som Seif: [00:41:29] people will travel. People go to hotels, people go to resorts. People do these things. The question is not everyone's going to survive. So what you need to be good at is to figure out who's going to win. And then you have to say, how long is it going to take and how patient am I to wait that out?
But if you buy the right ones, I think you could make a huge amount of money because when that comes back, they're going to go back and make lots of money for investors, but you gotta be great fundamental stock selection, bond, selection, asset selection, all the rest of it. So the active investor truly can make a difference there.
Whereas I think, and the growthier parts, you just buy a I bunch of them and these big valuations. And then a few of them we'll just find out you could forecast. And you could probably guess that a few of them will be better than others, but I actually think buying the innovation sector probably is better than just buying the COVID portfolio en masse.
Pierre Daillie: [00:42:22] So what are the areas of opportunity that you think are the most plum right now?
Greg Taylor: [00:42:31] It's going to be interesting, cause when you got the market at an all-time high it's hard to say that you can just buy everything here. but there are opportunities out there and it is going to be in some of that value area that's been forgotten that people don't want to look at it.
And certainly being Canadian. We probably spent too much time looking at the energy sector because there's a ton of value there, but do you really want to make a big bet on energy when you've got that the forces of ESG and different macro and the economics going on? But there's going to be some plays out there that really for good bottoms up stock pickers that do their work, the balance sheets.
There's going to be tremendous opportunity. Over time looking at the energy sector, I'm certain we've been looking at just, what are the benefits of this whole new world we've got, like we were making, across the portfolios, looking at the auto sector that is, people are avoiding public transit. They're going to be driving more.
And a lot of the companies are going off of that. So there's a lot, that's a lot of stock picking is going to be across all sectors. One area that we touched on already, though, right? I do think is going to be a lasting impact of the amount of stimulus out there is the gold sector.
We've all been reminded of why you own gold. It's a good insurance policy. And I think coming out of the global response to this, the very real risks that re they're going to get some sort of inflation coming or the U S dollar could come under pressure if either of those scenarios happen, that's a great environment for gold.
So I don't think every investor has to have 25% gold you talked about earlier, but maybe 5% gold is going to be something that people should look out in their portfolio. And the gold miners, which really had been the laughingstock of the capital markets for a number of years , when you look at them, now they're actually the they've turned their operations around. There's some good companies out there with real management teams that are not making stupid acquisitions like they had in the past. I think this is a good time to look at some of these cyclical sectors. And this could set up for a decent time for Canada as we've got a lot of these industrial cyclical sectors and to really have been forgotten when the global sense it could play perfectly into an environment where you've got increasing inflation and some lower us dollar.
Yeah, commodities in general, have been doing quite well. that's an area that's really been neglected for a very long time. and now, we're seeing a rebound accelerated by COVID .
Oh, absolutely. There's so much change the whole lot. If people move out of cities, they have to building houses, we've got low interest rates. So people are buying new houses and we've also had an underinvestment of the commodity sector. There's no real new copper mines being built. So supply demand economics are really in the favor.
So a lot of these sectors that are really been forgotten, I think our setting up for tremendous opportunity for the next few years.
Pierre Daillie: [00:44:59] What do you think of lithium and cobalt?
Greg Taylor: [00:45:02] that's a tougher game to play. The circle is really not developed yet. And then in certain parts of the world, there's lots of it.
Just at the right price. You can get a lot of it there. people have been trying to say that a play on the electric vehicles and, but it still doesn't really make that big a play. I think if you want to play a lot of these plays, you just go simple and go with copper. Copper is used in all electronics and there more copper in a Tesla than there is lithium.
So I think you really just want to look at copper as a play. If you look at global growth and a lot of these trends going forward.
Pierre Daillie: [00:45:32] What are some of the areas that are, notably bearish to you? I know we've talked about high flying technology stocks and, similar names that have had, big, multiple expansions during this period, so it's hard to be bullish. on many of these shares, because they're so inflated, but what areas of the market are you actually bearish about going forward, given your outlook around the market around the economy?
Greg Taylor: [00:46:00] I think it there's a lot of different factors out there.
Certainly technology would be the area that I'd be most, I think, at risk due to the valuations, but the other phenomenon out there, which is really just a sign of manias, is SPACs.
There's so many SPACs going around and that is almost it's the epitome of a mania sector going on is you're basically giving someone a blind pool of assets, money to go out and do what they want with it.
And people are paying a premium on that. And I think that's one of the pockets of the market. It's not a huge pocket, but there's a lot of risk in that. And that's really a good Canary in the coal mine of what's going on in speculative activity.
Som Seif: [00:46:33] I would just, it say in the short term, I think the broad markets are a bit of a risky area. And, I think, we've seen, pretty as we just talked about a pretty, Robust move in stocks and evaluations broadly, at a time when there's probably some volatility and risks that isn't being priced in effectively. And, we'll see that. and so the short term, I wouldn't be surprised if you know what we've seen in the last week with market declines, being a little bit more broad, especially going into the election as well, right?
Greg Taylor: [00:47:03] The election was always going to be the biggest risk for this year. And I think that's something that people forgot as we went through the COVID shut down and that's right in our face quite quickly.
And I think that's going to set up for more volatility and I think that's, you've got markets at all-time highs and some crowded trades. I think I agree with Som. This is the time you want to take down some of that risk and make sure that if you look at the experience of your portfolio through March, you may want to take a little bit off the table and make sure you're prepared for more volatility heading into the fall.
Pierre Daillie: [00:47:33] You guys have any bets on who's going to take the white house?
Greg Taylor: [00:47:36] I think the bigger bet is will it be solved at the end of this year?
Pierre Daillie: [00:47:40] or
Som Seif: [00:47:42] Maybe the bed is whether or not the current incumbent will leave the office. That's probably more of a bigger question and will he concede the loss if he loses.
Yeah, I think we all have our emotional goals out of this, but the question is, there's a lot too, there's still two months left between now and November 3rd and, there's still a lot to be resolved. and, look, it's not looking great for Trump.
There are many, if you look at the last number of years there hasn't been a single thing that has gone in his favor from the 2016 kind of numbers, all the factors that led to his results. But, there's a lot of risks, in voter turnout, vaccines, just.
General people, there's three, debates. and we all know that this is an election that Joe Biden can lose. Trump may not win it, but Joe Biden can lose it. And so there's a lot to be figured out still.
Pierre Daillie: [00:48:31] there's a lot of skepticism around the vaccines, isn't there? We did a poll and we've had now about a thousand responses to that poll. and, our sample is advisers. 64% of advisors have said, yes, they'll get the vaccine when it comes out, but there's this other 35% that say no that's a no, or maybe, or...
Som Seif: [00:48:51] That's standard, I mean you Americans right now. I think it's, I think it is, 35% of Americans will not take the vaccine. And, and that's the, so it's one thing to produce the vaccine in a reasonable amount of time. The second is to get people to actually take it.
It is a risk. it doesn't mean that just because he had a vaccine, there's actually some great charts that, you can look at of previous, not pandemics, but previous kind of, challenge health issues. And, when the vaccine was produced, it still took time for the thing to be abolished.
And so it takes time for these things to happen. I would say as a joking matter, I won't take the vaccine until Angela Merkel says it's okay to take. So that's what I'll take the vaccine, but, I think, look, I think people will take the vaccine over time and, but I think it's more a question of, will it be an effective vaccine produced in a reasonable amount of time?
It's going to take a while. There's a lot of effort going on. If one gets produced will be the fastest to ever get produced. I think in history, no question, but it still has to be decided that they will be one produced.
Greg Taylor: [00:49:53] Yeah, there's a modern day Manhattan Project going on because I think the record for a vaccine is three years.
Som Seif: [00:50:00] It's actually four plus years. And yeah, it's going to take a bit, but I think if there is one to be made, they'll be made within four years. For sure. So it could be 18 months could be 12 months could be three months from now, but the point is that.
There still hasn't been decided that they can actually make, there is a vaccine that will be produced for this, this virus
Pierre Daillie: [00:50:18] that sort of blows out the idea that, you know, back in April, may, they were talking about, at minimum 18 months for, for a vaccine, let alone a therapy ...
Som Seif: [00:50:28] if you actually look at the work that goes into a vaccine production, there's a bunch of course the scientific efforts and stuff. And then there's the testing and the approval process, the results and things like that.
And then there's the manufacturing and distribution. What America did was two things. The risk of that middle segment for the scientific. So they, they put a lot of effort in the scientific, but what they did was they pre-funded. By buying a bunch of the vaccines from multiple players. They pre-funded the risk of that failure because it's a binary like a venture failure.
If it works, it's huge. If it doesn't, it can be it's all you spend billions of dollars and they could go to zero. They pre-funded that. So the American government did that, and that was a really powerful thing. So they took the large part of the capital risk away from the drug companies. The second thing that they've done is they've.
And alongside some private players like bill Gates and others, they've actually gone and set up the distribution, the manufacturing facilities today, as opposed to waiting. And so they're all sitting there. And so why this is so cool is that they pre-funded the biggest part of the risk. And they've got the manufacturing all prepared and ready for when the vaccine is produced and gets approved, it will fly through manufacturing.
We'll be ready to go. I think that's what will accelerate it. The question is that first part can they prove to create a vaccine that will be effective and they haven't yet done that yet. So that's the big question.
Pierre Daillie: [00:51:53] So Som, why Angela Merkel,
Som Seif: [00:51:55] She's a doctor and so she has a, I trust her, but two is, I actually think, look, From a leader, global leaders perspective.
I think she's one of the, the great leaders, someone that, you can trust. so I said this in tongue in cheek joke, but I actually mean it. I would trust the vaccine from Germany and approved from Germany before I trust one from Trump.
Greg Taylor: [00:52:12] You're not going for the Russian one?
Pierre Daillie: [00:52:16] So that's a no.
Okay. What about fixed income? First government and then if you have any thoughts on credit, I know that's a that's Sandy's area, but, what are your thoughts on government bonds, treasuries, Canada bonds?
Greg Taylor: [00:52:34] It just start, the long bond has been one of the best performing assets this year.
And I think most people miss that it's outperformed most global equity indices. And that's really a function of when interest rates were basically cut to zero globally. That long duration bonds really exploded higher. But now if you're buying a long duration bond, you're taking the rest of, they can go negative.
And I don't want to make that bet because I don't think we're going to go to negative rates. so we've been shortening the duration, a lot of our bond portfolios. We think there's a lot of opportunity there. And if you do get the sense that inflation's coming back, given all the stimulus out there's a real chance that yields we'll start. to back up rates may not. So that will steepen the curve, but yields will start to move higher. So I think you want to be shorter duration on your fixed income portfolio. And I think there's a ton of opportunity in credit, as banks and companies are looking for different sources of financing.
Credit's going to be a great opportunity to make some money and very much like stock picking on the equity side. I think a good active credit fund is going to out-perform here.
Som Seif: [00:53:30] And I would just say, bonds are the most expensive asset in the market today, but they've been the most expensive asset, the market for 10 years.
They've just, like many bubbles, they can just get more expensive and we've seen that. And so it's extremely hard to call, what, if there's a return. squeaked out in treasuries. to Greg's point, we, I think it would be a really bad signal and the long-term, negative thing to see negative interest rates.
But the problem is that the buyers of these assets are not the same buyers that you and I, and the way we think they're not fundamental there they're central banks. they're the people who are doing, proxies and dollar hedging and things like that. There's a lot of things going on that are backing these assets and causing the rates to be where they are.
And you can speculate on treasuries and long duration bonds. and that speculation has been in your favor in the last, year. But the reality is you have to call it what it is. It's not investing. It's speculation. It's a trade. An investor who has a long-term perspective, owning a, strategic ownership of long duration bonds today is betting that they will, effectively make, less money than 0.7% for any other assets, over the next 10 years. And so that's the, if I buy a 10 year treasury bond right now and hold it for 10 years in my portfolio, I'm going to make 0.7% less fees.
And yeah, like that, to me, it doesn't make economic sense for a strategic fundamental investor. Yeah, but if you're a tactical investor, you may bet that because you say, I want to, de-risk a further deflation, or I want to de-risk interest rates going to negatives or whatever.
That's one thing scenario, but it's a probability in your portfolio, not a strategic bet that, when I buy an asset, the reason what makes a great asset, really strong is that you're buying an asset that fundamentally. Is a good return expectation too, is it fundamentally has a good risk return to associated.
It's a risk return associated with that return opportunity. And then three is that, I'm thinking about the term of that investment long enough. And then I put a bunch of those diversified exposures together. That's how I buy it. Build a portfolio. treasuries and long-duration bonds or mid-duration bonds don't check off any of those opportunities today.
Pierre Daillie: [00:55:49] Okay. so you've got a 60/40 portfolio, which has done up till now extremely well. It's been, it's been a very successful, standard bred portfolio for decades, where do you take that 40% now, assuming what you just said, Som. Fundamentally, I think we all agree with the idea that there's very limited return, in terms of income from having government bonds, maybe, like this year it provided some ballast to equity portfolios during that very dicey period, where, you know, risk on rapidly shifted to risk off. and of course the intervention from the government, from central banks to drop yields, Has proven to be a good trade as well, but, secondly, how much more of that is there in the market? Will the government allow yields to go negative? The answer to that likelihood is probably no. So if you're, if you've got 40% of your portfolio in government bonds, which is a very traditional holding, where do you go to for your allocation of fixed income, or do you just eliminate the fixed income allocation, the traditional fixed income allocation, going forward and change that 40% into other assets. What, what do you do?
Som Seif: [00:57:08] It's the same thing that people have been doing for the last 10 years is they've been taking on greater risk in their portfolio, more equity, like risk buying, preferred shares, or they're buying credits, or they're buying, longer, more dividend stocks or a B, and they're doing that.
And that's probably the right answer. The problem is you are readjusting your risk return, and the risk of your portfolio. portfolio. in my opinion, you need to focus on also at the same time, reducing the risk of those asset classes by hedging out and managing, through derivatives and other types of exposures to replicate.
The same principles of diversification and risk management, from equities themselves that you would have otherwise gotten from fixed income and bonds. and I think it's really critical. And we've been saying this for a while, the 60, 40 portfolio fundamentally, you either accept the lower expected return of it.
and keep going, or you rebalanced your portfolio structure and try to achieve a better, yeah. The expected return, which is what most people need to do, because most people can't accept a 4% or three and a half percent expected IRR on their portfolio, for the next 15, 20 years, if they want to meet their retirement goals.
And the other area is going to benefit us the Alts space.
Greg Taylor: [00:58:20] So the alternatives have really come on in the last few years. So I think that's going to be an area that's going to pick up part of that 40% sleeve, whether it's from private debt, whether it's from structured notes. And I think those are both areas that are going to become more prevalent in a lot of investorsā portfolios.
Pierre Daillie: [00:58:34] From your vantage point, do you see investors making that shift? Is it happening.
Greg Taylor: [00:58:40] Oh, absolutely. We're seeing more interest in a structured note product than we haven't some of a lot of products. And we're seeing a lot of people looking for sources of income away from the traditional sources, and then that's going to a lot of entered areas.
So I think advisors are making those changes and we're starting to see a lot of interest in these areas.
Pierre Daillie: [00:58:57] You know, Som, that's the question I've been asking you for years throughout, all the conversations that we've had, we've talked about this and, I guess my only concern, watching that, watching it from the sidelines as an observer is that area of alternatives has a really long adoption curve.
Som Seif: [00:59:14] Yeah. Yeah, there is. But look, we've had a lot, yeah. And time to talk about them. And I think people are, should be familiarizing themselves with the fact that risk management and strategies that employ risk management critically is important.
I also think that, experiences like this are really important to teach people that the importance of it. and again, if you look, if you. If you just keep doing what you've been doing for the last 20 years, you could that's one approach. And guess what, kudos it's working, investing is about stepping back and having perspective. It's not looking historically, it's looking forward. And we've seen this before. We've seen environments where, equities are expensive. We've seen environments where recessions happen. We've seen environments where interest rates are ridiculously low, and we know what happens when interest rates rise and normalize and economies grow and things like that.
And so I just think it's important for everybody to step back and remind themselves of the fundamentals of good long-term investing and good portfolio construction. If we do that, the logical answer comes out of it. It's actually quite basic. and I think it's really important to do that today, more than ever before, in the last six, seven months, we've been whipsawed a little bit.
And so to some degree we filled the gap and the holes, but people have been, made the look okay. if they didn't make a bad decision and they didn't sell in March or April. They're actually looking like, Oh, my portfolio is flat or, maybe better than it was at the beginning of the year.
And What pandemic, the reality is that's actually the moment where you count your chips and say, Oh shoot, I gotta take some money off. I got to make sure I've, I take my winning and purposely balance in the right way for what the next 10 years are going to look like the next five years is going to look like, because I, I benefited from being a, a non-active investor in the last number of months and years.
Pierre Daillie: [01:01:02] Yeah. we've been given a really, incredible second chance again.
Som Seif: [01:01:09] That's right. I wouldn't, if you didn't do anything, if he did something then know, getting back into the market has been extremely difficult for people. But if you didn't do anything, you were given a second chance and you, you've got your net asset value and it's question what you do with those, that value.
Pierre Daillie: [01:01:28] So before I let you guys go. During this very long self-isolation. What have you been streaming watching, any great podcasts you've listened to any great books you've read.
Som Seif: [01:01:41] I'll start with, I've been doing a ton of reading as I always do in the summers and during the year I usually try to, but the summers I've read a ton. I read some great books. It also just had a lot of time to just stop and read, personally about just industry trying to get myself back into, the curiosity of learning and things like that. And that's been really important. And I think those are really, critical things to do when you have an extra minute and we didn't have those extra minutes in March, April and May, but in July and August, we had some extra minutes and I try to use that to learn as much as I can and reset my perspective of the next number of years and try to have some vision to where we're going.
Pierre Daillie: [01:02:21] Greg.
Greg Taylor: [01:02:21] Yeah, the same, I think it was a great time to read for the summer, who, especially with not the distraction of sports, there's more time to sit and think, and I went back and re-read "Too Big To Fail" just to see what the learnings from that last crisis. And now the apply to this.
And that was really the governments and central banks took way too long to react. but there's just a lot of good time to read and think and step back and look at it. As I think there's a lot of benefits that come out from the self-isolation, whether anything else.
Pierre Daillie: [01:02:48] Yeah, it's been a really great time for introspection.
So did you not watch anything besides, did you watch anything ?
Som Seif: [01:02:55] We all watched "The Last Dance," which was a phenomenal, great show and, I w we. Sad and see what some of my favorite shows like the "Billions" didn't finish the season and things like that, but, we watched we stopped watching that right before that we went away for the summer and then now going to pick it back up here in the fall. but there's some great, great streaming shows on and, we've, we've enjoyed them all.
And as much as you can and watch a lot of movies on Netflix and on TV and, and a lot of I'd say more than anything else. So for me, I've got four young kids, so I get a lot of time with Paw Patrol and all of those wonderful shows. And so that's been really great.
Greg Taylor: [01:03:32] Yeah. And I would say the timing of Disney plus has never been better. The amount of time we've had them watch through the Disney lineup. I think that the timing has been perfect. So we've been going that also
Som Seif: [01:03:40] that's right. Streaming is the new thing and Disney killed it with that launch. Good for them.
Greg Taylor: [01:03:46] Yeah.
Pierre Daillie: [01:03:46] Yeah. They really did. They're the only real threat to Netflix.
Som Seif: [01:03:50] They've got the content that is relevant to people. it's not a threat as much as a, I think it's just, there's going to be multiple platforms, just like there are many multiple channels.
the question is who has enough of the quality of content that compels you to want to be a subscriber for that. And Disney has enough content to suggest to many people that they should add that on top of a Netflix. Netflix has already proven that they have their demand and there'll be probably a three or four or five, ultimately long-term platforms that people will be willing to subscribe for.
Pierre Daillie: [01:04:23] Som, Greg, thank you so much.
Som Seif: [01:04:25] It's great to be here and hope you're doing well and staying strong, and everyone who's listening. This will pass and, but let's make sure that we take care of ourselves and our friends, our families, and our businesses and our clients, and get out there and be strong-willed in every way we can and make other people feel great too.
Pierre Daillie: [01:04:43] Thank you .
Greg Taylor: [01:04:43] Thanks Thanks very much.
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