Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Maren Talks Money, the podcast in which people who know the markets explain the markets.
I'm Maren thumset Web.
This week I'm speaking with Steve how quantitative researcher at Bloomberg.
Now, Steve, thank you very much for joining us.
Very good of you, very nice to you are to speak with you marine, and thank you for the invitation.
I wanted to talk to you this week because this week.
Is macro week, right, everybody else is going to be talking Trump, talking tariffs, talking inflation, all this kind of thing, and so we're just going to leave that for everybody else because, to be honest, no one really knows what's going to happen with the tariffs. No one really knows what the macro effects are going to be. There's a lot written on and we are going to go a little bit more micro and talk about things that directly
affect company that we can understand. So in particular, I don't know innovation, how pressing power works, how analysts look at companies, all those kind of things, so all the areas that are specific to your work. So what we're going to try and do is not mentioned tariffs once in the whole forty minutes that we're going to speak.
It's going to be like a challenge between us. Okay, no mention of tariffs.
Can we try? Yes?
Okay, all right, everyone's going to let us know immediately if we fail, of course. And so I want to start by talking about the thing that, of course everyone talked about last week, about innovation discovery, in particular about AI. So everything that's happened over the last couple of years with AI has really been the most extraordinary wave of innovation and change. And then we had the news on Deep Seek of course only hit the market last week.
Better of fact, WITH was out there several weeks before that, and that represents massive change as well. So that's exciting. But there's a lot else out there, right, It's not just AI at the moment. We're in the middle of an extraordinary wave of technological change. One of the most interesting parts for you.
So first of all, a little bit of background myself. I'm a quiet researcher at Bloomberugh in disease and I create systematic strategies where we use, you know, sort of different signals that are trying to identify stocks systematically to create investment strategies. And one of the recent wides we've created is looking at innovation. How do you identify innovation in the systematic fashion? And what we've found this turns out that you can use R and D expenditures as
a signal. And this is not new, right, companies have researchers have looked at R and D spending, you know, for a long time and indeed identifies companies that are exposed innovative. But what we have found is actually the more indicative of research capability, innovative capability. It is not so much the absolute amount of R and D spending, but the persistence. Right when we screen for companies that spend and persistently row, they're earned the expanditure year on
year for say three trailing years. Right, without doing just so anything else, right, you autonomously pick up companies that are actually exposed very innovative, and should get into details as to how we actually show that they are indeed innovative, because it's such a you know, sort of abstract thing.
And what's really remarkable is that if you say, screened the US large MidCap companies, you know, by this metric right and sort of market cap weave them with some sort of camping and weights, so you get back exactly the cues the Nasdaq Stock Exchange, which of course is just happens to be everything that's listed on the NASTS exchange and not you know, explicitly screening for innovation, which
we think thought it was very fascinating. And along the way you also do pick up you know, of course AI technology, but you also pick up things such as pharmaceutical innovations. You know Eli Lilly, you know which invented along with the noval nor disc. You know, the GP one drugs, you know, the more weight loss want Wonder drug.
So you look at companies and you can see trailing R and D spend over over three years going up and up and up, and that gives you some sense that there's interesting innovations going on there, but of course that doesn't help you choose between people who are using their innovative abilities successfully with the product that will come to market and those that are not. And it also doesn't help you pick up the companies. So let's go
back to AI for example. Well, one of the things that was much discussed last week was the fact that so many companies are spending so much money, possibly on the wrong thing. So it's not helping you distinguish between good R and D and pointless R and D. And particularly when you get, for example, to their bubble situation where you get that massive capex spending over a series of years, but you only get one winner.
Well, let's unpack that idea a lot of bits. So first of all, let's get back to the idea of for just simply screen for companies with persistent R and D spending. You will think exactly like, how would I be able to tell whether the company is just throwing a bunch of money after bad right, you know, and there's way one power building and the money is just
being set on fire. That indeed, that is possibility. And what is surprising is it comes out when you screen for companies that persistently spend the R and D instead of just sort of you know, one.
On and off.
Uh, these tend to be companies that actually have the ascertainability or knowledge about innovative success. And that has been well documented in the academic literature that there is actually persistence in skills, whether it's you know, sort of investing skills or innovative skills, right, And it turns out without
explicity screening. So if you look at companies that persistently spend R and D, they tend to be companies with strong cash flows, internally generated cash flows, strong profitability, and high.
And low leverage.
And the reason is it turns out is because R and D is a fundamentally opaque and asymmetric information activity. Right. It is highly uncertain, it's extremely cost costly, So companies are going to struggle to raise external financing, whether it's debt or issue. You know, you should equity definance it.
So only companies that are confident in its own ability to innovate to translate that innovatives that R and D into valuable intensible capital that will produce cash flow streams down the road, will actually do it in a persistent fashion. And that's one thing. For example, you see when you take a company, say R ETF for example, right, look at the companies that are in the ETF. You know they actually have very high percentage of R and D
expanditures as a share of net sales. Right, that's a typical way people measure R and D. But if you look at the companies that have persistent R and D spending in that profolio is not very high because those companies are not persistently profitable. So the R and D
spending is on and off. Right in one year they spend a time and the next year run out of money, they don't spend any And the companies that we do pick up, you know, in our you know, methodology, then is actually the persistence, right there is actually the embedded quality screen. And I think that combine that with the fact that if you're just doing a market cap waiting, which you know sort of people do these days, you know, sort of matter of factly because it's become the convention.
But you think about what it really means is that there is a sense of expost market validation, right that having spend all this money exposed you got you're getting the market valuation because you've produced intensible capital that's actually spinning out cash flows, and and and and and and That's what's different about today's stock market compared to say the bubble of two thousand, is that the bubble today
is in the quality stocks, right. The bubble today is in the companies that are tremendously profitable, so much so they seem to have escaped velocity, right, they don't. They don't require credit, They don't require financing because they finance themselves.
Okay, So we have this link between a company that that has regular R and D spending and quality and that that's that's the important part of the link. That R and D spending as long as it's regular, inconsistent, and rising, is also indicative of a high quality company.
M h. Yeah.
If we're buying those companies in the US at the moment, we're really paying up for them.
Aren't we quite right?
Yeah, I mean, valuation has absolutely climbed over the last decade, I think ten years ago, you know, or more, I guess. So when Buffett started buying Apple that you know, tax stocks were really cheap, right, and you know how many years have we heard, you know, the sort of forecasts of EXCA returns for US equities being lower than the
rest of the world and keeps being proven wrong. Is because profitability keeps surprising to the upside, and along with it, valuation paid for them because there was this you know, desire for quality assets.
And do you think that that rising and persistent R and D is a thing that is driving earnings forward.
Oh, just and justifies the valuations.
Yeah, absolutely, thing we do in our white paper, which your listeners can look up when they just search a Bloomberok innovation factor and they'll find a blog.
In the blog, we'll put a link in the show notes. We don't have to search, no searching required. It will be in the show notes.
Perfect for you. So you can take a look at
the paper. And what we show is that if you sort of you know, do an experiment where you go back in history and identify companies that were persistently innovative in biomasure right, having spent three consecutive years of growing R and D, and look at that subsequent five year sort of key fundamental performances, you will see that these companies showed our strongest growth in revenue, net income free, cash flow free cash for pressure and you know, just
along all the fundamental metrics, and that particularly accelerated over the last ten years. And so, in other words, the selection is not just based on valuation expansion. We actually identified companies that produced intention by capital that translated into our earnings and that is the reason why these companies are being rewarded by the market and This is what is really particularly reassuring is that this is a phenomenon that we've documented across the globe. It's not just in
the US. It is in Europe as well, is in Asia as well.
Okay, interesting, but when we look at that, presumably, I'm well, presumably you see the majority of the companies that fit these fit these factors in the US. I mean, that's where we all perceive the main innovation in listed markets being let's put China to one side for a moment. If we're looking at the US, the UK, Europe, et cetera.
It is in the US that we see that innovation in the main and that's why we've seen that huge valuation expansion there, which has been the main driver of the US exceptionalism in the US outperformance since twenty fifteen or so. It is the perception and possibly the reality that all the innovation is in the US. That is that the case, or are you actually seeing that persistence of R and D spending in companies in say Europe or the UK as well.
Well?
So you're absolutely right in that the bulk of the dollar you know, activity, innovation activity probably takes place in the US just because of the size of the market. And also I think it was Jeff Bezos who recently made it remark that observation that was really insightful is because of the US risk capital markets that really finances you know, innovative activities. But that being said, there is less innovative activities, aren't the activity in Europe, But where
it does exist, markets actually rewarded those activities similarly as well. Right, you saw this dramatic outperformance, and you see, you know, market follows wherever the activity takes place. So whereas you used to take place more in Germany, Switzerland, you know, sort of in a farmer space, now micro it's more northward towards US, you know, the Netherlands because of SML, or because or Denmark because of a novel nor disc and the associate you know, supply chain as well.
Okay, so the innovation they you see in Europe is very much in the farmer area.
And and AI for that matter, ASML and their suppliers.
Right, uh huh uh huh okay. And the UK can you check us a bone here?
Well, you know, actually interestingly, you know UK, I recently noticed the company in my research on you know, we will get you. Later on pressing power, I noticed that there was a company called R E l X, and I was very curious what it is because the stock is absolutely ripping, and I realized it's actually a massive AI beneficiary. Because it turns out there, I think you may be familiar with the company, they own about half
the world's academic you know, publications, right, journals. And you would have thought before AI that this was a dead wood industry like who reads anymore? Led along academic journals, but it turns out this is basically a vast of extremely valuable data and AI. It's all about the training data. Uh and and and they're definitely benefiting from it.
Okay, that's interesting.
Oh, I mean beyond that, of course, there is the farmer angle and you know Astrosdenaga and so on. But yeah, but that's more traditional.
Okay, let's move on to talk about this pricing power subject. But before we get there, how does one invest in the companies that you've been talking about? Is there something we can do to get access to these persistent R and D spending quality companies across the board.
So with respect to innovation, right you're talking about, Yeah, we have a Bloomberg indices launched in the R and D industries.
So B R and D is the index.
But then we also have a smaller set of companies with a higher convication that's called be invent right, so easy to remember, Monka. And on the back of that, we have actually licensed the indices to ETF features. The First Trust, for example, has licensed being then to create an ETF with a ticket R and D in America. And we're also I personally think that this concept applies
equally well to Europe. And part of the reason why I'm in London this week is to try to persuade people that Europe ought to invest in the South and or to invest in innovation, because you know, the race is on and you know, by both necessity and reward, I think this actually presents a very interesting alternative to US innovation.
Okay, so if and if that happens, we might actually see the European markets pick up a little, which we already are this year, right, we're already seeing great performance from European markets relative to the US.
Oh absolutely abslightly better.
Yeah, yeah, German stocks are killing it, right, you know, everyone's talking about Germany going into a procession. But the decks keep hitting a what time highs and you know, and I think that's part of the reason why we're seeing this pivot of AI broaden out right away from the first phase of pigs and shovels to more applications software and you know, with you know AI, last week's news about AI being much cheaper to implement a much more you know, sort of energy efficient, that means that
everybody else can start getting into the game. And that's why software you know is actually doing very well.
And it's yet another reminder, isn't it, which apparently people do continually need that markets are not economies. Economies are not markets, and markets can move in completely different directions to economies depending on on the starting valuations.
Hmm absolutely mm.
Okay, right, So let's go back to what you were saying about pricing power. I mean, this is one of the basics of investing is that analysts and investors always say they're looking for companies with modes with monopoly power or agobly power of some kind and with the ability to control their own pricing. So you would think that that would be the kind of thing that we're be very much out there in the market and you wouldn't be able to find any pricing anomalies in that area.
But I think you're going to tell me that I'm wrong.
Well, we're going to go back to I think you know, eventually we'll always go back to the quality paradox. But indeed, we've been looking at these accounts of pricing power because over the last few years, so we were looking at this two three years ago, inflation was all the rage, and you know, everyone's asking how do we actually capture pricing power?
Pricing power?
So everyone has their own ideas and there's qualitative ways of you know, capturing it, and people will throw alls of company names out there and claim that those companies have pricing power. I've seen claims of our Tesla Hast pricing power, Apple is pricing power, But does it.
Really how do we actually know?
So we sort of did a bit of work and found that it turns out it's not so much profitable companies that have pricing power, because high profit margins can be eroded into right if you don't have pricing power. So either if you look at the case of Apple, right, you know, the flagship iPhone price has actually not changed very much all over the last few years, even though I'm sure cost has gone up, you know, tremendously for them.
So how do we actually then sort of capture companies that do have pricing powers, in my opinion, in our opinion, you look at not the level, but the stability, in other words, the standard deviation of gross margins over the last five years.
Right.
So again there's a certain theme to how we sort of look at to our you know, systematic strategies here. And it turns out that the reason we focus on gross margins because it's the least manipulated you know, accounting metric, you know, because it's just the difference between the top line and the subtracting the variable costs, including our wages.
So the things that are more sensitive to inflationary shocks. Now, if you have a company that have pricing power, then if there's cost push shock, they can pass on a cost to customers, and if gross margins growing indicative of a demand shock, then they can supply into it and drive down the margin towards their target. So that's why we've constructed a measure where we look at companies with the most stable gross margins.
Okay, and so if you're looking at companies like this, you're going to expect them to be in relatively niche areas like the company you were just disgusting being in an academic academic journals. This marcher not in an area that other people are going to break into in a hurry, is it.
Indeed?
Yeah, That's one An interesting thing that emerges from our systematic you know so of our screen is that you look at the companies that come out of the screen, they look incredibly either boring or you know, not really one you recognize. For example, one company that keeps popping up in the American version of the Oppresing Power Indux is this company called Cadence Design Systems.
Have you heard of it?
Chugs familiar, But I don't think I can straight up there, I have no So.
Caidence Design system they design software for designing microchips.
Uh huh that does that boring? Yeah?
Right?
So in other words, they are not the ones manufacturing the chips. That's a highly cyclical sector, right. Uh, that comes with bone and bars of demand of traditionally consumer electronics. They design the software with which uh, these manifesture these chip designers design chips. In other words, you know, you would even if your business is down a lot at a MD or wherever you are, you're not going to conceive of canceling your subscription to the software with which
you do your work. Right, So that's really what gives them the pressing power is that they are supplier in the verified space with which there's maybe a handful of companies and continuing consolidation. Uh So that and it doesn't attract the attention of regulators because it's not the category that people think of because it's not consumer facing or very glamorous, right, And that's how the pressing power is actually maintained.
This when you speak about companies like this and in the category we were discussing for R and D equality, etc. It sounds to me like you're making the case for active investment. You're saying this market is it is not particularly efficient. There's all sorts of anomalies out there. There's lots of places where investors can go to find companies
that other people aren't looking at. Are you making the case here for a shift back towards active investment or are you really making the case for factor specifical sector specific ETFs.
That's a great question.
I mean, so I have a somewhat controversial perhaps view on this whole active passive debate. I don't think of it as being I mean, I think the better word is discretionary versus systematic. Right, Like what I just described to you, the methodology, whether it's looking at the stability of growth margins or the persistent R and D growth,
that's not particularly passive. As much as you think about the traditional benchmark of just buying everything on the stock market simply market capt weighted, right, this requires a certain I think particular set of rules and actually involves pretty sizeable turnovers in your portfolios, you know, on every rebalanced date, and depending on the signal you're looking at that the channel can be did quite high. So I don't know if that means it's not in that case active in
some sense. Right, It's just it's not discretionary, right. The process is rules based and fully systematic, and that gives you the consistency.
Yeah, so rules based active investing.
I guess you could say so.
I mean, you know there are quant funds out there, you know, and would you consider quant funds to be active or passive?
Ooh, rules based active?
But it's still from what you're saying it sounds like an argument for active ETFs rather than a traditional active fund.
I do think there is opportunity to the extand that investors want to, you know, uh, take take a different view on things and try to you know, sort of capture the changing trends in the market, because I mean, let's be frank, it is incredibly difficult, if not outright impossible, to outperformed the S and P five Well, I mean the B five hundred. You know context we're here, and
you know we're talking about Bloomberg five hundred index. Uh and you know, for the matter, you know, a systematic you know, R and D index that we have created here. Like if you just simply have that you know, benchmark view, you know, that gives you essentially a core holding that's really hard to outperform. But then if you want to do some things along along that, if you have sort of microviews or micro industrial views, that's how you can
express it. In our opinion, you know, you should do it in a systematic fashion.
Yeah, fair enough, fair enough, Okay, Well, let's look at one more of the things that you've been writing about recently, which is about turnaround companies and the way that analyst ratings might give clues as to whether those turnarounds. Oh you wrote on that middle of last year.
Right I did.
Yeah, So yeah, that's that's another interesting idea that we were looking at. So here bloomber of indices, we tried to leverage the various types of data you know on the terminal that I think somewhat unique, and I think one thing is what everyone looks at is analyst ratings and less opinions you know about stocks.
Of course, you.
Know, a first order intuitive thing when we look at is just to buy all the stocks that analysts are recommending you to buy. And we were thinking, is there maybe a slightly different you know, views or approach to it? In particular, can we think about the you know, companies that the analysts are becoming more polish on And that led us essentially to looking at this idea of looking at analysts rating momentum but ignoring the ones that analysts
tell you to buy. So, you know, on the Bloomook terminal, if you look up any stock and you type the function A and R, you see a score going from one to five, one being strong seale and five being strong bys.
If you just toss out the.
Ones that have a rating of four and above in other words, a buy or strong by and then you look at the stocks whose consensus rating has improved the most between the last six to twelve months, and you buy those stocks. We found that that sets actually tended to capture a set of companies that the way we can think about summarizing them as being basically turn around companies, companies that are sort of have fallen on hard times. They were hated or not so much or not at
least not but love by analysts. But analysts are like starting to change their minds on those stocks before converging their consensus.
If that makes sense.
Yeah, So the general idea being that if you if you're only looking at stocks that everyone already has a buy on it, maybe.
Too late indeed, so yes, so all the games are.
In there, so you want to be looking for I mean, analysts, they're going to be slightly late to things, aren't they by definition, by the time everyone's caught hold of a story, and so it's already underway.
So it's it.
Is it contrariant by something where people are beginning to turn their minds. Yeah, because you've found you found the bottom and you've found the catalyst, right.
Yeah, I mean the way yeah, we think about is that, Yeah, analysts, you know, over the long run, they're not wrong, they can be late. By the time everybody comes to love a stock, you know, and give it, you know, a strong by rating, it tends to be that the price has already reflected you know, that strong sentiment and good fundamentals.
So we are capturing here. You say, essentially that company is just about turning around or from you know being previously you know, having been in a bad fact of fundamentals and that you know, sentiments to just about improving, right, and that gives you that asymmetric risk award.
So you've got an improvement score. Have you got any examples in mind of companies that fit that mold right now?
Yeah.
So there's a few examples that we go into in the white paper, which again we will.
Linked to uh one way.
Well, one of them is interesting recently is Oracle, Right. Oracle you know was actually you know, having a hard time until the whole AI thing you know, kicked off, and you know, their consensus ratings were in the threes
and and then improving a bit. And then we you know, the index sort of identify that company as say, you know, essentially a company who's analysts are changing their minds on right, And indeed, then we pick the stock and the stock sort of goes of a lot because it catches this AI you know, turn around and also generally I think
the sector having bottomed. So that's one example. And another example we saw was actually Hershey's, right, Hershey's, uh, you know in the chocolate you know industry, uh and.
Terrible, terrible chocolate. Terrible chocolate.
Was it? What's your chocolate choice? Milky?
Well, they're very very dark chocolate and my kind of lint eighty five person myself, so you know, Hershey's is inedible, inedible.
Well, perhaps that's why that's carry on, that's why the stock has fallen the hard times. And the stock did fall on hart that much chocolate A yeah, so and then you know it was getting hammered by the the the chocolate commodity ripping and eating into their margins. And then the stock, you know, was picked up because analyst ratings finally started improving. Right from trailing six to twelve month we take we'd take an average, and then we
saw basically the stock, you know, recovering. But then of course, you know, and then maybe this is the point with actively passive, is that because it's a fully passive, systematic rules based you know, signal, you can pick up, we pick up the stock, and then chocri rice, you know, went down and shot up again, and the stock went down again. So the index, the strategy didn't you know, react to it as quickly, you know, as you would if you were in a fully fully discretionary you know, strategy.
But but that's sort of the general idea.
Okay, And is there an index for that as well?
Oh?
Yeah, so the indexes again very simple, B, A and R. Is the index blone broke A N R okay?
And is there a way to invest in that?
Yeah?
There is a for the ordinary investor, Yeah, there isn't.
There is an ETF in America. That investor has licensed the index and they ticklar upgrade up g.
D uh that's upgrade.
Very good.
Actually, speaking of investment ways of investing, a Passion Pressing Power index in America has also been been licensed. And the ticker is p o.
W A p w A.
That's not too good. That's not too good.
I'm always interested in the in these tickets and the cleverness of some of them. You know, there's somebody out there who does a great job on tickets, isn't it who chooses those?
Who chooses those?
Maybe you knows that who worked when you when you apply to have your ETF do you think of the ticker and you ask them? Or is this someone clever around the the the creators.
You make, I think this typically comes from uh and yes, someone creative on the as a manager issue side, you know that, I think, Yeah, I like you marvel at not just the tremendous creativity but the availability of some of these tickets. You would have thought they'd been picked up. But yes, like I was very pleasantly surprised that R and D, you know, the ticker was actually available.
But there you go.
Mm hmm mmmmmm. Well interesting.
And I suppose that this tells you about the relative newness of the entirety of industry, doesn't it.
Yeah, at least you know sort of. Well, I mean in America it's not so new anymore. I mean, it's all the rage. But but we're trying to see if this become you know, the way in Europe as well.
Yeah, so what are you working on at the moment, Steven.
So right now, we're working on a couple of things. One of them is we're trying to you know, think about shareholder yield as a concept, you know, total shareholder return. I'm writing a white paper on that topic. So I don't know if you're familiar with the concept of shareholder yilding. You know, there was you know, sort of not just looking at dividends, but all forms in which companies can
return capital to shareholders, which includes buy back and debt reduction. Right. Uh, this is not a particular new concept and it has done well, but we have had given our own spin as well at bloom Bloomberg Indices, where we not just look at companies with strong total shareholder holder return, but the companies that have the consistent historical fundamentals to be ablity to afford those you know, strong total shareholder return.
In other words, we're looking at a long history of free cash flow and capacity as a ship you know, as a ratio to the total shareholder payout. That will allow us to eliminate more false positives that you might pick up, you know, if you just screened naively for companies that happen to have very large total shareholder return.
Okay, interesting, So that's the results of that would be something for us to look out for, assuming we can't see them quite yet.
Thank you, Steven.
Is it anything that you would like to tell our listeners that we have not talked about yet, Any any perfect little insights, any brilliant investment recommendations, anything we haven't discussed that you feel they should know.
One subject we are looking more active now is the idea of more macro aware investments because I think we've exited the age of moderation, you know, the monitor policy, which used to be the only showing in town. I think I taken a back seat, and we are now seeing more and more of these thematic trends, you know, a macro volatility. So I think during this period it's
important to be more tactical. And one thing we are looking at increasingly is how do we identify sort of robust, simple signals that will allow us to essentially pivot between different views. Not so much market timing, because now we know it's nearly impossible, but can we find ways in which that allows us to stay risk one and not miss the upside? While key junctures, you know, avoid the
big mistakes. So one signal I've found in all of my micro research, it turns out that you know, there is if you look at the change in CPI right, yeah, year inflation, that turns out to be an extremely robust and powerful projector of uh, you know, sort of as a performance. And what I'm talking about, for example, is if you look at today's inflation in Let's say I don't know what what's was the inflation in K today? Actually, because I normally follow the US, let's say it's two percent,
some two point two percent. Let's just pick up a number, right, and if it was say four point four percent a year ago, right, inflation would have gone down over the last twelve month. That is actually a very powerful risk on signal because what follows from falling inflation is you tend to get all the good things right Stronger economic growth, stronger job market, higher earnings per share, higher productivity, higher customer confidence, and lower bond yields. All of these things
tend to be good for assets. Now, if you flip the picture and you say, over the last traillion twelve months, if inflation had gone up, right, if let's say it was two point five percent and now it's going back to three point two percent. You get the opposite of all of those things previously. So how do we take
advantage of this? So we created a index that is called dynamic equity duration where we essentially calculated the implied cash flow distribution of stocks, and if inflation has been coming down, would buy stocks whose cash flows are further out right, they tend to be growth stocks, risk on stocks. Right, our inflation has been going up, then we do the opposite. We lean towards companies whose cash flows are more near term.
And that I think that we have shown to be actually a very interesting way to allow investors to remain risk on, ignoring all of the noise, right, you know, whatever you may be what this deep seek where there is terriffs.
Whoa, we nearly got to the end. We were so close.
Well I couldn't resist.
But anyway, but the point is that you know you've had all this well I think retail investors called fut right, all these sort of news that will give you a terrifying narrative. But if you just look at the trailing half months inflation and remain risk going in terms of equity duration, you would have actually done really well and avoided you know, the disares of Tony Hunty too, right when you know that we had an evaluation compression.
Yeah, okay, interesting, So that's the signal that everyone can watch. One last question, Davin, is there anything that you are reading at the moment that you are finding very interesting?
Yes, this is actually great question. And I'm reading this little white paper, a slash book called Situational Awareness, which I recommend to all of your listeners. Uh. This is a researcher who used to work at open AI and he has written this long essay or slash or you know book talking about the path forward on AI. And there is a one sentence in that intro that really sort of you know, made me curious. He says, everyone is now talking about AI, but few have the faintest
glimmer about what is about to hit them. Nvidia analysts still think twenty twenty four maybe close to the peak. Mainstream pundits are stuck on the idea of just predicting the next word. But they actually they think everything is going to be hype and business as usual. But actually we're going to look at another Internet scale technology change.
And I think what he talks about in that essay is going to be very illuminating for people who won't understand the implications of all these different news that comes along. That we are actually proceeding exactly according to script in terms of what the scaling law would have predicted. So what happened last Monday should not be surprising to you know, people at all if they actually, you know, read this little book.
So anyway, okay, well we will put the link to that in the show notes as well. I found that mildly terrifying, so I will I've got some long claim flights this way, I will make sure that I read it then. Steve, thank you so much for joining us today.
We really appreciate it. That was fascinating.
Thank you very much for the conversation, Marie.
Thanks for listening to this week's Marryn Talks Money.
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Special thanks to Steve Howe