Transcript
Intro
Patrick
My guest this week is Dr. Ben Hunt, the Chief Investment Strategist at Salient and the author of the extremely popular website, The Epsilon Theory. I've always enjoyed Ben's writing style, particularly his use of farm and animal-based analogies to describe market phenomenon. In this conversation, we discuss his recent post, The Three-Body Problem, why growth has been beating value, and why a strategy that he calls profound agnosticism, a sort of take on risk parity, may be the most appropriate investment strategy in what he views as a very uncertain world. Please enjoy our conversation.
Views on Investing
Ben
It's an old problem in physics, and it refers to Henri Poincaré who was one of the geniuses of mathematics of the last millennium. It was the 1800s, and what he was trying to figure out is this ... Well, back up a second. What's he's interested in ... This is going to be your connection to bees and, actually, I think, to humans and investing and to your original question of what's your fundamental idea about investing. He was wrestling with this question of algorithms, which is a formula, which is a process that you can apply over and over again, where you put in your values and you turn the crank of the algorithm and it gives you an answer. What I will tell you is that whether it's human beings, the way we construct our societies and our markets, whether it's bees and the way they construct their hives and the way that they search for honey or search for pollen and make nectar and make honey, they're all dominated by these algorithms, which are just our simple formulas for making sense of the world. In my experience, that whether you're a value investor or a growth investor or a momentum guy or a quant or whatever you are, in the back of your head, you've got a collection of algorithms for how you make sense of the investing world.