Transcript: Sarah Ketterer


The transcript from this week’s MIB: Sarah Ketterer, CEO Causeway, is below.

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VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: This week on the podcast, I have an extra special guest. Her name is Sarah Ketterer and she is the co-founder and CEO of Causeway Capital Management. They run about $52 billion. She founded the company in June 2001 and is a value and international investor. If you are at all interested in understanding how to use quantitative strategies as part of a value portfolio build or if you’re just interested to hear about how someone put a company together over 20 years and grew it to over $50 billion, then you’re going to find this conversation to be absolutely fascinating.

So with no further ado, my interview of Sarah Ketterer.

VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: My special guest today is Sarah Ketterer. She is the CEO and co-founder of Causeway, a $52 billion asset manager. She’s responsible for all of the investment research across all sectors at the firm. She was named the Morning Star International Manager of the Year in 2017. She is also a member of the Stanford University Board of Trustees. She is co-chair of the L.A. World Affairs Council and Town Hall, Director of the Los Angeles Philharmonic, Music Center Foundation, as well as Chair of the Investment Committee.

Sarah Ketterer, welcome to Bloomberg.

KETTERER: Thank you, Barry.

RITHOLTZ: Let’s start a little bit with your background. You — you have an interesting work history. You come out of Stanford and then Tuck where you got your MBA, and eventually end up at Merrill Lynch where you were running one of their international investment firms. Tell us a little bit about that.

KETTERER: I’ve finished graduate school, I think I want to be an investment banker, which turns out I didn’t know what then is ideal training to be an investment manager. And the distinction is one is a transactions business banking and the other is very much a deep thinking valuation-centric investing-type business. And the banking didn’t, after a few years, inspired me so I left to start a database business, which if I could be — I could have an avatar, that’s what the avatar would do because that’s a wonderful business. Right now I’m just a consumer of data.


KETTERER: But that turned out to be — as many startups are — money losing and I needed to work, living — I was living at the time in New York City, so I got a job at Hotchkis and Wiley. My late father John Hotchkis was the Hotchkis, and George Wiley his business partner. And they had a — a firm that was thriving, but had no international equity, so I got hired to bring my data and help start international equity.

RITHOLTZ: You alluded it when I was about to ask you, how did working in a data start-up impact your view of investing?

KETTERER: Well, I had a very good idea looking at all that data how much it needed to be cleansed and categorized, and that was beyond my scope. This was a — this was the 1990 when the tools we have today did not exist. So I was delighted to hand over the data and move on to the basics of asset management.

RITHOLTZ: So how did Hotchkis and Wiley eventually become affiliated with Merrill Lynch?

KETTERER: It’s true of many investment managers, particularly the time when they’re run by aging founders, the founders want to settle their estate and this was true of George Wiley, both extraordinary investors, but he was in his early 70’s when I arrived and it was time to do something with what they built. So they sold it to Merrill Lynch in 1996 and, therefore, I became an employee along with a person who became my business partner Harry Hartford. We met each other in 1994 and then by 1996, we were working for a completely different firm.

RITHOLTZ: And they ran it, it seems more or less, from the outside as an independent subsidiary. It didn’t get subsumed into the greater mother Merrill or how did that play out?

KETTERER: Yeah, it was rough, a bit rough because Merrill had aspirations for asset growth. And what I’ve learned over the last couple of decades is asset growth should never be your number one goal if you’re an investment manager, even secret goal. Your goal should always be satisfy your clients and the assets will come. And Merrill found that Hotchkis and Wiley didn’t have the ability to grow fast enough and ultimately decided to sell it.

RITHOLTZ: And so what happened then?

KETTERER: I had a hard time. By that time, I couldn’t look my clients in the eye nor could Harry and say, “Ah, this is going to be good for you. We’re going to now be part of this other firm that’s known for its growth investing.” We — we just couldn’t do that. It was beyond our abilities to — to telling a lie, so we concocted a — just began to brainstorm, how would we want to see a great asset manager? What would it look like? What would be the characteristics?

And we had an idea of best practices and worst. We’d seen them all. And choosing the best, we put together a business plan for Causeway and left in 2001 and got some seed capital, and spent the first three years losing lots of money but hiring some of the best people in the industry.

RITHOLTZ: Losing money as a operational firm not necessarily as a …

KETTERER: Oh, yeah, yeah, no. We …

RITHOLTZ: … as an investor?

KETTERER: It was good. 2001, post the technology, media and telecommunications bubble, was an excellent time to start a value-oriented manager. We had the wind at our back and value stocks did very well. We owned a lot of — what are — it’s interesting because back then value was low beta, tended to be consumer staples in other industries that today are untouchable valuation-wise. They’re too expensive. And those stocks did extremely well and we grew up very quickly. We also have the benefit of being unique and that Causeway, even from 2001, has been a — a convergence of fundamental investing along with quantitative research.

RITHOLTZ: So tell us a little bit about that. How do you merge quant research with fundamental really bottoms-up? You’re a stock picker essentially, how do you merge quantitative with bottoms-up stock picking?

KETTERER: What we do fundamentally is very bottom-up in its orientation, but I learned. This was back in the late 90’s before forming Causeway that many of our competitors had no idea what kind of risks they were taking, and that’s where quant is so incredibly precise and effective because our quant colleagues showed us right from the start they could this aggregate the risk. They could show us what sort of risk factors we had in the portfolio — systematic risk factors.

We knew all about the idiosyncratic, the company-specific. But when it came to how much cyclicality we were taking or volatility risk or value risk or — or any other of these major market risk, size risk, for example, that was illuminating. Now today it’s sort of humdrum, but in the late 90’s, that was revolutionary. And so our bottom-up process is very much fundamental stock selection combined with quant risk control and, therefore, the portfolio is inherently diversified.

RITHOLTZ: So it’s less risky, less volatile than a portfolio assembled without using a quant overlay. Is that a fair statement?

KETTERER: I’m convinced that’s the case. And then quantitatively, we use fundamental to make the quant decisions more accurate because our quant approach in emerging markets, these are very broad portfolios that are — the stocks are effectively assembled statistically. And fundamentally, we’re actually meeting with the companies that are in that portfolio, not all but many, making eye contact with management, probing them on their corporate governance efficacy. And this makes our quant, we believe, over the long-term much more effective than just a pure computer-driven process.

RITHOLTZ: Quite, quite interesting. Let’s talk a little bit about the company you founded in 2001. What’s it like being a woman, co-founder and CEO in finance that just seems to have an awful lot of dudes running everything? And I use that word …


… especially because it seems to be just rampant, and there aren’t a lot of people like you running $50 billion firms.

KETTERER: Yes, that’s true. And not only do we recognize it at Causeway, it does help having a female CEO, no doubt, because it shows the other women in our organization there is — there’s no limit, there’s no glass ceiling. They can go all the way to the top. But we do find that the pool of women to choose from is pretty small.

Even in graduate schools of business, there are fewer women than men, yeah, almost universally and …

RITHOLTZ: Have those — have those numbers kind of approached …

KETTERER: I think they prepped a little bit, but nowhere …

RITHOLTZ: … but not a whole lot, right?

KETTERER: … nowhere near 50 percent …


KETTERER: … as much as the graduate schools would like to think otherwise. And that means the pool is already smaller from a recruiting perspective. And of those, many are interested in other careers. They’re enchanted by technology, and finance seems to have lost some of its luster.

But there are groups of these women out there and it’s up to us to find them. So for a while we thought of it like a oceanographic experiment. We would tag them and, you know, like the whales and …


KETTERER: … figure out what …

RITHOLTZ: Release them out into the wild …

KETTERER: … where did they go …


… where did they go.


KETTERER: And that didn’t turn out to be very successful. But a former client of mine had an absolutely brilliant idea — this is Seema Hingorani. She ran the city in New York’s equities for years. Their pension fund started something called Girls Who Invest, and then we, Causeway, got behind that. So we’re not only have been an early supporter financially, but we’re also take these interests. It’s the fourth year we’ve had an intern, usually a rising sophomore junior in college, a young woman, brilliant. They have to get through a tough application process.

So, Barry, in effect, we are seeding the pipeline.

RITHOLTZ: What’s your involvement with Girls Who Invest? Do you run one of the advisory boards or …

KETTERER: I’m on — I’m on their advisory board, and it’s an honor to be a part of that organization. It’s very inspiring for the women in my organization because they can see that Causeway is actively involved in something that’s quasi-philanthropic for us. And that these young women are so young, they are 19 or 20 years old. We can’t hire them for years. They need to finish college and then typically we expect them to get their CFA and/or an MBA before they are hirable as Causeway analysts. So that’s years and years from now.

RITHOLTZ: Yeah, but you guys are long-term investors. This …

KETTERER: We are, we are.

RITHOLTZ: … this sounds like another long-term investment where you’re thinking in terms of decades, not quarters.

KETTERER: Well, this is — again, if you’re going to go — if you have to think about the problem in a — in a long-term perspective, this is how to deal with it is get women in college who are connected through social media to let each other know how exciting this is, and after our interns the next year they get another job in investment management and so forth, and best of all for us — so, of course, there’s something in it for us other than having more women. It’s a brand building exercise, its reputation-enhancing, so they tell their friends who tell their friends how great it is to work at Causeway. And that, in turn, gets back to the employees, so it’s a virtuous cycle in terms of culture and reputation.

RITHOLTZ: And Girls Who Invest is four years or five years old. Is that right?

KETTERER: It’s four — four and a half.

RITHOLTZ: So you’re five years away from seeing the first …


RITHOLTZ: … harvest, so to speak, of women who entered this as — this group as interns …


RITHOLTZ: … made their way through the process and eventually will be getting hired …


RITHOLTZ: … in various finance jobs.

KETTERER: And apparently the retention in the industry is very high. They are not deciding to go do something else which, to me, is a testament to what they were — what they learned in their four weeks on one of these university campuses over the summer and their first internship, and how much they enjoyed the industry. So it’ll take some time, but we started with 30 interns, and this last summer was 150 interns and rising.

RITHOLTZ: Quite, quite interesting. Let’s talk a little bit about the Causeway portfolio. Your global value portfolio has about 51 holdings, average size about $75 billion. What do you do with that sort of portfolio? What do you use for a benchmark and how do you expect clients to judge your performance because that’s not …


RITHOLTZ: … the most typical international portfolio?

KETTERER: Yes, our — both our international — our global portfolios are fairly concentrated, global more so than international because it has enormous U.S. market to choose from as well.

A number of value stocks out there has gotten larger over the last few years and especially true in 2019 year-to-date, meaning investors have abandoned these stocks. They don’t want chemicals. They don’t want autos. They don’t want banks and specially don’t want them outside of the U.S. market.

And for a value manager, this is the time. I haven’t seen anything like this nor have my colleagues since the sort of 2000 when these stocks were all — value stocks were abandoned or the end of 2008 when they were — they were left for dead. So that’s one of the reasons why we have such a large market.

Average market cap, you mentioned $75 billion, these are — some of these are very large companies. You’ve heard of them. You have German giants like BASF or — or Volkswagen, the parent company of not only Volkswagen brand but Porsche and Audi at the forefront of electric vehicles. Barclays Bank or Lloyds in the U.K., now downtrodden due to Brexit, but sound financial institutions. The market is treating them as if they are all going to shrink and just as if their growth rates are negative, which is true of the entire value index.

RITHOLTZ: So let’s use a couple of those examples because I want to dig into your thought process. Volkswagen has their big diesel scandal, the emissions rigging scandal, the stock gets clobbered. You immediately look at that as an opportunity. What is the internal process like when your investment committee sits down and says, “Let’s talk about Volkswagen and …


RITHOLTZ: … we want to step into this mess”?

KETTERER: We divide fundamental research into six clusters. There’s sector-oriented and our industrials cluster looks after automobiles, so the — it also covers consumer discretionary. And the head of that is a excellent portfolio manager named Jonathan Engaged, and he saw this problem. We didn’t know the company was committing fraud in September of 2015 when dieselgate was announced, but it took us a couple of weeks. And with Jonathan’s leadership to do the research to determine based on prior recalls of vehicles, the sticky accelerators at Toyota — remember when …


KETTERER: … U.S. Congress said, “Keep those cars in the garage. They are dangerous.” They were — it turned up the drivers couldn’t tell the break from the accelerator, but that is right.

RITHOLTZ: How do you want for something similar 25 years ago?


KETTERER: Yeah, G.M. the stick — the ignition switches.


KETTERER: And the some of those incidents caused deaths. In this case, it’s a pollution problem. So we were able to make an assessment of both the monetary damages associated with the fines and regulatory fees as well as the recall cost, the marketing spend.

But the reason why we went into that stock is emblematic of what we do at Causeway fundamentally. We find companies with great assets, with tremendous financial strength, so that company Volkswagen had EUR24 billion of net cash on the balance …


KETTERER: … sheet before they went in. Net cash, so that means they had no net debt when they went into the scandal, and they had operating margins a third of that of their best competitors. That, to us, is a — is a flashing red light of, wow, this company is really poorly managed, and if we can be there at the time when new management steps in and runs the business more efficiently, if we can influence them as soft activists making requests …

RITHOLTZ: Not talking about next quarter, but talking about …

KETTERER: The very …

RITHOLTZ: … where long-term investors we want to …

KETTERER: Multiple years, exactly.


KETTERER: We have a two-year price target on all 200 stocks we follow closely, of which you mentioned the 51 in the portfolio, they are a subset of that. And we went to management and said, “You have a crisis on your hands. What are you going to do about it?” And they had to replace all their senior people and then some.

But this — this company, if it weren’t for the fact, we were in a trade war and the — and the global investment community seems to be worried deeply about recession, this stock would be much higher than it is today. If a …

RITHOLTZ: Are you — are you guys still — well, first of all …


RITHOLTZ: … since 2015, VW has done pretty well, hasn’t it?

KETTERER: It’s put on from its lows about 50 percent in local currency terms.

RITHOLTZ: Not too shabby.

KETTERER: It — it isn’t too shabby, but it could be much better.

RITHOLTZ: So I assume you’re still long the position.

KETTERER: We are still long the position.

RITHOLTZ: Let’s talk a little bit about the state of the world both here and in Europe. You mentioned earlier the trade war and tariffs is having a problem. A lot of Europeans are fearful of recession. Germany is either in recession or about to be, and who knows what the U.K. is going to do to themselves with their Brexit. Whether it’s a hard Brexit or a — or a harder Brexit, it looks like those are the choices.

How do you deal with this sort of global mayhem and distractions …


RITHOLTZ: … when you’re investing internationally?

KETTERER: To some degree, the more mayhem the better if you’re a value investor …


KETTERER: … because that’s when invest — other investors discard great companies. And our mantra as value investors is there’s always a price. There’s a price for everything no matter what it is. At some point time you say that’s just too cheap.

I think the biggest problem for Europe is that investors appear to have become despondent and the quintupling of central bank balance sheets from early 2009 has led to this wave of money washing over the globe. And as rates have fallen, savers in Europe in an aging population have panicked and decided they need to save more. So now this is glut of savings and that’s a lot of people looking for low-risk investments that they can retire on. And there just isn’t enough low-risk investments, hence, the price goes up and guess what falls? The yield and that’s one of the reasons why bond yields, not just sovereign bonds but corporate bonds, mortgage bonds all over Europe and in Japan are negative yielding. And that scares equity investors, and then they panic more and they sell off the cyclical stocks.

And we think this is a tremendous opportunity to own some of these great companies, whether they be financial institutions or — or manufacturers at crisis-level valuations. And yet, looking at the businesses, how much better management has become over the years, how much more impressive is their financial strength, they’re not even comparable. The banks have three to four times as much capital as they did in the eurozone crisis in 2012.

And there’s nothing wrong with the Brits. My God, they have the — I think the best economy in all of Europe, whether they’re alone or together, it doesn’t matter.

RITHOLTZ: So when we — when we look at Europe, how did those valuations and yields …


RITHOLTZ: … compare to what we see in the United States. The S&P just soar its yield notch a little above …


RITHOLTZ: … the 10 years. The 10-year yield has fallen this past summer. What do yields look like on quality value companies in Europe?

KETTERER: The banks have a very high yield and likely to be higher as they continue to improve their asset quality and cut costs further, which is one of the few areas of control. They have — they can’t control rates, but they can definite control their costs. And as they generate more cash, we expect them to — as the U.S. banks have already done — return that to shareholders, so their yields are ticking higher in the …

RITHOLTZ: What — what’s the average yields of a lot of decent-sized banking?

KETTERER: I’d say somewhere around three to four percent.

RITHOLTZ: Oh, so not — sometimes yields get too high it’s almost a warning sign, either the dividend is going to get cut or there’s some other problem. This is rational within the realm of what makes sense.

KETTERER: Yeah, well, I don’t know how rational it is if the 10-year German government bond is negative 70 basis points.


KETTERER: That’s a tremendous amount of income.

RITHOLTZ: So 500-point swing, it’s giant.

KETTERER: Yeah, but look at the industrials, one of my favorites to mention is the German chemical company, BASF. They’re — they’re a giant across the whole panoply of different types of chemicals from — from organic to agricultural, to healthcare-related. They’re a phenomenal integrated business, and that dividend deal is over five percent …


KETTERER: … and nobody seems to be at all interested.

RITHOLTZ: What’s the fear? Why are people afraid of buying an internationally diversified industrial like that?

KETTERER: It’s — there’s a — the crowding effect isn’t just within the U.S. market globally, it is the U.S. market. The U.S. market and the U.S. dollar have attracted a huge amount of buying attention. And part of this has to do with what’s happened to the composition of investors.

You’re talking to me as if we make same decisions. I certainly believe we do, but we’re making these discretionary-type decisions fundamentally and our quants are doing so. They’re creating a portfolio systematically with also fundamental risk control. So in every way, shape or form, there’s some type of valuation effort underpinning our portfolios.

That’s not true with a lot of what’s happening in markets today. We see not just the advent of — or the massive increase in indexation which, as you know, as stocks get larger in index, they just attract more money and more buying. And conversely as they fall, they fall further. But the — the momentum trend following has been extraordinarily active, so more momentum trend falling and then money behind that. And as these European stocks to the point sell off, then they tend to sell off further.

So if value — if — if fair value is some sort of line, a continuum, these stocks have been trading so far below and they continue to fall versus fair value because — because they’re falling already. So momentum is a strange beast. And as there is more algorithmic, more computer-driven trading globally, we’ve noticed more — much more the way market inefficiency. So we’re willing to take positions in these securities, and we expect that sane investors will prevail, but it’s really tough to see this happen.

RITHOLTZ: So investors like Michael Burry have said indexing is a bubble and it’s going to blow up, you seem to be alluding that the more we index, the more opportunities are created for active management if there are that …


RITHOLTZ: … many more identifiable inefficiencies.

KETTERER: He again asked it every single client meeting these days, what’s the catalyst for value to outperform? Well, frankly, I wish I knew, but there are many possible catalysts. And one is simply that the very expensive growth stocks disappoint in earnings terms, and then they become the victims of momentum selling. It doesn’t take much in order to get that gap — massive gap to close between value and growth. We just could drive a truck through it now.

But — but I do think that as value turns up and it attracts more money, this could end up being a total chain reaction. And we saw this from the end of February of 2009 as value stocks just took off and the more cyclicality back then the better.

Just remember, markets are tremendous discounting mechanisms. So in advance of whatever the event, typically, that event is already priced into the markets and that event now is recession.

RITHOLTZ: You hinted at the concern of recession in Europe. Let’s talk a little bit about that. Is this a distinctly European concern, China and the U.S.? Should we be concerned about recession? We’ve — we’ve had the yield curve inverted now for — depending on which payer of bonds you look at …


RITHOLTZ: … for a couple of months. What do we think about the possibility of recession?

KETTERER: Recession could easily happen in the U.S. I don’t see why not. In fact, it’s so funny, everyone is so panicked about recession. It strikes me that they’ve forgotten history because recessions are that’s simply what happens in healthy economies. Healthy economies expand and then they contract, and then they expand again. Ideally, the expansions overwhelm the contractions.

But the — as for China, if they have a recession we may never know about it. I’m not sure those statistics will be revealed. That economy …

RITHOLTZ: You don’t buy the Bernie Madoff School of Statistical Analysis the Chinese seem to use?

KETTERER: I try to stay far away from that as possible.


KETTERER: But they — we do a lot of on the ground research, and so we’ll — we so already see the concerned small to medium size businesses have, and that’s one of the reasons why they are, for example, advertising less. These are lots of different ways of measuring the health.

But one way or another, recessions are just a transient effect, and out of that comes recovery, and the recovery gets discounted by markets typically four quarters at least in advance. Yeah, if you want to own the beneficiaries of recovery, you need to buy them during the dark gloomy periods.

RITHOLTZ: So that’s interesting. Look, it’s been over a decade since we’ve had a recession. As you point out, they’re cyclical. They’re — they’re not to be feared. And yet it seems like the U.S. Federal Reserve and the White House are horrified by the thought of recession. Is that just concerns about reelection or is there a real fundamental reason to be concerned about the first recession following the great financial crisis?

KETTERER: My colleagues and I don’t see the same type of financial leverage that unwound the global economy in 2008, but there are other risks out there and there is plenty of debt certainly in the corporate sector.

The way we look at this cycle is let’s just say there’s a slowdown. It may just be something psychological that all you have to have is purchasing managers and those in charge of capital expenditures to decide to pull back. So investment slows and consumers may be concerned about the price of goods. They may slow their purchases. It doesn’t take much.

In this country and as for Europe, I mean, Italy has sort of gone — going through a recession. Germany may be in one now. Whether they can spend their way out of it, this is sort of the $100 million question, will the governments there decide — it says it doesn’t cost them anything to borrow. In fact, they get paid to borrow, which is again the bizarreness of this, will they take advantage of that and engage in enough fiscal stimulus to revitalize their economies? Just a little fiscal stimulus would be phenomenal for investor excitement because there’s been so much bunker mentality.

RITHOLTZ: Let’s talk about that …


RITHOLTZ: … because following the financial crisis, look, we know the Canes playbook, what you’re supposed to do after crisis. Europe — especially the U.K. — seem to have forgotten about that and they went on austerity instead of saying, “Oh, the private sector has pulled back. We will temporarily step in …


RITHOLTZ: … to fill the gap.” What — what happened there? Why was the psychology so backwards? And how much of that is — is still lingering?

KETTERER: What happened to that is fixable is the other question. These are aging population, but I — my colleagues and I draw a very deliberate distinction between Europe and Japan. Japan, a closed economy, no significant immigration versus Europe with 3 million immigrants in the last five years.

Europe has still the potential not to stagnate as Japan has, and it hasn’t been that awful in Japan, it just doesn’t been great in terms of growth. They sort of tip on the edge of deflation continuously, which again is both a monetary phenomenon and a psychological one. But Europe doesn’t have to grow very quickly.

For European listed stocks, some of them they do very well.

RITHOLTZ: When you say not very quickly, two percent? What do you thought of that?

KETTERER: Yeah, I think two percent would be nominal, would be more than enough. I think they’d be (inaudible).

RITHOLTZ: And there’s no inflation really in the — in Europe now, nothing that’s really measurable to some background …


RITHOLTZ: … but inflation …

KETTERER: We’re hard-pressed to find it anywhere in the developed world.

RITHOLTZ: So is deflation the bigger concern than inflation?

KETTERER: Yes, deflation.

RITHOLTZ: Are we or Europe going to turn Japanese or is that …

KETTERER: I don’t think so.

RITHOLTZ: … unique?

KETTERER: I don’t think so, and there’s a sufficiently — there’s an influx of immigrants and a younger population. And the companies in Europe — and here’s why I draw the distinction with Japan, all those — I think back to the early part of my career and that of my more senior colleagues from the early 90’s, we worried so much about Japan and why didn’t we have an index wait in the Japanese market? Our clients would ask us.

And you may remember Japan from the late 80’s, early 90’s …

RITHOLTZ: Buying up Rockefeller Center and …

KETTERER: Absolutely. And …

RITHOLTZ: Taking it all back to Japan with them, I recall.

KETTERER: They — there was no need to worry because by capping — by putting a floor under the — any fan of downside in that economy, they capped the upside or think of it this way too much capacity and no willingness to really consolidate and well the Europeans follow that path we think less likely they will allow some bank consolidation they will have to have the job cuts necessary and the Brits the U.K. in particular has been good about that they have more labor flexibility mobility than anywhere else in Europe and less regulation and as they pull out of the rest of the E.U. that will be one less market that has the chokehold of E.U. regulation.

RITHOLTZ: So what does that mean in terms of the growth in — in the U.K.? Will they still be able to export on a competitive basis to the rest of Europe? What’s …


RITHOLTZ: … to a — to someone on this side of the Atlantic, it looks like the U.K. — second only to Germany — has been a huge beneficiary of …


RITHOLTZ: … the E.U. and they managed to maintain their own currency …


RITHOLTZ: … in central bank. They seem to have had the best of both worlds. What — why Brexit? Why …


RITHOLTZ: … get out?

KETTERER: The — like so many different possible economic scenarios, this one has a lot of politics behind it. But the idea of blaming globalization or immigrants seems to be a very popular way for politicians to get ahead and …

RITHOLTZ: It’s a lazy demagoguery.


RITHOLTZ: … but it’s effective.

KETTERER: It’s very effective.

RITHOLTZ: Hey, you know, it’s — it’s part of the greatest hits because it’s worked so well over that.

KETTERER: It’s very effective. We couldn’t have anticipated it would take the Brits three years plus post the referendum in June of 2016 to make a decision. That was a tough one.

But the U.K., we’re the — we have the largest international fund, the largest active weight, which is our — which is the weight versus the benchmark. So the greatest overweight is in U.K.-listed stocks.


KETTERER: They’re not all indigenous U.K. company, in other words, these companies operate multi-nationally. They’re like large …

RITHOLTZ: Like our S&P 500?

KETTERER: Yeah, yeah, many of them are global in scope and their revenues are either tied to or somehow related to the U.S. dollar, maybe oil and gas businesses or pharmaceutical businesses. So as the pound sterling weakens, all other things being equal, which sadly they never are, these companies are even more profitable. But we’ve also like their companies in the U.K. where the specter Brexit hangs over them, and that’s made them especially undervalued.

But one way or another, what we do know about the vast majority of politicians elected democratically is that they like to stay in office. And cratering an economy is not typically a way of staying in office, so there are — we are going to be negotiating. I assume the Brits will make a negotiating write-up until the eleventh hour, end of October, if not, before then and then they will strike a deal and the deal will be to spend the next two years working at a trade arrangement with Europe.

RITHOLTZ: So when many investors look at things like trade wars or Brexit …


RITHOLTZ: … and they see confusion and uncertainty and we don’t know what’s going to happen, I get the sense you look at these sort of disruptive events as saying, hey, creating all sorts of opportunities to buy otherwise great companies at a great discount.

KETTERER: It — it is a huge opportunity. And as long — what’s crucial is the financial strength is there because we have no way of knowing how long we’ll have to wait.

Client meetings, clients look limp and broken, like what’s wrong with you, value managers? And — and this is true. What we do quantitatively in emerging markets, we have a — more of a value emphasis, and it has been like swimming upstream. But that’s Okay because when value snaps back we see this historically, it does so very quickly, and the rewards are significant. So it does pay to wait a net income that — from dividends is very important to assure a certain level of patience.

RITHOLTZ: So value is underperforming growth for what, 10 years now? Is that about right?


RITHOLTZ: And the U.S. has just about outperformed everything internationally, so you are in two of the most challenging sectors there are. International has been battling uphill, value has been battling uphill.


RITHOLTZ: You mentioned clients look broken. How much time do you have to spend explaining mean …


RITHOLTZ: … reversion and this too shall pass to — to your clients?

KETTERER: Yeah. The vast majority of our large institutional clients, I’m paraphrasing it, but I think they’ve said something to the effect of, hey, look at values, they have to have it.


KETTERER: They — they know they have to have it.

RITHOLTZ: They get it. It’s painful for now, but eventually will work out.

KETTERER: A bit like an insurance policy.


KETTERER: You don’t really know when you’re going to have the hurricane, but you want to make sure you’re covered in terms of …


KETTERER: … property insurance and you pay the premium.

RITHOLTZ: Which is some underperformance for some period of time? That — you’re looking at that as an insurance premium.

KETTERER: Yes. And — and I suppose that value went through consecutive years of outperformance. They look at their growth exposure in that very light.

RITHOLTZ: I — I recall back in the late 90’s hearing this guy Warren Buffett was all washed up, and that was — whenever you start to hear that, you know you’re late in the value underperforming growth cycle …


RITHOLTZ: … and it’s a matter of time. And — and for the decade plus since then value did really well, and now we’re on the other end of that. Are — are you expecting this to turn anytime soon or we have no idea when value will reassert itself?

KETTERER: Yeah. Well, we don’t know, but every quarter that goes by — and this is particularly true of this summer, the July, August period 2019 where value just seem to take another sharp leg down and the risk aversion levels in the markets spiked up. In other words, investors would buy negative yielding bonds because that was the supposed risk-free asset. They’re — they’re buying consumer staples in healthcare and, of course, real estate. They can’t get enough and then dumping everything else.

And again, I’m not sure this is a — this is a group of people sitting in a room making decisions, but rather some of this is very momentum thread following software that just does what it’s told. But that opportunity now has become so large. We think of it in terms of — statistically in terms of valuation gaps and how many standard deviations from the long-term mean is it. And we are now getting to the point we’re extreme levels. And the more extreme the valuation gap that comes between growth and value, the more likely it is that that big premium for growth will shrink.

RITHOLTZ: I have a bunch of questions we didn’t get to, but there were two, in particular, I wanted to ask you about. Let’s talk a little about corporate culture. So you have an ensemble approach. How does that affect your corporate culture and how does the culture affect the way you invest?

KETTERER: I — I believe in team work ever since grad school, that’s what they specialize in the Tuck School that Dartmouth is doing everything in teams. But it was until I got to the world of investment management and saw the other side of the coin, which is if it’s not team, it’s star system. It’s one or two people making all …


KETTERER: … the investment decisions. And what I didn’t like — there two reasons I don’t like that and didn’t want to build and nor did my business partner, Harry Hartford, want to build a — a business around that is because, one, it’s too risky for clients.

Any — if the star gets up and leaves, your business is over.


KETTERER: So that’s no good. And the star also — and this is the second reason — he or she or maybe it’s a couple of stars, as humans, we have biases, we have investment biases. Some people are — are very short-term on how they think, some are long-term, some are maybe little gullible and believe management too often, and — and others are maybe too skeptical to the point of cynical. Whatever the biases are, you don’t want to have any one person’s biases or one or two people embedded in your client portfolios all the time. So that’s one of the reasons why we dispersed the responsibility for portfolio management amongst — in our fundamental portfolios amongst six different heads of these research clusters.

And it’s not as if people have a sleeve, their stocks have to compete with everyone else’s stocks in the group. So — and everybody is subject to the scrutiny and the — and the professional criticism of other colleagues.

But, for example, when financial institutions are extremely cheap and we think they have a promising future, Conor Muldoon who runs our financials and materials cluster, he will have more stocks in the portfolio than, say, maybe Ellen Lee who’s looking after consumer staples because staples generally across the globe are very expensive right now.

But a s — if the table is turned and it turns out that people realize that Diageo isn’t worth 25 times earnings and they’d rather sell that on something else will have a — and Ellen will have a chance to get more of her stocks in the portfolio. So that’s why we work in a ranking system, the highest risk-adjusted return stocks down to the lowest. And the returns come from the work that each one of these six cluster groups are doing with the oversight and the critique of all of my other colleagues in research. And quant colleagues as well participate.

RITHOLTZ: So when you mentioned portfolio construction from the six sleeves …


RITHOLTZ: … it’s not like I have to have five from each sleeve …


RITHOLTZ: … you — this is done very specifically.

KETTERER: That — that would be a disaster, yeah.

RITHOLTZ: Well, there — but that’s how some funds run. We’re going to have X of each sector.

KETTERER: But then there’s a wizard on top who decides how much sleeve should be at any point in time?

RITHOLTZ: Is that the quant team or is that you or …

KETTERER: So we don’t have — thankfully, there are no wizards. There …


… we’re not a born equal, but we’re definitely — no one making an allocation decision. The allocation in our international fund and in our global fund is entirely a byproduct of that bottom-up stock selection process, so stocks compete with each other.

If we have a — we talked earlier today about Volkswagen. If Volkswagen’s return is — has a certain — let’s say it’s a double-digit percentage return per year and we know what the risk is, we know it’s risk-adjusted return, it has to compete with the next stock on the list. Maybe that’s Barclays Bank in the U.K. That’s another large return, but even more risk.

So when a risk-adjusted return basis the stocks, this ranking gives us, as a portfolio management team, the roadmap. We now know that we should have larger weights and the stocks in our higher ranking and less weights in those that are lower ranking. And as the stocks ranking changes over time because their share prices typically rise and converge with their price targets, that means the return diminishes and the stock naturally fall in the rankings, so we have to sell them and then recycle proceeds back in the higher ranking stocks.

RITHOLTZ: So — so that’s by sector. What about by..

KETTERER: Well, that’s across the …

RITHOLTZ: … international region?

KETTERER: That’s the whole …

RITHOLTZ: Same process?

KETTERER: Yeah, the — the process — so — so when the stocks are researched by sector, then they get put together into a long list or this ranking, and then it’s — from that we select the 50 stocks to go in the portfolio.

RITHOLTZ: How does — how does the regional aspect of that play out? Is it — so, for example, you mentioned you were overweight in …


RITHOLTZ: … U.K., I’m assuming it’s not a macro …

KETTERER: There is no — there’s no regional allocation. The only region of the world where we have a specialized team — and you could guess this — is China …


KETTERER: … and that is largely — that — that is a function of the fact that there are so many stocks there and it requires a lot of local knowledge to — to get through them all. I mean, 3,000 new stocks for investors to cover. And the — and the indices are including larger and larger percentages of them.

RITHOLTZ: And it used to be fund investors were at a huge disadvantage with A shares and B shares. How has that changed in China?

KETTERER: A couple of years ago, the Hong Kong-Shanghai Connect Program allows investors to invest northbound as well as the southbound into Hong Kong, so we can — from Hong Kong — invest directly into those A shares on behalf of our clients. And that opens up a whole new investing panorama because formally you had to get a specific license to buy those …


KETTERER: … if you were a foreigner. And this is all part of the gradual opening up of the financial services sector in China. It’s a — you know, two steps forward, a step back.

RITHOLTZ: How is China valuation-wise compared to places like you mentioned Italy and the U.K.?

KETTERER: Well, if you would ask me what I consider to be the next great frontier in terms of — of undervalued stocks that are misunderstood, as much as we like all the developed world, the greatest number of them reside in the Chinese market. There — there are literally hundreds of phenomenally well-managed businesses often with a family or family members owning large percentages of the business. So private sector, not state-controlled and completely misunderstood or not well-followed.

That will correct itself over time. There’ll be more and more investors focusing in on the Chinese market. But for now, the alpha opportunity is enormous.

RITHOLTZ: Really. So that — that’s quite interesting about China. The one other area of the world I wanted to ask you about that also tends to be neglected by U.S. investors is India. What do you …


RITHOLTZ: … think about what’s been going on over there, both politically and economically, as well as their valuation situation?

KETTERER: The Indian market, it’s represented in our emerging market portfolio and we — the last election turned out to put Prime Minister Modi back in place, which is good. He’s done a good job. The demonetization are taking some of the cash and the economy has been helpful. But it’s — in India, we see a distinction. There are just more stocks in China. And the — and the enterprising and ambitious nature of management makes them the — many of these Chinese companies. And I’m generalizing broadly, but are — they’re in a huge hurry to be to …

RITHOLTZ: But China is.

KETTERER: Yes, China — to deliver profits for investors, and we see that less so in India. Just — just — it’s just the size of the Chinese market is unparalleled. It will be — we think like the U.S., it’ll be — they’ll be too large stock markets in the world in 10 years, and we may not be talking about India in that light.

RITHOLTZ: Really? Is that — is that much of a — is that much of a difference between …


RITHOLTZ: … China and India?

KETTERER: And the — the pushback I get on that is, oh, but, Sarah, there’ll be a recession. China will slow it. So what? I mean, you come out of recessions, and what they do is they tend to clean out any mis-investment where they have — money has gone into poor return projects or businesses, those will fizzle. And the — and in the Darwinian process, the better ones will come out of that.

RITHOLTZ: I don’t remember whose quote I’m about to steal, but I love — love the expression, “Recessions are where capital returns to its rightful owners.” And there’s some — some degree of truth in that. So — so we’ve seen the U.S. outperform the rest of the world for a long time, how long can this continue? It — it’s been a solid decade now.


RITHOLTZ: Are we almost done? Are we halfway through or do we have no idea whatsoever?

KETTERER: Well, given the extreme valuation gap to — to the degree ever want a bargain, it definitely — there are more of them outside the U.S. It’s one of the reasons why in our global portfolios we have such a large underweight. I think we’re least 15 percentage points underweight the U.S. market. And that also seems to make clients a little nervous.

But we — we have to go where the most undervaluation resides. As for when the U.S. market is the laggard, not the winner, it could happen at any time, and certainly a recession wouldn’t be taken well. And if it’s — if you think about some of the leaders in the U.S. especially in the technology area, this was one of the misperceptions that gripped investors in the late 90’s. They really thought technology stocks were — were defensive..


KETTERER: … simply didn’t, weren’t cyclical.

RITHOLTZ: Business that grow an 80 percent year-over-year doesn’t mean they’re speculative, it’s a defensive play.

KETTERER: Well, it’s not just — it’s just that many of them are cyclical. They are — erred they depend on advertising or they depend on some level of …

RITHOLTZ: The consumer, yeah.

KETTERER: … consumer demand that — that may wane. It doesn’t mean it’s gone forever. But at — at lofty valuations, there’s a level of vulnerability in those stocks that we haven’t tested in years.

RITHOLTZ: So when I speak to value investors about the U.S., they sort of fall into two camps. One is the — oh, the U.S. is wildly overvalued. We’ve never seen anything like this. And the others are, ah, U.S. is at the upper end of — of fair value. It’s pricey, but it’s not 1999.


RITHOLTZ: Where — where do you fall?

KETTERER: Yeah. The — the answer to this question somewhat depends on where interest rates go. And if they continue to fall, investors may get more and more nervous and defensive, and they will want to hide in what they consider to be the both the currency and the market where they can — they have the greatest shelter. On the other hand, if we just have an economic slowdown and then come out of it, so all bets are off on the U.S. market, it could end up not looking like it deserves its valuation.

But I’m not sure what really — frankly really matters, as long as there are value opportunities globally and there’s — there are plenty of them today, we see up — in our — I talked about that ranking, we have a two-year price target on all the stocks we follow. We’re following 200 globally at any point time, including U.S. companies. And the returns are huge for — for the value segment. It doesn’t matter whether they’re in the U.S. or out of the U.S.

If investors don’t like them, they also don’t like them in the U.S. The sights are set very narrowly on economically defensive and/or growth-oriented.

RITHOLTZ: So not — not value. Even — even though we have seen value really be a good place to hide during recessions, be it the dot com crash or the great financial crisis.

KETTERER: It’s — value is now directly linked with cyclicality, and because those have been the cheapest stocks and the cyclical stocks are considered to be very vulnerable to economic slowing. But again, I’m convinced that that slowing is already discounted in the price, and I would expect nothing less from markets.

RITHOLTZ: Quite, quite interesting. Let’s get to our favorite questions that we ask all of our guests. Hopefully, these will be a bit revealing about you. Tell us the first car you’ve ever owned, year, make and model.

KETTERER: I laugh at that question because it’s the security question for a lot of my password retrieval.

RITHOLTZ: Somebody else said that.

KETTERER: You know what?

RITHOLTZ: And I — I — I’m fascinated because …


… I’m waiting for the first guest to say I’ve never owned a car. So it’s sort of like my canary in the coal mine, but you’re the second who brought that up.

KETTERER: But what I — I can tell you, Barry, is that car I brought it to college. And in my great independent period, well, you know, I’m not going to take this to Jiffy Lube, I’ll just change the oil myself. So I crawled underneath and unscrewed the plug, and that was the transmission fluid.

RITHOLTZ: There you go.


KETTERER: So, I learned a lot about cars very quickly.

RITHOLTZ: That’s — that’s pretty funny. You — you know, the secret to doing an oil change is the oil is in the — the engine block …

KETTERER: Exactly, exactly.


RITHOLTZ: … not in the — the transmission …

KETTERER: Now you tell me.

RITHOLTZ: … transfer casing, right. Tell us the most important thing that people don’t know about Sarah Ketterer.

KETTERER: Well, I don’t like to sit. I think this is the longest period I’ve been in a chair.

RITHOLTZ: Really. You aren’t fidgety. You make me look like an amateur.

KETTERER: Yeah. I have a standup desk and I …

RITHOLTZ: So do we — so do I in the office. That’s funny.

KETTERER: … I was on the first one in my office and I — there was a certain amount of skepticism, they’re scoffing at me. And then it — then it took off and now everybody has one.

RITHOLTZ: They’re — they’re pretty much everywhere. And as long as it’s not the treadmill desk, it’s the treadmill desk …

KETTERER: That’s — yeah, I know.

RITHOLTZ: … is — terrifies me.

KETTERER: When I contact, they’re in motion, that doesn’t work for me.


RITHOLTZ: Who are some of your early mentors? I assume your father …


RITHOLTZ: … Hotchkis.

KETTERER: Both parents. I had — my parents were brilliant and inspirational, and worked very hard. They — they — they sent all the right messages to their kids. So I was really, really lucky.

And in terms of investing, my father does curious hobby. He was a — an amateur racecar driver, and he drove on all the tracks around the — the United States. And a couple of times he drove at LeMond (ph) …

RITHOLTZ: Oh, really? Wow.

KETTERER: And his — his driving partner for a number of years was the late Bob Kirby, who was one of the co-founders of Capital Guardian Trust Company, the Capital Group, one of the most …


KETTERER: … extraordinary and greatest longevity investors ever. And I had lots of time with Bob, sitting around, sort of sitting on a couple stack of tires, and we talked about investing. And he — he was the — he’s known for his Coffee Can portfolio of you just put it in there and seal it up and it’ll be fine 10 years later …


KETTERER: … because of transaction costs, which we know today, of course, have come way down. But this idea of being long-term and owning — thinking about the companies, if you owned it all, you didn’t just own a few shares. They’re not names, they are stocks. That has stuck with me for years.

RITHOLTZ: Did you spend a lot of time traveling with your dad while he was going …

KETTERER: That’s why …

RITHOLTZ: … amateur racing?

KETTERER: So other kids took vacations to fun places, I went to tracks.

RITHOLTZ: Really? Did — have you spent any time on tracks yourself?

KETTERER: Not driving, just sitting and walking around. I am — I’m surprised I don’t have a hearing problem.

RITHOLTZ: So you — you mentioned your mentors. What investors influence the way you think about putting together a portfolio?

KETTERER: Every investor I’ve worked with, including my current colleagues, I work with the most remarkable team of people and they’re all a little different. We deliberately chose them because they fit together nicely and they — they’re — it’s a very diversified group, but they inspire me to this day. Along with our rising core of analysts, they’re — they’re the remarkably clear-thinkers and they’re innovative and they can look at a problem from a variety of angles.

So I — I’m convinced and I tell this to clients, this team isn’t the same team it was five years ago. Yes, we’ve added a few more people, they look like the same people, but they’re so much more experienced.

Some of my most amazing colleagues started in the late 90’s, which as you can recall was the Asia financial crisis …


KETTERER: … where stocks were just coming apart at the seams …

RITHOLTZ: Ninety-eight, right?

KETTERER: … where the — yeah, yeah, there was no — it started with Thailand. There was — investors sold indiscriminately. And to see both indiscriminate selling where valuation doesn’t matter and — it’s cousin — indiscriminate buying does complete an investor.

RITHOLTZ: Right. That — that — that was an interesting year. Let’s talk about everybody’s favorite question. Tell us about the books you enjoy reading fiction, nonfiction, investing-related or otherwise.

KETTERER: Nonfiction. Perhaps the most helpful to me was Daniel Kahneman’s “The Signal and the Noise” — not Signal and Noise, it’s …

RITHOLTZ: “Thinking, Fast and Slow.”

KETTERER: “Thinking, Fast and Slow,” I’m not thinking. So Kahneman’s “Thinking, Fast and Slow,” I didn’t really understand behavioral economics. And he got a Nobel Prize for his work in behavioral economics and social sciences — economics sciences. And this idea of loss aversion never really occurred to me that people were asymmetric on how they think, and I found that really useful not only thinking about investor mentality, but also in managing a team of people.

RITHOLTZ: How — how does loss aversion or risk aversion impact managing a — a team?

KETTERER: Especially when it comes to decision-making and the concern about make about any type of loss or mistake — and this is true in a group setting — the hesitancy of someone bright to make a comment because it could be wrong, which seems to overwhelm their — their ability to participate.

We want them to — my colleagues and I want everyone there no matter how junior to know that their comments are valued. And whether they’re wrong or right, it’s, their participation is crucial because everybody else thinking.

RITHOLTZ: Interesting. What other — so “Thinking, Fast and Slow” is one …

KETTERER: Yeah, yeah. And then there was Nate Silver. That kind of jumbled in my head, but Nate Silver, “The Signal and the Noise” …

RITHOLTZ: “The Signal and the Noise,” yeah.

KETTERER: Yeah, some predictions are right and others aren’t, but understanding how statistics can manipulate it and investors can use data very erroneously, they couldn’t be more relevant today. We, at Causeway, we hired a data scientist and — and data expert software engineers to back him up to make sure that, as a team, both fundamentally and quantitatively we have the data we need.

But if we work with it incorrectly and we find false — what we think our signals is — which is actually noise will be misled. It’s — using that data is so important and not to be misled by it, and that book was revolutionary for me.

RITHOLTZ: Quite, quite interesting. Any others?

KETTERER: Oh, I have a like a million books, like everything that fiction-wise that Robert Galbraith, AKA J.K. Rowling, ever wrote is wonderful. Those are …

RITHOLTZ: So you’re a Harry potter fan?

KETTERER: No, no, no. This is — all her mysteries are Cormoran Strike mysteries.

RITHOLTZ: Oh, really?

KETTERER: Oh, my goodness.

RITHOLTZ: This was the one she did under a penname and people figured out …

KETTERER: Yeah, Robert …

RITHOLTZ: … it was her.

KETTERER: … Robert Galbraith, yes.

RITHOLTZ: Aha, oh, quite interesting.

KETTERER: Yeah, yeah, why she chose a man is very interesting. You’ll have to have her on your show and ask her.

RITHOLTZ: Please make an introduction.


Tell us about a time you failed and what you learned from the experience.

KETTERER: Yeah. I get most upset with myself as a portfolio manager when I don’t have enough confidence in the decision. So not owning enough of the — the — some great companies, when it’s — when you look backward you think, oh, so obvious …


KETTERER: … but at the time, struggling with should we, should we not, and especially in areas where you can keep these in the portfolio for a long time, like some of these health care stocks, that’s the frustrating.

RITHOLTZ: Hindsight bias is always 20/20. What do you do for fun? What do you do when you’re not picking value stocks?

KETTERER: I — I enjoyed being with my family, and then when they kick me out then I’m hiking.


RITHOLTZ: Okay. Tell us about what you’re most optimistic today within the finance industry and what do you most pessimistic about.

KETTERER: I am most optimistic about my team. I mentioned them earlier, but to have such talent and such dedicated talent, we have 21 partners at our firm and that’s deliberate rather than keep it narrow.

RITHOLTZ: Out of over 100 employees now, is that about right?

KETTERER: Yeah, just over 100 employees, 36 investment professionals. And not all the partners are investment professionals, some lead very key areas in legal. And our — our COO is an important partner of our firm. The — that team is everything. That — those people up and down the elevator every day in the human capital business are really all we have for our clients. And I’m so proud of them. I’m so excited to work with them. Again, they’ve — because we’ve been through such torture as value managers in the last few years, they’re more — their quality and their depth and their experience level, I think, now is unmatched.

And as for pessimistic, finance-wise not really — not really anything. I am so — I’m so optimistic about being a value manager now, but I think about my life and my eight-year-old loves baseball, the one sport I didn’t want him to play. I had to be sitting through so many games.


RITHOLTZ: Let’s talk about advice you would give to millennials.


RITHOLTZ: Someone comes to you and says they’re interested in a career in finance, what sort of advice might you give them?

KETTERER: I give them too much advice, but I had still it to one piece of information, it would be read. Read more, read everything you can get, not just the “Wall Street Journal” and the “Financial Times” and the economists every week, but go and read the books written by famous investors, read the biographies, read tomes that deal with different segments of market history so that you can fill in the gaps.

If you’re in your 20’s, you don’t know much yet. In fact, you really only know a period generally of falling interest rates and rising markets.

RITHOLTZ: Not — not the norm in other words.

KETTERER: Well, not — not my norm.

RITHOLTZ: And our final question, what is it that you know about the world of investing today you wish you knew 30 years ago?

KETTERER: I wished I had taken Chinese. I would love to be …


KETTERER: … a fluent Mandarin speaker. It’s not just that’s a huge population, not just as an important market, much of the talent. Many of the talented people we hire were born there. So — and I took French and German, which is beautiful languages both, but they’re not nearly as helpful. And it’s tough for a tonal language to — to grasp as an adult, it takes a lot of time that I don’t have. So I’m listening in my commute and when I’m walking anywhere I have — but it’s going to take me, at this rate, it’s going to take me time.

I also wish I don’t — not to fret about Japan because I didn’t need to, it took care of itself. We were chronically underweight as an international manager, took tremendous criticism and — but we did the right thing.

RITHOLTZ: Quite, quite interesting. We have been speaking with Sarah Ketterer. She is the co-founder and CEO of Causeway Capital Management. If you enjoy this conversation, well, be sure and look up an inch or down an inch on Apple iTunes and you could see any of the previous 250 or so conversations we’ve recorded over the past five years. You could see that pretty much wherever finer podcasts are sold — Bloomberg, SoundCloud, iTunes, Spotify, Overcast, Stitcher, et cetera.

We love your comments, feedback and suggestions. Write to us at Check out my weekly column on Check out my daily reads at You could follow me on Twitter @ritholtz.

I would be remiss if I did not thank the crack staff that helps put this together each week. We would not be able to do this without the help of Atika Valbrun who is our Project Manager. Michael Boyle is my Producer. Michael Batnick is my Head of Research.

I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

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