MiB: Where We Are in the Market Cycle


Why it is so challenging determining precisely where we are in the market cycle?

The challenge, according to Ben Inker, head of Asset Allocation at GMO is that the United States has never had these levels of monetary and fiscal stimulus at the same time. This gives low risk assets lower return expectations, but sends high risk assets soaring. There are obvious signs of froth — Gamestop, Bitcoin, Tesla, et. al., but even “small cap value” caught a bid. Inker believes we are clearly in an asset bubble, which he blames on Fed policies.

The legendary Boston-based institutional investment firm manages about $60 billion in assets. During Dotcom implosion, GMO’s US Aggressive Long/Short Strategy achieved 80+% cumulative net returns for their clients.

We discuss his theory as to why value, as it is currently practiced, tends to underperform. He suggests several proactive changes value investors need to make to update how they manage value. In particular, he explains why traditional Price-to-Book measures of value fail to capture the worth of intangibles, like intellectual property, processes, expertise, networks, etc. He explains why what you pay for an asset ultimately determines how successful that investment will be. Many people regard Inker as founder Jeremy Grantham’s heir apparent.

A list of his favorite books is here; A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotifyStitcherGoogleBloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Doug Braunstein, founder and managing partner at Hudson Executive Capital. The firm manages $1.6B in assets, and has underwritten several successful SPAC offerings. Previously, Braunstein was Chief Financial Officer at JPMorgan Chase, working directly with Jamie Dimon as both CFO and a member of JPMorgan’s Executive Committee. He served as head of JPMorgan’s Americas Investment Banking and Global M&A.


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