US Investing Road Trip - Flying home (Thurs 28/6/18)

It was predictable really. For the past few months I’ve been trying to string together a set of interviews with investors based in the US. Some of these people didn’t have much of an idea who I was, so the schedule was always a bit precarious. In the event, it wasn’t that anyone dropped out late last week (although that may still happen), it was actually that I got a new interview confirmation in the form of Joel Greenblatt.

Fast forward a couple of days, I’m now here in New York City. It’s hot - somewhere above 30 degrees, which the locals seem fine with… me less so. I landed at Newark Liberty Airport in New Jersey, and then took a 40 minute train ride into Midtown Manhattan. For a Sunday evening it’s pretty busy out there in the city that never sleeps.

As for me, I’m not really sure what impact the five hour time difference will have going into this week - possibly not very much. But with three interviews now packed into just a few hours tomorrow, is not quite as easy as it was. It kicks off with Joel Greenblatt (someone that I worked very hard to get hold of), followed by Barry Ritholtz, the wealth manager and media personality. Then after that I’m meeting Ted Seides, the hedge fund manager famous for, among other things, making (and losing) a 10 year bet with Warren Buffett.

Meanwhile, the schedule over the next week or so looks like it will probably see more changes. I’ll check back with an update on how the interviews go, plus preview what could turn out to be a slightly unusual interview on Tuesday.

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Monday, 18 June

Manhattan is famously constructed on a ‘grid’ system. A series of long avenues (some of the famous ones being Fifth, Lexington and Madison) are intersected by numbered streets. When the street lies west of Fifth Avenue then you get something like West 24th Street. East of Fifth Avenue, that same street is called East 24th Street.

Theoretically, this makes for a city that’s relatively easy to navigate. In practice - even just a day into this trip - it’s quite noticeable how even New Yorkers get confused by it. For me, it has been an eye-opener, and I’ve got it wrong quite a few times today. On first impressions, the subway - NYC’s version of the tube - isn’t quite as far-reaching as it is in London. But with aircon in the carriages it was the definition of modern mass transit, given it was pushing 34 degrees at times today (sorry to keep banging on about the weather.

Anyway, propelled by jet lag, I was wide awake at 5am. That meant I had the the kind of margin of safety that Ben Graham would be proud of as I headed off in search of the Gotham Capital offices (which are in the building below).

Under normal conditions I probably wouldn’t have picked Joel Greenblatt as the very first interview in this series (a warm up would have been preferable). But as it turned out, he was absolutely brilliant, not just in what he said about himself but also his interest in Stockopedia.

After that, it was a wander down Fifth Avenue and up to Bryant Park (under heavy direction obviously) to Ritholtz Wealth Management, and Barry Ritholtz. In all honesty it was like talking to a friend. This guy has himself interviewed some incredible people over many years for Bloomberg’s Masters in Business series. Having read up on him, I took his advice and ditched my questions and let the conversation go wherever he went.

My final meeting today was with Ted Seides who famously made a bet with Warren Buffett about whether a low cost S&P 500 tracker would beat a group of funds of hedge funds over a ten year period. He too was amazingly generous with his time and his views, many of which a relevant to the way individual investors approach the market.

Tomorrow I’m travelling out to meet Wes Gray of Alpha Architect. An added twist to this interview is that Wes - an ex-US Marine - has suggested that we perhaps combine this interview with his daily workout (the implication being that I’m working out too!). So depending on how that goes you may or may not be hearing from me again.

One final thing - on the suggestion of Barry Ritholtz I headed to the top of the Empire State Building this evening. It’s one of NYC’s most popular tourist attractions, and I can see why.

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Tuesday, 19 June

Philadelphia is about an hour and 20 minutes out of New York City on an Amtrak train. It’s another 20 to 40 minutes across town to the leafy road where Alpha Architect is based (depending on traffic and how fast the the Uber driver is thrashing his SUV).

Wes Gray runs Alpha Architect from his house. So you can reasonably say that he manages more than a billion dollars from his kitchen.  In one corner is an oven and a fridge (this is the family home after all). In the other corner is a huge, stuffed bear. The remaining 90 percent of the quite extensive kitchen space is devoted to his team’s desks, screens and bookcases.  With the CFA exams taking place this weekend, there are one or two stressed faces (and by the way, good luck Oli (@Stockopedia))!!

Walk through to the back and it opens up into a huge space, with more large stuffed animals - including a leopard. This house was once owned by a well known game hunter but Gray bought it in a distressed sale - and the stuffed animals came with it. Now it’s a symbol of his efforts to offer transparent, marketing-free, win-win ‘achievable alpha’ with value strategies that most investor simply don’t have the stomach to stick with on their own. He’s building a reputation as the money manager’s money manager.

Out in the yard he’s built a gym for his team but he’s currently nursing a pulled calf muscle, so sadly our interview-workout is shelved (I tried to look really sad about this - Jamie I know that you will be). But on the upside, I spent two entertaining hours with him talking about the journey he’s been on and everything that’s wrong with the traditional investment industry. It was a real blast.

Now I’m back in NYC and preparing for tomorrow’s interview with James O’Shaughnessy. Everyone I’ve spoken to so far has given me a question to ask him - which shows how highly regarded he is. So fingers-crossed it will go okay.

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Wednesday, 20 June

This whole series of US investor interviews only really got off the ground because of James O’Shaughnessy. When the idea was first floated and we were thinking about the perfect people to speak to, there were one of two immediate ideas. Given we’ve modelled his strategies and been inspired by his use of value composites and rankings, O’Shaughnessy was right up there. And when I asked him, he said ‘yes’ pretty much instantly.

So sitting in Gregorys Coffee on East 55th Street (between Madison and Park Avenue (I’m like a native with this stuff now)) three months later, I was still reflecting on how it had been so difficult to write questions for this guy. On one level I could have played for the purists and taken a deep dive on all the data analysis he’s done. That could be a whole interview in itself. But it would also miss the story, and his story is really interesting - and very funny in parts.

For example, in the aftermath of his books What Works on Wall Street and How to Retire Rich, he appeared on Oprah and completely won her over. After that, he was the regularly approached by women all over America telling him how wonderful he was!

Another slight concern was that we were having lunch together first, before the interview. And I have to admit to feeling a little bit apprehensive about this.  I know that he's a voracious reader and has a near photographic memory, so in terms of being interesting to talk to... the pressure is on!

The venue was the Core Club, a private members club in Manhattan that rejects a lot of the rules that strict, super-exclusive members clubs impose elsewhere in NYC. You can use laptops, talk on mobiles, discuss business and lose the tie - and that’s what O’Shaughnessy says appealed to him. Don’t get me wrong, it’s high-end, expensive and it has got some very heavy-hitting members. It’s also got a lot of modern art on the walls - some of which, at times, belongs to O’Shaughnessy and his wife (an award winning photographer).

Over the years I’ve seen one or two complex lunch menus, but nothing quite like what we were given. Fortunately - and this set the scene for our time together - James went with the Core Burger, which was hidden at the bottom (and I followed his lead). And in NYC there’s no messing about cutting burgers in half, or anything like that. In fact the cutlery was surplus to requirements (although the napkin was very handy).

And so it was, we chatted about art and kids (although his are older than mine) and human behaviour. Then we moved rooms and moved the conversation right back to the start of his investing journey - and how he went from being an enquiring young man to being one of the most respected fund managers in the world. He was fun and very engaging and I feel, again, that I heard stuff from him that I’ve not heard before.

That’s three intense days done, and I have to say I’m loving this city. Tomorrow, Todd Wenning, a big friend of ours at Stockopedia, is flying in and we’re going to talk about moats and dividends. Fingers-crossed I’m also taking one of our subscribers - a US investment newsletter writer - to dinner.

(Plus I really need to go for a run or something!)

In between times today - on the advice of Jim O'Shaughnessy - I walked the High Line, which is an ex-railroad turned garden walk that runs along the westside of Manhattan. And here's a picture of that...

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Thursday, 21 June

The New York subway is quite an interesting thing to deal with. One of the first bits of advice I got when I arrived here was to use the subway, because driving, or being driven in New York, is a nightmare. You only have to walk around to see why. Most roads in central Manhattan are one-way and packed with cabs, and the whole thing in controlled by traffic lights. The power between pedestrians and traffic is much more equal in New York as compared to somewhere like London. You don’t have to wait long to cross a road around here.

But if you need to travel any kind of distance, then you’ll probably need the subway. The problem for anyone new to this city is that there are hardly any maps on the walls in subway stations. So you’ve got to have some idea about how it all works before you use it. Some of these stations don’t even have staff in them. In fact a lot of ot New Yorkers are seriously unhappy about the state of the subway. But… the simplicity of it does definitely make it a joy to use once you’ve got the hang of what the hell is going on.

When they built this subterranean railroad, they often literally dug up the road and dropped in all the rails, etc before building a steel frame around it. There was none of the Crossrail-type approach! So now you can be walking down one of the main avenues, and if you get the timing right you can walk over a solid steel grate just as a subway train is whizzing literally centimetres  under your feet - and no-one bats an eyelid.

Today I met up with a friend of Stockopedia, and someone who really helped me in organising this trip - Todd Wenning. Todd was drilled as an analyst at Morningstar and has since become a specialist in what Warren Buffett refers to as Moats. He’s now a full time analyst for an investment firm that’s building a “Moat” portfolio. So - friend or not - I made him talk to me about  what it takes to find these special companies.

Tomorrow is my last day in NYC before I travel Saturday down to the West Coast. Washing clothes, Wall Street and the 9/11 memorial beckon...

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Tuesday, 26 June

So the New York City part of this trip wrapped up last Friday. Before I left I headed down to the financial district and had a walk around the 9/11 Memorial & Museum. The place is absolutely astonishing. They’ve built this huge new One World Trade building, which is a real symbol of American strength and resilience. But next to that they’ve constructed a museum that focuses on those who lost their lives in 9/11 and those who were involved in the rescue and recovery. The fact that it’s subterranean and they’ve built it inside the remains of the old building just adds to the sense of horror of what happened there.

Anyway, I shipped out to the West Coast over the weekend. Based on air travel distance, it’s about 3,500 miles from London to New York, and it’s another 2,500 miles from New York to Los Angeles. Transfers between airports and final destinations were always a bit hazy in the planning of all this. In event I’ve learned to love something called Lyft, which is like Uber but friendlier. Basically it’s people, often with regular jobs, who are supplementing their income by driving people like me around.

Until recently, the left-wing streak in me meant I was a bit squeamish about encouraging gig economy corporations (I can sense a collective rolling of eyes at Stockopedia HQ). But my view has changed (*sigh of relief*). For a start I’ve been staying in AirBnBs, which have been great. I’ve been able to stay exactly where I wanted, in apartments that were all mine, and for a lot less than the cost of staying in some crappy Holiday Inn (which was the option). Frankly, there’s no contest.

Meanwhile every Lyft driver I’ve spoken to seems to be really happy with what they get out of it. Among the last three that I’ve travelled with have been a nurse, a teacher and a guy that’s starting his own investment firm. The problem of course is that regular taxi firms can’t compete with it.

The EBI West conference at Dana Point is ostensibly for US investment advisors. I wrapped it into this trip because there were some interesting people attending, and doing talks. It was always a bit unclear whether it would work as a place to do interviews, but there was bound to be some interesting stuff going on, and there was.

One of the highlights was watching Barry Ritholtz interviewing Ken Fisher (the billionaire owner of Fisher Investments). Some time back I’d asked about interviewing Fisher myself but it didn’t go anywhere - and my goodness am I pleased it didn’t! He’s a really interesting guy but he was hard to handle and it went from combative and un co-operative to laugh-out-loud hilarious. Ritholtz - who I’m adopting as an interviewing mentor - said to me later in the day that he knew what was coming: “It’s like a bucking bronco, you just have to try and stay on!”

Elsewhere, there was brilliance from Josh Brown, Morgan Housel and Meb Faber plus several others - and I’ll be covering some of that stuff in the days/weeks ahead.

Today I’ve moved up the coast to Venice Beach in LA, as this trip starts to wind down. But before it does, tomorrow I’m interviewing two people that may well be familiar to the Stockopedia community - Meb Faber and Toby Carlisle.

When I was talking to Wes Gray last week he warned me that Meb Faber is almost impossible to pin down to times and dates. Well… I think I might have managed it. We’ll see.

Ben

PS. There are quite a few people trying trying to sell stuff on the path along Venice Beach - but I liked this guy's honesty...

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Thursday, 28 June

Los Angeles is a city of car drivers. In this 500 square mile city cars are much more popular than public transport, so it’s no surprise that the traffic is sometimes horrendous.

I’m happy to say that bad traffic only knocked 20 minutes or so off my interview with Meb Faber, who stuck to his word and met me at a coffee shop called Deus ex Machina in Venice yesterday. Meb is a quant whose fund firm Cambria runs around $1 billion in its range of factor-driven ETFs. He is a friendly, interesting guy and he’s pretty symbolic of a change taking place in US investing, where the traditional view of what indices are is developing very fast, and the ‘passive versus active’ debate is moving on.

Another quant on a similar road to Meb is Tobias Carlisle, who is currently working towards the launch of a new ETF based on the deep value strategy outlined in his book, the Acquirer’s Multiple. He was the perfect person to help me wrap up this series of interviews. As an Australian in LA, he gave me some answers on some of the little things that had tripped me up along the way (although we’re still both mystified by the rules around tipping!).

Before leaving Venice I couldn’t resist testing out a pretty new development here (and one that looks like it might spread to other cities). It’s hard to miss the proliferation in some UK towns of bicycles that you can hire for a couple of pounds. Here they are doing the same with electric scooters. Everywhere you look there are people whizzing around on these things. And every night, apparently they are all collected and recharged.

There area few rules involved, plus you need a driving licence, but after that you’re pretty much free to do what you like and go wherever you want. It’s an effort to get drivers to leave their cars at home - and it definitely puts a smile on your face (the scooters absolutely fly along).

In the nick of time - before I find myself testing out my medical insurance with one of these scooters - this trip is done. I’m flying overnight Thursday into Friday, and I’ll probably be feeling the effects for a few days after that. It has been a brilliant two weeks, surreal at times and I’ve met some incredible people. But it’s definitely time to come home.

Ben