Big Banks, AI & Anti Aging

[00:00:00] Welcome to Non Consensus Investing. I'm Ram Ahluwalia, your host and CIO at Lumida Wealth, where we specialize in the craft of alternative investments. At Lumida, we help guide clients through the intricacies of managing substantial wealth so they don't have to shoulder the burden alone. Through this podcast, we draw back the curtain to reveal the strategies employed by the best in the business for their high net worth clients so that you too can invest beyond the ordinary.

All right. Hey, Mark, how are you? Good, Ram. How are you? Happy Tuesday. Thanks for joining me, Mark. Happy Tuesday as well. We got this oversized image of you. We do. Wearing down it. I'm actually very proud, I do have hair. Sorry. You've got more than I do. I know. I know we're going to cover a few topics, but we may have to add.

Hair preservation too, to one of them. The more kids that I have, I'm three now, there's less and less hair. But I actually have, yeah, a few kids and a couple of grandkids [00:01:00] and I still got it. Yeah. Is it a you? It comes back at the end, like the hair? It does. It regrows. Really? Okay. I have something to look forward to there.

That's awesome. Thanks for trying. I know we're going to cover quite a few interesting topics. And I've known you, Mark, for I think over a decade now, and you've got an incredible background. Not only as a venture investor at Two Sigma, but also as a bank operating executive. And I always have fun talking to Mark and you try to assign yourself people you can learn from.

And Mark is one of those people I count on to learn from regularly. Some of the topics we wanted to touch on included non consensus investing. What are some non consensus ideas that are. Not in the mainstream, we want to talk about digital assets, AI, reshoring, longevity. Maybe we get into some ed tech, commercial real estate, up, upcoming IPOs.

We'll see what we can cover between now and 12 p. m., but we'll have fun with this though. Yeah. Mark, why don't we get into it? What do you, how do you see the world today? We see we're on the [00:02:00] precipice of so much change. We've got the onset of AI, semiconductors. There was this LK99. That doesn't seem to be going anywhere, but how do you view the world today?

Yeah, thanks. How do I view the world today? Let me give you the positives out there. I think the part of the positives are that I think there's some really interesting things going on in the tech part of the world, in the healthcare space, in the AI space, like Ram talked about, in the software space, even in things like on shoring manufacturing, 3D printing, additive manufacturing, subtractive manufacturing.

On the technology side and the productivity side, there's some really interesting things going on. On the And I think the negative side has been discussed a lot. You have interest rates high, you have issues, political issues, both domestically and internationally, that are problems. I think the world is like in a tug of war right now.

[00:03:00] And what that leads me to believe is that things will be flattish, and returns will be lower, and risky things may not work out as well. And so it's a period of time to be probably a little bit closer to home and slightly more risk averse. One more positive that I want to talk about is the world's also a relative place.

And the United States still is doing better than a lot of other parts of the world. I think we're more innovative and entrepreneurial than maybe Europe. I think we're having higher growth in Europe. I think we're a better business environment than Latin America or Africa. Some parts of Asia are interesting and China is, it's a place where we should partner there, but it's really hard to figure out what's going on.

The U. S. is the least dirty shirt in the laundry basket, right? We got high debt GDP, but rule of law works and people want to live in the [00:04:00] United States and build a career here and start businesses here. I was trying to be more politically correct than you, but yes. And yeah I think the United States, yes, we have a legal system that works and that's super important.

Mostly works. They'll cycle through some of those and on the productivity side, you mentioned 3D printing. 3D printing is quite interesting because it was a bubble probably like 10 years ago or so you had these stratospheric valuations and it crashed down to earth because it didn't deliver. But, it looks like you're seeing evidence on the ground of how 3D printing can enhance productivity.

Are there one or two examples around that? Yeah, no. I think if you go look, I think some of the 3D printers that came out through the bubble cycle and the stocks have come back down. But I think there's some new technologies out there where people, some of this 3D printing both additive and subtractive are really starting to.

Scale a little bit. It's still at the early [00:05:00] phases, but it looks promising and it's super interesting. As well, what's additive versus subtractive. What's the distinction there? Additive is really 3d printing, which is you have a material and you just build layers on it. Subtractive is the C it's an old business.

It's a CNC milling machine. And where you have a block of something and you. Then use tool, point clouds, tool paths, and different tools to actually cut out with very tight specifications out of a block of metal. I actually along, as an aside, I actually have a patent in that space. I sold, I did sell the patent, but I actually have a patent in that space.

From a long time ago, using a 3D scanner, To scan the bottom of mineral specimens, which were very irregular, to use it to make bases, to put the minerals in for display in museums. And it basically, yeah, [00:06:00] and that's the process that's used today to figure out how to prototype and make parts. I've seen stories around people using 3D printing to build homes, I don't know if that's actually taken off as reality or whether it's going to be used for more kind of light plastic molding type use cases.

Yeah, I think it's still at an early stage, but it still has some big machines that are actually 3D printing, I think, almost concrete. Really, yeah, they're actually printing the oldest. That's amazing. So the story is bright on the productivity front because of AI, 3D printing, and I think we'll probably get into like synthetic biology and genomics, which is finally starting to deliver as well.

And that's a mix of how we live a better quality of life because that doesn't show up in the productivity statistics if you're living longer and better. But on the other side, the tug of war, what you called is around higher rates, political conflict. And that's why on balance you're saying, Hey, I think this is [00:07:00] neutral or time to be more cautious around risk.

I like to keep life simple and you look at the out there and right now I can go buy, I can leave money in a money market fund or buy one year treasuries or six month treasuries and get over 5%. It's incredible. And that's really incredible. And for a New York resident, it's, you're exempt from state and local taxes.

In today's world, I don't know what the right thing to do for any person is, but I'm just saying that. For the first time in a long time that we now have rates that are very positive. We've been in a zero percent interest rate environment for years and years through the pandemic and it looked like it was headed there right before the pandemic.

Question I have, and I don't know the answer to this, did having zero percent or does having zero percent interest rates [00:08:00] environment. Lead to companies that were either way overfunded, misallocated capital, don't understand their financials, and what is really, what is a really good profitable sale. And now in today's world with 5 percent or higher interest rates, or close to 5 percent even in the 10 year, What does that mean for capital allocation?

What does that mean for accounting systems? Do we need to really start thinking about, we need to have good numbers, we need to really focus on what is gap, what is cash flow, and I'm a believer that's one of the big themes over the next five or ten years. I fully agree. Look, I, my view is yes and yes on the earlier question of what I meant for valuations and access to chief funding.

If there's no distinction. In the present value of a dollar earned tomorrow versus 20 years from now, because you're in a low rate environment, then you're rewarding long duration and that game is [00:09:00] over and there's a cost of capital and as also value has generally outperformed stocks over the course of decades, but in the 2010s, that was not the case.

Growth has trounced value and we may be entering a world where that starts to change because of higher real interest rates. And because of higher, high real interest rates, and I'm just speculating or thinking out loud, and I don't know the answers here, a couple of positive things could happen with that.

Number one, retirees and people on fixed income that have cash in their retirement accounts, all of a sudden may have income, and that could be a positive. The second thing is Do wages start to increase here a little bit and maybe some of the income inequality comes down because higher rates are not good for stock prices, but they may be better for labor settlements and higher wages so that people can [00:10:00] actually start catching up and making a better living.

Those are some of the things that I'm looking at. I think back to your point and what we're talking about here. It's the world is changing and it's more back to a normal, maybe more back to a normal type of world. You've got to figure out how to adapt to it. I fully agree. No, I agree. I think you nailed it too.

Like higher real incomes. We are seeing that and the technology we're seeing is improving the ability for employees, employers to create more value, especially around AI and the promise of that. No, I agree. I think I'm more on the optimistic side of things, but from an asset price and investing perspective, this is one of those times in history.

You've got to. Make sure you're not being complacent and reassess your base assumptions. And what's your take on barbell investing? I know you and I have talked about this approach before. Yeah. Again, I don't give investment advice. I don't want to hate you. I got to give that. That's my job. Yeah. You didn't give investment advice.

Barbell. Yeah. I guess I described the concept, which is [00:11:00] you want to have part of your portfolio on higher risk assets. And part of your portfolio shorter in, in things like the fixed income and higher yielding earning assets today. Back in the nineties, when rates were different, bar billing meant you owned treasuries and 30 year zeros.

It was very, it was a somewhat different kind of Zero coupon bonds at Zero coupon bonds. So you had the duration and sort of the Thing out there and much more risk. But in a bull market, that risk paid off. So I think you can do lots of different type of barbells here right now. The another concept is ladders.

And in the fixed income market, it's really interesting in a downward sloping yield curve. Some would argue that at some point you're supposed to go long, even though you're not compensated. You don't think you're compensated, you can earn a higher yield by just staying in money markets. And the longer term stuff is At [00:12:00] lower rates, that hasn't worked really to date, but maybe that's changing.

I don't know. Yeah, no it's a great point. I believe that is changing now. Like the move to make was to own short term rates when rates were zero and rising, but now it's changed. We're, my view is we're in the last few innings of higher rates, and I do believe there'll be higher for longer, but ultimately the Fed will have to ease at some point, and that means your coupon is lowering.

You do want to lock in longer term duration at some point. That is something to consider. By the way, one other interesting point on rates, so as you pointed out, one of the greatest bill markets in history was kicked off in 1982, when rates were very high, equity, P. E. multiples very low. One of the funny dynamics in this asset classes is, yes, higher rates.

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