Confessions of a (Highly Successful) Value Investor

This is Barron's Live. Each week, we bring you live conversations from our newsrooms about what's moving the market right now. On this podcast, we take you inside those conversations, the stories, the ideas, and the stocks to watch so you can invest smarter. Now, let's dial in. Hello, everyone, and welcome to Barron's Live, our weekly webcast and podcast. I'm Lauren Rueblin, Senior Managing Editor at Barron's. Thanks for joining us today for an update on markets and stocks in the news, and a conversation with Chris Davis, chairman of Davis Advisors, a New York-based investment firm with assets of $31 billion. Chris is also a board member of Berkshire Halfaway, Coca-Cola, and Graham Holdings, and we have always found him a thoughtful student of markets in particular financial stocks. My other guest today is Barron's Associate Editor, Andrew Berry. He's no stranger to Barron's Live in an on-news room. He's the authority on all things related to Berkshire and Warren Buffett. Chris and Andrew, welcome to Barron's Live, and thank you so much for joining today's call. Thank you, Lauren. I'm delighted to be here, and I feel like the three of us cumulate up to a lot of experience in these roles, so I'm really glad to be doing this with you. Well, we are thrilled to have you. So I want to start today, Chris, with a quick overview of Davis. You are the third Davis to run this story from. Give us a snapshot of your investing approach, and what you value as a value investor. Well, you know, our investment approach, you're right. It does trace its roots back to my grandfather, who started investing in the late 1940s, and there were a few sort of fundamental bedrock principles. And one is that if you want to build generational wealth, being an owner is better than being a creditor. And so it was this idea that equities is a wonderful way to build long-term wealth. And then, of course, the question is, well, which equities? And the mindset was always about buying the entire business and looking for your return to be generated by the success of the underlying business, versus by changes in investor psychology. So there was a very long-term research-driven focused approach. We tend to be classified as value investors, which we're very comfortable with, because the price discipline is very central to how we do things. On the other hand, we have such a mindset about quality and durability and the long-term that we want to avoid the famous cigar butts. The value traps. So we tend to fall in this place in between of sort of quality value or value-oriented growth. But in our mind, we really think of the value and growth as joined in the hip. Businesses that grow profitably are more valuable than ones that don't. So we have a culture of stewardship. We have, in fact, our independent board of directors is in town today. And we take this idea that we're stewards of somebody's life savings very seriously. And we try to manifest that by being aligned with them. So our family and my partners, our employees, are the largest investors in our strategies. We never start a strategy based on a marketing premise. We start it based on an investment premise. And it tends to worked out well over a long period of time. But of course, having a consistent discipline, the discipline can fall out of favor for periods of time. But over the long term, it's generated results that have outperformed and really a shareholder base built with financial advisors that were very proud of people that have been invested with us for decades. You mentioned falling out of favor. And we had a question from Terry. I usually say questions for the end of the call from our listeners. But this is germane to what you're discussing. And Terry knows that we've lived in a growth cycle since the global financial crisis, especially since 2017. How do you address that value as dead criticism? Well, you know, I think this is where all of our experience and I gray hair sort of help because we've seen this before. It really, you know, just in the history of our funds, you know, we saw an enormous growth cycle that culminated in the nifty 50 and 1972 and then marked the beginning of a long trading range of market. But, you know, in those galloping periods of time, when there's optimism prevails, value discipline gets pushed aside, multiples expand. It tends to be a time when value investing can get left behind and there begins to be talk of a new new era. Larry Tish famously saying, well, get me a kid. I don't understand this market in the early 1970s. And then, of course, we had the same thing in the late 1990s. You know, again, a long, one-way bull market culminating in a blowoff of sort of euphoria and optimism. And it's funny if you had been, you know, told investors that, you know, in 2000, the market was going to go 9,000,000. You better go to cash. Well, what's amazing is how many investors that had held to their discipline and their valuation discipline had spectacular years. I think in year 2000, we might have outperformed by 1800 basis points. So the market was down nine and we were up nine. But there were investors that we admired. There were up 15, 18, 20 percent. Jim Gibson, I remember it, a Clipper Fund had lagged the market for 17 years in 1999. Now, of course, he hadn't really lagged for 17. It was 17 cumulative, but he had been very good for 10, 12, 14 years. But then that blowoff in the late 90s was so extreme that it pulled his whole record down. Well, at the end of 2000, he was well ahead for 18 years. So that was a big cycle. And now, of course, we've obviously been in an enormous cycle since the financial crisis. And, you know, I think what separates us as we look at these things is we really appreciate what I'll call the value of growth. But we also recognize that sustaining growth is very difficult. And it is amazing when you look at all of the assumptions that I get sent, you know, in models and sell side reports. Let me give you a real number because I look at these models and it's amazing how many companies have Wall Street analysts projecting, you know, 20 percent sales growth for the next five to 10 years. And 50 percent margins for the next five to 10 years. And let me just give you a sense of how hard that is less than 2 percent of the S&P 500 companies have been able to sustain 20 percent sales growth for a decade less than 2 percent. So 98 percent of the companies are going to fall for short of that. But when you couple that with the idea of capitalism allowing companies to sustain, you know, EBIT margins above 50 percent, which I see in so many of these high per growth models that are put out there. So 4/10 of 1 percent of companies have done that. So you have 4/10 of 1 percent have been able to sustain these very high margins and then less than 2 percent have been able to sustain the high sales growth. So what I'd say is we appreciate the value of growth, but we also understand that in a capitalist system where competition is drawn in as Jeff Bezos famously said, your margins are my opportunity. But we have a much more skeptical or we would say realistic eye. And that's as I say, why we think of ourselves as quality value or value growth growth that reasonable prices. And so when you get this big one way market, of course, active managers, tender lag, value managers, tender lag, you get great market concentration at the top, you get a huge multiple expansion. But you want to hear an amazing statistic. Like think about the fact that today the S&P 500 is at 26 times earnings. The Russell 1000 value index is at 20 times earnings. So I wanted to ask you what is your view of the broader market and how has the Iran War changed that view? Well, you start with the market at 26 times earnings and you know, inverting the PE is a pretty good starting point for your return assumptions for the next five to 10 years. It's not ironclad. It's not a rule. But you know, when you get a PE of 26 times, you know, to have market return assumptions above four or five percent, you know, you need some things to go right. So we think we're starting with a very expensive market. We're thinking we're starting in a market where indexes have galloped ahead and become concentrated and fully valued. So I think we're at the beginning of what's really going to be an active management cycle. And you know, it's interesting to me that I think we're ahead of the market for the last three or four years. That's the S&P. And so. I think you'll be a long way into a market where active management is doing better before the psychology around the idea that passive always wins breaks down. But when it does, it will begin with a richly valued market. So I think that's where we are now. I think second, Lauren, there are three big transitions in the economy or in the world that are happening at the same time. And one of them is the geopolitical breakdown. And that's de-globalization. I mean, we've had globalization work for 40 years, 50 years. And obviously we're at the end of what's been a mega cycle of that sort of global cooperation, that economic binding together of different economies. So whatever your politics are, whether you think that's good or bad, it is an enormous change. And obviously it was a trend that had been very good for things like corporate margins and costs and for lowering prices to consumers, whether it was good for employment and so on. That's a different question. But then you have that change. Then you have a second change, which is from basically 1980 until 2022, you had a period of falling inflation and falling interest rates culminating in an absurd first time in human history of zero cost money. That is an era that we are decisively at the end of. And I think people should recognize that that was non-recuring. My grandfather started investing in 1948 when rates were around 2%. And he saw them go from 2% to 20% between 1948 and 1918. We don't see that. I hope we don't see it. But what we aren't going to see, I would bet is we're not going to see free money again. So that's a massive change. And then the third change is the AI and the technology change and all of the implications for unemployment. So you have that much uncertainty. You have a richly valued market. One of those things has got to give. And so our view is complacency is a real problem. And so I would say we're very optimistic about our portfolio at 14 times earnings versus the market at 26. But we are skeptical about the market. So that's how we're simultaneously bullish and skeptical. So now that you mentioned your portfolio, it's a good entree for me. You have called financial companies like Capital One Wells Fargo and US Bank AI Beneficiaries. And I wonder if you can explain to us what the investment case is for these companies and how you see AI benefiting them. Well, I think the most like AI, anybody that imagines that it's not completely transformational has their head in the sand or somewhere worse. This is one of the biggest shifts we'll see in technology and human history. Now I'm going to pause there and add what's called Amara's law. Amara's law states that revolutionary new technologies are overhyped in the short term, but under estimated in the long term. And we are decidedly in the overhyped, overestimate moment of it. But we have that. Tell me how you see it affecting financial companies like the ones you are. Well, what I would say is as you think about AI, we basically put all companies through, look at them through that lens and we come up with five categories. There's emerging new winners. That's where most of the spotlight is. Who are going to be the big winners in AI? Who are the, what Google was to the internet? Who will be that to the AI? Then they're the enablers. Who is empowering this? Think of the chip manufacturers and the semiconductor capital equipment companies, the power suppliers, copper, so on. Those are enablers. Then you have some companies that are what I call indifferent. And they're not many of them, but what Jeff Bezos used to say, people ask me what's going to change. They should ask me what's not going to change. That's a very important question. The demand for chicken probably won't change much. So Tyson Foods or something is probably fine. There's companies that are the walking dead, right? Just what happened to most newspapers, thank God, not parents. But many newspapers with the collapse of classified advertising in the internet, there are the AI equivalents of those. But the category that financials fall in to get right to your question is the users. Who are the companies and industries that will benefit from using the technology? And so when you think about financial services, they're hugely data-centric. They have huge amounts of costs, of compliance, regulatory compliance, accounting, auditing, so on. So you have a big amount of your costs that is essentially people performing functions that are easy to automate over data that can easily be digitized. But you'd say, well, so are financial services winners? Absolutely not. It really takes those select financial companies that have the right technology stack, the right management culture, and the right scale. And all three of those are necessary for a financial company to be a beneficiary. Capital one is the standout in that regard. It's been a FinTech company from the beginning. It was a data science company. It is a data science company. It's the original FinTech company. They didn't own a single physical branch until the mid-2000s. They were founded in the late 80s. It's still run by the founder. It's got, it's the only large scale bank that is fully out on the cloud with this modern tech stack. As I said, it's really run by data scientists. It now owns a payment system. And yet it trades at 11 or 12 times earnings. It's just amazing to me. So Capital One, I think of as an obvious winner in front of this wave. And then I think Wells Fargo has it advantage because they have the scale to make the investments, the right management culture, the right data. They've got, they had a less integrated system. JP Morgan would be the other. It's just much more expensive. But has the culture, has the scale, has the technology stack. So that's why I think financials, select financials, you really could see a significant improvement in their cost structure. And that improvement will accrue to fewer companies that have the scale and the ability to make the investments and make the pivot. Can you give us a thumbnail sketch of your investment in Tyson? You mentioned chicken and Tyson. Well, I'll put that in that category of, you know, what I call the indifferent, you know, the companies that where all of these big changes in globalization and interest rates in technology don't really affect Tyson. So when you're buying a classic value name like Tyson, the key is you, if you're able to buy it at a reasonable multiple on, on somewhat depressed earnings, right? In other words, when you have a business that doesn't grow very much, the risk of overpaying isn't you, one you really have to watch for. So typically in value companies that have some cyclicality, there's an idea that well, when the earnings are depressed, the PE is high. And then when the earnings improve, the PE is low. And when the earnings improve, that's often where they become a value trap because you're paying for peak margins or peak earnings in a cyclical business. And when the multiple is high, that's sometimes when the stock could be more attractive, but you're betting that things are definitely going to get better. Tyson has the best of both worlds where it's a reasonable valuation, unreasonably depressed or it's under earning. And it's under earning because you remember years ago they bought Iowa beef packers, IBP, and they went from just a chicken company to a, quote, protein company. There was investment bank speak, but beef has been a terrible business. And so there was a massive down cycle. So that part of their business, which is something getting close to more than a quarter around the third of their business is earning zero. So the company overall is valued at a reasonable valuation, generating a lot of cash, but on somewhat depressed earnings. And to us as, as what I would call like having this valuation discipline, having an orientation towards growth, we like companies where the earnings can grow. And so in a business like Tyson where the top line doesn't grow that much, it's nice to have the opportunity for margin expansion on top of that top line. And then not have the disintermediation risk from globalization, de-globalizing from changes in debt structures and cost of capital or from AI. So that's a little, by the way, I put a company like MGM in that same category in the sense that it's under earning a little bit because it's got some big asset coming on in Japan in four or so years, five years. Las Vegas has been a little depressed with travel bans and some of the travel down. And so it's had a very low multiple, but on earnings that are also so somewhat depressed. So those are what I would call the, this category that we call sort of the indifferent, but where having a real price discipline can allow you to cherry pick some companies that have business models that are not easily disruptable. - Interesting. Speaking of not easily disruptable, we have to talk about Berkshire. I'm sitting here with Andrew. I mentioned he's a Berkshire authority. You are a trustee. I'm gonna give the first question to Andrew here. Well, I mean, I don't know whether you can comment, but Berkshire today announced an investment in Tokyo Marine, the leading Japanese P&C, and sure they're gonna put a invest about $2 billion for Mr. Teague partnership. You're a student of the property and casually insurance industry. Can you tell us a little bit about Tokyo Marine and kind of what makes it distinctive? - Well, your first comment was right. I really can't say anything about Berkshire or the Berkshire perspective. And that, but I also don't know anything. I would make those decisions independently. There's not bored involvement in something like that nor should there be. I can tell you that I'm sitting, I'm doing this call from a conference room in our office and on the wall, there's a picture of the management team of Tokyo Marine and Fire from the early 1960s. And the reason is that my grandfather went to Japan in 1959 and as a specialist in financials in general and insurance in particular. And he started studying the Japanese insurance industry and he identified Tokyo Marine and Fire as the absolute crown jewel of the Japanese insurance industry. A completely dominant blue chip organization. There are other insurers, there's Sumitomo and Nippon Coa. But they also tend to have life businesses and Tokyo Marine and Fire has been by and large at property cash to insure. My grandfather, that picture's on the wall because he helped bring them public in the US in the 1960s. And at the time, the market cap of the company was less than the real estate value of their headquarters building. So it was a hell of a bargain. And he held those shares all the way until his death in 1994. So it is a wonderful company. Now it is by and large a Japanese company, by and large. And so it is somewhat tied to the growth of the Japanese economy, which has been very low. And again, going back to our early conversations with Lauren about price discipline, the real issue in a slow growth business 'cause insurance is basically very related to insurance growth is related to the growth of insurable assets in a country. And so therefore related to GDP growth. And so, slow growth has been the history of Tokyo Marine. And when you began the 1990s at these very, very inflated PEs, you were really set up for a disastrous value trap for lost two decades or almost three decades. Japan is obviously having its moment now. Tourism is booming. There's some optimism about the leadership and animal spirits. But we do not own Tokyo Marine and Fire as a firm. And I certainly will continue to go back and look at it. But at least that's a little bit of a historical perspective. It is important that when you invest in Japan, you recognize you're also owning a Yen-denominated security. And in the case of Tokyo Marine, a lot of your business is Yen-denominated. In other words, it's not like owning Toyota where you have a lot of your revenue might be in other currencies. In the case of an insurer like Tokyo Marine, you have a lot of domestic Yen earnings. And so you own a business where you're also taking a lot of Yen exposure. And you can look at the history of, you know, Berkshire's investments in Japan where they have raised debt in Japan. And that creates a very different profile than the average investor has because the average investor buys the equity but doesn't have a mechanism to issue debt in that currency. So the average investor is taking the equity risk but also some currency has a currency exposure with that. So that's a difference for other investors. - That was a great story about your grandfather. Certainly your knowledge of Tokyo Marine goes back a long time. I wanted to ask you, how is the board's role changing at Berkshire? Now that Buffett has stepped down a CEO and become chairman. - Well, again, I will really only comment on what's public which is, you know, that Berkshire has an extraordinary culture. And I think that an important part of a company like Berkshire existing is its willingness to look different than other companies. And that is very hard in the civilization. It's very hard, you know, it was, you know, famously said that it's better for reputation to fail conventionally than succeed unconventionally. Berkshire has had an extraordinary model and an extraordinary culture that are not, if not unique, are close to unique. And I think that incredible trustworthiness, the ability to execute without bureaucracy, the ability to get quick decisions made and to honor their words, have an absolute fortress balance sheet to be a resource to the country, especially in times of chaos. I think those core attributes are sort of sacred. And I think any, any director of a company like that would have to have as their top priority protecting those attributes that have been to be a part of the world's most definitional and essential to the long-term competitive advantages that the enterprises had. But it does, you know, their companies that really look different. We were talking about Capital One earlier, Lauren. And, you know, people, you know, on the outside, just they go, it's a bank. You look inside and you realize it's, it's, I don't know, the sixth or seventh largest bank in the Middle East, the Middle East, the Middle East. And so, you know, the first thing that I think that I think is, is that the most important thing is that you know, that you have to have a lot of money. And so, you know, the most important thing is that you have to have a lot of money. And so, you know, you have to have a lot of money, and you have to have a lot of money. And so, you know, you have to have a lot of money. And so, you have to have a lot of money. You don't meet with Wall Street. Capital One doesn't do Wall Street visits and things like that. And so, you know, if you were a director of Capital One, you would say, we really have to recognize what makes this place different that gives us an advantage. And the last thing we should do is try to look like, you know, everybody else in this banking business. We have a very different one. Question about Capital One. It comes from one of our loyal listeners, Lee. He knows that the stock is trading only at 12 times earnings. I think you mentioned that too. And that the market has doubts about Capital One versus a company like Goldman or Morgan Stanley or even MasterCard. So, he wonders under what circumstances would you sell the stock? Well, you know, when I said in the very beginning, Lauren, when you asked for sort of a snapshot of our investment approach, I said, we really focus on our returns being driven by the returns of the underlying business. And so, you know, what we focus on. So, imagine if your listener owned an apartment building and they paid, let's say they paid $100 million for an apartment building and the apartment building generated $10 million of profits each year, right? They would say their return is 10%. And if somebody came along and said, I'll offer you $50 million for that building. You know, you'd say, well, I'm not going to sell it. And by the way, the fact that you only offered me $50 doesn't make me think the apartment building is worth less, right, just because the price went down, the value didn't change nor did my return expectation. So, I would say that if we saw something that would permanently change the return on equity characteristics of Capital One, that would be the number one reason we would sell. You know, we have a model that says, you know, the return on equity on average over time will be, let's say, 12 to 16%. If we thought it was going to be, you know, 6 to 8, the business would be worth a lot less. And so, we'd have to look at what the price was when we made those. But now, the other hand, which is the sort of what people consider a high-class problem, is that somebody comes along and looks at your apartment building that's earning $10 million and says, you know, well, I'll give you $200 million for it. Or $300 million. And you think, well, at $200,000, 200 million my return starting in is only 5%. So, you know, I needed to grow a lot for that to be a, for that to generate a good return for me. So, with capital one, we actually think the low multiple is a huge advantage because capital one, unlike the apartment building analogy, has the advantage to buy in their shares at this low multiple, so call it a 9% year one earnings yield after tax. That is very, very attractive. And they've been able to do so episodically and tactically when the shares are very cheap. It's funny. I mean, I, I used to argue with the management at JP Morgan that, you know, their stock going up to two or three times book was actually a disadvantage. It looked great for the time being, but it really meant that every employee that owned stock going forward was likely to be a little disappointed. And it also meant that if you chose to buy in shares at 16 or 17 times earnings, your, your return and your risk was much greater, your return was much lower, your risk was much greater. So, a high multiple is like a sugar high. It gives you a buzz, but it doesn't give you a lot of nutrition. So we love that capital one as price or it was, but if we saw something that impaired the ROE, the long term ROE of the business, and that could be cultural, it could be a management change, it could be regulatory and so on, or if the shares in our view got so richly valued that the return for investors at that starting price was too low. Those would be the things that would lead us to change. And that's true for every business we own. I think Andrew had another question for you. Yeah, on Berkshire, I don't know whether you can give us any idea. I mean, Berkshire has about a $300 billion investment portfolio and it also has a lot of cash now. I mean, Warren Buffett is now chairman. Do you know how it's being run now? It's kind of a little bit unclear how many people are actually involved in running that portfolio right now. Can you give us any idea about just how things are going with that? Well, I would just defer to the annual report. I mean, Greg wrote the letter. I mean, can you imagine the pressure on that? I thought it was outstanding. I think it captures. It was everything that an owner of that business would want to know, including how the investments are run. And I think you got a sense of his culture, what his priorities are. And I, you know, it was a daunting task and I think it was beautifully done in terms of being informative. And, you know, there's nobody that could communicate like Warren. But if you were just to pick up the 500 annual reports of the S&P 500, I think you would be hard pushed to hard press to find, you know, a letter that was more substantial or informative. Then the one that Greg wrote. And so I think especially at this time of transition, it was very helpful to have such a thought out reasons and articulate sort of description of what will change, what won't change, what should people's expectations be? We encourage shareholders and others to read that letter. Yeah, it was a very informative letter. I mean, do you have a night? Do you know, what would you characterize as the company's biggest challenge right now at first? I would play, you say you can't talk about it. I won't. And I, you can't work. What I would say is there's a, now some talent, you know, I know you both know it, read. He wrote a book called Anti-Fragile. And it's an interesting subject for listeners because if you look at your portfolios, you're going to have certain companies whose businesses are tied, the value of the business, the amount of earnings that business can generate are very tied to, let's say, capital markets. Right? So you mentioned a few earlier, you think of Goldman Sachs or Morgan's say, you know, sort of investment firms. You know, if the value of financial assets goes down a lot or if there's financial chaos, that's bad for their business. They earn less, their balance sheets go down a lot and so on. Then you have businesses, we were talking earlier about the chicken business, you know, that you could argue are somewhat indifferent to financial, the financial environment. But there are a handful of companies that you would describe as anti-fragile. And what that means is that if you have a certain amount of chaos in the external environment, the intrinsic value of their business goes up. And historically, a company like Berkshire was anti-fragile because they had low earning cash when times were booming. But when times were bad, they were decisive and able to make significant investments at very attractive prices when there was panic in the external world. So cash has an option value. And what you would argue is that the value of that option depends on the idea that there will be dislocations in the market. A, so that needs to be true. And then on the timing of those, the sooner they are, the less that option costs you. The farther away it is, the more that option costs you because you're losing that return while you wait being in a very low yielding cash. So, and again, I think Greg's letter was informative a little bit in talking about, I don't remember the exact phrase, but around that concept of the option value of having that balance sheet. And so getting to deploy that and what are the circumstances, I can promise you that none of us will be delighted if those circumstances arise as citizens and as general investors because it will arise because bad things are happening in the world. We started with Lauren's question about Iran. And the amazing thing is you have this enormous geopolitical tension of going on with all of these other transitions of deficits and interest rates and inflation and technology and unemployment and implication. And you have the market very close to its all time high. So that recipe is certainly a tentative one. And when something does go wrong, we talked about 1999 when we started two in the year 2000. And in March of 2000, when the NASDAQ began its 50% decline, nothing changed. There was no news item that you could go back to March 2000 and say, oh my God, this is when this company missed its earnings and this all changed. There was no sudden event. There was a change in psychology that began to unfold and then 9/11. Right? So you had two totally unrelated things, but they multiplied on each other. And that's generally the way these things work, that you start with a position of high valuations, high complacency, people shrugging off bad news, shrugging off uncertainty, not demanding a risk premium. I mean, my God, look at credit spreads. It's unbelievable how tight they are given all of the uncertainty in the world. So I'm not a bear about the world. I don't think American economy is doomed. I think there's enormous resilience. But I'm shocked by the amount of complacency. And you're probably not the only one. I want to ask you before we conclude this, Chris, we had a ton of listener questions. We addressed many of them through my questions to you today and Andrew's questions to you. But there's a question from Allison that I particularly love. What stocks did your grandfather buy that you still hold? Well, and of course, within that, we were very large shareholders of Geico, which was acquired by Berkshire for cash, unfortunately. We were shareholders. I think we were the largest shareholder of General Rhee, which my grandfather owned from the beginning and that became Berkshire stock as well. My grandfather bought Marquell insurance at the IPO and added to it every year when the family would come through town and he would meet with them. And that's a wonderful, wonderful company. And we still own that. We still own some chub. But the one that we don't own was AIG. And AIG is an enormously valuable enterprise. But that was a catastrophic loss because my grandfather bought AIG at the IPO. And I want to ask you, Chris. to say, you know, it was about 50 cents. The stock got up to a high of about 120. So it was a hell of a compound. But then fell back below, you know, with the 95% delusion during the financial crisis. You gave up virtually not all of the return, but an enormous amount of money. You've had a lot of winners. Let's try to. I think Hank Greenberg is 100. He's still alive. And I think he's involved with star. So the 10 years, I guess his son is obviously is the head of job. And and and chub is, I believe right now, the most valuable insurance company in the world. I could be wrong about that. But it's not. It's very close. And and what Evan Greenberg has done at chub is just simply astounding. He's been one of the great leaders in all of financial services. And and at a second generation and running a competitor firm. So having been fired. So it is one of the great success stories. And I think he's a very underappreciated leader in terms of the public consciousness. But what a what a record. So I want to close with one more question from a listener. It's for Andrew and for you. There's been a lot of commentary, mostly negative about the private credit industry fairly or not. So Steve asks whether you can comment on the private credit industry where it's headed. And what is happening? Andrew, you wrote about it this weekend. A lot of private assets and he thoughts there that you can share with us. And we use start because I have a feeling whatever you say I'm going to agree with. I mean, I think there've been some cracks in the in private credit. Either essentially high rate loans, about about 10% to private companies and mostly who've been a subject of LBOs. And you're seeing some cracks in that market. You're seeing some concerns about the software industry. And so I think it'd be interesting to see how well these companies do in a more challenging environment. And I think the publicly traded private credit firm, which are the BDCs are already reflecting some of that risk given the discounts they trade at. Then you have the non-public ones like Decred, which you're not. So I think it's something to watch and I think investors order approach cautiously and we wrote favorably about some of the discounted BDCs. You can also buy alternative assets like high yield bonds or leverage loans, which are an alternative to what have been high fee private credit funds, which have been like the basis for much of the growth that firms like Black Stone, Apollo and KK on the list a couple years. Yeah, I would echo that, Lord, but I would say that within the private equity and the private credit space, which are absolutely entwined. There are some exceptional funds and firms, but in aggregate, the results have been shockingly bad for a very long period of time, especially when you adjust for leverage and liquidity risk. And it is amazing to me the pension funds that lightly allocate. If you look at the return on the New York State retirement fund, if you look at the return on all sorts of state and pension funds, they have been, they have so dramatically underperformed a classic 60/40 portfolio. And yet nobody is ringing their hands yet. And I think that when all of these dispositions, from, you know, when private equity's view is we buy a undermanaged company, we fix it up and we sell it. That sounds great. When you buy it, fix it up and you sell it to another private equity fund, who sells it to another private equity fund, and you have 70 or 80% of dispositions to other private equity funds, that begins to look a lot like musical chairs. And I think trying to get retail investors into this high-fee, high-leverage, low-liquidity spaces, a terrible disservice. And if you just look at the results in aggregate, again, recognizing that there's a huge dispersion of returns and there's some that are very good, I think it's scandalous. I do not think it's a systemic issue for the economy because unlike residential real estate or commercial real estate or stocks in the 1920s, you don't have this sort of systemic exposure at 10 to 1 leverage, even in private credit. You don't have that sort of huge leverage. But I think people took enormous liquidity risk and liquidity was the most missed price asset in the capital markets in the last decade. Well, as you said, interest rates were zero. Yeah, I think it's interesting. You pointed out that very few of these public pension funds are damaged. Actually, own Berkshire Hathaway stock, despite its benefits. I think Warren has talked about that one, but it's interesting. They want to own that, but they they feel that Berkshire is like, they don't want to, they don't want to risk your own Berkshire. Well, every dollar they took out of public equity and put into private equity was significantly delutive. And yet it generated hundreds of basis points of fees for every dollar spent. And some of that was masked by adding leverage and then convincing the buyers that it was low-volve because they didn't market to market aggressively. And so it was really, I mean, it was a real transfer from pensioners and to that industry. And it was not great policy. And so now you're relying on the sovereign wealth funds and particularly Middle East investors to be the providers of liquidity to that. And I think one of the potentially unexpected consequences of what's going on in the Middle East now is maybe some of those sovereign investors saying it's a real problem to have our money tied up in funds where we aren't able to access it if we need to rebuild some infrastructure here. So liquidity is very valuable. The ability to change your mind when the world is volatile is hugely valuable. And the idea that people were giving that up willy-nilly in their pension plans, in their endowments, in their sovereign wealth funds at a time of so much uncertainty. I think is they're really going to regret that. And those allocations are going to be higher simply because they can't get out. Chris, I want to thank you. This has been an amazing call really interesting. Some day we'll have a private equity person on and the two of you can debate on bed. You better put a metal detector on the door. There'll be some big fireworks there. But today I have enjoyed talking to two of my favorite market watchers. So thank you, Andrew. And thank you, Chris, for joining me. Thank you so much, Lauren. And Andrew, it's great visiting with you both. Thank you. Thanks again. Bye-bye. Thanks. Next week on Baron's Live, I'll be talking with our editor-in-chief Ben Levison and Matt Girk and head of Geopolitical Strategy and US Political Strategy at BCAA Research. Matt and his team take a geopolitical approach to making investment recommendations. And as we know, there is no lack of geopolitics to discuss these days. I hope you'll join us for what should be a very informative call. Thanks everyone for tuning in today. Stay well and have a great week.