The Three-Body Portfolio with Dr. Ben Hunt – [Invest Like the Best, EP.73]

My guest this week is Dr. Ben Hunt, the chief investment strategist at Salient and the author of the extremely popular epsilon theory.

I’ve always enjoyed Ben’s writing style, particularly his use of farm and animal based analogies to describe market phenomenon.

In this conversation, we discuss his recent post the three body problem, why growth has been beating value, and why a strategy that he calls profound agnosticism—a take on risk parity—may be the most appropriate investing strategy in what he views as a very uncertain world. We also discuss some of his favorite lessons from the farm.

Please enjoy our conversation!

 

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Follow Patrick on Twitter at @patrick_oshag

 

Links Referenced

The Three-Body Problem

 

Show Notes

1:54 – (First Question) – Applying the three-body problem to investing

 

7:24 – Fundamental view of investing, Profound Agnosticism

 

8:24 – Why has value done so poorly relative to growth in this framework

 

11:01 –  Ben’s thoughts on why value has been underperforming for so long

 

13:52 – Investors should be able to adapt

 

17:49 – Thoughts on the risk parity approach

 

23:23 – Ben’s strategy for working with several teams

 

26:48 – What’s the best way to gain an edge, top down factors vs company/bond individual analysis

 

28:29 – How do you measure risk amid the large amount of uncertainty that exists in markets

 

32:40 – How does Ben personally think about investing

 

34:41 – Ben’s farm and the investing lessons learned by some of the animals

 

39:55 – How bees can plan out their entire work structure by the angle of the sun

 

42:58 – Defining basis risk

 

44:59 – Personal risk vs portfolio risk

 

49:30 – The concept of fingernail clean and our perception of what eggs are

 

53:57 – How ETFs are like mass produced eggs

 

54:56 – Exploring the idea of quality vs scaling

 

58:39 – What is the current challenge/puzzle that Ben is focused on right now

 

1:01:59 – What is Ben looking for when looking into game theory and applying it to the words that are published and spoken about investing

 

1:03:57 – Most memorable day on Ben’s farm

 

1:05:04 – Kindest thing anyone has done for Ben