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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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