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Fill the Gap Podcast Special Symposium Episode with Bill Miller IV, CMT, CFA

 

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Summary

How does the heir to an iconic value manager find their path into the CMT Program? Where does technical analysis fit into the investment process of Miller Value Partners? What are the limitations of seeing the investing landscape through only one lens?

Bringing the CMT Association’s official podcast to the stage of the 49th Annual Symposium Dave Lundgren found answers to all of these questions and more in this fireside chat with Bill Miller IV, CMT, CFA. This wide-ranging discussion covered the process, tools, and approach of Miller Value Partners. Specifically, the use of momentum overlays, support and resistance levels, and core principles of investor irrationality and market trends.

Breaking apart the portfolio management process into security selection, portfolio construction, and trade risk management, Bill IV shared how technical analysis became an integral part of their investment process at Miller Value Partners as a complementary framework to fundamental valuation.

Reference

Transcript

Tyler Wood 0:13
Welcome to fill the gap, the official podcast series of the CMT Association hosted by David Lundgren and Tyler wood. This monthly podcast will bring veterans market analysts and money managers into conversations that will explore the interviewees investment philosophy, their process and decision making tools. By learning more about their key mentors, early influences and their long careers in financial services, filled the gap will highlight lessons our guests have learned over many decades and multiple market cycles. Join us in conversation with the men and women of Wall Street, who discovered engineered and refined the discipline of Technical Marketing.

Good morning, David Lundgren on this fine, sunny Sunday, May 22. How are you my friend?

David Lundgren, CMT, CFA 1:17
I’m doing well. Tyler doing well. Good to see you.

Tyler Wood 1:19
Good to see you as well. And for all of our listeners, what a special occasion for us to release episode, let’s call it 17 and a half special edition from fill the gap recorded live at our symposium what an awesome experience right?

David Lundgren, CMT, CFA 1:35
Yeah it was amazing,

I’m still coming down from it. Because what’s what was incredible with COVID was how it drove so much traffic to Fintwit and other social media platforms. And you get to see and become aware of some pretty great technicians that are out there. As they look for these channels to express their views. And to then now, two years later, be able to actually meet some of these folks that you’ve only come to know through Fintwit, it was just such a special opportunity. And, and I feel like I’ve you know, formed some great friendships that will last for a long time.

Tyler Wood 2:11
Yeah, friendships with someone’s Twitter handle. And now you can finally put a face with the name right?

David Lundgren, CMT, CFA 2:16
Yeah. Taller than they looked on Twitter.

Tyler Wood 2:22
You’re exactly more than those 50 pixels will allow. Oh Dave. It was it was such a great experience for us as well, the entire CMT staff, you know, we spent two years locked out of having a live event. And I know, today’s interview, this special edition was about three years in the making, we had invited Bill Miller, the fourth to the 2020 symposium. And of course, COVID had other ideas about what was going to happen for live events. And we certainly felt just a lot of gratitude, a lot of really positive energy for folks who were looking to get together with colleagues and share ideas and be in person. A lot of unsolicited hugs going around at cocktail hours. throughout the conference, it felt really great to be there in person. But of course, we also broadcast this online hybrid event. It was it was held April 28 and 29th in Washington, DC, but we had attendees from all over the globe. And for many of you who are listening to this, you might want to go back and review some of the content that was presented at the symposium. That’s all going to be available at cmtassociation.org. So Dave, let’s, let’s dive into this special guest for you in conversation with with Bill for what were really the standouts what what blew your mind talking to this great investor?

David Lundgren, CMT, CFA 3:49
You know, I made a big deal out of our last episode with Laura Martin in how it just seemed like she literally said everything we could ever want a fundamentally minded investor who happens to have her CMT, to say, particularly on this podcast, because it’s our goal is to, is to showcase how these things work together and to have Laura do such a great job in the day that, you know, she had a sell rating on Netflix, and it blew up on that day. And she accredited, she credited much of her CNT training to that outcome, to then follow that up with this special episode with Bill for Bill Miller, the fourth, where he is not only a devout fundamental investor, he’s a value manager and see into learn how value managers actually put put to work. The tools, the toolkit of technical analysis was was really really interesting. And I think the real surprise to most certainly to me and I think to you as well was is how he indicated that his dad, Bill three actually looks at charts and refers to supports and resistance levels when he’s when he’s making decisions and whatnot. So it was Really refreshing for me. He’s he’s a super talented investor, very inquisitive and very thoughtful in the way he thinks about the world and in his portfolio management, and it’s, I guess, in the end, it was not that shocking to know that somebody like himself in his in his dad, who are very holistic in their thinking, went out and, you know, got their CMT, to rattle that.

Tyler Wood 5:22
You know, that was, for me that comment about so Bill Miller, the fourth referring to his father saying that it was he was adamant that you see things from multiple perspectives and be able to, you know, dissect or pull apart an investment thesis or, you know, a trade that you’ve got going on, from multiple lenses, and obviously, the technical piece, not widely taught in business schools, and, you know, there’s a lot of fundamental dogma, but to hear that they were not dogmatic that they were really open minded to, all the tools that they could put to work was was great. And then obviously, you know, big, big commentary around how the tools fit into their process, and nice to hear just how significant a portion it is in their in their investment practice. Also, you know, really interesting sidebar comments around other investment ideas. So the idea of, you know, multiple perspectives are looking for opportunities in various spots, Bill for referenced big league advance friend of his Michael Schwimmer, who had set up, you know, kind of a momentum strategy on minor league baseball players, which was fascinating to see.

David Lundgren, CMT, CFA 6:34
Yeah, yeah. I mean, it’s sort of, it’s sort of like a derivatives play on trying to like, like call options on on the future prospects of minor league ballplayers and, but to your point, the fact that he’s involved in something like that, as well, just as another example of how he looks at the world, very, I mean, his portfolio is actually very eclectic in the sense that you can go across the capital stack, in a corporation and even do privates and whatnot. So yeah, this just yet one more example with this, with this minor leak, exchange, if you will. It’s just another example of him seeking ways to, you know, look and act in think differently about the world.

Tyler Wood 6:39
Absolutely opportunity wise, I know, your discussion with with Bill four went into the crypto and decentralized finance area as well and interesting to hear a value manager with a really strong positive opinion on the crypto space. Certainly, from a technical perspective, you know, everybody is well aware of just how destroyed those charts look right now. But, you know, to, to each their own right, one man’s junk is another man’s treasure.

David Lundgren, CMT, CFA 7:46
No, and I remember because I used to follow when I still follow Bill three, which is bill for his dad. And I followed him for for for years now. And I used to get a charge out of back in the 90s, early late 90s When he cuz he used to run the Legg Mason Value Fund. And one of one of his if not largest positions was Amazon. And he used to get pushback constantly about how you can’t possibly call Amazon at a value stock. And, and but he you know, he was looking out 10 years and saying yeah, but if you look at what the stocks gonna look like, 10 years from now, it’s actually extremely cheap. And of course, he was right, it went on to become one of the largest companies in the world. And so that’s just here we go again, another example of how they stretch their minds to think about things creatively. And in that they they’re doing so with, with their views on Bitcoin, of course, most technicians today would would have a hard time certainly justifying or identifying any kind of, you know, positive transition virtually across the entire digital currency space. But again, that doesn’t mean like you can’t have a fundamental view where you would you like Bitcoin, despite the charts, because Amazon in 2000, prior to becoming a great company that it is prior to doing that it did go down 90%. So the fundamental view, right, it’s just that you have a headbanger of a decline in the interim, that technicals can really help you navigate through and make, you don’t have to necessarily, if you’re that strongly, your view, is that strong about it, longer term, you it doesn’t mean you have to sell the entire position. But the technical deterioration could tell you to either reduce the position size or don’t buy anymore, and so you get you see a trend change or maybe find ways to hedge your position with options or something like that until the technical physician, you know, improves.

Tyler Wood 9:43
Yeah, just to paraphrase you, Dave, that navigation of the gap between value and price can save a lot of headache and protect a lot of capital doesn’t mean that your fundamental thesis is wrong. It’s just that the market hasn’t come to agree with you yet and being able to execute as strong and responsible trade discipline and portfolio risk management doesn’t doesn’t mean that you throw out all of your analysis or see value from a real wide eyed perspective on the world. But in terms of, and I’m going to use that dirty little phrase market timing. You want to you want to pay attention to what investor behavior is telling you, and that all shows up in price. Dave, without any further delay, let’s get to the live interview from the stage of the CMT Symposium on April 28 2022.

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David Lundgren, CMT, CFA 11:21
We’re speaking with Bill Miller, the fourth who is the son of what we say Bill three, see, I’m a pretty smart guy. I I’ve been in the institutional business for about 30 years and managing money, but also advising other portfolio managers. And so I’ve had the great fortune of working with some of the great fundamental oriented managers both on the growth side and on the value side. And what I have found just as a technician my entire career, I have found that the ideas that I generate visa vie the technical process just really, really resonate well with growth oriented managers. And I always struggle to find that similar overlap with value managers, typically, when a stock is really cheap, the chart that doesn’t look great in a trend following perspective, maybe on a mean reverting perspective, whatever it might look okay, but I struggled to get value managers to embrace trend following oriented ideas. So here we are, we’re sitting here speaking with Bill for he’s a devout value manager. And somewhere along the line you you thought about your process and you said there’s something missing here I need to fill the gap. And that’s by the way, that’s that’s the point of the name of the podcast fill the gap. And so somewhere along the line, you said, I’m going to get my CMT. Can you talk to us about that? What got you to get your CMT, and then maybe a little bit about how you do use it?

Bill Miller IV, CMT, CFA 12:39
Sure. So I actually graduated business school in 2008, spent a lot of time and financial classes, trying to figure out the market, how it all works, how it fits together, after graduating, ended up going to work with my dad’s firm, obviously, fundamental value manager. And along the way, you know, we started this income strategy that I now run, and

David Lundgren, CMT, CFA 13:05
That’s, that’s a mutual fund. Is it private fund?

Bill Miller IV, CMT, CFA 13:08
it’s a 40x, what do you have to go anywhere, the whole idea is a high level of income. And so we’re looking to buy undervalued yield is kind of the premise there. But um, so, in working on that portfolio, and employing a lot of what I learned at business school, I then did the CFA right after business school got that done in 2011. And, you know, rigorously applying those principles to the market securities with yields, bonds, up and down the capital structure. Yeah. I felt like something wasn’t working. And a lot of the time there, you know, we can talk about the Fed regime and all kinds of other stuff, but we will, if things weren’t working, and I was sitting here, like, this is clearly too cheap, every piece of fundamental theoretical work will tell you, this is too cheap. What am I missing here? And, you know, the more you dig into Bloomberg, the more time you spend in the financial services industry realize, there’s a lot of different ways to skin the cat. People look at the market from so many different perspectives. The marginal trader is not necessarily me, it’s not at all actually. And, you know, one of the things my dad is really well known for is coming at a problem from a variety of new perspectives is really valuable. And I was missing this entire set of perspectives that a huge part of the market was employing so you’re at a massive disadvantage if you don’t understand these types of things. You’re only looking at it from one angle, so I realized I gotta check this out. I found the CMT online and did a test and here we are,

David Lundgren, CMT, CFA 14:44
and I know one of the things I always appreciated a huge fan of yours as I followed his, his uh, his success through the years and I know that he he was he’s a very open minded investor. So he would engage in these these these things. Think groups that just really try to expand your the way you think about things, science and just bringing all these disciplines into your thought process so that you can have as holistic a decision making process as possible. And so I think even somebody like that, who’s that open minded? And his his son comes to and says, Hey, Dad, I want to get my CMT. What did he say about that? Was he was he that holistic?

Bill Miller IV, CMT, CFA 15:21
No. He said, Absolutely, you should do that.

David Lundgren, CMT, CFA 15:23
Great

Bill Miller IV, CMT, CFA 15:24
He actually used a lot of technical analysis himself, although he’s,

Tyler Wood 15:29
we’re recording this. We just hear what you just said,

Bill Miller IV, CMT, CFA 15:32
Oh, no, here, here’s an example. So the main sheet that he uses to look at his portfolio every single day, it’s called a daily Performance Report. And it’s got every single position, ranked by weight. Okay, so first stock things up by weight. And then you know, has stock price and has size of the position percent size. And then right next to that, which is what matters is performance yesterday, performance last week, performance last month, performance last quarter performance last year, trailing year. So it’s all these performance statistics of each position relative to each other in the portfolio. And then above that, we got commodity a you know, as SPX small cap, but so we’re looking at, we’re looking at this stuff regularly. And I, you know, I never would have thought of that as technical analysis.

David Lundgren, CMT, CFA 16:18
That’s exactly. So that’s momentum.

Bill Miller IV, CMT, CFA 16:21
And I think people also make too much of a distinction between, you know, fundamental and technical analysis a lot of time because we’re all trying to do is just recognize patterns. And so we use different toolkits to recognize those patterns. And fundamental guys are looking at, you know, the actual cash flows, generally speaking, or affirming the prospects for those discount rates and things like that. And, and technical guys are looking at other things. But there’s one of the things that’s taught in the CMT, that is just danced and danced around in the CFA is insider behavior. And we look at that extensively. Just because when you invest in investing with people, it’s important to know what those people are doing and thinking. We look at the context around insider activity. And we think about that that’s one of the highest signal value things I think out there things probably still underutilized, broadly speaking. So that’s a CMT thing. And it’s not really touched upon the CFA, but it matters immensely, right?

David Lundgren, CMT, CFA 17:20
Before we get too further down a discussion of how you think about markets and whatnot, I wanted to ask you one of my favorite questions, Tyler has to ask of a guest as who you’re really influencers? And perhaps what books have you read? And in your case, it seems like a silly question to ask, but I’m going to ask anyway, just because I guess maybe the proper a different way to phrase it for you particular was what was it like growing up with Bill three at the dinner table? Was it sports? Or was it kind of a part of by value stocks?

Bill Miller IV, CMT, CFA 17:52
Is a lot of sports? Yeah, it was a lot of him also getting upset about people doing dumb stuff. And not implying like rigorous thinking and goal based analysis are actually using evidence to connect, you know, ideas to actions. And so that’s one thing. I think he’s done really, really well. It’s just being relentlessly evidence based. And, you know, that’s an important thing I’ve taken away from that, from influence perspective, I think, one of the best books out there, right? I mean, I go through a whole bunch, but the psychology of money by Morgan Housel.

David Lundgren, CMT, CFA 18:30
Yeah, that’s great. But it’s such a good book, I started actually sent me a copy of that.

Bill Miller IV, CMT, CFA 18:35
So good, all the lessons in there just times and so well distilled to and so I think a lot of those things are things that I’ve learned over the years, but never seen him distilled in that way in such a concise format.

David Lundgren, CMT, CFA 18:46
And I just thought this is not an advertising advertisement for walking, but is his, I guess, we still call it a blog these days. But he writes a fantastic blog, and it’s very thought provoking. So like, I’m not gonna mold person in the way he writes and thinks about the world. It’s just really refreshing. And and again, it’s just pulling your mind in different directions to get you to think differently. Yeah,

Bill Miller IV, CMT, CFA 19:05
Michael is so good about differentiating process and outcome, you can have a really good process and a bad outcome and vice versa. And it’s important to to keep that in mind.

David Lundgren, CMT, CFA 19:15
Exactly. Yeah. We we had an opportunity briefly a couple of times to just get to know each other a little bit better before today’s discussion. And one of the things you had mentioned was and I can’t remember if you said it was when you were at Miller Value Partners, that was just before you joined, where they had done an analysis of your holdings. In Can you talk about that? Because I just think that that’s just incredibly refreshing. But it’s also I think this audience really loves to hear the story.

Bill Miller IV, CMT, CFA 19:46
Yeah, it’s a good. It goes back to the first question, I should have mentioned them but with regard to value and employing technicals as a value manager, they had a third party. Take a look at the history of the Opportunity Trust, and how they could have improved their own behavior. And the guy with the third party found was if they had just waited until their picks one above the 50 day moving average, they would have cut off a ton of downside. volatility. So the hobby not obviously, but they were identifying things that were cheap and inexpensive. But the reality was, they could keep getting more expensive. And by just employing that kind of behavioral hack, and so they could, you know, improve their your IRR significantly.

David Lundgren, CMT, CFA 20:32
Yeah. And that’s, that’s one of the main things that I’ve seen fundamentally oriented portfolio managers benefit from technicals, many ways. Want, you know, one of the great things about technicals? Is it scalable, so I can’t remember who said it. But he the quote was, I can look at 1000 charts in about an hour, how long do you think it would take me to look at 1000 balance sheets, you know, so that’s, that’s the scalability of technical, so it helps you with that. Where I’ve have seen it most benefit fundamental investors, it is on the risk side. So most fundamental managers have their style, they have the strategy, they know what they want to own, they know how to execute their process, but they don’t know is when they’re wrong. And what you just highlighted is a perfect real time example of how I, one of the best fundamental managers who’s ever lived. Who you show of hands, who knows who Bill Miller is, you’ve heard of him. So he’s, why don’t you introduce your dad you do away that’s

Bill Miller IV, CMT, CFA 21:31
his claim to fame is outperforming the s&p for I think, 15 consecutive years. Yeah,

David Lundgren, CMT, CFA 21:36
yeah. Which is due at one year is tough. 15 years in a row is it so he’s clearly in the top echelon of money managers of all time, in here. So here’s one guy who’s of that of that caliber, adopting technicals in a very rudimentary, very, very simple way. But it’s very, very powerful and very effective. And that’s actually, of all the fundamental managers I’ve ever seen, incorporate technicals into their processes, almost invariably, that’s the most impactful ways that they just have a column in a spreadsheet that delineates between good and bad trend, no matter how much they like the stock, I can’t buy it until they can at least make it a big position until the market agrees with them. I’m sorry. Yeah. So in that, sort of, in that vein, what what happens in a portfolio that you’re managing where you’ve got your fundamental thesis, you think everything’s going great, you just said the earnings call, and you’d liked what you heard. But the chart on in a meaningful enough timeframe, like the short term charts is, Charles Dow said, all the way back to the early 1900s. Short term charts are driven by emotions and fears, long term charts driven by fundamentals. So I’m assuming you’re looking at longer term charts, you’re not looking at the hourly chart and daily chart. So you’re looking at the monthly chart, say, for instance, on the weekly chart, it actually reflects trend, and it goes below the 200 day average, and the 200 day average starts going lower. But in your mind, you just got off the earnings call. You liked what you heard, what do you do with that disconnect? Do you actually respond to that? Are you or do you? Obviously, you sharpen your pencil, but what else? What do you do you take action,

Bill Miller IV, CMT, CFA 23:03
someone on the last panel made a point that you need to know what you’re looking at before you actually go into the position. And that’s incredibly important to be intellectually honest with yourself and say, Okay, here’s the thesis, here’s the three or four things we’re betting on, here’s the signposts to look for, if we’re going to be wrong moving forward. And it depends on what was said during the call and how that relates to your thesis, right. And if it was one of those things, you need to start thinking carefully about, you know, changing the thesis or getting out of it. If it’s not, there’s obviously also an offset to that move to and that when something moves, lower valuation changes at the same time. And so you then have to triangulate all of those things together. But it goes back to originally saying, Hey, this is what would make me wrong. This is what I need to watch for. And if it’s one of those things, and it’s still even hard when you know that you said this was what I was looking for this was the problem. And then getting out. It’s still pulling the trigger on that can be pretty tough.

David Lundgren, CMT, CFA 24:01
Right? Yeah. So So you could say, though, that if you went through that review process, and you still kind of came away thinking you liked the story, and everything’s fine. You, would you would you, would you or would you not take action, if you could clearly see in a meaningful enough timeframe that this chart is broken?

Bill Miller IV, CMT, CFA 24:21
I’d love to say I would but I know from evidence that I don’t always do. Yeah, yeah. It’s tough. Yeah. I don’t think we’d ever do something purely for a technical reason. And one of the one of the lessons for me from the CMT exam in curriculum was nothing works in isolation, and um, but the more stuff you have in your favor from a technical perspective, the more likely it is to work. And I think you can apply that more broadly to any stock or security which actually represents a set of attributes, more attributes that are in your favor for that security. the better it is. So you want to see it both technically working, right? You want it to be good technically, you also want it to be fundamentally inexpensive. And you also have this insider active. So the more things you can layer on it, it’s almost like a quantamental approach in a way. But it has to do with just making sure there’s more things in your favor, right? To maximize your odds, right?

David Lundgren, CMT, CFA 25:20
It’s kind of like, the way Ted Williams broke up the pitch the strike zone, yet he broke it down and said on the 64 squares or something, he knew his batting average and every single one of those squares. And if the ball was in a square, where he knew his batting average was 180, he wouldn’t swing. Right. But if you knew that his batting average was 190, in this specific square he swing. And that’s just making sure that the event the you know, the pitches in your favor, and your skill set

Bill Miller IV, CMT, CFA 25:44
Were baseball fans, and one of the things that’s funny about that chart, is if you look in the chart, it’s a great chart, by the way, there’s no signs of hitting the signs. It’s a phenomenal, great book, great book for trend followers and investors to read it is. And if you look in that chart, there’s only like, somebody I know somebody that once asked him a new Ted, he said, Hey, Ted, how come you hit 400 This year, but when I look in that chart, there’s only like three balls or four Andreessen swung it those three pitches?

David Lundgren, CMT, CFA 26:14
Yeah, you know, I the reason I was asking you about the, you know, there’s a, there’s a certain clear deterioration on the chart, that’s again, in a meaningful timeframe. So it’s driven by fundamentals, and it’s deteriorating. You know, in your you joined the firm in 09?

Bill Miller IV, CMT, CFA 26:29
08

David Lundgren, CMT, CFA 26:29
08, so were you there during the global financial crisis? I was. Yeah. So that’s what I always thought was, you know, we didn’t we didn’t call the crash or anything, we had no idea what was coming. But when you looked at the magnitude of trend deterioration in weekly monthly charts, it was clear something was bad. I mean, it was you could tell that it was once in a generation type of deterioration. So in our portfolios, we did go to cash, because we were bearish, we went to cash because the process was ready to trend, sell that stock. Okay, let’s redeploy the cash into another trend. And there were no other trends. So that cash just stayed and then just wash, rinse repeat before I think it was probably August or so or, or June or July, we were 100% cash. And that’s and I think a lot of technicians can relay A similar story in that period, because we just follow a trend. And we find out the fundamental reasons later. So I would be curious to know if if there were any lessons from 2008, that that you’ve learned, you, you and your partners at the firm have learned that you’ve used and utilize to change your process and make you more aware of that potential left tail risk where this does happen. I think it can’t remember who it was. But it basically who said it recently, but those types of events have happened three times in the last one year. So they’re supposed to happen once every 100 years, but they seem to be have a they have a high recurrence. So yeah,

Bill Miller IV, CMT, CFA 27:52
They keep coming up. But the markets still goes higher doesn’t also so it’s an important point to keep in mind. It’s true that it’s a process. You’re it’s important to think about the whys and your process, and to think about how they’ll holistically fit into what you’re doing. So, you know, it’s really hard for us and I think most people to intellect, if they’re intellectually honest themselves to call these big drawdowns, just by definition, they’re rare. Reality is world tends to get better over time tends to improve. So people like to work together that the world is you want to be optimistic. And so trying to predict these big, unique events is challenging. And I know the charts sometimes point to it, and you get out and that’s great. And congratulations. But they also said bond markets called 20. The past 10 recessions, yeah. So if you do that, and you go to cash, you then have to get back in at the right time. And so it also creates tax liabilities. The only thing you know, when you sell a heavily appreciated securities, you create a liability for yourself, and you have an outflow, then you have to pay the government. And you just have to think carefully about your process and how it all fits in so we don’t try and actively time these things. For the reasons I just mentioned, we try and bet on success. Somebody mentioned yesterday, economy grows, I mean, the stocks go up 70% of the time. That’s exactly right. And they go higher over time, you need to think about your process. And we tend to bet on that.

David Lundgren, CMT, CFA 29:17
Yeah, yeah. Maybe you can take a little bit of time and just detail as much as you’re comfortable doing your process. And, you know, tell us about your portfolio, what you’re looking for. A little bit more about the strategy and your philosophy.

Unknown Speaker 29:29
Sure. So the particular strategy was founded in oh nine, actually, in the depths of the financial crisis, when we looked around and saw high yield debt yielding 25%. And that’s what that market was trading at. We said, well, look, if this stuff doesn’t work, no one’s gonna have a job and we’re going to be in a Mad Max kind of scenario, a good time to start a strategy like this. And even if spreads didn’t recover that year, they’d eventually recover. And we’d clip a really nice income stream in the air No. And the idea was equity like returns at a higher level in the capital structure. That’s still the idea of we can go up and down the capital structure go anywhere in the world look short, just long, we don’t go short, no shorting is such a hard thing to do, again, because stocks tend to go up most of the time. But yeah, that’s it high level of yields go up and down capital structure, we take concentrated positions we sell and we think the market agrees with us, or our position on the security changes that we find somebody else better to buy. But we’re the largest investors and all of our strategies and funds were a huge portion of that fund, personally.

David Lundgren, CMT, CFA 30:43
Yeah. And you’re, it’s clearly you’re focused on yield, which tends to have a very high overlap with value in general, right. So you would call it a value fund or use more like, think about it as being an income fund that happens to traffic in value oriented games.

Bill Miller IV, CMT, CFA 30:59
I’d characterizes the ladder. So I mean, 30% of it’s in debt right now, this is not your father’s fixed income portfolio, or biggest depositions is unsecured debt of endo pharmaceuticals trading at 48 cents on the dollar, 44 cents in the dollar. Now, just because we’ve done the valuation work, and we’ve looked at the liability that we think it’ll eventually be there, and we think they’re ultimately worth par. And now they’re moving against us, right? So that’s something we obviously consider. You know, one of the things also the CMT has taught me is, is just the immense amount of knowledge tied up in security prices, and being able to use that to your own advantage. So one of the things I love to do is look across markets and say, okay, where the where the discrepancies don’t make sense. So we’re buying now the equity of a building materials company in Europe, whose long term debt yields 2.8%. I don’t know why anyone would ever buy that, by the way. But long term debt yields 2.8%. And the free cash flow yield to the equities, 11, 11 & a half percent. And so that’s pretty interesting discrepancy, right? Like, why is there that difference? Something’s probably going to break as someone would say, Something’s gotta give. And when you do the actual fundamental work on it looks like the equities where it’s mispriced charts, not great. But uh, no management on 25%. They’re buying shares every single day in the open market, management just bought 20 million euros worth of the stock. That’s all technical right there. Yeah, trades at four times, I think it’s worth 50, 50 to 60%, more than more trades today.

David Lundgren, CMT, CFA 32:37
So, so I want to run something by you. That is sort of a philosophy I’ve held to for a while. And it’s probably influenced by Frank, who was my former boss, and in very good friends today. In we talk about this, often, I think we actually talked about it last night over drinks, but it’s my belief that that value actually doesn’t work. And it’s never worked. here me out.

Bill Miller IV, CMT, CFA 33:01
Yeah, no, I’m not gonna disagree with that.

David Lundgren, CMT, CFA 33:04
So it’s not like value stocks don’t go up. Because they’re cheap, they go up because the fundamentals, in fact, positively, thereby unlocking that that value is becoming the fundamentals become a catalyst to unlock that cheap valuation. And so by definition, that means that that stock is no longer a value stock, it’s actually now a growth stock. So it’s, it’s growth that works all the time. It’s not value working, because it’s cheap, right. And so, in other words, the stocks that are cheap, that don’t inflect higher, and try and hire are what we call value traps. And the reason they value traps is because there’s no fundamental catalyst to unlock the value.

Bill Miller IV, CMT, CFA 33:41
Yeah, no, I think most businesses are value that are low, multiple businesses are low multiple, or trade a low multiple, because they’re crappy business. Yeah. And they’re in a competitive space and no pricing power, any number of reasons. But yeah, over time, share prices are generally gonna follow earnings per share, right. And so if you can find something where that’s not adequately discounted in the current valuation, that’s where you end up generating the alpha and making a lot of money, right. But you know, stocks tend to also follow marginal returns on or incremental returns on invested capital. And so that’s why you’re seeing now all of these Ark names that have these high growing things with no returns, actually, that’s again, going down and things that, you know, capital intensive businesses and inflationary environment, those returns on marginal returns on capital are going through the roof, right, and they’re not really investing anymore. A lot of them are not drilling all that much time oil. And so that’s kind of what’s the dynamic is right now in the current regime,

David Lundgren, CMT, CFA 34:42
Right! And so in that, in that regard, you you tend to find that your fundamental process works better in a certain because one of the great things about technicals is it’s fungible, you can, you can use that almost the same exact strategy across asset classes across timeframes across regions. You name it, it’s It’s trying to always try and follow. If it’s a price, it’ll try and then you can use the same tools. Fundamentals is different. Right? You can’t you can’t use the same valuation metrics, even from sector to sector, that’s very different. You certainly can’t, you can’t use the same fundamental techniques to analyze a company as you can to analyze soybeans, right. But you can’t do that with technicals. So I’m curious. Do you find that your process the way you executed on the fundamental side, tends to work better in certain sectors? Or is it pretty pliable?

Bill Miller IV, CMT, CFA 35:30
Tends to work better in stuff that I know well! Yeah. So it comes down to circle of competence and what you know, and don’t and understand it don’t. And I think that’s where it works the best right.

David Lundgren, CMT, CFA 35:42
Stick to Unity. Yeah. So your portfolio is I think you said was concentrated. And in what I find is in fight again, would cooperate this but the investors love the idea of concentrated, eclectic, uncorrelated, they love all of that until, until it’s eclectic, and uncorrelated, right? They they love the idea. And so it’s action so that you deliver it. So we struggled with that over the years. And so my question for you is, you have a benchmark, you have a public mutual fund, you have a benchmark that it’s a benchmark to compare to, what are some of the mental tools you use to help yourself personally, because this is a very tough thing, it is why it took a year off, it’s very tough to do. It’s draining, at least I find it is maybe your answer will be different. But what are some of the mental strategies you use personally, to help yourself navigate the windows of time where you have your bet, you have your conviction? And you just really deviated from the benchmark, and you didn’t use a phrase from earlier getting your face beaten? How do you deal with that mentally? I’m for yourself, and then we’ll talk about how you deal with it for clients, because that’s even more important.

Bill Miller IV, CMT, CFA 36:52
I go and take the CMT exam. Yeah. That’s, that’s what led me to it. No, I think it’s understanding why having a good understanding of why you’re underperforming, the worst is when you sit there and you go, why am i You can’t understand exactly, then you got a real problem? Yeah. If you understand why you’re underperforming, and understand the conditions that would cause that to reverse and what you’re betting on and what’s likely to happen in the future, you can get more comfortable with it.

David Lundgren, CMT, CFA 37:20
Right? And how about clients? Because at the end of the day, that’s Yeah, I think your answer was perfect. Nothing great in your answers. But I think that was exactly how that’s certainly how I think about it as well. But where we’ve struggled is trying to get that same level of conviction and understanding at the client level, because at the end of the day, you can have a great idea. But if a client comes in at the highs and lows of the lows, that’s doesn’t help anybody. I think somebody mentioned that Peter Lynch’s track record was George V. Lynch was 20-29%, of the average shareholder was 10%. Yeah, and that’s because of their buying high selling low. So and I always is that the more I’ve been in this business, that the more I’ve kind of felt like the onus is on the manager, the portfolio manager to properly educate and communicate with your clients and tell them and help educate them as to what to expect, as you said, this is what happened. This is how we’re underperforming, but we understand why. And so therefore, that’s why I as a shareholder, I’m adding to the position, that that kind of thing. So if you proactively I know it’s a mutual fund. So it’s a little hard to do this. But is there a way that you can communicate to your clients and help coach them through these very difficult, but at the end of the day, very rewarding if you pull it off properly? These periods?

Bill Miller IV, CMT, CFA 38:33
Yeah, absolutely. They need to know what’s going on the need to understand the strategy going in. And I think we’ve had a pretty good, you know, track record on the actual shareholder redemptions or lack thereof. I think they part of the problem, too, is mutual funds. Is it honestly, it’s a dying rapper, but it is. And so it’s important to actually one of the lessons I remember from business school is getting a growing, sitting, if you’re, if you’re in real estate, want to be in a growing city want to have that growth. And so, mutual fund rappers not ideal from that perspective. But it’s also not ideal from a communications perspective, I think now, you are, you’re actually in a really interesting point in the Investment Management landscape, and that you can actually have products with daily transparency, where you can communicate with shareholders directly live and nobody’s really doing that. Well. I think we’re gonna eventually do that. Yeah. But yeah, clients absolutely need to be informed of the bets you’re making the overall rationale behind the strategy and when it’s likely to be volatile or and when it’s like we were pretty explicit when we’re likely to underperform the benchmark and when we’re likely to do well, and I think people get that.

David Lundgren, CMT, CFA 39:47
And the idea is to coach them on that before it happens.

Bill Miller IV, CMT, CFA 39:50
Yes, right. Exactly.

David Lundgren, CMT, CFA 39:54
So we had some more questions for him on the on the portfolio, but I know we have some we have limited time, and I want to save some time for questions from the audience. So let’s, let’s maybe move to current elbows. And I know, obviously, we just had a brief discussion on cryptocurrency and whatnot. I know that, you know, Warren Buffett and Charlie Munger are very anti they’re like weapons of mass destruction, social financial wealth, and, and then we have Elon Musk, who’s all in, at least for now, who knows. But we so we have these very smart, very successful people who have looked at the same data they’ve looked at, they’ve probably spoken to the same experts, but they come away from it with a very different conclusion, which is, you know, thankfully, that’s why I’m one of the main reasons I’m a trend follower is because I let the market figure that stuff out for me. And we just heard somebody say that the best way to invest in crypto is using technicals. Because at the end of the day, trying to trend and all that, but we do have these smart people that weigh in with completely juxtapose viewpoints. And I know you and your dad or or I don’t, I wouldn’t say all in on crypto, but I know you believe in it. So maybe give us a quick synopsis as to what you’re thinking about it and why you believe it.

Bill Miller IV, CMT, CFA 41:04
Yes, so we’ve been buying steadily since 2013. Bitcoin. I kind of got interested in it just from reading about in the paper. And just saying this is a unique, weird little idea, the thing super volatile, let’s take a look and see what this is about. Now, when you actually dig into the white paper, and understand that it is actually a technological, technological innovation. So you mentioned earlier how people sit here, or they look at it from different angles, and you get a lot of smart people saying, Oh, this is garbage with that, because this doesn’t make any sense. This is rat poison squared, whatever. The reality is, it’s it’s it’s a new technology, in that you can transact with anyone anywhere in the world without any centralized authority. You don’t need government to bless it, your ways around that if when you actually look at how the protocol works, not that you need to be around it. Because if you look at the White House, white paper, whatever the executive order that came out a couple of weeks ago, they said they want we want to be a leader in regulating this stuff. Not we want to shut it down, we want to be a leader in allowing this innovation to occur. So there goes your legal could get banned one day bear case. Although I think that was out the window long before that, when they started auctioning Bitcoin to US citizens to the I think they’ve auction something like 25 or $50 billion worth of bitcoin to the to the general public. So you can’t do that and then go ban it. I mean, that would just be strange, I think. But again, it’s a technological innovation that hasn’t existed before it because it’s a self bitcoin is different than crypto, I want to make that point. It’s expensive. So it they’re entirely different technologies when you look at the consensus mechanism. And that’s why institutions are moving into bitcoin not moving into all these other things. So it’s, it is a technological innovation. It’s impossible, supposedly impossible to value, but it’s not at all because there’s a lot of frameworks you can use to think about it. And I wrote a piece called the value investors case for Bitcoin in 2015. So our website now

David Lundgren, CMT, CFA 43:04
reminds me of your dad constantly having to defend his value definition of Amazon. Right, right. In the 90s.

Bill Miller IV, CMT, CFA 43:09
Yeah. Well, you know, to that point, what’s really interesting is that all things that have massive right tails on him, every single one of them as people go on, doesn’t make any sense. This is silly. It’s stupid to sell books on the internet. So I mean, you know, we’re also invested in a really cool thing, personally called Big League advanced. It’s run by my friend, Michael Schwimmer. And so he this is financial innovation. Everyone thinks they’re gonna do a start up and they’re going to, it has to be an online thing. This is Financial innovation at its best. He he was a pitcher for the Phillies, the Blue Jays, and he realized that when he was minors, he’s playing these guys making 11 grand a year, in their event, a lot of them are eventually going to make 30 million a year. And there’s an interesting arbitrage opportunity there. Right. And that you can create a effectively a venture capital fund and get the guys who you think are going to be the best players. So he came up with all this around, Moneyball was coming out, working on stats and all these other things. And he came up with this idea, and he took it to a ton of investors. And it was pretty much all knows. So we were personally the anchor investor in this thing, and what’s called the Big League advanced. He’s now in his third fund, every single one is like his third one’s been oversubscribed, raise raise money like that, right? And so it’s income share agreements with minor league players. He, you know, did the models on OPS and who’s going to do well and ended up doing deals with a bunch of guys and that fund is performing incredibly well. It’s uncorrelated with anything else. And so that’s really cool financial innovation. My point on that is everyone he took it to accept individual investors who do weird things were like, Absolutely not. This doesn’t fit into this bucket. This is weird. And so things generally speaking, that fit those categories, often tend to be the things with the right tails. You know, the world is governed by fat tail events, and people underestimate how often those can happen. And and one of the things that also super interesting about Bitcoin for this particular audience, I’m surprised that more people are not into it just because the technical data that you can get on the blockchain is unsurpassed relative to stocks and bonds and other stuff like that. So you can get your mind there’s data ever being produced 24/7 number of wallets being created, realize price of every single coin on the blockchain and a blockchain. All kinds of information out there that you just can’t get in stocks and bonds. And that data I think, is ripe for potential people that want to be active managers in Bitcoin. I think it’s interesting. intellectual exercise. Can you outperform Bitcoin using technical analysis? Yes. I don’t know. I think probably yes,

the answer is yes, we have. JC pres was I think it was episode 16 guest on the podcast. And he did a great deep dive on that. What I’m excited to see coming out of his company is when if he eventually releases it to the public to make it more broadly available, as he’s doing all kinds of like breath work, and index development and things like that, that’s basically taking the same tools we’ve used for several generations in the technical community and using them to make similar assessments of the blockchain in that blockchain, digital currency space. Yeah, so it should be very transferable. But the idea is, if I understand is it is that one of my concerns about digital currency overall, is that it just struck me as being very, very similar to all of the IPOs that came out surrounding the internet, from say, like 95, to 2000, where we had all these companies that came out, that would just put a.com At the end of their name. And there were many things where they really didn’t have a defined business plan. And very similar to the specs of today. And in the hundreds of them came out just before the bubble took off. And in the hole, we now know that that’s a cemetery now of all those, those former companies. Today, when you look at the the most of the charts of I look at probably four, four or so 100, digital currency charts on my weekly chart review, in almost all of them start in 2020. Very reminiscent of how these things happened, we just get this flush of IPOs. And then the thing takes off, and then everything and so far, the evidence seems to be pointing to these things are watching. And we also know out of the bubble in 2000. We also know that all played out a lot of most of those companies went out of business, but we do now have Amazon, right Apple survive we now have Apple So somewhere in there is an Amazon maybe it’s Bitcoin, but it you see a similar fate for most of those other currencies, where they’re just like, sock puppets.

David Lundgren, CMT, CFA 46:47
And yeah, I think it could be even worse than that, that, you know, they may eventually be ruled unregulated securities offerings, who knows? Gensler has said that Bitcoin is not an unregulated securities offering again, it goes back to the consensus mechanism, where transactions are verified, but And again, the impetus of it, there’s no, for Bitcoin, there’s no head of the snake to cut off, there is no centralized authority. It’s entirely decentralized. And if you think about the history of fiat currencies over long periods of time, they have all failed, right? And if you think about the relevance of government over time, that is also going down. And so you can see this being a multi decade sort of interesting trend.

Do you think the prospect for regulation though, would undermine the law, those values that people point to in digital effects?

Bill Miller IV, CMT, CFA 48:30
I think regulation is a good thing. I also think owning some self custody, Bitcoin is a good thing. For that reason, but regulation is a good thing, because it brings additional clarity to the space.

David Lundgren, CMT, CFA 48:46
Yeah. Interesting. Let’s talk maybe about the fed a little bit. Sure. What so we had some great discussions through yesterday with John broke George noble and Jim Bianco talking about regime change. We see it in the charts all over the place. I mean, it seems pretty clear that these are pretty violent, changes, you see what’s happening with the Yen. These Fang stocks are blowing up one by one. You know, there’s a lot going on around the world. And it all seems to be pointing to a regime change of some sort. And so from a technicians perspective, all we do is let the market figure that out, you know, way I like to say is that the higher the market to do the fundamental analysis worse, it’s proven itself to be pretty good fundamental analysts over the time, all the time. That’s why it’s so hard to beat. So that’s our that’s our shit. We just check our opinion at the door and just follow Trent. I’m curious from your perspective, where you’re not that devout of a technician, you come to this from a fundamental perspective, and you’re seeing all these things happen technically. Can you can you see the fundamentals coming together with a chart? What’s what you see in the chart level? Are you are you still trying to figure it out? Do you think there’s a regime change?

Bill Miller IV, CMT, CFA 49:53
I do think there’s been a regime change. I think there was I think the regime change started when the Fed changed their reacftion functioning a year or two ago, and they said they’re gonna let inflation run hot, because prior to that it was a quote unquote symmetric goal of 2%. It wasn’t symmetric at all, what happened was they kept raising rates anytime the CPI got even close to 2%. And it was, you know, between zero and two, anytime it got one nine, to start raising, start raising. And so that’s a problem because you have capital allocators across the country, whether you’re talking about CFOs, or anyone else, building these, this symmetrical level of to under their models, and that capital is not, it effectively means it’s been mis allocated if you don’t have that level of inflation over time. And so then they kind of realized that as we were getting close to zero, and going into this kind of vortex toward zero, the only way out is to get all inflation. And now they’re so far behind the curve. On the other side, it’s it’s, you know, that’s why values ripping, and they’re still very far behind the curtain, and now they’re talking 75, and inflation is at eight. So there’s that to to actually get get ahead of the curve, they need to do something the market is not expecting. And the levels just aren’t aren’t there right now. So that’s the real concern thing. Right?

David Lundgren, CMT, CFA 51:08
And so they, it’s, it seems to be the common belief in those halls that you can, it’s more difficult to incite inflation than it is to stop it. So, which which I always found interesting that that was their belief. But then why were you so worried about going above 2%? But that was that’s what that was their modus operandi. That’s how they did it. But here we are today, in you know, we’re now seeing the highest monthly month or year on year inflation, you know, 20 years, maybe four years. And in the question is, do you? Do you actually think that they can stop it, like put the genie back in the bottle?

Bill Miller IV, CMT, CFA 51:48
I don’t know, at this point. It’s, they have to do something drastic. And they have to do it now. Do it yesterday. So I don’t know. It’ll be interesting to see what happens. You know, the Goldilocks thing I’m talking about that yesterday, Goldilocks is dead? That’s yeah, that’s probably right. It’s just how long is this regime going to last? You are seeing some interesting corrections on valuation on the other side of things, right. Like, you never been able to buy I don’t think Amazon at 14 or 15 times next year’s EBIT, da. That’s interesting.

David Lundgren, CMT, CFA 52:20
Yeah, I just always I remember I see that. And I understand that. But I also remember, back when Dell peed, it was finally cheap. And then it just went down. 90%. Right. So that’s why it’s valuation is just not a good timing tool in either direction. But I do want to ask you, that if indeed we are inflecting, toward inflationary environment, I think okay, inflation, that means inflation expectations go higher, which means rates go higher, whatever that yield is, whatever that instrument that is on the price of it goes down to So you’re an income investor, how are you dealing with that? Because that implies that you, you might be in some tough road.

Bill Miller IV, CMT, CFA 52:57
Yeah, now we’re doing stuff like owning endo unsecured debt, at 20% yield that we think is worth our, we’re doing stuff like Chemours is one of our largest positions, CC is the ticker there, it’s a three percentage yields pricing, power, operating leverage, phenomenal allocator, capital, serial share repurchase or good management team, stuff like that. So you’re looking for yield and alternative ways that were the yield is a value type of yield. And where in a rising rate environment, you’re likely to see the residual cash flow that you’re entitled to grow. So that’s how you try and deal with it,

David Lundgren, CMT, CFA 53:35
And just stick through to the maturity of the

Bill Miller IV, CMT, CFA 53:40
In some, okay, well, so let’s say something, we bought PBF energy bonds at like a 75 or 80 cents on the dollar. I think they’re now 95, the yield seven or eight? would, you know, we may not stick around till par on that one. Maybe wait until things are fairly valued, and then sell and look for other stuff to rotate it into fairly priced?

David Lundgren, CMT, CFA 54:01
Is there anything more recently that’s kind of check the boxes for you in this regime that you haven’t owned up until now that you’re pretty excited about? And would it be a stock or sector or asset class are you I’m really excited about because, you

Bill Miller IV, CMT, CFA 54:22
No it’s, again, it’s everything’s a one off bottom up kind of basis. And then what you try and do is you manage the aggregate risk at the portfolio level. And so, you know, we invested in weed on some Russian securities for a couple of years, which are currently market zero. Markets telling you they’re not going to end up being worth zero but either way, we knew our risk Russia going in this year was 3% of the portfolio. Okay, if that goes to zero, you’re down 300 pips. And so that’s the kind of thing we’re you know, but you’re still not down and out and you look at kind of our tracking error or volatility relative to the bench To mark and what we can do in short periods of time versus it. So

David Lundgren, CMT, CFA 55:04
Did you take any measures to hedge out? Foreign exchange exposure?

Bill Miller IV, CMT, CFA 55:10
No hedging is a cost. I think it’s up. But you need to have a fundamental view on the currency. I think when you buy stuff like that, so for us, Russia was actually somewhat of an oil. Energy, right. Yeah. And so that didn’t work out, obviously. But you need to have a view on the currency and what will make it move in your favor or not?

David Lundgren, CMT, CFA 55:29
Okay, I have one more question. So I don’t know if you want to. You have good questions online as well. Yeah. So let’s start. Let’s end with something a little more fun. Okay. This hasn’t been fun. But so what do you do for fun? What do you like to do?

You can say markets. It’s fine.

Bill Miller IV, CMT, CFA 55:45
I didn’t know. Yeah, markets a lot of it.

David Lundgren, CMT, CFA 55:49
Do you feel like you work for a living?

Bill Miller IV, CMT, CFA 55:51
No, not at all.

David Lundgren, CMT, CFA 55:52
Yeah I dont either. Yeah, cuz I don’t.

Bill Miller IV, CMT, CFA 55:56
That’s exactly right. It beats working every day.

I like to try and take up golf. I love its quantitative. I love this. Personal you don’t need anyone else to do it. Do it on your own time. Get better watching YouTube. Yeah. Pretty cool.

David Lundgren, CMT, CFA 56:15
Yeah. Alright, so let’s open up for some questions. Thank you very much, Bill, for that was a wonderful discussion. I really appreciate it.

Bill Miller IV, CMT, CFA 56:22
Thank you.

Tyler Wood 56:23
Got one right back here from Brett Villaume, president of the CMT Association.

Brett Villaume, CMT, CAIA 56:30
Thanks for sharing your comments with us, Bill. Really appreciate it. And great job, Dave, thanks for doing this. My question was you kicked off your comments today by saying that you pay attention to Insider transactions. And I, during my career, I spent many years trying to incorporate insider transactions, my analysis and then I sort of had the rare experience of being inside of a publicly traded company, where I use TA to help advise the executives about timing their sales. And and so I kind of learned that most executives, including board members and and executive executive officers have these compensation structures that reward them and incentive comp shares, unlike their outright sales, which there is no real structure to so I wanted to see if you could elaborate a little bit more on how you view insider transactions.

Bill Miller IV, CMT, CFA 57:27
Yeah, you made a great point there on the sales front, we pay a lot less attention to Insider sales, and we would buys just a lot of reasons people would sell something. And there’s generally a reason people would make a sizable purchase in something because they think it’s mispriced or cheap and they want more of it. The context matters immensely on the insider side of things. I think probably if you run an aggregate analysis of these things, it may not you know, may be hard to incorporate it, you need to look, the context matters. So who’s doing the buy? Is the buy significant to them personally? Maybe not? Is it just a virtue signal? Is it, you know, self flagellation for poor behavior? Is it? Or is it actually, you know, is it actually cheap? And so, all the context goes into that corporate strategy goes into that capital allocation goes into that. And everything is context dependent, but you’re looking at the track record of the person doing the buy, you’re looking at the overall company strategy. And so the context does matter.

Audience Member 1 58:32
Hi, thanks for your comments today. The one question I have is if you took a Bitcoin currency, and today we have the fed with a lot more control. So when you have something that’s decentralized, like the, like a crypto, how do we prevent market crashes? And what tools would the would we be able to employ if everything’s decentralized and not in government control?

Bill Miller IV, CMT, CFA 58:58
It’s a great question. Yeah, well, so there’s there’s puts and takes to it right? In that the scenario you’re envisioning is effectively hyper Bitcoinzation where everything is true. Bitcoin is the global currency. Right? I don’t think that’s necessarily the only outcome. I think, you know, there’s could be a hybrid where there’s the dollar, there’s Bitcoin, there’s the yen, there’s a Euro, maybe that’s it could be a digital dollar. Yeah, I think they want there to be a digital dollar. And there’s all kinds of major issues with that, just ethically and other stuff. But yeah, so that’s a really good point. And that if there is hyper bit quantization, the the offset to that not having these escape valves that you mentioned, is that if everyone knows the rules ahead of time, and that’s why I like Bitcoin, is that you know the rules ahead of time you know exactly how many Bitcoin are gonna exist. You know exactly what that’s going to look like. And if people mess up, they mess up and you deal with the consequences but I’m hyper Bitcoinzation, I don’t think is necessarily the only outcome. The other interesting thing is that you don’t you’re if it actually ends up that that is the method by which we transact. Number one, volatility will be much, much lower in that circumstances because a broader adoption other things. But the so sorry, where was I in this, I just lost my train of

David Lundgren, CMT, CFA 1:00:26
thought let you get get back. The only thing I would say to that is, is that some of the most violent crashes have happened because of the regulations put in place. And like I’ve worked with the SEC was 1941, the SEC was the the SEC style reserve was 1930. And some of the most egregious bubbles have happened since the Federal Reserve was put in place. So it’d be like, it’d be nice to think that, you know, a regulatory body like that would be able to corral and contain and make things better. But in actuality, as Master Oogway said, when also meets his destiny on the path he travels to avoid it.

Bill Miller IV, CMT, CFA 1:01:05
Yeah, so the, the offset to that is that people’s behavior will improve just because of the fact that you have a currency that doesn’t lose its value over time, I think, right? In the US immutable protocol, where there’s 21 million coins exclusively, you know, exactly how in your mind, you don’t have inflation, reason inflation exists is because of policy missteps. That at the fiscal level, and so those policy missteps you don’t have the inflation if you have a Bitcoin, which actually appreciates has appreciated significantly biggest trend of the past 1213 years. So that is an offset is that it matches people’s behavior. You want to save your money, if you’re not investing in stuff that’s gonna go up faster and this rate of mistakes in the government you know, you can just sit it in, it’s a Bitcoin, you don’t have that inflation. So hold its purchasing power.

Tyler Wood 1:01:59
I think that was our last question. Gentlemen, thank you very muchfor your time today.

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Contributor(s)

Bill Miller IV, CMT, CFA - 2022

Bill Miller IV, CMT, CFA

Bill Miller IV, CFA, CMT is a portfolio manager at Miller Value Partners, where he co-founded and co-manages the Miller Income strategy, which invests opportunistically across the capital structure in pursuit of undervalued yield. He began his investment career with Legg Mason...

Tyler Wood - 2022

Tyler Wood

Tyler Wood is the Managing Director of Global Business Development at the CMT Association. In collaboration with CMT Association members and charterholders, Tyler has presented the tools of technical analysis around the world to investment firms, regulators, exchanges, and...

Dave Lundgren, CMT, CFA

Dave Lundgren, CMT, CFA

Dave Lundgren, CMT, CFA is a 30-year investment industry veteran, with a focus on technical analysis strategies, particularly momentum and trend following. He has held both analyst and portfolio manager positions at several major investment firms, including Wellington...