Tom Bodrovics welcomes back Bob Elliott, Co-Founder, CEO, and CIO of Unlimited Funds, who shares his insights on how to evaluate skills from luck in investment outcomes. The discussion also touched upon the current state of inflation in developed countries like Europe, the UK, and the US. Despite recent supply shocks causing higher price growth, wages have matched or surpassed it, resulting in elevated rates exceeding central bank targets.

Elliott also addressed the concerns of central bankers regarding debt and income dynamics, mentioning the risks of negative reinforcing cycles and comparing credit-driven economic expansions to sustainable income-driven ones. The speakers discussed the relationship between government deficits and economic growth, debating whether high levels lead to significant stimulus or a large debt burden.

Regarding labor markets, Bob addressed the rising costs of inflation and the impact on reshoring production in the US. The speakers touched upon de-globalization, parallel supply chains, and shipping costs as causes for price increases and disruptions. The Fed’s current monetary policy stance was discussed, with potential future actions debated due to low unemployment and while inflation is still above target.

Bob questioned the significance of specific labor market numbers and he also touched upon why the US economy avoided a recession despite predictions. In this income-driven environment, Bob discussed the shift from growth to value stocks and the impact on investable assets in sectors with earnings and market consolidation. The supercycle in resource markets was also discussed highlighting investment lags behind demand and potential higher commodity prices contributing to inflation.

Timestamp References:
0:00 – Introduction
0:47 – Investing Luck Vs. Skill
4:18 – Understanding Biases
6:54 – Evaluating Advisors
10:05 – High Inflation & Rate Cuts
13:06 – Why a 2% CPI Target
16:56 – Time Preference & Demand
20:12 – Types of Economic Expansion
27:39 – Deficits & Growth
30:32 – Inflation Forces
33:52 – Goods Deflation & Supply
37:30 – Reshoring & Labor Costs
40:16 – Shipping & Disruptions
43:24 – Container Ship Costs
45:35 – Fed & Rate Cutting?
48:02 – Labor Data & Noise
50:05 – Global Bond Markets
53:23 – U.S. Resilience?
55:40 – Value Vs. Growth
59:00 – Sectors & Resource Cycles
1:03:52 – Wrap Up

Talking Points from This Episode

• 
  
• Bob Elliott emphasizes the role of both skills and luck in investment outcomes, suggesting investors focus on evaluating individuals’ ability to make informed decisions rather than solely relying on past successes.
  
• Central banks are grappling with rising inflation rates exceeding targets due to wage growth matching or surpassing price increases in developed countries like Europe, the UK, and the US.
  
• Elliott discusses the shift from growth to value stocks amid an income-driven economic environment, highlighting the importance of investing in sectors with earnings and market consolidation.
  

Guest Links:
Website: https://www.unlimitedfunds.com
Twitter: https://twitter.com/BobEUnlimited

Bob Elliott is the Co-Founder, CEO, and CIO of Unlimited, which uses machine learning to create index replication ETFs of 2&20 style alternative investments like hedge funds, venture capital and private equity.

Prior to founding Unlimited, Bob was a Senior Investment Executive at Bridgewater Associates where he served on the Investment Committee (G7) and created investment strategies across equities, fixed income, credit, exchange rates, and commodities, including many used in the flagship Pure Alpha fund. He also built and led Ray Dalio’s personal investment research team for nearly a decade. He’s the author of hundreds of Bridgewater’s widely read Daily Observations and directly counseled some of the world’s foremost policymakers and institutional investors on economic and investing issues.

Bob has also served as an advisor and executive at several startups including CircleUp, an investment company focused on early-stage consumer brands. There he revamped the investment strategy for the company’s $150mln venture funds leveraging big data approaches to improve decision making. He was also the co-founder of GiveWell, a startup charity evaluator which now directs more than $500mln in annual contributions.