The Big Picture

Transcript: Erik Hirsch, Hamilton Lane

 

 

The transcript from this week’s, MiB: Erik Hirsch, Hamilton Lane, is below.

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This is Masters in business with Barry Ritholtz on Bloomberg Radio.

00:00:16 [Speaker Changed] This week on the podcast, I have yet another extra special guest. There are few people in the world of private equity better positioned to identify and discuss the explosive growth and changes coming to the fields. Eric Hirsch has been with the firm Hamilton Lane for nearly 30 years, both as CIO and Head of Strategic Initiatives now. He’s co CEO. I found this conversation to be absolutely fascinating. If you wanna get a sense of why this space has been growing so dramatically and what the future of private credit, private capital, private equity, et cetera, is gonna look like, then you’re gonna find this conversation to be absolutely fascinating. With no further ado, Hamilton Lane’s Co CEO, Eric Hirsch,

00:01:09 [Speaker Changed] Thrilled to be here.

00:01:12 [Speaker Changed] So let’s, let’s start with your background. Bachelor’s degree from University of Virginia in 1995. What’d you study? What was the original career plan?

00:01:24 [Speaker Changed] I think I had no career plan because I originally studied philosophy, which I think is pretty much the definition of, I’m not sure what I’m gonna do with my life. I think I was probably thinking lawyer back then and I luckily got on a different track and ended up in finance.

00:01:40 [Speaker Changed] Huh. That’s really, that’s really amusing philosophy. I have discovered that a number of people who’ve studied philosophy have said it’s useful for developing frameworks and thinking about the way to approach management. We’ll get to that in a bit. So from philosophy, what drew you to a career in finance and investment management?

00:02:02 [Speaker Changed] I was not highly sought after when I was graduating from college. I think it was a combination of the philosophy degree and perhaps a little lack of studying. But I ended up getting lucky and found myself in a public finance firm in Philadelphia called Public Financial Management. And there we were really servicing governments and trying to help them with budgets and bond offerings and the like. And that really taught me the fundamentals of finance. They had an incredibly strong training program, excel modeling and just learning kind of the ins and outs of finance. And it was from there, that was sort of the launching

00:02:38 [Speaker Changed] Point. Did, did I read this correctly? You specialized in sports stadium financing

00:02:44 [Speaker Changed] Back in the mid nineties. Yeah. Governments were paying for stadiums. They were not being privately financed. They were, the belief back then was that this was gonna be a big revenue draw for cities if they had these great complexes. And so we had developed one of the expertise early on to help cities go through that process of raising bonds, financing that

00:03:06 [Speaker Changed] I’m, I’m always fascinated by that because you mentioned Excel. If you have a spreadsheet, it’s pretty obvious this ain’t a moneymaker for cities. Maybe it’s good for, you know, the municipal morale or town spirit, but it’s a money loser, isn’t it?

00:03:23 [Speaker Changed] I think what you found was it depended on the location. So Camden Yards in Baltimore, if you remember when that sort of first opened, was a moneymaker, it totally altered the landscape of that city. Now that didn’t prove to be true everywhere that stadiums began to be created. And so today we no longer see a lot of public finance capital going into stadiums. But there was, again, a moment in time where in the right location, it, it did make sense for the

00:03:48 [Speaker Changed] Cities. Yeah. That that was a deeply depressed area and you pour a billion dollars into it. It certainly helps. But when we look around at other stadiums, it’s kind of amazing the, to me, it looks like socialism, we’re gonna pay for your means of production as the government and you get to keep the profits. But it’s amazing, it took decades for, you know, the, the taxpayers to kind of, and the elected officials to reach that, that conclusion. You also focused on mergers and acquisitions work in the 1990s. What was that like?

00:04:22 [Speaker Changed] Grueling. Grueling? I don’t miss it. Right. I think I, I am happy to have been moved on. I think the good thing about my time as an investment banker was that it really introduced me to private equity. We were mostly looking at selling businesses for privately held businesses with, with families most often and selling them into private equity. And so having come from the public finance side, it was really the first time that my eyes got opened up to the fact that there was this whole other industry out there that seemed pretty in interesting. And again, in sort of the mid later nineties, the private equity world was just beginning to start to grow up and start to have its first real growth movement.

00:04:59 [Speaker Changed] Brown Brothers Harriman, a storied firm. What was your experiences like there? Great

00:05:04 [Speaker Changed] People? It is a lot of tradition. Incredibly long history, particularly in, interestingly in Philadelphia. The firm had been there going back into the 18 hundreds where it was more of a sort of a mercantile business. And it was just a good place, again, to kind of get the basics and the fundamentals of what it meant to be on the corporate side of finance again, as opposed to the public side of finance.

00:05:27 [Speaker Changed] And if memory serves, they stayed at a private partnership way longer than a lot of their peers. Am I, am I remembering

00:05:33 [Speaker Changed] Correctly? I think they still remain a private, a private

00:05:35 [Speaker Changed] Partnership. That’s correct. Think that’s right. Which is, despite all the other partnerships having either gone per public or getting acquired by other public firms. Correct. I’ve always wondered if that’s the reason they never ran into trouble during the great financial crisis.

00:05:51 [Speaker Changed] I suspect it’s a lot of reasons. Again, there’s a lot of, it’s a conservative place by nature. I think it’s one of the reasons why clients are attracted to them. Partners have a lot of their capital invested in the business alongside of customers, also a, a good business model. And so I think it’s just a, a company that has had tremendous success, but as you said, has kinda remained true to its roots in that private partnership.

00:06:13 [Speaker Changed] Yeah, no, that’s worked out really well for them. So from Brown Brothers, how’d you make your way to Hamilton? Lane?

00:06:18 [Speaker Changed] Headhunter came knocking. I was again familiar with the concept of private equity and I had met some private equity firms in my short time as an investment banker. But the concept of Hamilton Lane and what they did as this kind of solutions provider intermediary was not something that I was familiar with. They were also, you’re gonna continue to have the Philly theme here. They were also headquartered in Philadelphia. So I didn’t move very far, but I went over and met some people, thought it was interesting. Firm was very tiny at the time. It was probably 20, 25 people, this would’ve been in 1999 and essentially single office business. And the firm had been around for a few years and had had some early success, but at that point in time was still very tiny. And

00:07:03 [Speaker Changed] When you began at Hamilton Lane, what was your role there?

00:07:06 [Speaker Changed] I joined the investment side as an associate, so I was still a pretty young person and I joined the, the investment team back then was simply one group. There was no areas of specialization like we have today. But within a couple of quick years, I became the chief investment officer and we began to sort of think about the business in a slightly different way. It had been historically solely focused as a consulting company, and once we got into the early two thousands, we began a bit of a migration of adding more of an asset management service offering. So

00:07:37 [Speaker Changed] You stayed CIO for like 13 years? Is that about

00:07:40 [Speaker Changed] Right? Yeah, 14 maybe 14 or 15 years.

00:07:42 [Speaker Changed] But really, so that must have been fascinating because the firm grew, the entire private space exploded over the past 25 years. How did your role as CIO evolve? What did you begin investing in? And then we will talk a little later about what you’re investing in. Currently

00:08:00 [Speaker Changed] Everything was changing. So as I said, the firm itself was very tiny when I first took that, that role. And while we’ve grown a lot, I still think of us today, it’s a relatively tiny company in the grand scheme of things. Right. On our tour in here, you were mentioning the employee count, we’re we’re one 10th of the Bloomberg Employee Council.

00:08:19 [Speaker Changed] Oh, that’s just this building. I’m

00:08:20 [Speaker Changed] Not even talking

00:08:21 Globally. Right. So we’re, we’re a total of a little under 800 employees today. And so despite having gone from sort of 20 saw employees when I got there to about 800 today, I still think of us as a, as a small business. But in the CIO role, everything was evolving. When I first came in, the concept of secondaries was very new. The concept of co-investing was relatively new. People were not specializing products in any great way. Fund to funds, which is something that we don’t talk much about today, was sort of the norm. That was mostly how limited partners were accessing the private markets. The private markets themselves had not really developed. So back then private credit wasn’t really much of a thing, whereas today it’s a huge driver of the growth. So I was witnessing and got through experience change on lots of different axes. And it was also for me growing up in the business, I arrived there probably a 26-year-old, I’m 52 today. And so I’ve also kind of grown up alongside of the industry.

00:09:24 [Speaker Changed] Hmm. Really, really interesting. When you were first appointed CIO, what sort of investments were you making back then? Was it strictly private equity or was it a smattering of everything?

00:09:36 [Speaker Changed] It was primarily private equity. The firm was at that point not really engaged in things like private infrastructure or real estate. And as I had mentioned, credit wasn’t a huge part of the industry. So it was mostly leveraged buyouts, venture capital. And we were again, a manager of managers. So most of our investment activity was selecting fund managers on behalf of our clients. Really the genesis of the firm was, was quite simple. It was sort of late eighties, early nineties. The institutional world was just beginning to make their move into the private markets. Prior to that, kind of in the seventies and into the early eighties, most of the activity, small as it was, was primarily financed by large families, high net worth families, endowments and foundations. Things like public and corporate pensions were not a big participant in the private markets. And with some regulatory changes and with greater awareness, that began to shift.

00:10:36 And the founders of Hamilton Lane had a very simple concept, which is people are gonna want and need help. And so we were really designed then, as we are today, to really be a solutions provider to help whichever kind of client is trying to access the private markets to do so in a way that most and best fits their needs. Our view was that we didn’t think that most limited partners were going to invest the time, resources, and energy to build out large internal teams to cover this asset class. And that has proven to be correct. Most don’t they primarily find a, a partner, a solutions provider. And we’ve been that partner of choice now for over 30 years. But that was the business model. And so our evolution has really just kind of mirrored what the industry itself has been doing is as credit came online and became bigger. So so did we in that space as infrastructure and real estate developed, so too did we in that space. And so I sort of say that we’ve been kind of growing right alongside of the asset class.

00:11:36 [Speaker Changed] Hmm. Really, really interesting. I’m also intrigued by the idea of quote unquote consultants, but with some skin in the game, it’s one thing to give advice, good or bad as it might be, but it seems like something else entirely to say, here’s our recommendation and by the way, we’re gonna co-invest our dollars, our personal dollars alongside with you. Tell us a little bit about how that developed and what does that mean for the clients you work with?

00:12:07 [Speaker Changed] So as I said, the firm really began as a consulting firm that the idea originally was these were gonna be new decisions, new asset class for these public pensions and corporate pensions primarily at that time. And that they were gonna want someone to make a recommendation that they then could kind of ultimately take the decision themself. But what we found was that the clients realized that this industry was growing quite rapidly and the need for resources was growing quite, quite rapidly. And the decision making needed to also happen on a quicker pace. And so that consulting model began to morph to the client simply saying, we want to just have you handle this For us. I think the advantage that we’ve had came from that consulting DNA, because it, it rooted the firm in an incredibly client-centric mindset that still is a hallmark of our service offering today.

00:13:05 So today, while we’re primarily doing asset management, we’re still doing it in a very bespoke model, a very customer oriented, but to your point, as an asset manager, we’re making the decisions, we have the discretion and we’re putting our own capital at risk alongside of the clients. And I think that alignment of interest rings true today as it rang true many, many years ago. And so today it’s, it’s still the biggest user of our balance sheet capital. The firm has invested a huge amount of money alongside of our clients over our history. But doing that sort of asset management alongside of, in combination with that really strong customer focus, I think that has been one of the reasons why we’ve been such a winner.

00:13:47 [Speaker Changed] Hmm. Really, really interesting. You’ve been at Hamilton Lane for nearly 30 years. I want to talk about the growth of the firm and the parallel growth of the sector private markets. The growth has just been amazing over the past 25 years. To what do you attribute this explosive increase in size of this sector?

00:14:10 [Speaker Changed] I think there’s a variety of factors. One, the most simple is just performance. If you take a look at aggregated private market performance and you compare that over 5, 10, 15, 20 year time periods to the public markets, you’re gonna see meaningful outperformance. I think the second thing though is becoming more recognized, which is diversification. Today our public equity markets have never been more concentrated. A very, very small number of companies all oriented make up a huge portion of the overall market cap. And I think when you sort of see that occurring in combination with the fact that more and more investors have moved to a passive public equity mindset, it means that you’re ending up with these oddly concentrated portfolios in a small number of stocks. The other thing that’s happening is that the public markets themselves are growing from a market cap standpoint, but they’re not growing from a number of publicly listed companies. In fact, if we go back to the eighties and sort of draw a chart of number of publicly listed companies in the us, that chart is essentially moving down into the right, it’s shrinking. So today about 4,000 publicly traded businesses. But think about Barry, how many businesses you interact with every day that are private.

00:15:25 [Speaker Changed] It’s most of them, right?

00:15:26 [Speaker Changed] The vast majority. And so they employ a huge amount of people in the country and all around the globe. So as an investor, if you want to get access to that part of the economy, a substantially large portion of the economy, the only way to do that is through investing in the private markets. So I think when you combine the performance, the diversification, all of that is resulted in the growth. And yet the private markets remain very, very small. If you took all of the capital raised last year across all of the sub-sectors in the industry, it wouldn’t be enough to buy Apple.

00:16:03 [Speaker Changed] Wow.

00:16:04 [Speaker Changed] So if you look at total fundraising, again, all private markets fundraising, it accounts for about 2% of the MSCI market cap. So again, there’s been huge growth, but the public markets themselves have also been growing quite a bit. And so when we put it in context, just like I say, Hamilton Lane in context is a relatively small company. So too are the private markets.

00:16:27 [Speaker Changed] So how much growth is possible in this space? I’m, I’m gonna go off script and ask, can the private markets ever expand to where they’re comparable to what we see in the public markets?

00:16:41 [Speaker Changed] You’d have to see an enormous amount of growth for that to happen decades. Decades. But I think what you see in front of you is I think there are still decades more of growth to occur. The private markets are expanding across lots of different axes. So they’ve expanded geographically. So if we went back into sort of the eighties, it was basically a US only business and then you expanded into Europe, et cetera. So now it’s becoming much more of a global phenomenon. It’s also expanded across strategy. We’ve talked earlier about the fact that credit, for example, is becoming a bigger part, infrastructure, real estate. So we’ve seen that expansion. Now you’re also seeing expansion across the clientele. So we’ve gone decades. We’re essentially the only entities that were able to access this industry were institutional investors and ultra, ultra high net worth investors.

00:17:33 [Speaker Changed] So family offices, foundations, endowments, et cetera. Exactly.

00:17:37 [Speaker Changed] Today, you now see more mass affluent individuals able to access this industry. People with say three to $5 million of investible assets, of which there are a lot of those people all over the globe. They’ve been, again, historically shut out, but with some regulatory changes and new product offerings, they, they too are now accessing this industry. So I go back to lots of different axes, all of them kind of growing in different ways. And I think that trend is still has a long, long way to go.

00:18:08 [Speaker Changed] Huh, really, really interesting. So let’s focus on the firm’s growth. Obviously the tailwind of the whole industry is helpful, but not every private equity has grown as explosively as as Hamilton Lane has. What’s been the most surprising thing about the firm’s growth to you?

00:18:27 [Speaker Changed] Well, I think no one would’ve predicted that we’ve got, that we would’ve gotten this large. So I think that in itself has been a surprise. But I think what’s been noteworthy, you hoped it was gonna be true, but you weren’t sure, was that could you continue to grow and could you continue to expand again in different ways across geographies, across clientele, and at the same time maintain the firm’s core DNA. And I think one of the reasons why the growth has occurred and why the success has been there is that we have done that. The, the the, the roots of the firm are still very present in how we interact with customers today. How we interact with our own employees, how we interact as a team, how we interact with shareholders. All of that still I think remains kind of very true to the firm’s values and foundations. And so being able to achieve both of those was always the goal. Again, always a risk that you don’t pull it off, but knock on wood, here we are and we’re still doing it.

00:19:24 [Speaker Changed] So you, you described all the various sectors that you’ve expanded into and the growth that’s been there. Let’s talk geography. What are the plans for a global expansion? So

00:19:34 [Speaker Changed] Today we have 22 offices around the globe. So we already have a very large geographic footprint. And our client base is also about equally split between kind of North America and non-North America. So while we’re a US headquartered business located outside of Philadelphia, we have a very global feel to the firm in that you have hundreds of employees who are operating outside of the US and my partner and CO CEO is a Hong Kong resident and operates out of Asia. So that footprint combined with the client base has already established us in a very geographically diversified way. I think as we look forward, I suspect the 22 offices will continue to grow. We have plans to open up in other locations and if you look at the map of where we are, there are some very big places where we are not at present. So India for example, would be a fairly large economy, but so far has had a very small private markets industry that will change over time. And I think you’ll likely see a Hamilton Lane office there at some point in the future. So there are a number of places that you can look around the globe and say, well, I can imagine that at some point in time that would make sense to have an office presence there.

00:20:45 [Speaker Changed] So in the public markets, the rest of the world has lagged the United States for, I don’t know, the better part of 15 years, decade and a half, certainly since the end of the financial crisis. This year to date, or for the past 12 months, depending on where you’re looking around the world, the United States has become a laggard, even though first half of the year we’re up 6% pretty decent. You know, 12% run rate is pretty typical, but Europe is doing really well. Asia’s doing really well. How do you look at those parts of the world? Especially I’ve been hearing Europe has structural problems, Europe has all these cultural issues, Brexit, Brexit, all these different things, and yet Europe really seems to be having a banner year. How do you look at that part of the world?

00:21:36 [Speaker Changed] I think this is the luxury of being a global firm with global deal flow. And most of our clients take a a global view on portfolio construction. They want the best investment opportunities, the best managers that we can access for them. And so in building portfolios, we have the ability to move around the globe to take advantage of whatever we think is interesting at that moment in time. Now, unlike the public markets, we have to be making investment decisions with an eye towards how’s this gonna play out over the next sort of 3, 5, 6 years? Because most of the investments that we’re making have a fairly long duration, again long relative to public markets. So once you’re investing in a private company, the work then starts, the value add then actually is happening and that exit ultimately comes years in the future. So I think our investment view is, has to be balanced. We have to be looking both at short term and long term simultaneously to decide where you sort of see trends going, how that’s gonna impact the company or manager that you’re about to invest in. But we don’t have the ability that the public market has, which is to say, two hours after making a trade, I’m gonna change my mind and unwind that once we do something, we’re gonna own it for a while.

00:22:55 [Speaker Changed] The illiquidity premium is, is significant and real.

00:22:59 [Speaker Changed] It’s real. It changes the mindset. I have the benefit of interacting with lots of different investment heads who run all kinds of different investment firms. And as a public company ourself, I’m also constantly interacting with our public equity shareholders and and research analysts. And it is just a different mindset. The Hamilton Lane team is thinking about things over many, many years. They’re not fixating on what’s gonna happen this week or this quarter with that company. They’re thinking, how can I invest a dollar today and five years from now turn that dollar into $3 or $4. It’s just a different orientation.

00:23:39 [Speaker Changed] So prior to becoming CIO, you were head of strategic initiatives. Is that timeline right or was that after? After, so after you were CIO, you become head of strategic initiatives. It sounds like the different sectors, the different geographies, the different clientele fits nicely into that role. Tell us a little bit about what that role was like and how that eventually led to becoming CO CEO.

00:24:05 [Speaker Changed] What we realized my partners and I and our, and our board was that as we were continuing to evolve, one of the areas that we needed to have a real rethink on was technology. Having spent 14 or so years as CIO and building out the various investment verticals and putting senior leadership in place, really the thought was best place for me to spend the next part of my career was doing the same thing on the technology side of the business. While Hamilton Lane had embraced technology and had various technologies that we had been using, I think the view was we sort of, we foresaw growth accelerating and the idea was we needed to really rethink the tech stack and we took an interesting approach. So in my job as the sort of head of strategic initiatives, I was afforded the opportunity to have access to Hamilton Lane’s balance sheet capital.

00:24:56 And in using that balance sheet capital, we went off and established partnerships with a variety of primarily tech startups that were focused on the private markets. So what we were doing was we were starting to meet with these firms who were trying to identify problems and areas that were gonna impede scaling in the private markets. And we took an ownership stake in a variety of these businesses. To date, we’ve done over 15 transactions where we’ve taken anywhere from very small ownership stakes to very, very large ownership stakes. And the benefit of doing it with balance sheet capital was we got to be unlimitedly patient. There was no pressure of us to have to exit, we weren’t using client capital, we weren’t using fund capital. And our thought, our thinking was if this is gonna be something that’s good for us, it’s gonna probably be good for others in the industry.

00:25:45 And if we’re going to be helping to drive these businesses and to help give them ideas and real time feedback and become a customer, then we’d rather align with them by actually being an owner as well. So I spent several years developing and sourcing and working on these various partnerships with some other Hamilton Lane people to try to get us into a much better position to have a market leading tech stack, a variety of these strategic partnerships. And we’ve had a couple of these that have exited very successfully. So it was also a good use of balance sheet capital.

00:26:19 [Speaker Changed] So let’s talk a little bit about one of the companies that you guys are founding members of, which is Nevada, which is a tech platform providing private markets with ESG data and benchmarking analytics. Tell us a little bit about Nevada and and how that’s working out.

00:26:36 [Speaker Changed] This is a great example of seeing a problem and not seeing an obvious solution. Our clients no different than they focus on the public equity side if they want to understand what’s sort of happening around ESG issues with companies that they’re investing in. And so they’re beginning to ask for various data points and tra various tracking. There was no system to do this. And what you also realized very quickly was that investors did not have a one size fits all approach to this. An investor in Norway has a very different orientation around what ESG means to them than an investor in Japan or an investor in Saudi Arabia. And so trying to say to the, all these investors, oh here’s the one way you have to look at it, we thought was a total losing proposition. We also thought that frankly the ESG metrics and the way that scoring is working on the public equity side was a little bit nonsensical. And so take us for an example. Oh, Hamilton Lane in the public equity world has a pretty lousy ESG score. Well, we have an incredibly good environmental footprint. We do all kinds of carbon offsetting, so no issue there. We have very positive societal impact. We’re helping with an awful lot of retirement benefits. We’re consistently listed as a best place to work and providing employees with a healthy and and and constructive work environment. So why is there a score problem? Well, we’re a controlled company in the public world.

00:28:05 [Speaker Changed] Define what a controlled company means.

00:28:07 [Speaker Changed] So controlled company means that the insiders, some, some shareholders have super voting shares. And so we are technically controlled by those inside shareholders as opposed to our outside shareholders.

00:28:20 [Speaker Changed] Shouldn’t that be a different scoring for a private company than a, it’s one thing if you’re a public company with tens of millions of shareholders, like I am not a big fan of the Facebook management structure and we saw something similar chops like Theranos and Uber and other places that ran into WeWork as another example. You’re less than a thousand employees. The founding partners are mostly still there. Why shouldn’t the founders have, maybe I’m speaking my book here, but why shouldn’t the founders have super majority?

00:28:56 [Speaker Changed] I think our investors liked it. Yeah. And that was the irony was that they liked the alignment, they liked that we were, again, a lot of our capital’s at risk alongside of there our clients like it shareholders liked it. But again, in sort of the way the public equity ESG scoring works, it’s a little bit blind to nuance. It’s, you know, controlled company bad, therefore bad score. So as we were looking at ESG for the private world, we didn’t wanna replicate what we saw, the mistakes being made, we thought in the public side and there wasn’t really anything out there at the time. And so we created from whole cloth, we came together, we met some of the, the, the now management team of Nevada shared a philosophy around the problem that we were trying to solve. Gathered up a group of various shareholders now including the Ford Foundation, s and p, Microsoft, a lot of other interesting institutional investors. And we literally created Nevada from wholecloth. And now today, Nevada is the world’s largest collector of ESG data for private companies. Client base is all over the globe, huge database, interesting technology, interesting solution, and allowing investors and clients of Nevada to consume data, how they want to consume it, rather than giving some arbitrary scorecard that says this is how you should look at it. We instead empowering people by saying, here’s the data you do with the data that you think is best for you and your organization.

00:30:24 [Speaker Changed] Huh, really, really fascinating. So let’s talk a little bit about some of the most significant changes that are going on in the private markets. What’s the difference between today and the 1990s?

00:30:37 [Speaker Changed] I think it depends on which vertical we wanna focus on. I, I would say probably the biggest difference is really around the client base. In the nineties, as we had mentioned, it was really just a game for institutional investors. And today that’s no longer true. Today the retail investor has finally been afforded the opportunity to take advantage of what the institutional investor has been taking advantage of for many, many, many years. So that’s the biggest change. I think on the investing side, the expansion of some of the verticals is also a big change. Private credit has really taken over from banks, particularly regional banks as well as large banks and being the primary provider of lending capital to businesses, that’s been a huge sea change. If we had gone back into the eighties or nineties or even in the two, two thousands and you were a local business owner that had a small factory and a town in the Midwest US and you wanted to expand and you know, add another factory, you would’ve probably gotten in your car and driven down to your local bank where you knew the bank manager and they knew you because you were the big employer in that town.

00:31:46 And you said, I’m gonna build another factory. And they said, great. And they were gonna give you a loan to do that. That’s really not existing much anymore. Private credit has really taken that over in a much more sort of programmatic way. So I think there’s a couple of big examples of some of the changes that you’re seeing across the asset class.

00:32:06 [Speaker Changed] You know, it’s interesting because I have a recollection of the late nineties, early two thousands and as all the large money center brokers and banks just became larger and moved upscale upstream, there was a void created behind them and private equity filled that void on the mercantile banking and private equity side. It sounds like you’re saying the exact same thing happened on the private credit side. Banks got bigger and they left their smaller midsize clients behind,

00:32:37 [Speaker Changed] They got bigger and they got regulated in a way that made it harder for them to participate here. And I think the private credit firms have frankly just done a better job of making that an asset class and making that both accessible to borrower and lender. And so I think all of that has actually been a positive development.

00:32:58 [Speaker Changed] So private equity, private credit, both expanded. How about infrastructure? How

00:33:03 [Speaker Changed] Big expansion there really, I mean if you look around the globe, we can go anywhere very quickly and see that there’s huge need for infrastructure overhaul, our systems, roads, telecom, power sources, all of that is aging in a way that governments are just frankly not able to keep up with it and they’re not able to finance it. And so you’re seeing more partnerships with private infrastructure to go and deal with, again, whether it’s transportation needs or energy needs, all of that becoming much more in the purview of the private markets.

00:33:40 [Speaker Changed] So we’ve seen a torrent of capital entering a variety of different private investment strategies. When I see that much money piling into a space, the first question that comes to mind is, Hey, are there enough good deals to go around for all this capital to find a home? Or are we just seeing a sea of cash just washing over too few deals?

00:34:05 [Speaker Changed] I think like in anything, people do things better and some people do things worse. I think the interesting part with the private markets is that capital flows have really not been a good barometer of much of anything. So in years where you’ve seen lots of capital raised, you haven’t seen any correlation to performance, good or bad. And in fact, if you look at performance over long periods of time, one thing that has been true is that the dispersion of performance has remained very wide. Pundits would’ve said and did say 20 years ago, well, as the industry matures, the dispersion will shrink and the difference between top and bottom will become very small because the markets will quote, become more efficient. And in fact, that hasn’t happened at all and it hasn’t happened for a pretty basic reason. If you think about what is a private equity investment, you’re literally partnering with management to run a company.

00:34:58 And so one of the examples I always say when I’m talking to audiences about this topic is if I put 10 people out of out of the audience and I gave each of the 10 a chance to be the CEO of this particular business for a year, we would have 10 wildly different outcomes because each of the 10 would make very different decisions on marketing and manufacturing and hiring and culture. And so whether there’s more or less capital thrown at that company, it’s not gonna alter the outcome. What’s gonna alter the outcome primarily is what decisions were being made and were they good decisions or bad decisions. It’s sort of the very definition of active management where people are hands-on with that company making choices, fundamental choices. So some people make better choices than others. And so the dispersion remains very, very high despite the fact that more and more capital continues to move into the business.

00:35:56 And one of those choices is around deal flow. Not every manager has an equal access to the same deal flow. In fact, proprietary deal flow is very much still alive and well in the private markets because there’s no screen that they can log into to simply look up, hey, what’s available to buy today in the private markets? It’s really about getting out there, unearthing opportunities, networking, meeting with management teams, meeting with sellers. All of that is a skillset. All of that is frankly unequal. And all of that then leads to way better outcomes or way worse outcomes.

00:36:31 [Speaker Changed] Yeah, I’m surprised to hear that pundits would’ve imagined that that dispersion with would narrow when we look in other areas, it doesn’t matter, ETFs, mutual funds, SPACs pick your public investment strategy, almost a winner take all scenario and a group of also rans, the winners have a flywheel where all these advantages accumulate and compound and work to the benefit of those who were early and right. I I like, why would anyone really imagine that that dispersion would narrow? You certainly haven’t seen it in mutual funds or anything in the private markets. It it looks like, hey, if you have an advantage and you’ve been successful for a while, you should be able to continue to build on that advantage.

00:37:16 [Speaker Changed] I think the mistake that people made is that they just simply made the kind of bold and incorrect assumption that time or growth or scale would sort of cause a reversion of return or a reversion to the mean or a collapsing of dispersion. And it just goes back to what we just said. No, this is about a skillset and what choices you make with the business and and what choices you make with your own business. And again, you’ve got winners and losers. What’s not happening in our industry is there’s not a winner take all. There are thousands of private fund managers around the globe operating in different geographies and across different styles and strategies. And that number has generally continued to grow year after year after year. So lots and lots of fund managers and if we then put ’em on a plot chart across performance, you’d sort of see a big gapping between the top quartile, which is still a huge number of managers, could be over well over a thousand managers who are in the top quartile relative to the bottom quartile. And then you sort of see everything that’s kind of in the middle. So lots of choice for investors, but it’s also why frankly a firm like ours has the ability to exist. Navigating all of that is hard. It takes a lot of resources, a lot of expertise, a lot of data, a lot of technology to try to figure out from those thousands of choices, which ones do you wanna put in your portfolio?

00:38:41 [Speaker Changed] So, so sturgeon’s law applies to private capital and private equity and private credit as well as everything else. I was kind of taken by a quote of yours earlier this spring. You said this could be a choppy summer. What does that mean and and why do you expect choppy?

00:39:00 [Speaker Changed] Well I think what’s happening in the US politically has been very choppy. Tariffs changes in the labor workforce, new regulations, changes in tax code. It’s a lot of altering the landscape. And so I think one of the reasons why we have seen a fair amount of public market volatility, while it’s generally been still moving up, we’ve seen a fair amount of volatility. And in our world it’s harder to price assets today ’cause you’re trying to look ahead to see, okay, does this company have exposure to something that might be tariff impacted? How much exposure and what will be the tariff impact and how long will the tariff impact be in place? So what you’ve seen in our industry is that deal volume deal doing remains relatively healthy, deal exiting remains pretty slow.

00:39:55 [Speaker Changed] Is that driven by the lack of an IPO market or reduction in m and a or just,

00:40:00 [Speaker Changed] I think it’s more back to the choppiness to use my own word of, is today really the day I want to sell this company to maximize value? And by the way, that potential buyer is also thinking to themself, is today the day that I actually wanna buy this business? Right? Could the price get lower tomorrow or might it get higher tomorrow? So I would say we haven’t seen buyer and seller agree to what norm is, and they’re both kind of staring off at each other looking to see higher, lower, better, worse. And the result of that is causing sort of a lack of this volume across the industry.

00:40:37 [Speaker Changed] Huh, really, really interesting. So the equity markets seem to have figured out, for lack of a better phrase, hey, most of this lack of clarity around tariffs is gonna go away, that there’s a little bit of the taco trade and that this is a negotiating tactic and eventually we’ll have 10, 15% tariffs marginally higher than we had before, but nothing that’s going to push the economy into a recession. Do you think that’s a fair assessment or perhaps the public markets are being a little too optimistic?

00:41:14 [Speaker Changed] I think it’s a reasonable assessment and the, and the public markets have the advantage of momentum. If everyone can kind of collectively agree and kind of drink that Kool-Aid, then you get the benefit of the sort of the tide is rising. It’s different in the private markets. If you and I are out there to go do a deal, we’re about to walk away owning a company, well we’re gonna live and die by that company’s actual results. And so hoping that tariff impacts will be either non-existent or hoping that they will change or that they will be shortlived, that’s not a strategy because if we’re wrong, that company’s earnings and revenue is gonna be fundamentally altered and then we’re gonna have a hard time selling that company. So I think you have a difference of, in the public equity world, I see much more macro overlay because you’re sort of trying to figure out, yes, is this a good company and how do I assess the company? And at the same time you’re trying to figure out, well generally what direction are the markets going in? But on the private side, a lot less macro overlay and much more fundamental focus on that single asset. You

00:42:25 [Speaker Changed] Don’t get the same tailwind from the sector and the market overall in private markets that perhaps you get in public

00:42:31 [Speaker Changed] Markets, you get some of that when it comes time to sell of are you in a good space? Is your industry growing? So you get some of that halo effect, but you’re still pinned to a single asset. And on a relative basis, most private markets portfolios are pretty concentrated. So if you’re a fund manager running a private markets portfolio, you might end up with a portfolio of 15 companies. Well, you can’t be wrong on a, on a bunch of those or that’s, you’re gonna have a terrible result. The winners won’t be big enough to outweigh the losers.

00:43:02 [Speaker Changed] Hmm. Really, really interesting. So two related questions. The first is, what do you think is next for the private markets? And the related question is, what are your strategic priorities for Hamilton Lane?

00:43:15 [Speaker Changed] I think they’re both related. Actually the answer is gonna be sort of one and the same. I think what’s next is there is going to be this adoption and influx of retail capital. We’re seeing it, but it’s still very early innings. If you look at the institutional world, most institutional investors have an allocation to the private markets that’s north of 10%. If you look at the average retail investor, their exposure to the asset class is about 0%. And if you look at just wealth statistics around the globe, there are trillions and trillions and trillions of dollars in the hands of individual savers globally. So if you believe that they over time will have portfolios that look much more similar to an institutional portfolio, there’s a huge amount of capital that’s gonna get migrated. But that capital is coming from a different type of investor. One who is accustomed to everything being on their phone and everything being available.

00:44:16 Now think about how we all interact with the public equity world as individual investors. I’m sitting here in front of a Bloomberg terminal, I have unlimited access to information and I can execute on anything I want to do right here without moving more than a couple of fingers. The private markets today technologically are not built that way. And so there’s a lot of change. I think that’s gonna be coming around private market infrastructure and I mean the infrastructure for our industry and how we interact with the customer and that flow through is gonna not only start with the retail investor, but it will then flow back to the institutional investor. So strategically for Hamilton Lane, we’re very focused on making sure that we’re getting that market segment right, that we’re purpose building to make sure that we’re properly carrying and feeding of that customer base, which is again, different than the customer base that we’ve historically dealt with. And making sure that all of that is oriented to sort of achieving success. There is right now a huge strategic priority.

00:45:20 [Speaker Changed] So many of the topics we’re discussing are very much front page headline sorts of news. Let me ask a little bit of an under the radar question. What are investors not talking about? What topics, assets, geography, I dunno, policy data points is getting overlooked but perhaps should not be.

00:45:43 [Speaker Changed] I think one of them is back to this retail question, which is how is the emergence of this new investor class going to impact the industry? ’cause I believe it’s gonna impact it dramatically in the technology, in the flow of capital, in the style of investing. And so what are the ripple effects? I suspect there’ll be positive and negative of that. And so what does that sort of shake out and impact then do to the industry? One of the things I think we’re gonna clearly see is that if you want to be a player in the industry, a fund manager, a service provider, the need for your own infrastructure, your own technology to be substantial is very real. And that’s adding a whole nother layer of expense to the management of these businesses. Some will figure that out and we’ll have the size and the scale and the growth to sort of do that. And I suspect a number of firms will simply not. So today, while the industry has been growing from both a number of managers and asset perspective, I think if we were to fast forward and come back and have this conversation in 10 years, I think the asset base will have continued to grow. I think the number of participants will actually have gone down. Really I do.

00:46:57 [Speaker Changed] Even as you’re adding more and more mom and pop mainstream investors to the client base of, of private,

00:47:04 [Speaker Changed] I think the number of firms that are going to be capable of successfully servicing that investor base is relatively small.

00:47:12 [Speaker Changed] I will tell you from personal experience working with individual investors, some of whom want exposure to various alternatives, the backend, the legal compliance, reporting, custodian, all those different things that have really become frictionless on the public markets. It’s really challenging. It’s really difficult on the private markets, correct? It’s everything is its own unique, I don’t even wanna say cusip, its own unique animal that is pet in a different way. It has to change, change, no standardization at all. It has

00:47:47 [Speaker Changed] To change. The investor will not tolerate it. That’s the reality is that you can’t expect that individual investor who has been so trained and, and has adopted that frictionless environment for for, for the, for their entire portfolio. And now to say to them, well, for this 5% of your portfolio, it’s gonna be a gigantic pain in the rear. They’re gonna say, I, I’m not dealing with that. So it can’t stay this way. So one of the things that we believe will be one of the change agents is the world of tokenization that does make things much cheaper, faster and and without friction. And so Hamilton Lane has been a very early and aggressive adopter of that technology. We’ve tokenized more funds we believe than anybody else in the world.

00:48:37 [Speaker Changed] Define that. What does tokenization mean for an individual investor?

00:48:40 [Speaker Changed] It’s moving from a physical world to a digital world. Tokens are simply tracking of investments using blockchain technology. And so instead of dealing with subscription docs and all of the pain points of all of the legal and regulatory structure, imagine doing this in a point and click world where you can access a fund digitally using a digital wallet and storing it in a digital wallet and tracking it in a digital wallet. And that is the world of tokenization. So today there are a number of token exchanges around the globe. Hamilton Lane is an an investor and owner and a number of them. And if you go on today to firms like Republic or Securitize here in the us, you would see product offerings there. Investors can still access documents and information, but when it’s time to actually purchase or invest, they can just simply click the buy button. And as that world matures over time, you will have exchanges that have buyers and sellers. And so some of that illiquidity issue that we’ve always been mired with, given the long duration should start to lessen because you’ll be able to trade more freely.

00:49:55 [Speaker Changed] My assumption is that if you’re trading private locked up assets, regardless of what they are, hey, if you wanna sell, you’re gonna be getting a discounted price versus holding it for the duration.

00:50:09 [Speaker Changed] That certainly has been the case historically. I think what remains to be seen is, is that still true in a vibrant, healthy token world where you have lots of buyers and sellers on these exchanges, I think what you’re gonna see is that discount is going to greatly reduce because access to information and the ability to move assets is going to become much easier and quicker. So,

00:50:32 [Speaker Changed] So what does this mean for the illiquidity premium? The fact that investors who agree to tie up their money for five years, seven years, nine years, get a theoretically higher payout than they might in a liquid public market.

00:50:46 [Speaker Changed] Well, this is gonna be what the managers are gonna have to deal with. They’re gonna have to continue to deliver some level of outperformance. Now if the illiquidity issue completely evaporates because tokens become so freely exchangeable, then I think what you’re gonna simply say is, well, it’s an equity strategy, so it might be the exact same return as a public equity, as long as it’s mirroring that you still get the benefit of a diversification, you’re still accessing assets that are non-public. And so the only way to access them is in the private world. But I think that will sort of cause a, a change in how people think about benchmarking and how they think about portfolio construction. We’re a long ways away from that. So today the illiquidity premium exists and the illiquidity issue is still very much front and center, but I think you can sort of see the building blocks are being put in place that could really begin to alter how that all works. Huh,

00:51:37 [Speaker Changed] Really, really very fascinating. All right. I don’t have you all day long, so let me jump to my favorite questions starting with who are your early mentors who helped shape your career?

00:51:50 [Speaker Changed] I’m a huge believer in mentors. I’ve had the benefit of several. My first boss when I came out of college is still a friend and mentor today. We were recently on a vacation together and he still treats me like I work for him, which is great. And I think it’s healthy and it’s good to have someone in your life who reminds you where you came from and is quick to give you advice and perspective and has nothing but your best interest at heart.

00:52:15 [Speaker Changed] Let’s talk about streaming. What are you watching or listening to today?

00:52:21 [Speaker Changed] I consume a lot of news and so I also have a bit of a political junkie. So I’ve been enjoying a, a new launch of a new kind of network, I guess you’d call it, called Two-Way, which is an interesting series of political conversations and access to different kind of political pundits and elected officials. So I’ve been consuming a fair amount of news via two-way.

00:52:44 [Speaker Changed] Huh, interesting. Let’s talk about books. What are some of your favorites? What are you reading right now?

00:52:49 [Speaker Changed] I am a voracious reader, so something is always open, not all of it’s good or worthy of sharing. I recently finished something that, that I think is Worthy, which is a book called When the Sea Came Alive by Garrett Graff. I think he writes in a really interesting way where he’s piecing together firsthand accounts and diaries. And so this book was really a focus exclusively on the landing of on the beaches at D-Day. Huh,

00:53:14 [Speaker Changed] Interesting. You said something, not all of them are good or worthwhile. My my view is if you are reading a book and you’re not enjoying it, well give it to someone else and start the next book. I should

00:53:25 [Speaker Changed] Do that. I really struggle with that. I am,

00:53:27 [Speaker Changed] It’s not homework, it’s not an assignment

00:53:29 [Speaker Changed] I know. And yet I find myself grinding through things that I, I’m sitting there thinking, this is really not worth my time. And yet I have this compulsion of I started it. I have to finish it.

00:53:41 [Speaker Changed] I I I somebody turned me on to the idea of not finishing books. You started like, I don’t know, 15 years ago. All right, that’s one my to-do list and it’s changed. The average American reads four books a year. The average quote unquote reader reads 10 books a year. I find if you don’t like a book and you close it, you are reading, you know, two books a month. It’s a whole different world.

00:54:05 [Speaker Changed] I’m probably reading two books a month and I’m not closing them. At least I should accelerate and I, I have to learn. That’s a good lesson for me to take, take away from this.

00:54:14 [Speaker Changed] Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either private equity or private capital or, or investing in general?

00:54:26 [Speaker Changed] I think I would give the same advice regardless of the industry, and that goes back to your question on the mentor piece. I think we employ a whole lot of young people, and I love that. In fact, we literally just last week welcomed our brand new analyst class. They seem younger and younger to me, and I’m clearly getting older. So I had the privilege of welcoming them to the firm and, and and addressing them. And I was asked this question and my answer was, get a mentor. I think right now, particularly with younger folks, there’s a belief that everything that you need to know, you can look up. I can just go online, I can ask chat, GPT, I can Google for it. And I just don’t believe that’s true. I still think that whether it’s an investment industry or a legal profession or a medical, that while you can get a lot of knowledge via the internet and via other electronic resources, there is something about learning from the mistakes that others who have gone before you have made that is invaluable. And I think aligning yourself in a really healthy mentor mentee relationship, I think is an enormously important part of a good career.

00:55:40 [Speaker Changed] Hmm. Really interesting answer. And our last question, what do you know about the world of investing, be it private or public today that would’ve been helpful had you learned it back in the 1990s?

00:55:52 [Speaker Changed] I think just how much change is coming. We, it’s so easy to go to work every day and kind of make the assumption of, I’m just thinking about what I have to do today and tomorrow will be very similar to today. I think training yourself to step back and try to see around corners and try to think outside the box of saying, what if it doesn’t work like this forever? What if there’s gonna be a big change? What if this new technology’s gonna take off? Continuing to sort of push yourself to do that. I’m better at doing that now. I wish I had done more of that when I was younger.

00:56:28 [Speaker Changed] Huh. Really, really interesting. Eric, thank you for being so generous with your time. We have been speaking with Eric Hirsch. He’s co CEO of Hamilton Lane, which manages or advises on nearly a trillion dollars in private assets. If you enjoy this conversation, well be sure and check out any of the past 500 we’ve done over the past 11 years. You can find those at Bloomberg, iTunes, Spotify, YouTube, wherever you find your favorite podcast. Be sure to check out my new book, how Not to Invest the Bad Ideas, numbers and behavior that destroys wealth and how to avoid them, how not to invest at your favorite bookseller. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Meredith Frank is my audio engineer. Anna Luke is my producer. Sean Russo is my researcher. Sage Bauman is the head of podcasts at Bloomberg. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

 

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10 Monday AM Reads

My off-to-Maine morning reads:

Trump Claims the Jobs Report Was Rigged. Was It? He does himself and his party no favors by waving away economic reality—as Biden did with inflation. (WSJ) see also What to Do When the President Acts Like a 5-Year-Old? For over a century, the integrity of U.S. economic data has rested on a fragile but vital precept: independence. Agencies like the Bureau of Labor Statistics, the Census Bureau and the Bureau of Economic Analysis operate under the executive branch, but their mandates are to serve the truth, not the administration. Their job is to report what is, not what the White House wishes were true. (NYT)

What’s Driving the Surge in U.S. Corporate Profits? U.S. corporate profits have risen markedly to near all-time highs since the start of the COVID-19 pandemic, both in nominal terms and as a share of national income. We examine the factors and industries that have driven this surge. (Federal Reserve Bank of St. Louis)

The Tech Industry Is Huge—and Europe’s Share of It Is Very Small: A risk-averse business culture and complex regulations have stifled innovation on the continent, weighing on its future. (Wall Street Journal)

That time people freaked out about the CAPE ratio 10 years ago: Whenever there’s talk about decades in the stock market, my brain automatically goes to the cyclically adjusted price-earnings (CAPE) ratio, the metric popularized by Nobel Prize-winning economist Robert Shiller. (TKer)

After a Lag, Consumers Begin to Feel the Pinch of Tariffs: There are growing signs that President Trump’s levies are filtering through to consumer prices, as companies exhaust options for keeping them stable. (New York Times) but see Might Tariffs Get “Overturned”? “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general.” (The Big Picture)

The Country Where 76% of Cars Sold Are Electric: Subsidies, hydroelectricity and a manufacturing powerhouse neighbor are moving the cars into Nepal faster than almost anywhere else. (New York Times) but see Chinese graphite is crucial to electric car batteries. Trump just put a 93.5% tariff on it. The Trump administration is imposing a substantial tariff on a raw material that is critical for electric vehicle batteries, which could significantly raise the cost of building EVs in the United States. (CNN)

The Pollster Who Sensed Democracy Was Faltering: What does the road map to restore American democracy look like? (The Atlantic)

Competing Conspiracy Theories Consume Trump’s Washington: President Trump is trying to divert attention from the Epstein conspiracy theory with a new-and-improved one about Barack Obama and treason. (New York Times) see also Conspiracy Theorists Found a New Boogeyman: Payroll Data: Efforts to improve the accuracy of employment statistics have stoked claims they are being manipulated. (Bloomberg)

Against Self-Optimization: The wellness industry sells you a version of yourself it can’t deliver. Hope lies elsewhere. (Plough)

Lionel Messi’s superhuman form paces Inter Miami: “He is the one” Movie theaters around the country may be showing “Superman,” but the real Man of Steel was doing his own hero work in Fort Lauderdale. (MLS Soccer)

Be sure to check out our Masters in Business interview this weekend with Erik Hirsch, Co-CEO Hamiliton Lane, which manages or advises on $958 billion in client assets. Previously, he was an M&A banker at Brown Brothers Harriman, and a municipal financial consultant with Public Financial Management, specializing in asset securitization, strategic consulting and sport stadium financings.

Inflation-Adjusted House Prices 2.0% Below 2022 Peak

Source: Calculated Risk

 

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10 Sunday Reads

Avert your eyes! My Sunday morning look at incompetency, corruption and policy failures:

DOGE-Pilled: Luke Farritor could have been an artist, or a builder, or someone dedicated to seeing a great historical mystery through. Instead he wound up at the Department of Government Efficiency, slashing, dismantling, undoing. Luke Farritor could have been an artist, or a builder, or someone dedicated to seeing a great historical mystery through. Instead he wound up at the Department of Government Efficiency, slashing, dismantling, undoing. (Businessweek)

Trump officials accused of defying 1 in 3 judges who ruled against him: A comprehensive analysis of hundreds of lawsuits against Trump policies shows dozens of examples of defiance, delay and dishonesty, which experts say pose an unprecedented threat to the U.S. legal system. (Washington Post) see also On the Supreme Court’s Constitutional Vandalism in Service of Inherited Wealth: How Oligarchs Bought a Constitutional Theory to Kill the New Deal. (Notes from the Circus)

Elon Musk is turning US liberals off not just Tesla but electric vehicles in general: Disgust at the CEO’s rightwing activism is casting a pall but conservatives are no more likely to buy EVs. (The Guardian)

The Enshittification of American Power: First Google and Facebook, then the world. Under Trump 2.0, US statecraft is starting to mimic the worst tendencies of Big Tech. (Wired)

Chinese graphite is crucial to electric car batteries. Commerce just put a 93.5% tariff on it: The Trump administration is imposing a substantial tariff on a raw material that is critical for electric vehicle batteries, which could significantly raise the cost of building EVs in the United States. (CNN)

How Axios rebranded conservative ideology as objectivity: Our news is carefully curated by conservative billionaires: Sinclair Broadcast pushes right-wing propaganda into 40% of local news markets. Fox News is in 70M homes. The WaPo and Politico owners are Trump donors. CBS has a political bias monitor. (Popular Information)

•  The FBI Took Her $40,000 Without Explaining Why. She Fought Back Against That Practice—and Lost. The twist underscores just how little accountability exists in civil forfeiture, which allows law enforcement to seize assets without charging the owner with a crime. (Reason) see also Dropped cases against LA protesters reveal false claims from federal agents: Records show border patrol gave inaccurate testimony about people it jailed. Prosecutors now face ‘embarrassing’ dismissals. (The Guardian)

How Trump Killed Cancer Research: Attempting to eliminate funding for certain kinds of “woke” studies, the Trump administration erased hundreds of millions of dollars being used for cancer research. (Wired)

In Game-Changing Climate Rollback, E.P.A. Aims to Kill a Bedrock Scientific Finding: The proposal is President Trump’s most consequential step yet to derail federal climate efforts and appears to represent a shift toward outright denial of the scientific consensus. (New York Times)

The Singer Who Skewered America: So long, Tom Lehrer. (Yascha Mounk)

Be sure to check out our Masters in Business interview this weekend with Erik Hirsch, Co-CEO Hamiliton Lane, which manages or advises on $958 billion in client assets. Previously, he was an M&A banker at Brown Brothers Harriman, and a municipal financial consultant with Public Financial Management, specializing in asset securitization, strategic consulting and sport stadium financings.

 

Drug prices have outpaced inflation since the 1980s

Source: USA Facts

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MiB: Erik Hirsch, Hamilton Lane



 

 

This week, I speak with Erik Hirsch, Co-Chief Executive Officer at Hamilton Lane, previously serving as CIO and Head of Strategic Initiatives. As co-CEO, he is responsible for the firm’s strategic direction and operations. Erik is also Vice Chairman and a trustee of the University of Virginia’s College Foundation, and serves on the board of the Philadelphia 76ers Youth Foundation. In this episode, they discuss the future of private credit, private capital, private equity,

A list of his favorite books is here; A transcript of our conversation is available here Tuesday.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, SpotifyYouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Tim Ferriss, author of five #1 New York Times and Wall Street Journal bestsellers, including The 4-Hour Workweek and Tools of Titans. He is also host of The Tim Ferriss Show podcast, which has had more than a billion downloads. Ferriss was named to Fast Company‘s “Most Innovative Business People” and one of Fortune‘s “40 under 40.” He is an angel investor/advisor to firms such as Shopify, Twitter, Uber, Alibaba, clear and more than fifty others

 

 

Favorite Books

 

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10 Weekend Reads

The weekend is here! Pour yourself a mug of Colombia Tolima Los Brasiles Peaberry Organic coffee, grab a seat outside, and get ready for our longer-form weekend reads:

Volkswagen’s Secret: History forgot the horrors endured by laborers on the automaker’s massive cattle ranch in the Brazilian Amazon. But a priest had recorded it all and made a call. (Washington Post)

• The Next Thing You Smell Could Ruin Your Life: Millions of people suffer debilitating reactions in the presence of certain scents and chemicals. One scientist has been struggling for decades to understand why—as she battles the condition herself. (Wired)

The High-Schoolers Who Just Beat the World’s Smartest AI Models: Google DeepMind and OpenAI won gold medals at the math Olympics—but these American teenagers still got higher scores. Will this be the last time humans outperform AI?  (Wall Street Journal)

The Man With the Hot Hand: The dizzying rise, brief fall, and white-hot resurgence of Abstract’s 34-year-old Founder, Ramtin Naimi. (Colossus)

Where are Vacation Homes Located in the US? As of 2023, the US has around 142.3 million housing units: roughly one home for every 2.4 people in the country. The vast majority of these homes – 127.5 million – are occupied. The remaining 14.8 million homes are vacant. Of these, around 4.8 million homes, or around 3.5% of the total, are vacant because they’re seasonal, or vacation, homes. (Construction Physics)

Britain’s spies-for-hire are running wild: Lucrative, freewheeling — and largely unregulated — private intelligence and security firms are booming in the land of James Bond and John le Carré. (Politico)

The Trump administration attack dog you should pay attention to: Bill Pulte started with viral cash giveaways, public family feuding, and meme stocks. Now he’s targeting Jerome Powell and Adam Schiff. (Vox)

How NASA Engineered Its Own Decline: The agency once projected America’s loftiest ideals. Then it ceded its ambitions to Elon Musk. (The Atlantic)

4.6 Billion Years On, the Sun Is Having a Moment: In the past two years, without much notice, solar power has begun to truly transform the world’s energy system. (New Yorker)

Why Exercise Is a Miracle Drug: We’re Never Going to Invent a Drug That’s Better Than Exercise. (Derek Thompson)

Be sure to check out our Masters in Business interview this weekend with Erik Hirsch, Co-CEO Hamiliton Lane, which manages or advises on $958 billion in client assets. Previously, he was an M&A banker at Brown Brothers Harriman, and a municipal financial consultant with Public Financial Management, specializing in asset securitization, strategic consulting and sport stadium financings.

 

Bitcoin Holdings By Country

Source: @valaafshar

 

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NFP Disappoint; Revisions Worse

 

Who would ever have guessed that chaotically deploying a random set of discredited economic policies for 6 months would disrupt the economy and hurt the labor market…?

The headline NFP number was a disappointing +73,000; that included a decrease in government workers of -10,000. Unemployment ticked up to 4.2% from 4.1% last month. Hourly wages gained a third of a percent.

But the big news is the revisions:

June was revised down by 133,000, from +147,000 to +14,000
May was revised down by 125,000, from +144,000 to +19,000

That makes three consecutive months of sub-100k payroll data.

If the economy were not so robust heading into the tariff mathem, I’d say these were very recessionary numbers. (Listen to my conversation with Neil Dutta from July for his economic warnings of a recession late 2025/early 2026).

These are no good, bad datapoints. Philippa Dunne of the TLR Analytics described it this way: “While not a disaster, this was one of the weakest employment reports we’ve seen in a long time, with nary a bright spot.”

Markets are down 1.5% – 2.0% as I write this. The silver lining is that it increases the odds of rate cuts in September and October.

Data points like today’s NFP explain why I am hopeful that the tariffs will be lifted. Yesterday’s discussion of their dubious legality was two parts analysis, one part wishful thinking.

~~~

Light posting next week — I am off to the woods of Maine…

 

 

Previously:
Might Tariffs Get “Overturned”? (July 31, 2025)

 

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10 Friday AM Reads

Happy August! My end-of-week morning train WFH reads:

Almost Every Corner of Emerging Markets Is Surging as Dollar Sinks: After more than a decade as an afterthought in investing circles, developing assets are having a moment as Trump roils the dollar. (Bloomberg)

2024 Private Equity Fundamentals. An analysis of private equity companies showed they are smaller, more leveraged, pay higher interest rates, and have lower margins than public companies. (Verdadcap) see also Foie Gras Retirement plan participants shouldn’t be force-fed private assets: Private equity and credit managers desperately want access to retirement plan participants. And steps are reportedly being taken to make that happen. I feel ambivalent at best about this. (Basis Pointing)

As Consumers Lose Their Appetite, Food Brands Fight to Keep Wall St. Happy: Packaged food companies are struggling to adjust — and profit — as tastes, waistlines and wallets change. (New York Times)

The Texas Economy Ain’t All That: If Texas were a country, it would have the world’s 8th largest economy, with its sights on overtaking France at No. 7. It is also, according to the personal-finance website WalletHub, the state with “the most people in financial distress.” For all the impressive economic statistics, Texas doesn’t generate sufficient income or security for its residents. (Bloomberg)

Scapegoating the Algorithm: America’s epistemic challenges run deeper than social media. (Asterisk)

Why Smart People Deliberately Kill Their Status: The Art of Strategic Disappearance “Status Death”: the deliberate decision to walk away from recognition, followers, and prestige to start fresh. From Roman Emperor Diocletian retiring to grow cabbages, to modern founders abandoning million-follower accounts, we’ll dive into why this counterintuitive move is often the secret to long-term success. (Listen Notes)

Norway should buy Harvard: Academic excellence has never been more affordable. (DN)

Trump’s imaginary numbers, from $1.99 gas to 1,500 percent price cuts: The president likes to cite specific numbers to bolster his claims. They are often wildly improbable — or just impossible. (Washington Post)

‘Real-life Happy Gilmore’: Meet the hockey player who inspired the Adam Sandler movies. (New York Times)

I Drank Every Cocktail: The International Bartenders Association, or IBA, maintains a list of official cocktails, ones they deem to be “the most requested recipes” at bars all around the world. It’s the closest thing the bartending industry has to a canonical list. As of 2025, there are 102 IBA official cocktails, and as of July 12, 2025, I’ve had every one of them. (Adam Aaronson)

Be sure to check out our Masters in Business interview this weekend with Erik Hirsch, Co-CEO Hamiliton Lane, which manages or advises on $958 billion in client assets. Previously, he was an M&A banker at Brown Brothers Harriman, and a municipal financial consultant with Public Financial Management, specializing in asset securitization, strategic consulting and sport stadium financings.

A growing share of US household assets is owned by people age 55+

Source: Apollo

 

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Might Tariffs Get “Overturned”?


Somebody’s paying the tariffs. Looks like it’s you.     Source: OptimistiCallie

 

 

You probably missed V.O.S. Selections, Inc. v. Trump, a little-noticed case that is working its way through the courts.

Most investors are not paying attention to this. Maybe they should.

The underlying thesis? Congress, not the President, is the only entity empowered to implement tariffs. As per the U.S. Constitution,  Article I, Section 8, Clause 1:

“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States…”

Recall the April 2nd White House announcement threatening global reciprocal tariffs of 100%. That shocked the equity, fixed income, and currency markets. It also surprised numerous legal scholars, who were confident in their beliefs that the right to tax and spend — and that includes tariffs — lay solely with the Legislative and not the Executive branch of government. Congress, not the White House, is the entity the Constitution empowers.

Following those announcements, a lawsuit was filed on April 14th, challenging the Administration’s authority to declare an economic emergency and impose across-the-board tariffs under the International Emergency Economic Powers Act (IEEPA).1

The litigation argued it was an unconstitutional violation of the separation of powers because only Congress has the authority to levy tariffs. The plaintiffs were successful in front of a three-judge panel of the U.S. Court of International Trade. They concluded under the IEEPA, neither the President nor the Executive Branch could impose tariffs as a way to respond to longstanding trade deficits.

The ruling was stayed pending appeal. That appellate hearing was held today, in front of the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. The jurists appeared to be skeptical of the government’s arguments that declaring a state of emergency was simply an option to bypass the constitution.

The constitutional power to tax was given exclusively to Congress, and these tariffs increasingly resemble a tax on consumers. Reuters reported “Tariffs are starting to build into a significant revenue source for the federal government, with customs duties in June quadrupling to about $27 billion, a record, and through June have topped $100 billion for the current fiscal year.”

The nonpartisan Tax Foundation has reached similar conclusions. The tariffs imposed by President Trump’s current administration constitute “the largest tax increase on American households since 1993.” According to their analysis, the tariffs scheduled and imposed for a full year would increase federal tax revenues by $167.7 billion, or 0.55% of GDP. This makes them the largest single-year tax hike since 1993

Neal Katyal, former Principal Deputy Solicitor General in the U.S. Department of Justice, is leading the team of attorneys arguing on behalf of several small businesses.

Katyal discussed the case recently on TV recently; I found his arguments so compelling, I jotted some down:

“No president in 200 years has ever been able to unilaterally impose tariffs. This separation of powers goes all the way back to the Revolutionary War…”

“Congress gave President Lincoln all sorts of powers – including the power to blockade and ban all products from the South – but the one thing they didn’t do was grant him was the tariff power.”

“The constitution was very clear in saying there’s one branch that has the power to tariff and it isn’t the president and it isn’t the courts – it’s the Congress of the United States.”

“if you’re raising revenue, you’ve got to originate that bill in the House of Representatives… The president tried to do that in his first term and that legislation failed…”

“What’s happened here — and the way we’ve always historically done things — when presidents want to have trade authority or negotiate a deal or threaten tariffs, they go to Congress in advance and get that approval. They can’t go off on their own and say “Hey, I know what’s best and blow off Congress.”

All of the new tariffs are scheduled to go into effect tomorrow, August 1st.

I don’t get to play attorney very much these days, but every now and then i see a reminder I didn’t totally waste three years in law school. This case is very much one of those instances.

This could be a significant litigation. This is definitely a case investors should not ignore…

 

 

See also:
US appeals court scrutinizes Trump’s use of tariffs as trade deadline looms (Reuters, July 31, 2025)

Trump Tariffs: Tracking the Economic Impact of the Trump Trade War (Tax Foundation, July 29, 2025)

U.S. Court of Appeals holds oral arguments in VOS Selections Inc v. Trump (7/31/25)

 

Previously:
Its the Law, Bitches! (July 19, 2010)

10 Things You Don’t Know (or were misinformed) About the GS Case (April 23, 2010)

 

 

___________
1. From Supply Chain Dive:

“On April 23, 12 states filed a parallel lawsuit, mainly making the same arguments. So, the USCIT consolidated the two cases, and a three-judge panel ruled on May 28 that the president had no authority to impose across-the-board tariffs under the IEEPA. As a result of the findings, the USCIT issued a permanent injunction against future tariffs.”

 

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10 Thursday AM Reads

My morning train WFH reads:

Trump’s ‘massive’ deal with Japan is giving US automakers heartburn: The preliminary agreement suggests there is a path forward to lowering the auto duties on other major trading partners, as well. (Politico)

Investors See Few Alternatives to U.S. Treasuries. Could Europe Make One? As President Trump’s chaotic economic policies provoke questions about U.S. stability, a proposal for European countries to issue joint debt has drawn attention. (Dealbook)

Third Point Is Not the Firm You Think It Is: Once famed for Dan Loeb’s blistering activist letters, Third Point is now quietly reshaping itself into more of a credit-driven manager. (Institutional Investor)

The Stock Market’s Most Unserious Season Is Back and Dorkier Than Before: A new generation of meme stocks are soaring and falling again. (New York Times)

Wall Street Is Rewriting the Rules of Bitcoin Trading. DeFi? Wall Street is seizing control of Bitcoin’s center of gravity, with the US financial system increasingly pricing and steering the world’s largest cryptocurrency. BlackRock’s iShares Bitcoin Trust, IBIT, has catalyzed an options market, with open interest in IBIT-linked options more than tripling this year to around $34 billion. (Bloomberg) See also Capitalism Devours Crypto … by blowing up and looting DeFi to enrich TradFi (System Change)

The seven rules of stock market bubbles: A few universal truths about the b-word. The seven rules of stock market bubbles. (OptimistiCallie)

The relationship recession is going global: A rise in the number of single people is becoming a key driver of falling birth rates. (Financial Times)

It’s Not Too Late to Avert Dementia: After Age 60, US Study Shows: Lifestyle changes including exercise, a better diet, and more mental and social activity yielded significant protection within two years, according to a large clinical trial. Making such changes appeared to slow the cognitive aging clock, said Laura Baker, a professor of internal medicine at Wake Forest University of Medicine and one of the study leaders. (Bloomberg)

Earth is spinning faster, leading timekeepers to consider an unprecedented move. Earth is spinning faster this summer, leading astronomers to notice that some days have clocked in at slightly less than the standard 24 hours. (CNN)

South Park’s Creators Are Now Billionaires: If you piss off South Park creators Trey Parker and Matt Stone, they will make you pay—both financially and satirically. On July 2, after Comedy Central delayed the Season 27 premiere of the show because Paramount, the network’s parent company, was locked in a contentious negotiation for its streaming rights—in the midst of months-long acquisition of Paramount by David Ellison’s Skydance Media—Parker and Stone issued a statement on X.com and let it rip: “This merger is a shit show,” the duo wrote, “and it’s fucking up South Park.” (Forbes)

Be sure to check out our Masters in Business interview this weekend with Erik Hirsch, Co-CEO Hamiliton Lane, which manages or advises on $958 billion in client assets. Previously, he was an M&A banker at Brown Brothers Harriman, and a municipal financial consultant with Public Financial Management, specializing in asset securitization, strategic consulting and sport stadium financings.

 

Market-based inflation expectations over the next 5-10 years have risen to the highest levels in almost two years, at an implied 2.44%.

Source: @lisaabramowicz1

 

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At the Money: Building A Car Collection

 

 

At The Money: with “Building A Car Collection with Hannah Elliott (July 30, 2025)

Are you passionate about cars? Have you imagined collecting, rebuilding or showing them? Classic cars have been appreciating rapidly, and if my emails or anything to go by, quite a few of you have caught the fever.

Full transcript below.

~~~

About this week’s guest:

Hannah Elliot is the super car reviewer for Bloomberg, and has been covering the auto industry and exploring car culture for over 15 years. She also drives a 1975 Rolls Royce Silver Shadow.

For more info, see:

Professional Bio

Masters in Business

Instagram

LinkedIn

Twitter

~~~

 

Find all of the previous At the Money episodes here, and in the MiB feed on Apple PodcastsYouTubeSpotify, and Bloomberg. And find the entire musical playlist of all the songs I have used on At the Money on Spotify

 

 

 

Transcript:  Building A Car Collection

 

Barry Ritholtz:  Are you passionate about cars? Are you interested in collecting, rebuilding, racing, or showing them? Have you ever considered having more cars than you could reasonably drive in a given week or month? Classic cars have been appreciating rapidly, and if my emails or anything to go by, quite a few of you have caught the fever.

If you’ve ever wondered what it’s like to build and own a car collection, well then, I have the perfect guest for you. Hannah Elliot is the supercar reviewer for Bloomberg. She’s been covering cars, the auto industry, and exploring car culture for over 15 years. She also drives a 1975, Rolls-Royce Silver Shadow.

So, Hannah, let, let’s start broadly. How does a person who’s passionate about cars find themselves with a collection? Is this an ill-advised idea?

Hannah Elliott: That’s a great question. I think, uh, the quick answer is no, it’s not an ill advised idea. If you like cars and you want to have joy in your life, buy an old car, buy a vintage car.

It’s fun Now. If you are hoping to, that this is going to bring you a lot of money, a long time down the road. Probably not the best investment class, but there are a lot of other values that you get from owning old cars that aren’t just about the money.

Barry Ritholtz: Since you brought up the money, what separates a passion project for, from an asset class, for the average car guy or car gal? Is this a hobby or is this an investment for the average person?

Hannah Elliott: This is a hobby for sure. There are a lot of expenses associated with owning old cars on top of the initial purchase price that, you know, of course you’ve gotta think about storage, you’ve gotta think about insurance, you’ve gotta think about maintenance, repairs, gas obviously.

There are lots of things that are going to come up. I think it’s important to think of it as a relationship. This is a give and take thing. There may be a little bit of dysfunction. It’s not just going to be a, you know, right off into the sunset and you, you pay up front and you never pay again. Um, for most people, yes, it’s a hobby. It costs money, but. You have a lot of fun.

Barry Ritholtz:   So where does one begin? Do you go with the models that excite you or do you try and pick those cars that they’re gonna appreciate over time?

Hannah Elliott: For somebody just getting involved in owning old cars, I would really strongly recommend you buy things that you genuinely like. Buy things that genuinely excite you.

Sometimes if you’re really lucky, maybe those things will retain their value. Maybe they will even gain value over years, if you hold something for a long time.

But here’s the thing, if you buy something that you really like, even if it loses a bit of value over the years, you still get the value of owning something that you genuinely like. Whereas if you buy something simply because you think it might gain value, if it loses value, you’re kind of out because you didn’t necessarily like it and you didn’t make a lot of money on it. So it’s kind of a lose-lose. At least if you buy something you like, you know you will enjoy it, and if you make a little money on top too even better.

Barry Ritholtz: Let’s talk budgets. What do you need to become a hobbyist and what are some of the costs that you should budget going forward?

Hannah Elliott: Okay. I would like to say there is a vintage car for every price point you can buy an old Porsche. Now, I’m not gonna say an air cooled 911, but you can buy an old Porsche from a swap meet in Pomona, California for eight grand, ten grand. It’s gonna need some work.

But you know, I buy old Rolls Royces. I have bought them for 10 grand. Now that maintenance costs a little bit more on that and we can talk about that. But I just wanna illustrate there is an entry price point for every budget, of course.

And I would say, I don’t think there’s necessarily a correlation between spending a lot of money and having a lot more fun on a car that’s perfect and spending less money and you’re gonna have less fun and the car’s gonna need a lot of work.

There’s not necessarily a correlation. You can spend a lot of money on something and it’s not great to drive and it requires a lot more maintenance.

Obviously, registering a car is a one-time thing insuring a car. There are many vintage cars, insurers like Haggerty, for instance, that have pretty great insurance policies and you can even get less expensive insurance policies on classics.

If you don’t, because you don’t drive them as much because they’re not daily drivers. So it’s worth going with a, um, insurance provider that specializes in classic cars that will charge you less.

Barry Ritholtz:   When people used to ask me for suggestions for a fun car to start with, I used to say, “Hey, check out the Honda S 2000, convertible, stick shift, ton of fun.”

But those have been appreciating. So now the answer I give people is find a well sorted out Mazda Miata, also with a convertible, a stick shift. So much fun for so little money. And you could go from there if you want.

Hannah Elliott: You know what, as you said, Mazda Miata, I was typing Mazda Miata. So we are completely tracking. You’re so right. It’s a, it’s such a fun car. Parts are readily available. It’s very predictable. You know, it’s not gonna need a lot of maintenance. You can get a manual. And I’m looking right now on Haggerty’s price values. You can get one in driving condition for $8,100.

Barry Ritholtz:   That’s amazing. A fun car. You get a nice one for $10, 12,000. They’re very reliable. They’re very tossable. Yes. It’s just a beautifully balanced car. And they have some history. That’s the car that sort of brought back the resurgence in convertible.

So the other question I wanted to ask is, how important is it to have a theme or a focus. For your interest or collection. And I ask that knowing your husband specifically collects air cooled 911s from the sixties and seventies; some people have a broad assortment, like Jay Leno, but for the average person thinking about adding a car or two, where do they go?

Hannah Elliott: It’s nice to have a theme or a focus because it creates efficiencies. Mm-hmm. For instance, if you have a great mechanic who works on your Mercedes, he’ll be able to take on more Mercedes vehicles. Whereas if you bring him something else, a Miata, for instance. There may not be as much overlap.

It’s kind of nice to have a specialist, you know, I’ve also got a ‘77 C3 Corvette. That car goes to one guy, the Rolls Royces go to another guy, the Porsches go to another guy. So when you do have a theme, it creates more efficiencies. You can send them all to the same person to work on them. You can swap parts. That’s also a nice efficiency. Also, you can get involved more deeply in the local culture of whatever that make is, which is really fun because when you start talking to other people who own similar mix, or even if you’re just going to say all British cars. Or all, Italian, Alpha Romeos for instance. You kind of, it’s fun to get involved in a culture that focuses on that thing. You talk to old-timers who have a wealth of knowledge, who can give you tips. You start to learn who the trusted mechanics are. It just makes it easier. So I do really like the idea of having a, a particular theme to it.

Barry Ritholtz: So you mentioned earlier the local car community or the enthusiast community. How important is it to get involved with your local BMW or Miata or Porsche Club, in your neighborhood?

Hannah Elliott: It’s important. I think it’s a nice value added thing to get involved with other like-minded enthusiasts in your area.

You know, that is, some of those clubs can be really picky. Of course, I’m thinking of Rolls Royce people. I sort of deliberately avoid some of the Rolls Royce clubs in, in Los Angeles because those guys are, they know there stuff – which is great and not great. They, I don’t drive mint condition cars, so, you know, they certainly are friendly, but, they also can tell me everything that’s wrong with the car.

The, the broader answer is yes, of course. Get involved. The more people you have around you, hey, at some point you’re gonna break down. You need to phone a friend. And AAA is great, but you know, you just want people around you who are a network, a support network. They’ll lead you to, again, the right mechanic, the right place to find a part. Maybe you end up getting a second car. And the same theme they’re gonna, they’re going to know who wants to trade, who wants, who can, you know, lead you down a path deeper down the rabbit hole of whatever your drug of choices.

Barry Ritholtz:   And you mentioned garages, but there are other options for storing a car. Sure. It’s not just your own garage. What are some of the other storage options?

Hannah Elliott: Car clubs, um, car clubs can be a little bit expensive, but again, it’s an investment in the hobby. There are many car clubs. I just know Manhattan and LA because that’s where I live.

But, there’s some great car clubs, of course, across the south in Arizona, car clubs are great because again, you pay a price per month for them to store your car. Often they will also maintain the car for you. In-house, which is a great benefit. And again, you get exposed to similar people, like-minded enthusiasts who are keeping their cars there. It’s all, at the end of the day, about building this community of people, friends, colleagues who enjoy what you enjoy.

Barry Ritholtz:  You mentioned Haggerty and you mentioned bring a trailer. What other resources should potential car collectors know about it?

Hannah Elliott: The third one that comes to mind is K 500, which is an index that Simon Kidson runs out of England. Very good on, really high-end, now this is like an advanced move, K 500. You need a membership to subscribe. But again, they have amazing data on values, trends, um, history. They will have specific pedigrees and lineages of particular cars.

This is for the really high end stuff. But I also look at K 500 just as educational. They cover all of the auctions. They’ve got analysis. They’ve got experts. Steve Wakefield is Simon Kitson sort of top analyst. Those guys are really great. They’re out of England, so I, I recommend it.

Barry Ritholtz:   Ever play with Auto Tempest as a website? No. No. So it’s just a giant relational database that lets you search for any year or group of years for any marquee in specific car. Cool. And specific variants. And then you can refine that search for, alright, show me just the convertibles. I wanna see just the cars with the sticks. Just show me this color. I like that. And it really allows you to hone in and it pulls in stuff from tons and tons of other sites.

Hannah Elliott: Auto tempest.

Barry Ritholtz:   So last question, let’s talk about documentation. How. Important is it to make sure that you’re not only getting clear title, but seeing the service history of any vehicle you’re thinking about purchasing.

Hannah Elliott: I think it’s important. Um, obviously you wanna make sure you see the title with the seller’s name on the title.

For some older cars and race cars, a bill of sale is also used. Some cars don’t have titles if they’re really old, so a bill of sale is used if you’re buying a car from Europe. That can be pretty complicated to confirm, to transfer a bill of sale into like an American style title. So you might wanna consult a professional about that.

The more maintenance records, the better, obviously. The longer ownership span that a car has by a single owner, generally the better.

You don’t want a car that’s been flipped, you know, every two years because generally that car. There’s a reason it’s being flipped and it may not have been maintained so lovingly as someone who owned their special baby for 20 years. So the more records you can have, the better.

Barry Ritholtz:  So to wrap up. There’s a lot of common sense involved in this. You don’t need a ton of money. You could start with just something very basic, like a Miata or an old SL – but find the cars you really like. Do your homework. Get to know your local enthusiast club or that particular BMW or Porsche Club and learn from the experts how to make a good decision with a car that will bring you pleasure. And maybe a little money for as long as you own it.

I’m Barry Ritholtz. You are listening to Bloomberg’s at the Money.

 

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