george grombacher 0:01
Bob, to get us started give me two truths and a lie, please.

Bob Elliott 0:06
Well, I have worked in some unusual, unusual work environments I thought I’d do it in in the in the work context, to give people a flavor of my experience to truth and a lie I’ve got. I once was reprimanded for installing my own light bulbs in the ceiling. Number two is, I was once told that I couldn’t meet with any external clients because my bag was too Ratty. And number three is, while I was working at the world’s largest hedge fund, junior people became concerned about whether they were ever going to get paid because the car I drove was so cheap that they thought that maybe more experienced people weren’t actually making any money.

george grombacher 0:56
Wow, those are awesome. reprimanded for stolen your own lightbulbs, your bag is a little too ratty to be client facing. And your car is not impressive enough for the younger folks. My goodness.

Bob Elliott 1:11
Hmm. I know. A couple.

george grombacher 1:16
User excellent. I think that that the bag to to ratty is the lie.

Bob Elliott 1:23
Oh, wow. You got it, you got it was not it was in fact, not the bag. It was it was my suit was to Ratty. The one suit that I had, which I which I bought in college to do original interviews and was still had something like 10 years later was my primary suit, because most of the work that I did was, was building investment strategies where you know, one’s quality one suit was not that important. So I said I had to go get a better look and suit in order to meet me.

george grombacher 2:02
And as I will have already let people know, you spent a long time at Bridgewater was was this while you were

Bob Elliott 2:09
there? Yeah, that’s right. That’s right. Okay. All right.

george grombacher 2:13
So it’s not a not a buttoned up culture necessarily.

Bob Elliott 2:17
No, certainly not certainly not. In terms of certainly the in terms of the apparel, it was not buttoned up. In terms of the secrets, you know, certainly very bummed.

george grombacher 2:33
Kind of lightbulbs, we dealing with these just average run of the mill light bulbs. Oh,

Bob Elliott 2:38
no, no, these are the special, you know, the fluorescent ones. I, when I started, when I started working, I was actually in the basement, literally in the basement of the building, and it was a bit dreary. And so I thought hey, that I could get something a little more upbeat around here. And the head of facilities the time strolled by and said How the heck did you get those light bulbs those new light bulbs in there? And I said well I stood on my chair and I installed them the old fashioned way no fashion but

george grombacher 3:17
now were these like strobe lights they like have a certain brighter

Bob Elliott 3:21
than than the den you know, I’m sure you’ve been in a dingy office buildings or hasn’t you know, no one’s thought about for many many years and so that’s that’s I try was just trying to spruce it up a little bit for me and the people around me don’t

george grombacher 3:38
really get it totally get it man. And are you still a guy that is not necessarily concerned with the kind of car you drive? Or is that changed? No, no, I

Bob Elliott 3:47
I have always driven cheap cars, cars or consumption item not a investment item. I was I was actually just just talking to my wife about how my current car is I think 10 years old. I’m driving around works gets me from point A to point B No need to get too stressed about the problem the nice cars and you get stressed about if something happens it gets dirty something like that. You know you don’t need any of that stuff just by car that gets you around and you’ll be happy enough and the nice thing is if you always are driving an old car then when you get a new old car It seems very new to you. Like wow, the innovation here is incredible. It’s all about you know that’s that’s part of in the financial markets you know how things transpires you know, what’s what happens relative to expectations you know, the same is true and your consumption patterns if you haven’t always have an iPhone that’s like five generations back when you upgraded all seemed like an upgrade for you.

george grombacher 4:56
I love everything about that. Is there any part of your life where you run contrary to that food, entertainment.

Bob Elliott 5:07
Yeah, I, I, I do spend on nice salt, which I find to be a very critical cooking ingredient that is under underappreciated. So fancy sea salts is the is the extreme of my consumption.

george grombacher 5:29
I think that that is awesome, you know, used to fight wars over the stuff, so we should have a deeper appreciation.

Bob Elliott 5:35
That’s right. Yeah. And you’d be surprised at how good good salt is. It’s not it’s not that expensive. But, but it’s, it’s worth the effort in all sorts of different cooking in environments, so definitely something to check out.

george grombacher 5:52
That is awesome. I love it. All right, those those were solid, and I lucked out, it was just a blind guess. That’s the blind guess, man. All right. Well, in terms of of the world of investing, what is top of mind for you right now?

Bob Elliott 6:07
Well, I think, you know, for me, one of the the big things I’m wrestling with is weather. What the outlook is for the for the 6040 portfolio, you know, I think the sort of typical investor and a 6040 portfolio, so I’m pretty well, really over the last 18 months or so, as inflation has come down. As you know, the economy has been stronger than a lot of people expected. You know, it wasn’t that long ago, when people said, there’s 100% chance of a recession coming soon enough. And, you know, we’re, we’re we’ve passed the point, and there is no recession yet. And so I think the challenge with that is that it now has created an environment where what’s priced into these markets is now something that is going to be difficult to achieve. On the equity market side of things. Here, we’ve had a heck of a run up since those October 22, lows, on a combination of very high expectations related to AI, and the growth that would come as a result of it, combined with, you know, an expectation of sufficient significant easing by the Federal Reserve, and then finally sort of exacerbated or pushed even higher, I should say, in recent weeks by expectations of the election of a new administration. That combination of things is basically pricing and extremely high earnings growth and outcomes for the US economy. At a time when you know, your economy’s not doing poorly, but it’s certainly not booming, and the continued tight monetary policy that we have seen, is continuing to weigh on the economy. And so I think it’s going to be challenging on the equity side, and then you go over to the bond side and, and what you see there is that things aren’t quite weak enough, inflation hasn’t been quite defeated enough to for the Fed to start a quick easing cycle. And right now six to seven cuts are priced in over the next 14 months or so that’s a lot of cuts that basically basically one cut every meeting starting in September. And if that doesn’t happen, bonds are not going to be a good offset to any stock weakness, because they’re already pricing in significant cuts. And so you put those two things together, that’s a pretty likely a challenging environment for the 6040 portfolio ahead. And, you know, the reality is most investors in one, you know, have something that is close to the 6040 portfolio. And so that could be a meaningful, meaningful challenge for many investors, kind of like what we saw in 22.

george grombacher 8:44
Appreciate that. So you launched unlimited going on two years? Yeah, that’s right. And how is it? How has it been? Has it been exactly what you expected?

Bob Elliott 8:58
Ah, well, it’s, it’s certainly it’s been quite a ride, being an independent creator of financial products is, is always challenging. Because the deck is stacked in favor of those with high distribution capabilities and not necessarily stack towards excellent products. It’s also been a challenging environment, frankly, for anyone who hasn’t been, you know, YOLO NASDAQ. And that is a that is a circumstance that happens at times in markets where, you know, equities meaningfully outperform for an extended period of time. I think it highlights sort of a, a story that always exists when you’re investing which is the prudent prudent asset management, always underperformance and always underperforms, the thing that is very strong. And so if you’re in the market, you’re trying to build products that help to create a prudent in vestment strategy, you know, time you need time in order to prove that thesis out. And so, you know, it’s been two years, we, we’ve, we set about to replicate how hedge funds are positioned and how they perform, we’ve been able to do that pretty well with our technology. So we’re happy about that. But it is certainly, I think, if you talk to a lot of product issuers a challenging environment for anything that isn’t, you know, all in on the video or NASDAQ.

george grombacher 10:36
Now, you were when when we spoke last year, you use and used and probably always have everything that technology has to offer you. At that time. I don’t think that we were all talking as much as we are today about AI. How if it if at all? Has it changed? What what you’re doing with unlimited?

Bob Elliott 10:59
Yeah, I I think it’s interesting, being a systematic investor for something like 30 years, 2030 years, there’s always been incremental tools available, more innovative tools available to help with, you know, analysis and reasoning. And, you know, it’s just 20 years ago, that looked a lot different than what it does today. And the computational capabilities looked a lot different back then than it does today. And so I think I would sort of look at something like AI and really wouldn’t be when we were talking about at work, you know, most people are familiar with large language models. That is just that’s a another step in the historical evolution of these sorts of technologies. And another tool in the, in the quiver, another arrow in the quiver for people who are building systematic approaches. And so it’s not, it’s not probably likely to, it’s not the appropriate solution to every problem in particular, Chet GPT, and other MLMs are not great at reasoning. They’re good at summarizing, but not independently reasoning. They’re good at text, they’re not good at numerical probabilities, things like that. And so they have a particular place that can be useful. A lot of what we do with our replication is oriented around machine learning approaches. So more quantitative oriented, probabilistic inference, and that that sort of field has been very rich and has advanced a lot and always is consistently advancing, and so less about the LLM that have become a little bit more popular in pop culture, so to speak.

george grombacher 12:42
Yeah, I appreciate that. So, looking looking ahead, we have no idea what’s going to happen. But assuming that the 6040 Pro portfolio does struggle a little bit. That doesn’t necessarily and then the conversation about how a prudent approach takes time, because it’s not necessarily the most exciting thing. It’s tortoise and the hare mutant is the tortoise and the hare is invidia. And then the next big thing that’s that’s, that’s, that’s that that’s going to come along. How do you advocate that, that people use alternatives? And when I say people, I mean, ordinary retail investors use alternatives, like unlimited?

Bob Elliott 13:29
Yeah, I think for most investors, finding, you know, diversifying diversification is the key to success. That really is the key to creating long term wealth creation in your investment portfolio, and your savings portfolio, your investment portfolio. And so there’s a couple of different ways you can do that alternatives are very, are useful because they provide often in return that can go both long and short financial assets, whereas most investment opportunities are long only. And so having a portion of your portfolio in those alternative investments can be valuable to help cushion during times of down asset market environments. The other thing I’d emphasize is that you have the ability to, you know, while most people are focused on a 6040 style portfolio or have something that akin to that there’s other assets out there that can be very beneficial to create diversification. For instance, gold is a is rarely invested in and has returned properties that are actually, you know, better at cushioning stock declines than bonds, in many cases. And we’ve seen that circumstance play out over the course the last couple of years, where you’ll gold has done quite well and has been very diversifying the stocks have actually had returns that have been a bit higher than stocks since the beginning of the year. And yet very few people think about gold as part of their strategic portfolio. So alternatives in gold both provide a nice avenue for diversification, particularly in light of a portfolio that might not a 6040 portfolio that not might not deliver the returns that people have expected to come to expect over the last 18 months.

george grombacher 15:16
Do you have thoughts on on the best place to own alternatives? Is it inside of a qualified plan? Is it inside of a non qualified account? Well,

Bob Elliott 15:26
I’d say the best place to own alternatives, I sort of flipped the question a little bit and say, the best way to get access to alternatives is to look for a low fee or low cost opportunities. And, you know, if you go back 10 or 15 years ago, like basically, the only way to get access to alternatives is investing directly and fund LP style structures. And the world has really come a long way, in the last 10 or 15 years, in terms of making those sorts of investment opportunities available both at without needing accreditation, or high income or savings or assets, but also making them available in more tax efficient structures like ETFs. And at much lower cost. And so whereas you know, that before, it was pretty challenging, honestly, to get access to those sorts of alternative exposures, today, looking in the alts category, particularly in ETFs, I think can be very compelling, the lot of great products that are out there that can provide that diversification benefit to a portfolio. And basically all of them are under 100 basis points of annual fees, which is pretty low in comparison to sort of the typical 2% fixed fee 20% of performance fee, that would come with most alternative strategies. Yeah, just slightly less expensive, a lot less expensive, and also more tax efficient. Because if you’re a saver, you know, taxes matter. What you care about is the Netta fees, net of taxes outcome, and for many investors, ETFs, in particular, are the best investment or the best structure, because they’re essentially just a tax loophole. And so you know, instead of paying ordinary income, you you can pay capital gains. Typically, if you hold those securities for more than a year, I know taxes aren’t the most exciting thing to talk about, but they matter at the end of the year.

george grombacher 17:24
100%. So I’ve got an off the wall question for you. How do you think botany and investing are similar?

Bob Elliott 17:33
That’s I think that’s a that’s a great question. You know, my academic training is in in botany. And in particular, my training was in something called systematics, which is basically how the various plant systems interact with each other. If you remember, from your old days, xylem, phloem, those sorts of ideas, you probably dusting that off in the back of your mind, thinking about that the water and nutrient transport systems and a plant. That was the focus of a lot of a lot of my work. And in a lot of ways, you can think about the macro economy and markets as similar, which is their complex systems, each individual piece of which can be understood. But it has to be understood in the context of how all those pieces intersect with each other to create the macro environment, whether it’s, you know, the equity market, the economy, or in the plant case, an actual plant that you’re looking at. So it’s very similar, I’d say in the way of thinking, that sort of systematic approach or systems approach to thinking about how things play out over time. So it’s been very valuable for me, probably a different perspective than most people who are in the markets. I’ll tell you that. Yes,

george grombacher 18:51
certainly. But I can definitely see how the very, very, very similar, we like to as investors, or just as human beings, compartmentalize things and say, Oh, this is my 401k over here, it’s separate than my investment account is over here. But in reality, it’s, it’s it’s all the same ecosystem.

Bob Elliott 19:11
Right? For sure. And that’s, that’s sort of, from the pieces to the whole on the whole to the pieces and how the pieces interact with each other, I think is something that is very common to sort of the sciences, life sciences. And I think it’s, you know, when you’re investing are trying to generate unique returns or products in the financial markets, you have to have a unique perspective. And so you know, everyone who came up looking at the world through the lens of, you know, an economy. An economics textbook, will have very similar worldviews and probably won’t provide it won’t be able to have non consensus ideas about how the world is likely to transpire. And so I think, I think you find But people who are in markets for long periods of time who can generate, you know, differentiated returns over time, very often have non traditional backgrounds in terms of their thinking, whether it’s music or engineering or the life sciences or physics. I think it’s it’s always interesting to hear that a good good sign that someone probably can bring something different to the table.

george grombacher 20:24
That makes sense. Well, Bob, we’re ready for your difference making tip. What do you have for us?

Bob Elliott 20:30
Well, I think probably the going back to what we were talking about before, I think probably the biggest difference making tip is to add gold to your portfolio, you probably don’t hold gold. And the vast 99% of investors don’t hold gold in their portfolios, and even those that do hold something like 1% on average. And it is a uniquely diversifying asset that complements bonds as a diversification tool towards stocks. And in particular, in the sort of environments that we’re seeing. Looking ahead, that might be higher inflation, higher deficit type environments, gold in particular has proven out to be a good diversifying asset in those sorts of macroeconomic environments relative to bonds, so look for gold you can there’s lots easy ways to do it, probably the easiest way is there’s a suite, there’s a bunch of different ETFs that you can go out there and, and and buy in and liquid low cost way to get exposure in your financial accounts. Well,

george grombacher 21:39
I think that that is great stuff, it definitely gets a Come on. Thank you so much for coming on show. Where can people learn more about you? And how can they take advantage of the work you’re doing with unlimited? Yeah,

Bob Elliott 21:52
for folks who are interested in our work making these alternative strategies, and hedge fund insights available to all investors check out on limited funds.com where we have a lot more information about what we’re doing there. And then for those of you who might be interested in sort of more day to day takes on what’s going on in the global macro economy and markets, definitely follow me either on Twitter at Bobby Unlimited, or on YouTube, where we have a channel of various clips and interviews that I do also at Bobby unlimited. Excellent.

george grombacher 22:27
Well, if you enjoyed as much as I did show, Bob your appreciation and share today show the friend who also appreciates good ideas go to unlimited funds.com. And it’s been fascinating to to learn about you you’re ago and follow your work. And it’s really interesting how you’ve created a new opportunity for folks to be able to take advantage of hedge fund like investing it’s such a fraction of the cost and ease. So definitely check that out. And you can also follow Bob on Twitter, Bob e unlimited and also YouTube and I will link all those in the notes of the show. Thanks again, Bob.

Bob Elliott 23:06
Awesome. Thanks so much for having me.

george grombacher 23:08
Finally, a friendly reminder, never gonna be anybody more interested in your financial success than you are. So act accordingly.