As rates normalize, certain business models are going to be severely challenged. What kind of companies do you want to own?
Transcript
| Chris Davis: | Well, free money being sucked out of the system is going to have a lot of effects. And some of those will happen very quickly and some are going to bleed into the system over many years. It was a hell of a party that a lot of people lost their minds in and how that plays out, I think it can take some time. And of course there are real risks. There are risks that people are still willing to finance our government, despite its enormous deficits and unfunded healthcare and social security liabilities at very low interest rates. And if those were much higher, interest payments would be a much bigger percentage of the budget, which could become politically untenable and lead to spirals. And the question is, if that happens, what do you want to own? And our answer is, you want to own durable, reliable businesses that have staying power and that have some diversification, have pricing power. And so we own businesses across a number of different industries. We own businesses that benefit from different geographies. Owning a bank in Singapore and a bank in Norway and a bank in Bermuda, in some ways, those are currencies that we think will hold their value. They have very different monetary policies in those economies. So our answer is, we don't know. What we know is that any investor should be building a portfolio recognizing that they will go through storms. You are going to go through a recession. You're going to go through high unemployment. You're going to go through shocks in the system, unexpected geopolitical events, unexpected healthcare events. That the nature of the word unexpected is that you do know it's not priced in. You don't know it's coming. So you can't predict. You have to prepare. And that's the mindset through which we manage the portfolio. |
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