Harnessing The Power of The Bear Market with Lauren Templeton

Transcript

Josh
Good day, fellow dealmakers. Welcome to the deal scout. This is a show all about deals and deal makers, right? The reason we started the show is to take a look at all the different types of deals in the industry, and then report back in. As an audience group, you can take a look at things and you say that interests me. I want to educate myself more on that, or maybe even get connected to the groups that we interview. On today's show, we're going to have a conversation with Lauren and she's going to give us an idea of who she is and some of the things that she's invested in and interested in. So Lauren, welcome to the show.

Lauren
Thank you for having me.

Josh
Yeah. All right. You and I are having a coffee and someone walks in, they go, oh, hi Lauren. You know, who are you? What do you do? That's how typically people, start out conversation. How do you typically respond to that?

Lauren
Sure. I'm the president of a registered investment advisory firm in Tennessee focused on global value investing. I have learned the investment philosophy that we use at this company from my great uncle who is a legendary bargain hunter named John Templeton. He pioneered global investing and was a pioneer in behavioral finance. So we specialize investing the Templeton way. I am the author of a book called investing the Templeton way, which my husband and I published many years ago. I am corporate director of three publicly traded companies. I am a co-founder at a startup and I am chairman of the board of my family's philanthropic foundation, the John Templeton foundation. I am mother of two young girls.

Josh
Holy moly. All right. How in the world do you balance that? Right. You've got a lot of stuff going on from a startup to publicly traded companies, sitting on three corporate boards, having to start up of your own, being a wife and a mother. How do give us some ideas of what, how you do this because I can't do it with a lot less than that.

Lauren
The process is not pretty. My house is often not clean and my car is full of, goldfish, crackers and juice boxes and all of that. It's a lot of work, my husband and I manage the investment business together. That helps because we're definitely on the same team all the way. If I have to step out, you don't have a team member that's going to be upset with you. He's definitely on the same team. The publicly traded companies are interesting. They take a lot of time. Luckily one of them does a lot of business over in China. A lot of my hours are spent in Asia market hours. So I'm allowed to work at night. I have an office that's about a mile from my house. I'm often here at night and come back here after dinners. From the John Templeton foundation, I'm very involved in serving as chair as the John Templeton foundation.

Lauren
It does take a lot of time. That is a very large charitable organization and keeps me very busy.

Josh
Yeah. On all the things that you're doing, right, you're staying, you're staying busy. You're, you're producing a lot of impact your value investing or you're doing, your own startup mother a lot. Right? How do you, how do you stay focused? How do you stay grounded? How do you, how do you prevent yourself from going crazy with all the details? Like how is your brain wired in those things?

Lauren
Yeah. I mean, I think it's all about establishing a healthy routine. Being very disciplined, which my husband and I often talk about discipline and routine help make you a better investor. We believe, we believe that in bed, people are not hardwired to be good investors. We are all descendants of men and women with acutely attuned amygdalas. While that had made us, how having a great amygdala has allowed many of us to survive for many years, it creates a lot of distraction and unhealthy behavior when it comes to managing capital. Some of the ways to prevent these behavioral biases from taking over is to run a very disciplined schedule, be very disciplined, have a rigid schedule. We do that and it kinda keeps me afloat, I would say. Okay.

Josh
Yeah. So you make an interesting point. Let's, let's come at this from the approach of the behavioral investing, right? We're not wired to typically be good investors. Correct. How, how, so you talked about the mid-level, right? That's the, that's where the fight or flight kicks in. Right? How are, if we follow our natural wiring, how does that turn into a poor investor?

Lauren
Many ways there are many biases that have been noted by scientists from anything from confirmation bias, et cetera. I would encourage everybody to read a book about them. I always like James Monte's books on behavioral investing. The basic idea is by the time you turn on your computer screen and you're seeing red, everywhere, your brain, you're probably already your heart rates higher. You're probably perspiring and your amygdala takes over and your fight or flight response kicks in. What you need to do is to prevent that, right? You want to have a rational mind when you're making decisions and prevent some of these biases that creep up. One of the biases that I always side is called mental accounting. This can often be seen with people when they go into a casino in Vegas. You walk into a casino in Vegas, let's say you came with a thousand dollars, you're gonna gamble with a thousand dollars and you do well.

Lauren
Your a thousand dollars turns into $1,500. They've actually videotaped people putting the additional $500 that they've run one in their pocket, in one pocket and the money they came with in another pocket. They will do completely different things with the money. The money that they came with, they're going to be very conservative. They want to take that home with them. They're going to pay their electricity, bill, pay their mortgage, but the $500 that they won at the casino, they will do things that they would never do in real life. They'll buy an expensive mill and expensive handbag, which is why you see all those shops around the Vegas casinos, rationally. This makes no sense all dollars are created equally and you should make the same decisions, right? That's kind of the found money effect. You see that often in financial markets. Markets are going up and people are looking at their paper, wealth going up, and I'm very careful to say paper wealth, because paper wealth is very a theorial in nature.

Lauren
I think people are learning that the hard way today in the market. When paper, wealth goes up, there's this found money effect. People tend to take more risk and more risk until eventually the bubble implodes. They learn that paper wealth is often a theorial. So it's just interesting. That's an example of one behavioral bias. Another bias that people often talk about is confidence or overconfidence bias. There have been psychologists that have gone in and looked at women versus men trading, and they have noted that women actually generate modestly higher returns than men on average. The reason that women generate modestly higher returns on average, just because they don't trade as much. Cause they're not as confident. So confidence is, is a bias. So there's a great article out. I think Tara Terrio Dean was the professor that noted this and it was called gender overconfidence and common stock investing.

Lauren
That's the study that noted that women typically had higher returns simply because they didn't trade as much and they didn't have as high of transaction costs. That's another type of bias that often expresses itself. Of course, there's, hurting the herd mentality. Following the herd social proofing is another one. You see a lot of that in the markets today, I tweeted last night, a great quote from John Templeton that is very minor. It reminds me of hurting. It says a major cause of higher prices is simply higher prices. When the trend is reversed, lower prices lead to still lower prices to buy when others are despondently selling and to sell when others are avidly buying requires the greatest fortitude and pays the greatest ultimate rewards. That reminds me of the herding bias, right? Lower prices, lead, distill lower prices in the market. So, all of these biases contribute to really poor returns.

Lauren
When you study investor returns over many decades, the average investor, under-performs almost every single asset class. They underperform real estate. They underperformed stocks, they underperformed bonds. Really the only thing the average investor has outperformed over time is long-term inflation. How could the average investor consistently underperform every single category? Well, another example of that is Peter Lynch. When Peter Lynch was running the Magellan fund and he was compounding and the high twenties, he did analysis to see what his average investor returned and the average investor returned 5% or less than some have even lost money. So why is that? That's because people were adding capital when the fund had gone up and selling when the fund drew down. I always tell investors, there's a really easy way. You could outperform Warren Buffett, Peter Lynch, and John Templeton sitting on your sofa, eating potato chips. That way is simply to add capital to their products in a market downturn, arithmetically, you would have a higher return.

Lauren
Investing can be as complicated as you want, or as simple as you want at this company, we believe there are three sources of alpha and there you can have better information than the crowd. So, that's what wall streets there for sell side. That's where that's the area they play is in better information. You can have a better model. Think AI quant fund and, or you can have better behavior. That's the area where my company makes it stamp. We think we have better behavior than other investors and our better behavior mandates that we go in and buy at moments of maximum pessimism in the market.

Josh
Yeah, that is definitely, that's not the norm, right? That is against all of our upbringing, right? It's against our common like reactions to things.

Lauren
Well, it is my upbringing. I was raised in that house that did that. I mean, it's very contrarian and it's very difficult to go against the crowd. I always say there's a reason that John Templeton was based in Nassau Bahamas. Warren buffet was, is based in Omaha, Nebraska. They're not in these big financial centers because it's often so difficult to go against the crowd that even physically removing yourself from the crowd is helpful.

Josh
Wow. All right. I have to, as an investor and I would say, I would call myself a young investor, right? First-generation young investor as a young investor, I need to unwire and relearn a lot of stuff. Let's just say I come to the group and I want to be an intern and I want to be mentored to learn that, the Templeton way, I've read all the books. So, I know the first probably the response would be like, go read the books. Okay, I've read the books, I've gone through the process and I want to be mentored. What, what are some things that young investors first generational wealth, first generation maybe family offices can do to start learning, to go against the herd, to do value investing, to learn what you've learned through generations.

Lauren
I think you just have to have the right mentality. You have a saying here at the office, that trouble is opportunity. That's the way we view the world. I think many people are born value investors. I mean, in my family bargain hunting is a pervasive life quality, whether you're buying a car or a home or a stock. We often are very competitive about that. The great thing, I think the takeaway that people need to consider is that when you're investing in the market falls in value, it's actually a less risky time to invest. It feels like it's more risky, but you need to remind yourself that after the market has fallen in value, it's less risky. Conversely, a value stock or buying a stock for less than you think that intrinsic value is of the company gives you a lot of safety and value investors call that a margin of safety.

Lauren
Right? John Templeton thought, and he was well known as one of the world's greatest stock pickers, money magazine, I think called him the world's greatest stock picker, but he thought he was right 60% of the time. If the world's greatest stock pickers, right, 60% of the time, average investors probably right. A lot less than that. You make decisions, it's good to have a margin of safety built in. If you're buying an asset for less than you think it is worth, that is your margin of safety and that's the value investors view. You have to reorient yourself to see the world that way. I think, it can be done most value investors look to Benjamin Graham as their teacher. They've read Benjamin Graham's books and often point to that as being the most important author in the space of value investing. To me, it's only common sense value investing resonates with my children.

Lauren
I'm like, well, don't you want to buy that for less? If it's worth $10, if you can buy it for five doesn't that make sense to you? And it does. It's very intuitive.

Josh
Yeah. It comes to raising kids, I have a, I have three kids, nine, five, and two, and they come to me sometimes with now they work in the yard and they pick up sticks and I want them to be entrepreneurial. My daughter wrote a book and she sold it on my LinkedIn page for 20 bucks. I'm trying to teach them right about money, but just like, I sometimes have no clue about things. They have no clue about things. Sometimes they come to me and they want to buy something that I think is absolutely ridiculous. What are some of the things that you're doing to train your kids about money? Because I want to learn with you and from you.

Lauren
Yeah. I mean, everybody thinks that I have like that the magic one on teaching kids about money. I actually don't, I mean, I grew up in a home where my father allowed me to pick one stock per month. He would take the stock certificate. He would hang it on my bedroom wall. My walls were wallpapered in stock certificates. He would teach me about opportunity cost and everything I wanted to buy. I had to do a calculation. I mean, basically it was like, you want this toy for a hundred dollars while you're 10 years old, most people retire when they're 65, the Templeton growth fund is compound to get almost 15%. If instead you took the a hundred dollars and you put in the Templeton growth fund at 15%, for 55 years, how much money are you foregoing? That's your opportunity costs? That was a lot, I mean, we did, that was my childhood and it was a lot.

Lauren
I haven't really taken that approach with my children. A because you can't get a stock certificate really. B just the whole opportunity cost on every decision was a bit exhausting. I think it can go way too far. In the other direction. My girls do have brokerage accounts. We do review their holdings. I buy them pretty much whatever stock they want. Without question, I do not preach to them about valuation. I mean, one of them wanted to invest in roadblocks and has been a terrible investment, but at least she's saved some money and put it in the stock currently, right now, she loves to play some game on roadblocks. I am in the process of hiring somebody to tutor her on how to build her own. I think, what did she say? It was a role-play game or something on roadblocks so that she learns to capitalize on it instead of just being a consumer of this.

Lauren
My girls have gone to Berkshire Hathaway with me many years. My first born when she was six weeks old, obviously she didn't get anything out of that. We took her for business reasons and we're just practicality, but we just got back in April, 40,000 people in Omaha and the girls can really they're nine and 13. That perfect age is to take them. Omaha is a perfectly lovely place. The convention center is a wonderful place to teach kids about investing in businesses because you walk around the convention center, it's all the stuff the kids would like, would you like a dairy queen ice cream bar? Yes, I would. Well, Berkshire Hathaway on that. Would you like some cowboy boots made by Justin's? Oh yeah, those are cool. Well, Berkshire Hathaway owns that. Let's go to where the Clayton mobile home let's go through the NetJet let's, do all of these things that help.

Lauren
It will help. It helps them contextualize conceptualize the underlying businesses in Berkshire Hathaway. Hopefully they just, I don't know, absorbed some of this through osmosis.

Josh
Right, right. No, I get.

Lauren
A good dose of it in our house.

Josh
Well, that's, it's so, it's so cool to see that in place. What was the first thing that one of your kids did that like surprised you? You're like, wow, that was actually pretty wise. I was a student, investment or business decision.

Lauren
Yeah. I don't know. My youngest one is she's going to be a great investor. She has a lot of backbone. She understands it and she's ruthless. I think that she's the one when I bring the girls into the office and have them assist with filing or administrative work, because we think that's important to do, the 13 year old rules or eyes and doesn't want to do it. The younger one is like, oh, that's my account statement. I need to review this with you. We need to think about what changes we're going to make to my portfolio, et cetera. And she's on it. What impresses me most about her is that she's constantly reading disclosure statements on things. So, I mean, that's weird for a kid to do, but she will sit and read the disclosure statement. She knows all sorts of things that the rest of us don't know.

Lauren
We're like, where did you learn that? She's like, oh yeah, there's a little button you push. And it says disclosure. And I'm like, wow. Okay. I think she's very detailed oriented and we'll probably do very well conducting due diligence. I don't think she'll have any problem buying at the bottom of the market. So yeah.

Josh
Yeah, yeah. Yeah. In your family, you got, your business, your family is a business, right? You're, you're teaching your daughters, about buying and investing and you, you and your husband are our partners in such like this. Let's, let's look at roles responsibilities within that, the business family union, what is your husband's super power in the business? And then what is yours?

Lauren
Yeah, my husband, his background is in research at an investment bank. So he started off in research. He's very quiet. He reads all the time. He really goes down these rabbit holes where all he wants to do is research something. I mean, he's very focused on research. I think I'm very equipped to go in and buy during really scary moments in the market. I think that is something that my family either it's genetic or I learned it through observing this behavior over and over again, but I think I'm very good at that. If you want to break that out, I would say analysts versus portfolio management, but we do both. I mean, when you work together with your spouse, you can kind of do everything and we bring home the work with us. For sure.

Josh
Yeah. All right. As you guys are doing this for yourself, your organization, the foundation, tell, talk to us about the mission and the purpose of the foundation and where, where do you think the impact is, is focused there?

Lauren
Sure. Sir, John Templeton funded three foundations, one of which is in the United States, the one in the United States called the John Templeton foundation, the two offshore or Templeton world charity foundation and Templeton, religion trust. They have very similar missions and they fund in a variety of categories, but that predominant category is what he called humility and theology. They fund on the Templeton prize, which is one of the world's largest cash prizes. He started that in 1973, mother Teresa was the first recipient we're approaching our 50th anniversary of the Templeton prize. Frank well-check just won in 2022. So he's the 2022 Templeton Laureate. Frank is a well-known Nobel prize, winning physicist. They fund the Templeton prize and then the founder had some other favorite categories. Individual freedom and free markets and character virtue development. Those are the different areas that the foundation in general works in.

Josh
Yeah. The word humility, your family, legacy heritage. You guys have done some massive things for you to say that this is a, a point of focus for us as humility. How, how did you guys come up with that? How, how is that founded and rooted in your and your family tree and the way you approach things?

Lauren
Sure. Well, John Templeton called it humility and theology, and he always said, when I go to a doctor, they don't fill out a 2000 year old textbook to diagnose me with whatever I have. Yeah. We want to fund initiatives to bring about more spiritual progress. He was very spiritually curious and he was looking for other people to fund in that area. He was looking for discoveries to answer. Life's big questions. What is our purpose? Why are we here? The foundation really funds some really interesting initiatives. Yeah, it's an exciting organization to work with.

Josh
Super cool for you. You're building a lot of cool things. You're in a startup and you have your it's your ordination organization set up similar to a hedge fund. Are you guys?

Lauren
Yeah. So we're a registered investment advisory company. We have separately managed accounts and we have a hedge fund that is predominantly long only, but we do have a short book. Some people call that a commingled fund. So it's just a terminology thing.

Josh
Got it. In a second. I want to ask why you chose those business models like to go that approach. Dang it. I might've forgot my marriage. I right. Let's go with the business models, why you guys choose, for the hedge, that hybrid model and then the RIA approach. Talk to us about, because these are your organizations that you guys have built, right. So, so why did you choose to do this and then choose those?

Lauren
Yeah. I graduated from college, I was working for a hedge fund and I received a letter from John Templeton saying that I needed to come visit him in The Bahamas, that he was funding a hedge fund to the tune of $30 million. He wanted to work with me on managing the fund. I quit my job and I went to The Bahamas and I launched a hedge fund. The mandate of the hedge fund, this was in 2001, was to be dollar neutral. And it was to be largely quantitative. We invest in 25 of the cheapest stocks we could find in the United States. Went short 25 of the most expensive stocks we could find in the United States based on valuation only. So it was very volatile. We had a big beta bias on the short side, September 11th happened, the company that fund was very profitable because of that.

Lauren
But over time we refined the strategy. We moved from being a us, predominantly us to global. We moved from being exclusively quantitative to the process that we manage now, which is quantitative screening is our first step in the process. We screen all the companies that we can get data on. On a global basis. We screen them based on very traditional valuation metrics. PE price to sell price, to book, peg ratio, all of that stuff. We're constantly modifying the metrics that we focus on the most, in the most recent years, free cashflow yield has worked really well going forward. For the past year, we've been very focused on dividend growth, but we do these quantitative screens. We focus on the bottom decile of the market. If we see something interesting, we'll pull it out of the screen and then we'll run a model on it. Typically, a discounted cashflow model send sometimes a dividend discount model to come up with what we feel is appropriate intrinsic value for the company.

Lauren
We want to buy at a significant discount to where we think intrinsic value is. If it passes that step, we'll do fundamental analysis and we'll go talk to sometimes the company, a lot of times the competitors will do more industry analysis. We'll see if the company has earned a spot in the portfolio. That's anyway, that's a long way to answer your question. That is how the strategy is managed today. In the great financial crisis we had, there was a large appetite for separately managed accounts because I think investors coming out of the great financial crisis had some bad experiences with some managers and demanded more transparency. You saw more appetite for separately managed accounts. We have, we launched separately managed accounts, and now we've come back around really emphasizing the pooled product, the hedge fund or the co-mingled fund D whatever term you want to use, because it's easier to manage a pooled product than it is to manage a ton of separately managed accounts.

Lauren
So that's how we launched. That's why we're structured the way we are. We're registered as a RIA, just it's a regulatory thing. Our assets are large enough that we have to register with the sec. So we are a registered investment advisor.

Josh
Okay. So you said something really interesting, right? I could go to the stock market right now and I could put money on a stock and then they're in my portfolio. You said, you know, we screened these. We look at all these different ratios and numbers because we want to see who earns a spot in the portfolio. This is a different way of thinking. I want you to explain what you mean by that. They have to earn a spot in your portfolio. What does that look like?

Lauren
Well, I mean, it looks like it has to have enough upside potential for us to go in the portfolio because value investors are very disciplined. I mean, it's not Hocus Pocus, you were valuing a business. You you're coming up with what you think, the fair value of the businesses. You're buying at a discount to that. If that discount doesn't exist, you're not going to buy the security. As the market gets more expensive and hotter, I would say in a bull market, we'll end up with a significant amount of cash. Not because it's a asset allocation decision where we're sitting down and saying, well, let's have 20% cash position. It's more like, oh my gosh, I can't believe we can't find anything cheap to buy. This is taking forever. Why hasn't anybody come up with any good ideas? So cash builds very organically. And, and also if you have a global mindset and you have a large universe of stocks to choose from, this allows you to move around the globe.

Lauren
If there's a bubble one place, there's probably a depressed market somewhere else. So John did this very well. He was one of the first investors into Japan in the 1950s and sixties, he was investing his personal capital and the 1950s, and then investor capital in the 1960s, he had identified their amazing work ethic, et cetera. Japanese securities were trading at about an 80% discount to us securities. Wow. He'd also identified an accounting anomaly and knew that businesses in Japan were not consolidating the earnings of their subsidiaries. If they were to consolidate the earnings of their subsidiaries, PE ratios would be even lower. Good example of that would be Hitachi, which was trading at 16 times. If you consolidated the earnings of the subsidiary, you would be trading at six times, he invested investor capital there. He rode those returns through the 1970s when the U S market.

Lauren
I mean, that was a horrible decade for the U S market because indices ended up ended the same place. It began in the seventies, 1979. I always get confused on the financial publication. I think it was Newsweek. I want to say, I always want to say business week, but a financial publication came out with a headline called the death of equities in August, 1979. About that time, he had pulled all of the money from Japan and moved most of it into the U S when no one else would touch an equity in the us. And then he rode that bull market. That's a good example of how having a global mindset and a large universe of securities to choose from can really impact your work and your returns as an investor. Another thing that we say at this company is that, everybody makes money in a bull market, but if you want to have good returns, that is dependent on your behavior in a bear market.

Lauren
Yeah. If you want to outperform the crowd, you want to be one of the greatest investors in the world. It's pretty much dependent on your behavior in a bear market. You have to harness the power of the bear and learn to take advantage of these events to distinguish your returns going forward,

Josh
Harness the power of the bear.

Lauren
Yeah. My dad has been trying to get us to have a bronze statue made of a bear, clawing like this.

Josh
Five.

Lauren
There. Right. But it is true. It is a grand opportunity. A bear market is.

Josh
So nobody can predict the future. Right? Well, maybe you guys can, I can, what's going on, as recording in 2022, let's just say a bear market may occur in the future. What kind of things do you pay attention to in a bear market? What do you pay attention to in a bull market?

Lauren
Well, bear market is occurring now. So, and you don't, you, they do come along frequently enough, but you have to take advantage of them. I mean, we have some old plays. To say that are out of the John Templeton playbook, that we're always running in the background. And, and so, we have a wishlist of securities we've made that wishlist of securities when our brains were rational before there was a market sell off. These are companies that we think are really well managed. They're just not priced right for us. In a bear market, we're almost always taking advantage of those opportunities. To say, so I always talk about the wishlist. That's very powerful. There are a few other screens that we like to run in a bear market that surgeon always run. Some of them don't work as well anymore. I'm as hate to mention them, like one is a closed end fund screen, where you're looking at closed in funds that are trading at least a 30% discount to nav.

Lauren
If you can purchase those in a bear market, sell off, if they're not using leverage that potentially could generate good returns because when the market rebounds, the discount closes and you get a bump and it's like a double whammy. That is something we haven't done that in this market, but that's one thing that can work. Also part of our job is to be contrarian in a bull market. What do we do in a bull market? Well, we're avoiding the crazy, right? So, because of low interest rates, you've really seen some crazy risk taking and all of that is unwinding now. Whether that's in crypto or growth stocks, we, whatever we've seen, just a lot of risk-taking. Now that monetary policy has changed all of that sun unwinding and our job in that market was to avoid those asset classes. We recognized in 2021 that on us exchanges, there were over, I think it was at, there were two different numbers based on when we looked at it in 2021, but there were over 718 stocks trading enterprise to sales ratio at over 20 times.

Lauren
So that should be shocking for investors. There is a great quote by old CEO. What's his name? Scott McNealy, I think. He was talking about his company coming out of the.com bubble, right? That company at the time has been valued at 10 times sales. If you just Google Scott McNealy, quote.com bubble, it'll pull it up. It's, it says something like a 10 times sells. I have to pay you a hundred percent of revenue every year in a dividend that assumes you're not going to pay any taxes. I'm not going to pay any taxes. I'm not going to pay my employees. I have no cost of goods sold, et cetera. I have to do that for 10 years to pay you back on your capital. How ridiculous does that sound? It's a really important point because in 2021, with over 700 companies in the us trading at over 20 times sells that's that's revenue.

Lauren
That is really an amazing statistic. Our job was to avoid that or possibly short those securities, which we did to take advantage of it. I mean, we are short crypto and waking up to see these Bitcoin headlines has been delightful this week.

Josh
Yeah. Wow. This is kind of a personal question. Do you watch, do you guys watch any shows or TV or is it just reading Scott McNealy and reading books on invested? You're brilliant. This is,

Lauren
I think, yeah,

Josh
I appreciate that.

Lauren
I don't feel brilliant. I feel actually really slow compared to many of the people I surround myself with. Right. But that's the whole thing. Surround yourself with smart people. We do watch television. I'm not even going to tell you which show I watch because it's so disgusting and bad. My husband, I watch it at night to go to bed and my husband always comes in and he's like, how do you watch this film? I'm like, because I don't have to think like,

Josh
And if I fall asleep.

Lauren
In the middle of the episode, there's no skin off my back. I don't worry about it. I don't really care what happened. It doesn't matter. I do watch the office and modern family I'll throw on. Those are good. Like go to bed shows. He watches very different things that I don't know. I don't have much interest in, but.

Josh
Have you seen the show? Billions,

Lauren
I have. And we.

Josh
Thought,

Lauren
Well, we, what, first of all, I mean, I started in the hedge fund industry in 2001, the hedge fund industry was pretty nascent back then. I mean, hedge funds have been around for decades. I think Alfred Jones created the first one, maybe in 1949 or maybe it was in the 1950s, but they were pretty nascent in 2001. There weren't many people running hedge funds and like a $50 million hedge was a big hedge fund to start with. It was just a different, so watching that show, I don't know, brought up so many different memories and I'm like, I've kind of lived this, but haven't lived this. I got bored and just quit watching it. I think Scott wants to finish it. And I dunno. Yeah. It's interesting.

Josh
Yeah. When they're talking, you actually know what they're saying. When I'm talking, I have to like do all the, like what the meanings. Okay. Yeah. So.

Lauren
Investing is just terminology. You should investors or your listeners should understand that don't be intimidated with the terminology. It's just terminology. Once you learn it, investing is really not that complicated. You just have to surround yourself with the lingo. It's like if I, I don't watch sports and I go to football games and I literally have no idea what they're talking about.

Josh
And I don't know nothing.

Lauren
I'll tell you a funny story because the person wouldn't mind me telling it. Before I launched my own fun, I was doing some marketing for another hedge fund manager. I had spent about two years courting. This potential investor is institutional investor. And the account came in. It was like this big payday for me. This account was very important to me. For two years he was a huge football fan and I know nothing about football. He would write to me about football. I would ask my husband, I'm like, tell me what to say. Like, I don't know. We had these long conversations where I'm corresponding in great detail about this one specific SCC football team and who the players are and who they're recruiting. The investor finally said, okay, I have great seats for these games. I'm inviting you and your husband to come to the game with us.

Lauren
And I was like, what?

Josh
I'm going to be found out.

Lauren
Yes. So I was so stressed about it. My husband said, well, here's the plan, I'll elbow you and you stand up and go, what the hell? I'll grab your leg and you just shout something else that was like, okay, this is the plan. We walk into the stadium with an investor and because I, I cannot lie. I turned to him and I said, oh my gosh, I have to let you know this. Like, I don't know anything about football. Scott told me what to say on the emails. I'm sorry. I feel so guilty because like, oh, I don't care. By the way, y'all are sitting over there, we're sitting up here. I was like, oh no, I could have, but it's just terminology would be my point. Investing is no different.

Josh
If you and I ever go to a board meeting or something like that, UL we'll meet, I'll stand up, go, what the hell? Just to pretend like I know what I'm talking about. All right, we'll do that perfect line or one of these headpieces. You could just, you'll be on a radio. So, so with this, I remembered the question that I was going to ask you, what is the, what's the big plan for you? Like, how do you're on path in terms of your life purpose and the, some of the things that you want to accomplish? How do you're winning and where are you heading?

Lauren
My life purpose is to help other people maintain and grow their wealth and do that in a very honest and transparent fashion, which hopefully is always in my client's best interest. As long as I have clients that are good partners, I'm very happy to continue for a long time. I don't really have specific goals on how much money I want to manage or how big I want to grow the business. Our partners here are wonderful. People often learn more from them than they learn from me. They're usually pretty seasoned business owners themselves. I learned early, you don't accept capital from just anyone, particularly if you're managing a value fund, because what happens if you're managing a value fund and your strategy is dependent on, let's say a market sell off to go in and take advantage of the market. And you've partnered with the wrong person.

Lauren
They don't understand that or believe that philosophy. They come in and withdraw capital at the same time. You need it. That is going to produce some pretty bad returns for both of you. So it's important for me. It's important for my partners that we have the same investment philosophy and that they're not just saying it, that they understand this is when you make your money in a bear market. This is when we're coming in with capital. That as long as I have that as part of my equation where I'm happy to continue this for many years and hopefully have the privilege to work with these partners for many years. Cause it is a great privilege to oversee anyone's wealth.

Josh
Yeah. If we, if we had your phone or your original iPod or whatever, and we looked through the number one played song, since, you were first able to put it on a digital device, what is your number one go-to song? When you're driving in the car, going for a jog, doing whatever, what's your number one go-to song.

Lauren
I don't have a number one song. I mean, it depends on my mood. I love Tom petty. I love the grateful dead. I love to listen to some rap. I dunno. I mean, right now, I I'll tell you. I have a really weird tendency that everyone thinks is bizarre. When I, I run right to exercise and I have to listen to the same song on repeat during the entire run. And then I exhaust that song. I have to find a new song to listen to on repeat for the next run. It is hard to find running music because you've got to have something with the right tempo and all of that. I'd probably spend more time looking for the song I'm going to run to then actually running. But I like all sorts of music. What's your favorite?

Josh
I would say, if I look back maybe top few red, hot chili peppers under the bridge. I love,

Lauren
Well, not under the bridge. I like another one, but I can't remember what it is right now. Let me, like,

Josh
I love all these on the construction side, growing up with my dad, were only allowed to listen to oldies. So I love fifties, sixties. You get into maybe some sixties and seventies, Vietnam, era music. My dad would love those kinds of songs. I listened to a lot of that. I'm a Dave Matthews guy.

Lauren
I like Dave Matthews. I like snow or scar tissue, but red hot chili peppers. Yeah. It's a good running song to you.

Josh
The scar tissue that I was she's so yeah, it is a good one. I like old school rap. I like nineties. I like.

Lauren
Western, like.

Josh
I would say west coast a more. I like, I, I got to be careful. I can't like, I guess I can. I, you know, I do like outcast. I like NWA. I like, I've been on a Wu Tang kick lately. I'm looking for some of their records like that. That's one of my goals. I like, I like going to grad chills and I take my daughter to grad sales and we do some, we buy stuff and have some fun treasure hunting. Right. I want to find an old routine record or something like that. Like I think that'd be super cool.

Lauren
Maybe on eBay.

Josh
Yeah. That's, that's a lot easier. I could probably get there, I guess. Second. What about you Eastern west coast?

Lauren
Well, my husband likes east coast, so I'm just going to say east coast because that's what, like, he likes, tribe called quest, all that stuff. I'll say that just because he does all, he downloads all the music and does all the playlists in our house. If it's, I don't put anything on the phone, he puts it all on there.

Josh
He's a, he's a, he's the DJ. All right. So let's ask this question. Best deal. Worst deal ever. And then what did you learn?

Lauren
Well, I'm not an M and a, we discussed this going into the interview, so we don't really do any deals. I mean, we're trading public equity markets. Yep. Our best deals buying companies for a large discount to intrinsic value have all occurred during moments in maximum pessimism. Our best deals were done in the great financial crisis. Our best deals will be done in this market because that's where going to get the biggest discounts. Yeah, that's, that's how we look at it. We don't, we don't do anything in private equity, so I clearly follow it. There are a lot of hybrid managers that do both public and private equity. Some of them have some really bad returns that she, I mean, they're, front page of the wall street journal returns they're really bad. It'll be interesting to see in this market when the funds finally take their marks on their private portfolio, some of these managers have already marked down physicians.

Lauren
I would argue they haven't marked them down enough. Of course there's a big lag when it comes to private equity. So, the markdowns are coming and that will be interesting to see how the market tolerates that, what people think about it. I think that you're going to have a lot of large endowments that have allocated a huge percentage of their portfolio to privates in the past specifically past five years, that are going to have some explaining to do to their board. I think, their values are going to be down a lot. So it'll be interesting. Of course that's not liquid. I always say to boards, one of the best problems to have is when you can't do anything about, so they've made the allocation and it's not liquid. They're gonna kind of have to sit in their discomfort. There'll be interesting to see the marks come through.

Lauren
I think people are going to be really shocked and as equity markets continue to fall, the marks on the private will also follow suit.

Josh
Wow. For people who want to connect with you and follow the work that you all are doing, kind of across the board, what's a good place where people could go to learn more about you.

Lauren
Sure. We have a really poorly managed website, Templeton and phillips.com. We have a section on the website called like commentaries or something like that. We produce a report called the maximum pessimism report. It's periodic. It's not, we used to produce it quarterly, but honestly we only put that report out if we have valuable information to share with people. And that is the truth. If there's nothing, we don't see anything new, have no new ideas. We're not seeing any changes in the market. We will not produce it. Those reports are on there and they're free. They're worth exactly what you're paying for them. You can also, occasionally on Twitter at LC Templeton and LinkedIn, I'm happy to connect with people. Of course, we have our book investing the Templeton way and yeah, happy to connect with anyone.

Josh
And you also are a fellow podcaster. Is that correct?

Lauren
I am what we can talk about that. So.

Josh
Good. I love it.

Lauren
I really wanted to start a podcast years ago and I had a very specific vision for the podcast. I'm not going to tell you what it is a great idea. Somebody will steal it and I don't want it to happen. One day I was trail running and I was listening to this great song. I can't remember the name of it. I'll think of it in a second. I was like, oh, we're going to call this podcast is investing. My assistant was really good at podcasting. She had some experience and she did all this research and she was like, I can handle all of this for you. She left our firm. I knew that it would be one of those things that once I started, it would be hard to stop because people will generally accept an interview from me. That is not because of the work I've done.

Lauren
That is because of the great work. My great uncle did John Templeton and I happened to bear his name. That can be a great advantage getting your foot in the door. I have very prestigious guest and I started, it's very unprofessional the podcast. I will say that we're currently in a re-evaluation period that we are going to continue the podcast, but the next time we pick it up, it's going to be professional and done a lot better than Lauren managing it herself, sitting at her desk on lookout mountain, Tennessee.

Josh
Awesome. Awesome. Awesome. What we'll do is we'll put your contact information in the show notes and, people could connect with you and find the Maximus, pessimist newsletter.

Lauren
Maximum pessimism.

Josh
Maximum max, say that again,

Lauren
Maximum pessimism. You know that from sir, John bull markets are born on pessimism, mature on skepticism. Gosh, I had no this Quip by heart, but for some reason I'm having trouble remembering how it goes. See I've got like, all the timers. I really don't. Don't tell mine. I'm just busy. Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy. The time of maximum optimism is the best time to sell. And that perfectly describes our investment philosophy.

Josh
Super cool. What question during this interview that like, should I have asked you that I completely screwed up and did not ask you?

Lauren
I don't know. I think you asked. All.

Josh
Right. Sounds good. All right. Fellow dealmakers, thanks for listening into this interview as always reach out to our guests, say thanks for being on the show and find a way to connect with them and learn more about them and maybe find a way to do a deal with them. I, if you guys are working on a deal or looking at a deal, and you'd like to talk about it here, educate us on what you're working on. Head on over to the deal, scout.com. Fill out a quick form. Maybe get you show next. Talk to you too. Yeah, I totally messed that up. I've done this 1000 times and I can't talk to you guys on the next episode, I guess.
Josh
Good day, fellow dealmakers. Welcome to the deal scout. This is a show all about deals and deal makers, right? The reason we started the show is to take a look at all the different types of deals in the industry, and then report back in. As an audience group, you can take a look at things and you say that interests me. I want to educate myself more on that, or maybe even get connected to the groups that we interview. On today's show, we're going to have a conversation with Lauren and she's going to give us an idea of who she is and some of the things that she's invested in and interested in. So Lauren, welcome to the show.