#27 - Luke Gromen

Balaji Srinivasan (0:00)

Luke, welcome to The Network State Podcast. Great to have you here.

Luke Gromen (0:03)

It's great to be here. Thanks for having me on, Balaji.

Balaji Srinivasan (0:05)

Yeah, so, you know, we have been carrying on a fairly long running conversation, a sidebar on the world stage.

You know, one of the things as a meta comment, like the group chats are actually good because they are, everybody is busy, so you can have like an asynchronous conversation, and then you can, you know, hang out in person, like sometimes you'll see Kathleen Tyson or some other people from the group chat. And it's always great because you can pick up right where you left off and everybody knows all the same references over the last several months. So anyway, so welcome. Great to have you here.

Luke Gromen (0:41)

It's great to talk to you. I know we've talked before offline, but it's, I've been looking forward to this.

Balaji Srinivasan (0:46)

Awesome. So, okay, so you are, you know, you've got Forest for the Trees LC. Do you want to just give your quick bio, your pretty, you know, big account on Twitter, but just for those people, or X, you know, I should say nowadays. Give the, give the Luke on Luke Spiele, if you wouldn't mind.

Luke Gromen (0:59)

Yeah, sure. I'll give you the elevator pitch. So, nearly 30 years in finance, started out in investment research, was a partner at two different firms that were pioneers in bottoms up, fundamental channel check research. At both of those places, I was one of the founding editors of a weekly piece that basically aggregated the bottoms up fundamental research we were doing into sort of a macro thematic piece that became one of the more widely read research pieces on Wall Street, Heard in the Midwest and then straight from the source at the two different shops. Hung out my own shingle as FFTT in 2014, doing the same type of work with publicly available information. And what we do is, I have what I think is the best job in the world. I get to sit around, read, comprehend, think all day, and aggregate large amounts of publicly available data into what I'm looking for are developing economic bottlenecks. Because for me, my 30 years in finance have taught me that how a developing economic bottleneck will affect various sectors in the economy is the biggest attribution for investment outperformance. Perfect example, in the housing downturn, it didn't matter if you owned the best home builder. It was only down 90% while all the others went down 95% to 100%, right? And maybe not home builder, but mortgage broker, you get it, right? The most important thing was getting the bottleneck correct in that time, and that's something we try to do. So that's the short version of where I've come from, my background and what we do today.

Balaji Srinivasan (2:38)

So it's funny, you say finance in the East Coast way, as supposed to finance, which is the West Coastish way of saying it, which is funny.

Luke Gromen (2:48)

It continues our thing, right? It's like almost instead of flashing gang signs, we'll just, it's how you say it.

Balaji Srinivasan (2:53)

Yeah, exactly. It's funny. So, but the, it's interesting you say economic bottlenecks, because, so what you mean by that, do you mean macro trends, or do you mean a bottleneck in a chemistry sense where there's genuinely a scarcity of some compound or raw material or something in the economy? Explain to me how you think about that.

Luke Gromen (3:21)

At the risk of being flipped, yes. It's a little bit of both, right? I am, when I read and read and read and read, I don't know what I'm looking for, right? I've equated myself to being like a giant catfish at the bottom of the Ohio River, just waiting for stuff to kind of come downstream to me. And sort of the secret sauce in it is, when I see something that interests me, it's like a splinter in my brain. And I kind of go, okay. And I don't, most of the time, I don't know, sometimes it's like, oh, well, that's important. Other times, it's like, that feels like it could be important. I don't know why, I don't know when. And then I put that in what I call my cutting room, which is I set it aside, I save it. And, and as things, especially for the things, I don't know exactly where they fit, but I just have a feeling, almost an intuition that they're important, possibly.

For whatever reason, I retain a lot of what I read for long, long periods of time. And so it might be 24 hours later, it might be 24 days later, it might be 24 years later, and it'll be like something else triggers. And I go, oh, that reminds me of this, and this is related to that. And you start sort of putting pieces together in a way that starts to build a mosaic of something that's happening. And I kind of see things in these trends, where I get really excited because not only am I reading for what is happening, what interests me, but for what I call the dog that doesn't bark, right? When you're when for what's not happening or for what people are not reacting to, they should be. And so when I get really excited and when I talk about a bottleneck, what I'm most excited about is when I've got and have read for investing consensus, which is over here, right? And everyone thinks this is going to happen. And I've got this big body of evidence way over here saying, this is actually going to happen, not that. I mean, yeah, another goal. Yeah. So and that's the it's the conflict of those two. And that's why I say, yes, it's both is it's it's it's more sort of sort of fundamental macro driven, but it is almost like a chemical reaction of sorts. When you've got in, you know, when you've actually got the people, you know, when you have positioning in assets and flows, physical flows on the wrong side of things, and they need to move somewhere else to adjust to what's happening.