A Challenging Year Ahead For The S&P = Opportunity For Active Investors | Dave Iben

**Dave Iben** (0:00)
Yeah, considering the last three, four years of fiscal policy and monetary policy and the valuation levels, we suspect that for the indexes, it's going to be a tough year. For active managers, I can get back to that later, we're actually pretty encouraged.

**Adam Taggart** (0:25)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. On this channel, we often highlight abnormalities that we notice in the financial markets. Well, today's guest actively embraces them as gifts from the investment gods. In his words, fortunately, the financial markets are often quite inefficient, presenting opportunities for us to generate substantial value for our clients' portfolios. So, where does he see the biggest inefficiencies in markets today, and what opportunities are they presenting? To find out, we've got the great fortune to speak today with highly respected money manager Dave Iben, Chief Investment Officer, Managing Member, Founder, and Chairman of the Board of Kopernik Global Investors, as well as Portfolio Manager of its main funds. Kopernik manages billions in client capital. Dave, thanks so much for joining us today.

**Dave Iben** (1:17)
Well, thank you. It's great to be here, and happy New Year to you and everybody.

**Adam Taggart** (1:21)
Thank you. Happy New Year to you. And I've got to give a quick shout out here at the start to our mutual friend Stephanie Pomboy, who made the introduction for me to reach out to you. Dave, I got to tell you, Stephanie, one of the most wonderful and just smartest analysts I know. And she said that, Adam, you've definitely got to interview Dave Iben. He is hands down the most brilliant analyst I know of. So I'm so grateful she did. I'm sorry to set such a high bar of expectations at the start of this interview. But I think Stephanie was being very genuine.

**Dave Iben** (1:58)
Well, I'm a big fan of hers. She did set the bar way too high, but she's very nice and I appreciate it. And I agree with you. She is one of the smartest people I know out there. I always look forward to talking with her and reading her great research. Yeah. Well, all right.

**Adam Taggart** (2:12)
Well, you know, you and I and virtually everybody watches her huge, huge Stephanie Pomboy fans for very good reason. All right, Dave. Well, look, super excited to get to know you through this discussion we're about to have. If we can, I'd like to kick it off with the very intentionally general question I like to start these conversations with. What's your current assessment of the global economy and financial markets?

**Dave Iben** (2:35)
All right. Let me start with the disclaimer that we are 100 percent bottom up. So my top down views are worth exactly what you're paying for them. But we do look at history. We do look at valuations. We look at what is currently happening in the world and see where that leads us. And it's clear to us that one, the US market is the most expensive it's ever been on almost any metric versus the size of GDP or replacement value or book value or sales and earnings. When calculated right, all these things suggest the US market is going to be difficult to sustain at these levels. The rest of the market is not so much so. We can come back to that. As far as the economy, that's interesting because it is doing what it's doing. Some people think it's pretty strong. Some people think we're actually in a recession. What we do know is it's where it is, despite in the US alone, $2 trillion worth of deficit spending every year. And most other countries are maybe not to that extent, but also deficit spending. So the economy is artificially strong versus whatever any fundamental backing it is. And maybe we're in the early process of rediscovering that debt is not a free lunch.
As the interest costs start to pick up. So, you know, considering the last three, four years of fiscal policy and monetary policy and the valuation levels, we suspect that for the indexes, it's going to be a tough year. For active managers, I can get back to that later, we're actually pretty encouraged.

**Adam Taggart** (4:30)
All right, so, thank you for doing what an interviewer always wants, is getting the punchline in there, which is you think it's going to be a tough year, presumably relative to the past two years that we've had, right? That were 20-plus percent years for investors. Pretty much a buy anything and hold it, and you're going to do fine type of year. As you mentioned, your firm is a bottoms up firm.