Animal Spirits Podcast - Title: Talk Your Book: The Anti-AI Portfolio

Episode Date: December 15, 2025

On this episode of Animal Spirits: Talk Your Book, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠��⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ben Carlson⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by John Neff, portfolio manager and CIO at Akre Capital Management to discuss: the firm's concentrated stock portfolio, how to hold stocks for the long-run, beating the S&P 500 and more. Find complete show notes on our blogs... Ben Carlson’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠A Wealth of Common Sense⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Michael Batnick’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Irrelevant Investor⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Feel free to shoot us an email at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[e-mail]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ with any feedback, questions, recommendations, or ideas for future topics of conversation. Check out the latest in financial blogger fashion at The Compound shop: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://idontshop.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you about Akri Capital Management. Go to acrycapital.com to learn more about the new AkriFocus ETF. That's ticker AKare. That's how you spell the name of the firm too. That's acrycapital.com. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholz wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the

securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. On today's show, we speak with John Neff. We've spoken to before. He's a portfolio manager, CIO from Ockrey Capital Management. You may have heard of Chuck Ockrey before. He is a Buffett disciple, is that fair to say? concentrated portfolios, old-school investor, and I always find it fascinated to talk to these portfolio managers who just have a different way of looking at the world. A concentrated portfolio, a lot of times these kinds of investors are not focused on the Mag 7.

It's not that type of concentration. So Akri, their portfolio, was more filled with financials, but they have very low turnover. Their typical hold period is 10 plus years. and most individual investors don't have the intestinal fortitude to hold a stock for 10 years. So I find it really interesting when an institutional level portfolio manager does, especially when they're managing billions of dollars. So they do huge deep dives into these companies.

They're buy and hold and keep checking in investors. Does this seem like sort of a dying breed to you? I think it's right, it is. No, I would say it's a dead breed. Agreed. Okay. And I love, I love what they're doing. I think that if you are going to pay an active manager, you want to pay a manager with conviction. And I've never seen a portfolio like this. Is there 16 names? Yeah. It's very, it's called the Focus Fund for a reason. My favorite quote that John said on the call was, we have buy targets. We have no sell targets. Right. Yeah, that was interesting. And they've done a good job of keeping up with the S&P 500. over the long term, and what I said, and I asked him, is this the most challenging period

to ever beat the market? And he said, I think it probably is, especially that market. And they've done a good job keeping up without owning Nvidia and Apple and Microsoft in these big tech names. It's astonishing. Yeah, no, this was a fun one. We don't have too many conversations like this with a legendary investment group. So I hope you enjoy our conversation with John. John, welcome to the show. Thank you, Ben. All right. So you have your Akri Focus Fund, that's been around for a long time. And the benchmark is the S&P 500, correct? That's your, that's your boge? Yes. Do you think that the S&P 500 is the hardest benchmark

to beat? I think over the last five to ten years, it's almost been structurally impossible to beat. Right. I think this is one of the hardest times to beat, if you're calling that the market. I think this probably is one of the hardest periods and cycles to actually try to beat the market. That's kind of my feeling. No, I agree. I mean, it's, you know, we're not shying away from, you know, the comparison. You know, we need to benchmark ourselves. But at the same time, when seven names account for half the index return over the last five to ten years, um, constitute about 33 to 35 percent of the total market cap of the index, it's, the index has become itself a very concentrated momentum bet, and that's worked in the favor of the

index over the last five to ten years to an extent that I think an active manager that is trying to, you know, sort of manage performance and balance, you know, what they're looking at in terms of their own research process and concern over valuations, it makes it very difficult. So we're dealing at a time right now. I wonder if we'll look back a year two, five from now and wonder whether or not we've sort of reached the pinnacle of sort of the indexing argument. I'm looking at a three-year return basis and considering that you guys have no exposure to the mag seven, at least in your top 10, you did an incredible job, even keeping pace. Now, there has been a sharp break in the lines on the chart that happened in the end of the summer, which I'm curious

to get your take on. We'll talk about that, a really fascinating development. But Ben opened the conversation saying that you guys have been around for a while. Chuck Ackrey, legendary investor, concentrated positions, discipline approach, which we're going to get into. I guess better late than never. It's 2025. You guys launched an ETF. Well, it took so long. Yeah, well, in fact, the launch was actually the conversion of our longstanding single mutual fund. So what that did, so we didn't launch a new product, we converted our largest existing product, did that essentially right in place. And that's a tremendous boon, we think, for our investors, because the ETF structure, I think, as you and most of your listeners know, is an tax-advantaged one, you know, because it, you can use a redemption and kind process to move in and out of positions as opposed to selling

positions and generating potentially realized taxable gains, which you then have to distribute. And as an ETF, we can manage what is already a very tax-efficient strategy, even more tax-efficient But when you're as concentrated as we are and as long-term as we are, and our turnover is typically somewhere in the 4 to 10% range in a given year. Unheard of. I'm heard of for a $10 billion fund. I mean, very rare, I should say, not unheard of, but very rare. So we're holding positions. And if we're doing the job that we purport to do, we're going to have significant embedded unrealized gains. So with a strategy like ours, that is as concentrated as it is, and as low turnover as it is, the benefits of the ETF structure weigh even more for us because our strategy brings with it, if it's done correctly, significant unrealized gains. That's what we're compounding over time. And so the fact that we can now, new investors into the fund don't have to inherit that embedded tax liability. is a great thing we think for our investors moving forward.

Your turnover being that low means that you're holding these stocks for an average period of, I don't know, seven plus years or something. I don't know what the actual number is, but in your... Probably 10 to 15. 10 to, okay. So in your presentation, you have some examples of some investments, and you have listed when the first investment was made.

And so Moody's, you said, you made in 2012. Constellation Software was in 2014. and you have MasterCard, first investment began in early 2010. I think one of the harder things for most investors to do is to hold onto something and to know, like, has this story changed? And I'm curious what your process is for actually holding something. I think it's way easier to buy and sell something that it is to hold and just kind of sit through the cycles and understand when something has changed

or when the story or narratives change. Like, how does your process evolve enough that you can just sit on your hands and let these stocks run. Ben, I think that's a really great point, and it's something I say all the time. I do agree with you. I think it's easy to buy and it's easy to sell, and the harder thing to do is to hold. And essentially what informs it is we talk about our process, according to this three-legged stool notion, something that Chuck Akri, our founder, talked about at the inception of the firm in 1989, which is this notion of trying to concentrate capital in businesses that have all three of these legs of this stool working in concert

together. The first leg being the quality of the business. And what we really mean there is how formidable and durable is the competitive advantage. And can we understand it? We'll come back to the importance of understanding. And then there's the caliber of the people managing the business. So it's business, first leg, people, second leg. What is the caliber of quality of the management team? What is the culture of the company? What are the incentives? Are they properly aligned? How does management behave in relation to shareholders? And the third leg of the stool, which is a really important one, is reinvestment. So business people reinvestment. And that third leg of the stool, that reinvestment leg really refers to, you have this great business that's generating

all this free cash flow. How does the management team rank order and prioritize and execute against the reinvestment menu. And the reinvestment menu is the same five items for any business you ever care to look at. You can reinvest organically through the P&L or through capital additions. You can make acquisitions. You can pay down your debt. You can buy back your stock or you can pay a dividend. Those are the five items. They're the same for every single business. And what conventional wisdom, what you often hear in business schools or in the popular financial press, is dividends, good, acquisitions, bad. But everyone always forgets to look at the example set, you know, since 1965 of Berkshire Hathaway, from a reinvestment perspective.

Berkshire Hathaway has never paid a dividend. Berkshire Hathaway has been a serial acquirer and is focused on organic reinvestment through the P&L and through capital additions. And so has compounded at this incredible rate. And that's what we're looking for. We want to understand. So that's why we have to know the management teams as well. How do they think about this reinvestment menu prioritize and execute against it? So what we're looking for from the standpoint of the businesses we own is this reinvestment that focuses on organic and acquisitions. So if you look at our portfolio today, we own companies that are serial. acquirers in some particular niche, Constellation software, or Roper Technologies, or Topicus.

And as a result of that serial acquisition mindset, they're able to put to work more capital at a higher rate of return and so compound faster. And that's what we're looking to own. Great business, great people, great reinvestment. And finally, we don't want to pay too much. So when we find a business bend that actually combines all of those things, which is extremely easy to describe and very hard to find in practice, we want to get to know it really well. We want to understand it across those criteria. And so what enables us to hold the stock for a long period of time is that knowledge and us tracking the business across those three criteria. As long as the competitive advantage remains intact, the people are behaving. well, the reinvestment opportunity and acumen continue to be in place, we're going to hold the business. And that's what we spend most of our time monitoring. Ben mentioned the difficulty of holding onto an investment. I'm reminded as I'm looking at your holdings. The last time we had you on, you made such a compelling case for MasterCard that I bought it and I probably held it for seven

months. Now, credit to me, I think I'd turn the nice profit, but MasterCard is a secular compounder. that I probably should still be holding, but I don't. So one of the legs of the stools, now there's only three of them. So they all play a critical role. And if any of them get wobbly, the stool is going to fall over. One of the ones that I think is really under attack right now is business, just generally speaking. People are people.

Management is what it is. Discipline reinvestment, I think, is pretty straightforward, although none of these are easy. But the business part of it, when we've got so much uncertainty with AI, adoption, where does value accrue? I mean, you can't not have a view, especially in a portfolio like yours, which is concentrated in 16 holdings. You have to have some sort of view on how this is going to impact the master cards and Brookfields and KKRs of the world. Yeah, no, Michael, it's a great point. And we've had, you mentioned, you know, sort of the sharp break we've had in the last few months. I would attribute a fair amount of that to this narrative that some of our companies, particularly

our software companies, are sort of laboring under, which is this notion that AI, in fact, we said on our recent semi-annual call, you know, Mark Andreessen, I think in 2012, said software is eating the world. And the question now, I think in investors' minds, is AI-eating software. And so that's become kind of the question, and you've seen significant multiple compression across the software universe, including some of our holdings.

And the question in our mind, I think that people are overstating the disruption, the disruptive effect on a lot of the businesses that we own, certainly. And one of the things that people do, and I'm old enough to remember you know, my career really began in the late 90s. And I remember watching, you know, the Internet and this expanding bubble. And one of the things that I, the analogies I will draw to, you know, sort of, you know, from today back to the late 1990s, is that in the late 1990s, people thought AOL was the Internet. It was.

in in terms of people's daily experience or introduction to it was but it never was it was an internet service provider and what what tends to happen when we're sort of at the cusp of you know no argument no question you know transformative technology a transformative you know boom people are in a rush to anoint the leaders but people tend to be awfully myopic about what the opportunity is and tend to be awfully myopic about what, you know, the leaders, who they are and what's going to sustain that leadership. And so today, what AI is in the minds of a lot of people are chips and large language models. That's AI. So it's invidia and it's chat GPT, essentially. And what we think is being missed today,

is that these AI tools provided by ChatGPT and others are very powerful, but they're going to add the most value to companies that already possess certain characteristics. And those characteristics include customer intimacy, ecosystem dominance, and proprietary data. And if you look at our holdings, that's what we own. So, and I always use the example of, you know, Bloomberg is an interesting example, which is a tool and a product. A lot of folks in the financial services industry use, and people maybe use 0.1% of the capacity of their Bloomberg. Why? Because the whole architecture, the whole system is architected in this bizarre, ancient way where you have to go use unintuitive prompts to go to a specific page. to see what, you know, the information you want to find.

And you think about what an AI and natural language processing can do to a system like that that has all this amazing data and analytic capabilities, but now can go to thousands of providers to provide natural, who can provide natural language processing capability to unlock the value in that Bloomberg system. So the value of proprietary data, customer intimacy, and ecosystem dominance, become even more valuable. We would argue in an AI world, and that's not the narrative today. Today, AI is all chips and large language models. And the belief out there that large language models represent essentially a push-of-the-button opportunity to create all your software. Because we hear

about, well, you can code with these large-language models, and look what that's going to do to the number of human users for software, and look what's going to do the number of programmers. We don't believe, number one, you can just press a button and software becomes a DIY proposition. That's number one. And number two, the tools and the efficiency that those tools provide are going to be best utilized by the companies we own that have that customer intimacy, ecosystem dominance, proprietary data. So, John, the break that we, and great answer, by the way, the break that we spoke about earlier towards the end of the summer, it's not a mystery. I mean, one of your largest holdings, Constellation Software, is one of these companies that is under assault, at least the narrative is. The price is under assault.

And it's not just Constellation, of course. It's other giants like Salesforce and Adobe, businesses that I'm sure you are intimately familiar with. So I'm guessing that you see opportunity during this market narrative shift that we're experiencing right now. Yeah, we do. And I think that there's some interesting examples there. So Salesforce is a horizontal software. company. Adobe is a creative software platform. And then Constellation is comprised of roughly a thousand small vertical market software companies. And I think the answer to AI is a little

different across those three things. I think horizontal software is in good shape, but horizontal software, because it's not based on customer intimacy, is theoretically a little more exposed than I would argue vertical market software is to sort of the AI disruption. That said, I think horizontal software companies like Salesforce are fine. Adobe might be a different question

because Adobe is a creative thing, and I think that's what a lot of the sort of the immediate low-hanging fruit for these large language models, these image generators. We made, this is kind of a funny thing, because we talked a lot on our semi-annual call about this AI narrative, having weighed on our holdings of late. We actually had, I had some

friends of mine create a unique stock market themed country music song, created entirely in seconds on AI. Better than I would argue, I'm not a country music fan, better than I would argue than 99% of country music songs, and created in seconds an amazing sounding, like you would think it was being played on the radio. And that kind of creative capabilities, I think, are being really accelerated, let's say, by AI and LLM and these image generators, music generators, and things like that. That would make Adobe a little more frightening to me. So where we are really focused is on those vertical market applications where you compete on the basis of customer intimacy, ecosystem dominance, and proprietary data.

And Michael, you mentioned MasterCard. MasterCard has been using and pioneering AI back to the 90s, back when it was called machine learning. There's a reason why you can travel to, you know, West Africa, go into a store you've never been in, and swipe your card, and be author. to make that purchase in microseconds, you know, that all, that doesn't happen without AI. So MasterCard and the security and the data and the behavioral data, the purchasing data, the transaction data, all that feeds this incredible AI engine that just gets more and more powerful over time. This is the history of technological innovation, is just that there are over and under reactions, right?

mostly overreactions. But other than just people maybe taking the valuations of the Mag 7 too high, where else are you seeing overreactions right now that you think play out in two, five, 10 years that people are going to look back on and go, oh, of course, that was obvious. Why didn't we do this? Well, I think I mentioned, you know, some analogies to the internet bubble. But I also think it'll be interesting. I'm not predicting it per se. But there are some awfully large spending commitments being made by some of these large AI players. So at last count that I saw, and again, I'm not trying to pick on, you know, OpenAI and chat GPT, but, you know, last count, they had committed to $1.4 trillion of spending, you know, at data centers on chips, et cetera.

no one's calling that debt right now. And in some respects, therefore, it becomes kind of analogous maybe to some of the telecom boom bubble that we saw as well. And I forget the name of the company that sort of set the tone for this, but essentially got taken out in the late 90s at 10 times, you know, for every dollar of CAPEX they spent on fiber, they got taken out at 10 times. that. And that sort of set off this massive stampede to sort of deploy fiber, the capacity of which we still haven't. You know, people still can't make a great economic return on fiber that's been in the ground, you know, for 25 or more years. And so is there an analogy there, you know, to some of the spending here, you know, from the standpoint of the viability of an economic return? These are huge numbers.

So, you know, I think that's just, again, that's just a question, not an answer. Yeah, well, it's a question that the market is grappling with. You just see these trillion-dollar companies just swinging around $100 billion market gap here, up to the upside, and then $300 billion to the downside. There is a lot of uncertainty, and you see it in the stock price because we're trying to make sense of the future. And every day we show up again and say, nope, different today, nope, different tomorrow. So, yeah, obviously the question, the ultimate question in my mind is what happens to the

hyperscalor and the commitments on the money they're going to spend, shifting gears to some of the financial companies that are in your portfolio, which is a huge part of your portfolio. Over 50% of it is in financials. We mentioned MasterCard. You've also got a large. I don't even have to say large because they're all large positions. You also own Visa, but I want to talk about Brookfield and KKR because Ben and I spend a lot of time on our show is talking about the private equity industry, the build out. By the way,

these are data infrastructure players, certainly large exposure there between these two. The prevailing story is that the institutional investors, I'm generalizing, institutional investors have been allocating to these private assets for decades. And they are basically full. They're on average at 30 to 40 percent, give or take, and they're not going to repeat their allocation of the last 20 years. It's not happening. They're full. Okay, great segue to the wealth channel where the average millionaire next door has effectively

zero exposure to these private assets. The pivot from their point of view is understandable. The opportunity is less certain what's going to be left for us. The wealth managers as more and more capital comes into the story. space. I would assume that returns get lowered, but whatever. I don't want to start rambling. What's your take on what's going on with these two behemoths and the field? Yeah, well, we think, you know, it's, there are some secular tailwinds to the space in terms of institutional allocations in terms of the wealth channel, you know, kind of starting to open up.

That wealth channel essentially represents at sort of a seeming reasonable level of penetration. essentially a doubling of the AUM that the alt space currently has. So there's a big opportunity there. I think there are some real issues with how do you make that a palatable structure for the individual investor? One of the things, kind of an interesting segue there, one of the things that distinguishes KKR and Brookfield in that space versus some of the other folks who have made a retail offering, and this again goes back to the people and the culture aspect of why we own some of these businesses, is that there's no adverse selection of deals offered to the retail channel. They are peri-passu with all the institutional investors.

Other places, other firms you're seeing in terms of what gets offered to the retail investor, it's sort of what's left over from a deal quality perspective. So again, I think that's an instructive insight into sort of the behavior of the people and sort of the cultures there. But we think that there is a great deal to be said for what these two companies are doing. One of the other things that we would mention is that back to the reinvestment, you have a compounding mentality. at Brookfield and KKR. In fact, when we first bought KKR, it was on the heels of them

converting from a publicly traded partnership structure to a C-Corp. They made that transition. Oh, I'm blanking on the... It was at 2015. I'd have to go back and look, Michael. I'm not exactly sure of the date. I'd have to look back that back up.

But it was a while ago. And they did that entirely to be able to read it. retain earnings and reinvest, instead of having to dividend everything back out to their investors. And so that compounding mindset, again, one of the few companies that's really studied the example set by Berkshire Hathaway, they said, well, the whole fund structure, as traditionally conceived, requires that we sell all the businesses after five, seven, nine years. Well, what if we want to hold on to some indefinitely on our balance sheet. And so that's the strategic holdings component

of the KKR story today, which is going to go from, as these companies have sort of, they own 18 or 20 companies today, 20-ish to 30-30 percent sort of minority stakes held in perpetuity where the dividends from those companies collectively are going from about $6 million as of two years ago or so, to a billion dollars in the next two or three years, all on the balance sheet at KKR. So we think that there's a difference among these companies, although they all enjoy certain secular tailwinds, there's a difference in compounding mindset, compounding structure, and sort of a cultural mindset that attracts us to the ones we own.

public markets shifted on private markets, interestingly, a couple of weeks ago, as news started to leak out about some of the loans gone bad, which from an outsider's point of view, I understand the concern. You shoot first, ask questions later. I think it was an overreaction. And I understand exactly why people overreacted. I'm not like naive to the risks there. But when a company like KKR loses a third of its value, again, due to some narratives that might not be 100, 100% true or might not be not 100% false. Do you act on something like that? How quick are you to put money back to work? Well, we have buy targets on everything we own. We have sell targets on nothing that we own. So we know where we want to buy KKR or Brookfield or anything else that we own or are looking at. And those valuations tend to come around seldom because they have to be truly sort of opportunistic and have to discount a fair amount of bad news. what I would say is... Did we get there or was it not quite that extreme? It was getting there. It was getting there. Definitely. And we, you know, sort of in that 115 range for KKR is looking pretty attractive, would look pretty attractive. What's happening a little bit right now is that there have been some, you know, and look, we have the concerns for all the potentialities, you know, that you can have. But there's been some concern and some sort of looking to private credit today, which has grown very rapidly.

You know, it's been a strong area of growth for a lot of alt managers. They're looking at trying to find like, okay, is this going to be where the next credit crisis comes from? Right, right. You know, and so you've had some high profile bankruptcies, but as Howard Marks recently said, you expect that. You know, it's, there's a, there's a, there's a, there's a, there are going, to be defaults in private credit. And you would expect that. And we're really not seeing anything that would impact our view of sort of how sound that practice is at KKR or Brookfield. By the way, there are defaults in public credit. Yeah, exactly. It happens. Yeah. Well, and nobody,

you know, we own Moody's. And I remember Ray McDaniel, years and years, who was the CEO prior to Rob Fowber, who's the currency, telling me, you know, look, you know, there will be AAA credits that default. Just like there are 26-year-old, you know, marathon, you know, triathletes who die during a race. You know, there's, you know, it's an actuarial risk. You better be careful. You're going to talk Michael into holding this for seven months. John, one more while we, while we have you on this topic. This might be a little bit in the weeds, but I am curious to hear your take. So Moody's, there was an article, the FTA has done a really good job covering a lot of what's happening in the private credit

space. And there are some flags. I don't know exactly how to color code them, but there are some concerns that I think are warranted on the insurance companies that are captive, that are owned by a lot of these alternative asset managers and the private credit that they're buying and them not going to Moody's or S&P and going to some companies, some rating companies that I've never heard of. I mean, what's your take? I'm sure that you know the story better than I'd do. No, Michael, no, you're raising a really important point.

And it's something that the NAIC itself is, you know, which is sort of the insurance industry credit rateer, if you will. I'm not sure that they're actually rating a lot of credit, but they're sort of looking at the credit that their insurance companies that they oversee are holding. pointed out that in some private instances, you're seeing internal rate, you know, certain marks are being made that, you know, are multiple notches higher than what the equivalent Moody's or S&P rating would be. In KKR's case, you know, we, we asked them about this. So you mentioned Egan Jones,

you know, not by name, but you mentioned Egan Jones, which, you know, is a name that, you know, has been around for a long time, but that rates thousands of credit issues with, I believe, a team of about 30 analysts. You know, and their ratings, you know, we could spend two hours on the history of the interesting history of the credit ratings industry. Let's just say that I think that this is probably not the last time

we'll see that story. No, no, it won't be. And one of the things that was interesting and we talked to KKR about this. I believe KKR in their global Atlantic insurance company, I think less than 1%, maybe not even that high, of the bonds held in their insurance company, are rated outside of Moody's S&P or Fitch.

In other words, they're not using these kind of more rubber stamp type of inflated ratings. in order to mark their portfolios. Very important question, though. It's something we've definitely trying to pay attention to. So a lot of people are worried about the technology aspect of the stock market being concentrated. Your portfolio has, I guess, over 50% in financials. Does that worry you when you have that big of sector concentration?

Or for you, is it? No, no, no. It's bottoms up. It's companies first. And it just happened to be that financials were the ones that we thought were under value and that we own. Yeah, no. It's an important question, and I, and thank you for giving me an opportunity. I meant to sort of say this in response to Michael's question as well. But, you know, we own financials that are called financials by, you know, industry, outside industry, you know, classification systems. But, you know, really, we don't own any banks. We don't own any lending institutions, with the exception. in a limited way, you know, it's not like they're, they're not entirely lending institutions by any stretch. Most of what they do is private equity. KKR and Brookfield are the closest thing to a financial that we own. Moody's rates credit. They don't extend credit. MasterCard and Visa are payment networks. There is no credit being extended there whatsoever. So I do make that distinction in terms of, you know, financials and financials. When I think of a financial, I'm thinking of a lending institution first and foremost.

And that isn't what we own. So what we own, you know, in that concentrated sector allocation, we own two of two in terms of the payment network oligopoly. We own one of two in terms of the credit rating agency oligopoly. These are exceptional business franchises, not commodity lenders. And that's a huge part of what gives us, we lose no sleep over that financials allocation. John, for people who want to learn more, where do we send them to find out about your funds and your ETFs and the whole investment process? Well, thank you. The best place is

acrycapital.com. We have some good white papers on there about how we think and approach the investment process. And also, as relates to our ETF, theokrefund.com website. Perfect. Thanks, John. Thank you, Ben. Thank you, Michael. Okay, thanks to John member, check out Oprycapital.com. To learn more, email us Animal Spirits at the CompoundNews.com.