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Season 3, Episode 22: The Transformation of the Hedge Fund Industry (Updated)

With Dominique Mielle

(Updates with transcript below. To get the transcript earlier, sign up to become a premium subscriber and take advantage of this and other benefits).

Dominque Mielle joins the podcast to discuss the transformation of the hedge fund industry, as encapsulated in her book ‘Damsel in Distressed: My Life in the Golden Age of Hedge Funds.’

Mielle’s career in hedge funds spans three decades, a period of dramatic growth that has culminated with many investors today questioning whether it still makes sense to allocate to the asset class — to the extent that it can even be called an asset class.

The guest says hedge funds still have value in certain circumstances, but there are many forces working against them.

She also has some views on markets and even cryptos that are discussed in the back end of the episode.

Content Highlights

  • Her reasons for writing the book: very few women in hedge funds and the critical growth periods she observed in the industry (2:05);
  • So does the hedge fund industry have a future? (5:15);
  • What exactly has changed in the last 20+ years to make hedge funds less compelling? (8:02);
  • There is certainly less mystique around hedge funds, and the media now reports returns and other things regularly — something the host himself has been guilty of. How has that affected things? (13:54);
  • Okay, so what is the value proposition for hedge funds? (18:58);
  • Background on the guest (25:36);
  • What if a woman wrote a ‘Liar’s Poker’ of the hedge fund world? And why aren’t there more women in finance? (31:30);
  • The guest’s view of markets at present. Tapering is critical (40:23);
  • Her views on cryptocurrencies (44:47).

More Information on the Guest:

Quick Highlights From Our YouTube Channel

Not intended as investment advice.


Nathaniel E. Baker 0:36
I am here with Dominique Mielle. She has written a book called damsel in distressed my life in the golden age of hedge funds. I am very excited to discuss this book with Dominique, because her career on Wall Street and on the buy side somewhat overlaps with my coverage of hedge funds, I started covering hedge funds in 2004 and I’ve kind of done so in some capacity ever since. But she was a lot closer to the action inside a hedge fund at Canyon partners in LA, right? But even before that, she had worked in Wall Street, going back to the early 90s. So you have some very interesting views on the hedge fund industry in general, and and especially what it was like from a woman’s perspective. And so maybe I’ll just let you start and talk a little bit about that, and about your book, and then we can take it from there.

Dominique Mielle 1:39
Sure. Thanks for having me.

Nathaniel E. Baker 1:41
Thanks for coming on.

Dominique Mielle 1:44
Yes, one reason for writing the book is that as you know, there are very few women in hedge funds. And while there are probably more at the junior level, they become really rare. When it comes to the senior level, particularly on the investing side, you’ll find more on the marketing and the business development side. And so, you know, part of why I think there are a few women is that there are a few women speaking about the career and that means there are a few examples of successful careers which I consider mine to be. And it’s there’s very little to aspire to. So that’s, you know, I wanted to put out there a female voice on that career. And the second point is, I think the years that you and I have experienced coverage from the inside or the outside in the hedge fund business have been really critical in the building of the industry. Certainly it’s been the growth period, if you think of now, the hedge fund businesses, any industry with an S curve, I think we’re probably on the flat part of Yes. And that the 20 years from the late 90s, early 2000s. To today has been the exponentially growing part of the business. And that is particularly interesting in any industry. But specifically for me in the hedge fund because you have you’ve had a lot of innovation, a lot of transformation of the business. And I wanted to explain those transformations to the layman out there in, you know, in a complex that hopefully lots of people can relate to can understand in a light tone, because most hedge fund books are pretty, pretty dry. And you know, make it an entertaining if possible. read a short read. There’s no other quality to the book, at least it’s short.

Nathaniel E. Baker 4:00
brevity is a friend of quality, and it is certainly entertaining. I can vouch for that. And you bring up some interesting points here right off the bat. And this is my first question to you then is do you think that the hedge fund industry does have a future? Because you speak about this a little bit, and there’s a quote here from the very early part of your book, you say, that is the problem with hedge funds. They are an unstable business model. And you cite a number of based on your own research. I believe it’s just more anecdotally but still 9% of hedge fund close each year. It seemed I thought actually maybe higher than that. But But the point is, and this is in fairness, this is not just hedge funds. The whole active management industry in general has you know, lost a lot of sway recently over passive investing in indexes and such things like that. So yeah, so but you do think here that the hedge fund industry does have a future

Dominique Mielle 5:00
I think it has a future. I think we are in desperate need of innovation. I think if I reflect on my own career, my own job, 20 years after I joined, everything had changed around hedge funds, the markets, correlation between assets, availability of data, regulation information, and particularly the size and the scale of hedge funds from, you know, 300 billion or so to probably close to 4 trillion. And so the real question is, of course, there’s there are a lot of hedge funds that disappear. But then again, that happens in any industry that there’s a fair amount of, you know, small companies that are left behind, the real question is the value proposition of hedge funds was really to outperform the market to use that alpha. And for that investors, at least original investors were willing and happy to pay very high fees. And that was the deal. That was the handshake. So the real question at this juncture to me is, is the value proposition still sellable? Or is there a better mousetrap? And if you’re going to charge the same fees, slightly lower? I think they’re generally they’re gently feeding. But are you able to deliver the alpha is that your your pitch is all about. And if you look at the hedge fund business in general, if you were to aggregate those assets, as in one giant hedge fund, but it has not outperformed the market, not systematically, not consistently, sure, some hedge funds outperformed the markets, some of the times, but I don’t think anyone is smart enough or nimble enough to invest one year was a polo in the next year with York. And then the third with, you know, point 72. People generally have long allocations to hedge funds, they don’t change the name that often and that means that if on average hedge funds don’t outperform, then there is something that needs to be examined between the price of hedge funds and the value they deliver. I do think that is something that is is going to change.

Nathaniel E. Baker 7:41
Yeah, what is changed? Would you say in the 20 years, be at amount around reporting returns, or anything else that that might make it more difficult to produce alpha now, then back in the night,

Dominique Mielle 7:58
I can think of two important factors. The first one is the sheer scale of hedge funds. So if I think of my own piece of business, which was distressed and stressed, and I think of, you know, some of the best periods or the best returns, they were right after and telecom crisis, yes. When when they were oodles of companies in bankruptcy and the distressed area produced 2020 to 23% return in several years. And you look at the size of hedge funds chasing those bankruptcies. The amount of bankruptcies dwarfed the amount of capital allocated to it. And it’s so we’re back to you know, it’s a simple problem of supply and demand, there was a ton of opportunities for very few hedge funds. You go to today, and my impression or my belief is that it’s the other way around, you have the hedge fund business that’s literally become the market. It is enormous. And so you have an enormous pool of capital chasing few opportunities when you have you know, 20 3040 50 billion, you know, hedge fund, it’s really difficult to find a lot of good ideas, a lot of differentiated good ideas and large enough to put that much capital to work. So that’s, that’s one problem and one great hurdle to producing alpha and producing. The other one I would say is information and data, how readily available it is and how cheap it is. So again, going back to my own neighborhood of stress and distress, back in the early days, it was very expensive and very difficult to get bankruptcy court data. There. There’s only one service called Pacer, you had to pay by the page, it was very difficult to get not to go even further back on to reg, fd and all this disclosure. But essentially, it was a lot easier when not everybody had the same information. Once we had some information advantages, it sure was easier to exploit the market and its inefficiencies. But to a very large extent, you know, how quickly you can get the info how available it is how the fact that every company has a website, everything’s posted there real time, including bankruptcy documents, that makes the, you know, the market much more even field type of opportunity. And so if you don’t have an edge, or you don’t have the data edge, presumably the alpha is a lot harder to produce.

Nathaniel E. Baker 11:03
What about the fact that we’ve had 12 straight years and counting? Have you mentioned alpha while the beta has been been there? You know, we haven’t had you mentioned distress, we haven’t had a real distress cycle in 12 years. Right? And what about that the fact that every year pretty much just about stock markets have been going up these last 12 years? And that, you know, that’s that’s your beta? So, yeah, what do you make of that?

Dominique Mielle 11:30
It’s certainly more difficult when the market keeps on going up. And it’s not only that it keeps on going up. It’s also that the volatility has been very muted. And you can point to periods of increased volatility. But unfortunately, or, unfortunately, for hedge funds, fortunately for investors, those periods have been exceedingly short. So if I think of the last bouts of disruption and volatility, certainly March 2020, and COVID. Before that, end of 2016, the oil choices and shale industry crisis before that, maybe 2010, I think 2011 tea pretension. The problem with those is that they’ve been a few months long. And again, for hedge funds that are very large. It’s not like you can sit in cash and wait for the opportunity, and then within 234 months, because that’s essentially what the COVID crisis lasted. reposition yourself, you just can’t. So that’s actually good for smaller hedge funds, but for various stablished very large funds. It’s just not enough time to capitalize on those on those bouts of of disruptions. Where it is it is another difficulty for sure.

Nathaniel E. Baker 13:05
Yeah. And also in 2008 2009, hedge funds didn’t really do that great. They didn’t really protect, invest, some did, but they didn’t really protect investors all that much. Maybe because they already were that big. And maybe because it was such a historical crisis that the correlations everywhere went to zero or one or whatever. And up ended a lot of them. I’m curious. I mentioned reporting before and reporting returns. And this is something that I thought was kind of maybe there’s been a Mystique around hedge funds leaks there was when I started reporting on this industry back in the early 2000s. And it was hard to get any real information on them. As you said their information just wasn’t there. And it was very difficult to get any returns on any of these guys. And that seemed at some point that I think that seemed to kind of change a little bit but anytime we did, it was like a huge scoop for us. Like when we got like some like oh, wow, here’s what Bill Ackman has been doing or whatever. And since then it seems that a guilty party of this, of producing these every month like when you have when a hedge fund has a down month, you’ll see these screaming headlines, you know, so and so lost 1% last month, right? And, again, that they could hedge funds don’t actually report this. There’s no like, you know, Lipper or anything. But it’s somehow it’s it’s much more available, it leaks out a lot more easily. And it’s all out there. And as a result, you have all this screaming and crying about hedge funds under performance on a short term basis. That is maybe not entirely fair. What do you think about all that?

Dominique Mielle 14:48
I think you’re right on on many points, and you had a lot of points in that. The first is that the industry was very secretive. We’re very little known. I want to back 20 years ago, even, I would say pre 2008. And one of the reason was that our investors were largely wealthy individuals making decisions for themselves. And who had a strong understanding that the deal was high risk, high return. And so a negative months or a negative year was, while extremely unpleasant, neither something to write a headline about more particularly surprising because you could have a 30 40% return through the next year, that has completely been changed and turn on its head. Number one, the industry is very well covered it is now I would think, I’d be curious as to European but institutionalized industry, and one of the different asset classes like you know, of asset management, one among others, to obviously, the investor base has totally changed, and is now largely institutions, pensions, endowments, insurance companies, family offices, but very large. And the deal has changed in that. They’re really looking more for safety than return, they say they look for return. But my feeling and from, you know, practicing for many years and pitching to them is that it’s more safety than real return with the associated risk. The other is that those organizations many times do not make the allocation decision directly but use allocators advisors, brokers, consultants, and so when you do that, and you sort of outsource the risk profile, you’re going to tend to diminish your appetite for risk and increase your appetite for safety. Because the third party is never incentivized to take large risks. They’re always incentivized to keep their job and advise and recommend the large funds that, you know, as the saying goes, they’re not going to get fired for recommending even on a down year. So all this has meant that you have more headlines that, you know, outlandish returns, up and down are less and less frequent. And yes, you see headlines on, you know, so and so lost 1% one month, which is probably unfair, and to be honest, hardly relevant, right. And then you see the other way around the number of headlines on Bloomberg on, you know, different financial organizations about hedge funds are back, because in 2020, they beat some is not even a lot. It’s, you know, some categories of hedge funds beat the market. And that that is a fact. Right. But how interesting or relevant is that, as you say? No, very, really in? At least not very, for the investors in headshots. Sure. Neither indicate the future nor the past.

Nathaniel E. Baker 18:43
Yeah, these are these are all really interesting points. And the begs the question, you know, what is the value proposition now that hedge fund could do if it’s not beating the market, which, and again, this isn’t just hedge funds? This is like, I mean, you’ve seen the statistics, right? I mean, for an active manager to beat the market, it’s very unusual to do it consistently. And legally, is pretty much unprecedented. But so yeah, what is what is what can you do?

Dominique Mielle 19:11
So do you know, then you got to ask yourself, why are investors still allocated to hedge funds? And there are different reasons, some good some bad. one good reason is diversification. That’s, that makes sense. Right? But how good is the for diversification? That’s one important question. And how much should you pay? How much should one pay for diversification? Is it one and a half and 20? Not completely clear. Another reason is, a lot of CIOs are paid to beat the index. And so the inner was explained to me by a very Smart, very honest CIO, the one way to make sure you’re not going to beat the index is to buy the index. So you got to give it a shot. And to give it a shot, you have to invest some in alternative Asset Management rate, because otherwise you’re just not going to hit your your bonus target ever. That’s not alternative

Nathaniel E. Baker 20:26
What if you just picking stocks? It’s not there’s nothing alternative about that.

Dominique Mielle 20:30
You could be picking stock, I think for a large school, endowment, insurance pension, who’s outsourcing big categories of asset classes? They’re not gonna pick stocks, between long only bonds, you know, loans, hedge funds, private equity, macro, crypto, etc. So in those large buckets, you know, hedge funds, and as an alternative, no,

Nathaniel E. Baker 21:01
I know, what if the head of a hedge fund is doing is picking stocks? You know, that’s not really alternative?

Dominique Mielle 21:06
It’s, it’s not

Nathaniel E. Baker 21:09
So maybe the maybe the answer has to be, you have to be a little bit more esoteric and willing to take on risk. There are some studies that I’ve seen, I’m sure you’ve seen them too, about new hedge funds, younger hedge funds, outperforming the bigger ones, because of all these issues that we talked about, one of which is his risk appetite, frankly, you know, if you’re, if you’re managing a billion dollars, you can live very well off the management fee, you don’t need to produce any alpha really, as long as you just keep people on board, right? Whereas if you’re brand new, and you’re you’ve managed 50 million or whatever, 100, even a couple 100. And you know, you’re going to be a lot more ambitious to and willing to take on the risk that is necessary to get the high returns. So maybe that’s something I don’t know,

Dominique Mielle 21:52
it definitely is something I was I could think of two avenues you were going down when he said young hedge funds. First off with the increase in regulation, unless you have a billion it actually very hard. In in credit, it’s very hard to make a solid living without that size. But certainly do a two reasons why a young or a smaller, let’s call it smaller. Well, what is that risk appetite you’re talking about every decision is a make or break, you got to make it you got to leave no stone unturned. The other very important is you and then you can be all cash one month or invested the next you can trade very actively once you get into double digit billion. There are that many cap structures that provide that liquidity and liquidity is a very important factor in in return and your ability to time. So if you think our conversation, distressed or volatility bouts are shorter, you need to me to be able to capitalize on them. So size your extra size is kind of your enemy.

Nathaniel E. Baker 23:14
Yeah, absolutely.

Dominique Mielle 23:16
Then another thing new that I thought you were gonna say that’s beginning to interest me more anecdotal. I wish I had data but I don’t at least not yet is young hedge fund as in junk management? Right? If I think of the management of all the various stablished very successful known hedge funds, you know, from Leon Cooperman to David Tepper to you know, all those guys, first of all, they’re all guys. Yeah, decades. They’re kind of in their 60s, if not 70s it not 80s. And so you got to, I started thinking, even if they’re very sharp, they have the experience, what risk profile does a 70 year old person have versus a, you know, when they started 20 3030 year old break, and it seems to me that whether you’re consciously seeking it or not, as you age, your hunger, your risk profile sort of shifts from capital preservation to capital, whether it was return proliferation or growth, right, it’s sort of it would seem to me that it is a human evolution that as you get older, you’re a little bit more timid. And that would play in what you just said, which is, you know, it it’s harder to make it When when you’re you’re leaving a very large sort of tanker in, and you’ve, you’ve done it for 34 years.

Nathaniel E. Baker 25:10
Yeah, absolutely. Absolutely. Okay, I want to take a quick break here and come back and ask you some more questions, Dominique. But let’s first let our sponsors be heard. And if you don’t, if you’re a premium subscriber, you’re not going to get a break so you don’t touch the dial to become a premium subscriber. Check out the website We’ll be right back.

Nathaniel E. Baker 25:36
Welcome back, everybody here with Dominique Meo and Dominique, this is the segment of the show where we ask our guests a little bit more about themselves. And how they arrived at their current station in life. We touched on it you had a pretty long career, about quarter century it looks like on on Wall Street. Yeah, but but I laugh because you’re covering your eyes. It does it does it It has been a long time. But yeah, so curious about about all that, and how you came to investing in the first place, and how you came to write the book. So talk to us about that.

Dominique Mielle 26:14
Okay, yeah, I guess my cringing when you said a quarter century does not translate in a podcast, but it was definitely there. And it’s, it’s true, it’s true. to how I came to to invest in Well, it was serendipitous, I would say, and I think that it matters, for me to say it because the public or in or the media has this well scripted notion that a hedge fund manager is somebody who started trading at a very young age, you know, out of grammar school, they’re already trading baseball cards or looking at arbitrage between, you know, lemons and lemonade. And that was certainly not my case, I grew up and did my studies in Paris. And then I did take a finance job in New York as my first, my first gig, really not because it was in finance, but because it was in New York, and I wanted to travel and see the world and leave my place of birth. So I did that, and then joined Lehman Brothers again, you know, more coincidentally, than anything else, which by the way, life as an investment banker, is, is a fairly miserable experience, at least at the very low level, where I was, which led me to go to business school. And it really is in Business School, after a couple of classes about portfolio management and risk management that I realized this would be a really interesting job. And not particularly because I love math or love deals, but really, because of the creative nature of the job. And I don’t think it’s something that you hear enough about the job, certainly about distressed and restructuring. It is a highly creative job that uses imagination that uses sort of the ability to connect points. It’s very much a game of strategy where you look at the capital structure and the different layers, loans, bonds, vendors. Equity, obviously, maybe they’re people suing and they have claims, what is their position? What is it that they want to do? What kind of restructuring do they want to drive? What is their endgame? And what is yours? And how do you position yourself these are the those opponents because there’s going to be a pie, you’re going to slice it in a restructuring document that will be blessed by the bankruptcy judge and voted upon by the different parties as to how you divide the value of that pie. And it is sometimes a matter of picking the right security or securities. Sometimes it’s a matter of designing or devising a plan that makes sense that will either get everybody together to vote yes. Sometimes it calls for creating a new financial instrument upon emergence that is going to give you upside or give you over time a bigger piece of the pie. So that sort of ingenuity, I found very attractive and frankly, that’s what kept me in the job for for 20 years. It’s not you know, that’s not The typical image, I think of the hedge fund manager that that is portrayed, maybe because it doesn’t sell maybe because it’s not cool. And it’s a lot cooler to be, you know, a ruthless deal maker, and a magician with math and numbers. Maybe that’s a better image. I don’t know.

Nathaniel E. Baker 30:21

Dominique Mielle 30:22
But that leads me to your second question as to why read I wrote the book, I wrote the book because of that general lack of a voice in my mind in the, in the in the books that I saw around. If I think of books in finance that I really liked, they’re really few and far between I loved liars, poker, I thought it was just a joy to read fun, honest, authentic. And I thought what if a woman wrote liars poker about the hedge fund world? coded? Do you know inspire inspires is a is a very big word. But could it give some women, some outsiders because I’m not only a woman and the foreigner, the, you know, the impetus to try their luck at the job of investing? And if the answer is yes, I thought that was a worthwhile effort.

Nathaniel E. Baker 31:27
This is something that comes up here on this podcast a lot. And partly because I’ve tried to book women for the show. And my original idea was to alternate between a man and woman and that quickly became unfeasible. And so when I do have a somebody, and so it’s not by lack of trying, but I have made women realize my point, right? And so when I do have them on, I often like to ask, and then there’s another thing here, which is the listeners of this podcast, by the way, according to Spotify, at least are 90%, nine, zero, male. Okay, so I, it’s, I’m wondering why that is. And I do like to run this by all my winning guests. And so what what are your views of that? Why are there so few women in finance? Why are they seemingly not interested in investing? Or are they and maybe they just aren’t listening to my podcasts, but 90%? Because, anyway, yeah,

Dominique Mielle 32:29
Your thought of alternating made he laugh, because it reminds me of the countless business dinners that I had during my career where, you know, when you have a dinner, you usually say, hey, should we do one woman when one boy, one girl, and I would always make that joke and be, you know, 12 men and me? It was funny at the time. Anyways, why is that? It’s? Look, it’s not a simple question. So I think the answer is complicated. I think they were, if you think of the equation as women wanting to join, and hedge funds wanting to hire them, I think there are issues on both sides. Women not joining in, I’ve had that comment from colleagues of mine who say, I want to recruit women, but I can’t find any. I think one problem is, as I said earlier, the job is not very well advertised, there is no My book is the first book by a woman about a woman and headstrong unless there are more voices, and voices that are positive about the experience, and give an example of what you can do how you could enjoy your job, how would you be extremely lucrative, which I’m not shy about saying, I think it’s not very attractive, right? If you only see white men in the job, in the media, in books in on TV, then as a woman, as a foreigner, as a minority, it’s maybe not even a job that that registers on your radar screen. So I think we need more voice. Certainly Cathy wood is you know, their vocal and and my hope is that we’re going to see and hear more voices. And that’s going to be the impetus for more minority and women candidates to to be wanting to try the job and to be on your podcast. And then the other side of the coin is why are hedge funds not hiring? I think one reason is, look, the business model has worked and worked so well for so long. Why would you change it? I think it’s human nature. If you have a winning team, why would you change it and unless and until Internally, they are convinced that their performance will be better with a diverse investment team. It’s just not a lot that’s going to happen. What you’re seeing now is investors making a very large push for, for diversity in the investment team. So it started with David Swensen one of the last things he did before his untimely death was to tell the managers of his large endowment that they’ll be weighted on diversity in the investment team. And he, as you know, he was a very powerful voice. And I think it’s only a matter of time. And it’s happening already, before all institutional investors not only ask about the mercy will require it, and grade it, and, you know, put it as the factor are just as important as reporting and compliance and, and, you know, structure and, and all those factors that you want hedge funds to have. So I’m, I’m hopeful, but it’s really takes time that the face of the business has changed that, internally, more research will prove, I mean, it’s been absolutely undeniable that, for example, diverse corporate boards are more effective, make more decisions, and companies with diverse management are more profitable. The research in in asset management, you know, I’ve looked at a lot of research for my book, there is some, but it’s a little old, it’s a little outdated. So we need more people looking at that issue. But, you know, once if, and when hedge funds are convinced that a diverse investment team will produce better returns, their profit oriented or that their investors are not going to stick with them, or invest more money unless they have a diverse team. I think that these are very important. incentives.

Nathaniel E. Baker 37:11
Yeah, no question. No question. But that’s all top down. What about the from the bottom up? I mean, you yourself said you weren’t interested in finance, you just took the job? Because it was in New York, whatever. I mean, a lot of people do that male and female. But But what? And what about the This, this, as I mentioned, about nine, maybe it’s just my podcast, and 90% of the listeners are men, is why aren’t more women? Or are they and I don’t know it interested in investing. And young women too, or maybe that’s changing.

Dominique Mielle 37:39
I’m hoping that it’s changing, although, I mean, we are in such an extremely interesting investment for stocks, period, with the retail trading on exploding. And that I think that’s probably fair to say. So in a way, that gives me hope for women to invest in a way I have to catch myself, because if I think of the Robin Hood crowd, I’m guessing that it’s heavily male oriented. That is the role of unity. Yeah. I think again, it’s a matter of, you know, persisting and providing female voices. And I think your example, your efforts at putting women in your podcast are going to bring more women, right. And if it’s sort of a vicious circle, or a virtuous circle, both at the same time, as you get more female guests, I think I would imagine you’ll get more female listeners, as you get more female listeners, you will get more female wanting to be part of the of the podcast. I really do believe that in that circle,

Nathaniel E. Baker 38:57
hopefully, yeah. Cool. Awesome. All right, Dominique. Um, lastly, maybe let’s see if we could talk a little bit about the current state of the market. I know you obviously your background is in distress. We were saying there hasn’t really been a distress cycle. In general, where do you view markets right now, in terms of risk taking risk, appetite, economic cycle, and things like that?

Dominique Mielle 39:21
Well, I’m not a macro person. So you know, you got to take what I say with a grain of salt. And again, I’m the distressed investor. So I tend to be, you know, sort of have a very cautious view on those mega bull cycle. I’m not in stocks. I don’t understand valuations. today. Certainly I have no competence in inputting valid valuations on super high growth companies. But there are companies out there that are clear Li overvalued and particularly mean stocks, by traditional measures. And you know, for example, AMC is actually a company that I followed for years, literally decades, because if you remember, the theater, the movie exhibitors, as we used to call them, went through a bankruptcy cycle around 2001 2002, as they were building, multiplex Mega plexes and replacing multiplex The audience was in there, there were spending cap x, they just all went under, and, you know, spurred a wave of consolidation. And then AMC was bought by your private equity, and then they went public, the IPO actually took quite a few tries, because they had a botched IPO value shouldn’t was too high. I can, you know, confidently say that the company is not worth 65 times EBIT, da, whatever the value, the valuation that it trades at. The problem is, it seems to me that stocks are now valued on on a different paradigm that he that it used to be meaning a stock is not only a piece of equity in a company, it’s also a game. And a game has a an economic utility, how much fun it provides, like when you go to the casino, you actually paying the casino company to have fun. Just like when you go to Disneyland, you’re paying to ride and to have fun. So those stocks probably Tesla and AMC, for sure, and game stock and hertz at some point, the investor is paying a premium to be part of a community that has fun. My problem is that no one’s actually been able to quantify and theorize what that premium is. And it’s quite large, right? I mean, it really is a disconnect between between the reality of the cash flow and the stock trading. So unless and until academics, investors, practitioners come up with a good way to actually value that premium. It seems to me very difficult to invest in separate stocks. And as opposed to just going into index. That’s sort of my little view on stock picking. As far as the macro environment make watching the tape rain is going to be critical. And past examples, so or history has sort of shown that the Fed tends to overshoot one way or the other. overstays its welcome in having low interest rates. And then once in a while that, you know, that was decades ago. overshooting increase in interest rates? Have they learned? Are they much more subtle and managing rates? I don’t know. So I guess my my answer is I would, you know, you got to know your limitations. And mine is to give advice on the direction of the market. I you know, I’d rather I’d rather make

Nathaniel E. Baker 43:27
Yeah, is there anything else that what on the on the distress if there wasn’t a distress cycle there any particular industries that you’d be more interested in now than others?

Dominique Mielle 43:35
Well, like everyone else, I’m trying to figure out crypto not so much the value of the currency right? Because we you’ve you’ve seen that in many industries where there was so many candidates for sort of winning the battle, is it Bitcoin? Is it Ethereum? Tons of others, I don’t know. And it’s not so interesting to me to know whether it’s worth 50,000 or 100,000. What’s really interesting to me, are the applications and particularly what people called defy and how we could utterly transform the finance industry, the trading industry, you know, thinking about everything from shortening, settlements of trades, being able to have options of any strike any length, you know, ends with a lot of liquidity. It really has the potential of making instruments a lot more liquid, a lot of a lot more customizable. It’s, of course there are regulations issues with it. So that’s, that’s very interesting to me. And then the distress cycle is super interesting to me in that you have tons and tons of Assets being raised against a somewhat small number of bankruptcies, particularly the large bankruptcies are really seldom heard was one of the biggest and it’s something like, I don’t know, I want to say 20 30 billion. It’s tough. It’s puny, if you think of Lehman Brothers in Washington. So that’s, that, to me plays in the hands of smaller distressed guys. And it was also a very, again, very short period of distressed and one where the strategic players have changed so players who are able to drive the dip that are in position financing a really ruling the day these days is something that we hadn’t seen in in previous cycles. So these developments are very interesting.

Nathaniel E. Baker 45:54
Very cool. All right, Dominique, in closing, let’s talk about how people can find your book I know you have a website I’ll put this all in the show notes as well.

Dominique Mielle 46:03
It’s distributed by Simon and Schuster. So it’s on Amazon in hard copies and in Kindle and in in different bookstores. Cool.

Nathaniel E. Baker 46:15
And what’s your website?

Dominique Mielle 46:18
My name

Nathaniel E. Baker 46:24
Which does not mean honey.

Dominique Mielle 46:26
No, I wish. It does mean honey but I spell it differently. But God gave me a different personality, I’m afraid

Nathaniel E. Baker 46:33
Come on now. That’s not fair. Anyway, so you’ve mastered the art of New York self deprecation at least but yeah, even if you’re a West Coast Are you based on the West Coast or now?

Dominique Mielle 46:44
Yes, I’m based in LA and I do think self deprecation if there was ever be an undervalued asset in the world of hedge funds then that is it,

Nathaniel E. Baker 46:57
indeed, and very cool. Anyway, so thank you so much for coming on the show today. I really enjoyed having you and interesting conversation. Thank you all for listening. And we look forward to speaking to you again next time.