In short: His "most out-of-consensus call." UK defined-benefit pensions cut UK equities from 50% of assets to 5%: "who's left to sell?" The UK left "the Titanic" and has its own central bank. He frames it as a correlated hedge for anyone short euro assets, "not so much due to inherent bullishness."
The UK is his most contrarian call, and he knows it: nobody likes UK stocks, including the British. UK company pension funds once had half their money in UK shares and now have about 5%. When almost everyone has already sold, there is little selling left to push prices down.
His main use for it is as a hedge. He expects a eurozone debt crisis. Someone betting against European assets wants an offsetting position that moves in a similar way but should hold up better, and the UK fits because it has its own central bank and is outside the euro. It's less "UK is great" and more "UK beats Europe in the storm."
22:37No one more so than British investment managers themselves. So I found this crazy stat: British defined-benefit pension funds used to invest 50% of their assets in UK equities in the early 2000s. That has fallen to 5%. That is just stunning. I don't think of any country where there's this level of self-hatred.
In short: Global/UK value — international value has doubled the S&P this year; historically the start of a 6–7-year outperformance trend.
EWU is a basket of UK stocks — a way to own cheap "international value." His point: foreign value stocks have doubled the S&P's return this year, and over 50 years that has never been a one-year fluke — it has always kicked off a 6–7-year stretch of outperformance. UK stocks lagged the U.S. every year from 2010–20, so he thinks it's their turn.
31:44International value small cap has doubled the S&P's return this year. At the ideas dinner last week, the takeaway from three legendary investors: when value and international value outperform the S&P by this much over the last 50 years, it's never been a one-year event — it's always been the beginning of a 6-7 year trend. Look at the EWU portfolio — global value UK equities. Underperformed the S&P every single year from 2010 to 2020 in that disinflation regime. Now we've gone into this fiscal overdose — 16, almost 17 trillion of fiscal and monetary response since COVID, versus only 4 trillion for Lehman. This forces a massive migration into global value.
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