Jaume Puig is the general director of GVC Gaesco Gestión and manages various funds and Sicavs. He always liked mathematics and graduated in Economic Sciences. He started working as an actuary, but changed insurance calculations for financial risk. He will soon have been working at Gaesco for 30 years. One Club Man, as they would say in the world of football. Puig is also a European financial analyst and a member of the board of Inverco Catalunya or of the advisory committee of Esade's Executive Master in Finance. His philosophy is that of Kant and the theory of knowledge. His literature is that of Asimov, Steinbeck, and Pla. And his vision is always long-term.
--- Why did you study Economic Sciences?
--- I was an interdisciplinary student and had doubts. Mathematics and sciences were very good for me, but I also liked philosophy and history. I decided to study economics. I was afraid of focusing only on one thing and forgetting everything else.
--- You also graduated in Actuarial Sciences.
--- I chose actuarial because it was the most mathematical specialty. Finance and risk focused on insurance, but it could also be directed towards finance. I had great professors.
--- You started working as an actuary at Fibanc.
--- I worked as a pure actuary for two and a half years at Banco Vitalicio. Fibanc came looking for me at the university because they wanted to create an insurance company, but they still haven't succeeded.
--- What was the work of an actuary like then?
--- Actuarial practice is quite simpler than what is studied. The same thing happens to architects. I was all day doing insurance calculations that I liked very much, but it was not what I wanted to do my whole life.
--- What is the work of an actuary like now?
--- The work of an actuary is very good for those who always want to have a technical profile. It hasn't changed that much, but there are many actuaries who take advantage of their knowledge in financial risk to develop in other areas. This is what has happened to me with investments. Mathematics is mixed with philosophy or sociology. You have to use everything you know because circumstances are changing.
--- It will soon be 30 years since you started working at GVC Gaesco.
--- A lifetime!
--- Propensity or aversion to risk?
--- Risk is very linked to time. It is very risky if we understand risk as investing all savings in equities or as volatility or evolution of assets in a short period of time. However, there is very little risk if we talk about long periods of time.
--- A matter of time.
--- I will never be risky in the short term, but I can be in the long term. It is evident that there is nothing more profitable in the long term than investing in business wealth and equities. However, it is also true that equities are subject to significant short-term variables. I believe a lot in long-term investments, but you need time and temperance.
"There is nothing more profitable in the long term than investing in business wealth and equities. You need time and temperance"--- Temperance?
--- You have to know how to endure difficult moments. On average, there are three every year. I have time and I endure short-term oscillations very well, but there are people who do not have enough time or who do not endure well what happens. You have to be sure that the financial strategy is appropriate for each person.
--- What is the appropriate financial strategy?
--- There is a very simple rule: people should invest 100 minus their age in equities. If you are 30 years old, invest 70% of your savings in equities, and if you are 70 years old, invest only 30%. Why? Because of the recovery time against oscillations, falls, or a crash. There is another financial law: higher risk, higher return.
--- He who does not risk, does not win, says the popular proverb.
--- First comes equities, then real estate, fixed income, and the money market (treasury bills, bank deposits, etc.). Stock markets have falls and that is why you need enough time to invest in the long term. But the most curious thing is that people invest more in equities as they get older.
--- Why?
--- Because they think this is ending and decide to take on the risk of a lifetime. There is another issue: the volatility of prices and quotes is much greater than the volatility of companies. What you cannot do is change your long-term investment strategy, no matter what happens. Time and temperance to endure oscillations? Guaranteed success.
--- What is guaranteed failure?
--- Investing in the short term. It is not a matter of assets, but of financial optimization.
--- Maximize profit and/or minimize risk?
--- Bad news from Silicon Valley Bank.
--- Imagine you are at home and someone tells you there will be a banking crisis, even though interest rates are rising, commissions are maintained, and banks are healthier and earning more money than ever...
--- I can imagine it.
--- How can news of a banking crisis due to management problems in a couple of companies be massively disseminated if the banking sector as a whole is achieving historical results? News like this impacted the market. What happens to people who don't have all the information? Well, they change their financial planning strategy and sell their equities. This is pernicious. Market fluctuations are natural, and one cannot panic.
--- Alert: panic!
--- Not everyone can be an investor, and our job is to convert savers into investors. However, once a saver becomes an investor, there is no turning back. They will always be an investor by virtue of time and profitability.
--- A matter of mindset.
--- Mindset, advice, and many other things. We live in a country that is very lame in financial education, and I'm not referring to explaining how to get a mortgage ---which also--- in schools, but rather to understanding financial assets. The consequence of all this is that the wealth gap between families is widening because some invest more and better in equities.
--- Investing in equality?
--- The lack of knowledge of the most basic financial rules generates many inequalities and has a great impact on the financial wealth of families. One only needs to look at how some and others reach retirement. It is very culturally complicated because people believe that investing in companies is a game.
"The lack of knowledge of the most basic financial rules generates many inequalities"--- What kind of game?
--- Economic growth reflects the profit of companies and that profit also ends up being reflected in the stock prices. A very important turn must be made and if it is not done, the differences will continue to increase. You can have more or less money, but there are instruments flexible enough to have your financial investment well designed.
--- What does it mean to work in the stock market in the 21st century?
--- Investing in companies and we offer the option of doing so in the money market, fixed income or variable income. This 2023 we have already conducted more than 200 interviews with listed companies from different sectors around the world.
--- What is the art of interviewing in the stock market?
--- It is about verifying if the management team has a long-term vision and therefore, knowing if, when making decisions, they are thinking about their bonus for next year or the future of the company. There are companies that are very good, but have very short-term management and that makes us stop the whole process.
"Keynes went broke many times investing in the stock market"--- Vision and incentives make the difference.
--- We have learned a lot about different companies and sectors thanks to these interviews, which have allowed us to have a clear idea about the aggregated economic situation and which show a series of trends before they are officially reflected by the market.
--- What is your day-to-day like?
--- My day-to-day is talking to many companies. At Gaesco, we are a factory that puts a lot of effort into deciding where to invest. It is a long and agreed-upon process. We also hold many strategy meetings with investors.
--- What do you need to know to invest?
--- The first time an investor comes, they don't need to know about finance, but the idea is that they learn more in each meeting beyond knowing how their finances are specifically doing. The more knowledge they have, the better their investment will perform because they won't undersell and will stay with us longer.
"Stock prices do not always reflect the correct value of companies"--- What are the most important lessons you have learned in the markets?
--- Many! When you are a student, you tend to think some things that experience later makes you doubt, such as, for example, that the management of listed companies around the world is excellent. However, when you conduct interviews with companies, you realize that it is very important to discern what interest drives each executive.
--- Individual vs. Collective.
--- If the interest is collective then it's fantastic, but we have seen many cases where the interest is primarily individual. Episodes of rationality in the markets are impressive. It is also very curious how crisis news spreads.
--- Market (dis)information?
--- Disinformation spreads among clients and time must be dedicated to explaining how things really are. Markets are inefficient by nature and we end up living off the inefficiency of the markets.
--- To quote up or down?
--- Stock prices do not always reflect the correct value of companies and our job is to see when they are trading above or below. In 2013, the Nobel Prize in Economics was awarded to two people who explained precisely the opposite: markets are efficient and prices are correct versus bubbles exist and sometimes the market price is not paid.
--- Both were right.
--- Exactly! It's a matter of time. The first spoke of the long term and the second of the short term. You won't be cheap or expensive your whole life. Our job is to detect the difference between fundamental values and the stock price at any given moment and wait for everything to fall back into place.
--- Putting everything in its place is not easy at all.
--- Convergences take some time. At Gaesco, we have seen many inefficiencies of different natures over the years. However, the causes are often common and lie in investor behavior. We return to mathematics and philosophy.
--- We return to the origin of knowledge.
--- To understand the stock market, one must understand Immanuel Kant and the theory of knowledge. There are decisions we make more based on what we imagine it could be, rather than what it actually is. From this arise certain attitudes that are repeated over time.
"The stock market is a market where companies are bought and sold. Transmitting the basic rules of markets is democratizing financial knowledge"--- Good will and Kantian logic.
--- Kant says that you are a subject and that the market or the company are objects about which you want to decide. When you make a decision as a subject, you do not do it with the information of the object but based on the image that the object transmits.
--- Deciding by image and not by information.
--- Deciding by what you believe is real and not by what really is. One might think there is a banking crisis, but there really isn't. Kant's philosophy is key in all investments. There are many philosophers who have greatly influenced the stock market.
--- "The stock market moves a lot by feelings," assured Joan Hortalà, former president of the Barcelona Stock Exchange.
--- Totally agree.
--- And Keynes's self-fulfilling prophecy and the animal spirits?
--- John Maynard Keynes went bankrupt many times investing in the stock market. There is a very interesting current called behavioural finances that helps you understand irrational behaviors and the complexity of the market.
"To say that one gambles on the stock market is to demonize it"--- Give me an example.
--- They are more collective than individual phenomena. A few years ago, an experiment was conducted in the field of socioeconomics where two groups of people were taken and asked the same question, to which no one knew the answer.
--- What question?
--- They were asked up to five times how many murders there had been in Switzerland during 2006. The difference was that one group was informed of the average of people's answers, and the other was not. The change was brutal because when you communicate the average, there is a conversion towards it.
--- The average as a frame of reference.
--- Despite not knowing the answer, people give more credibility to something that is collective. That is, an average, and that also happens in stock market quotes. However, the collective can also be radically wrong.
--- Why?
--- Due to feelings, ignorance, misinformation... If a person lets themselves be carried away by erroneous decisions, they will make a big hole in their financial assets and will not be able to grow with their planning.
--- All very rational in an emotional world.
--- There are patterns that people repeat over time.
"The stock market can reflect collective fears and introduce an excess of euphoria or depression"--- What does it take to make good decisions?
--- Long-term vision and autonomous thinking. It is better to rely on the information you have than on what is news today but perhaps not tomorrow.
--- Silicon Valley Bank?
--- Who decided that the fall of Silicon Valley Bank was extrapolable to the entire financial system? It had no logic! Finding truthful information is very complicated. The investor at home receives many bombardments and needs verified sources to make good financial planning. The first big mistake of an investor is not knowing enough about finance, and the second mistake is not maintaining their planning.
--- The stock market: oligopoly or democracy?
--- The stock market is a market where companies are bought and sold. As a shareholder, you can benefit from the economic wealth that companies generate. Transmitting the basic rules of the markets is democratizing financial knowledge. Saying that one "plays" the stock market is demonizing it.
--- With people's money, it's better not to gamble.
--- People can invest with total independence of their assets and thus benefit from economic growth. Democratization of the stock market, without a doubt, but this has a dark side.
--- The dark side of the force (and the stock market).
--- [Laughs]. Whoever interprets the stock market as a form of trading and quick money does not have much of a future. The future is identifying good companies, as well as good moments. Investment must be long-term because many mistakes are made in the short term.
--- So, what is the good side like?
--- The good thing is to buy on the stock market, own it, hold it, and benefit from economic growth. I have never been attracted to the dark side and the short term.
--- Is the stock market also a good reflection of the progress and risk of the business world?
--- The stock market can reflect collective fears, and one must see how they are generated and how they are transmitted. Many fears have a very small underlying content, but if it spreads collectively, it is very likely to be reflected in the stock market. Generally, it is a good estimator of the economic situation but can introduce an excess of euphoria or depression.
--- Euphoria and/or depression?
--- Millions of people buying do not necessarily make the price correct. Everyone can be wrong at a specific moment due to individual or collective fears.
--- The law of large numbers vs. the contagion effect.
--- Contagion doesn't last forever because in the end, it gets a bit out of hand.
--- How do you assess the interest rate momentum?
--- According to experts, we have a context of rising interest rates. If you take a historical perspective, it's a pure normalization of interest rates. It's good to invest in short-term fixed income but not for 10 years. You have to understand that the entire yield curve doesn't normalize suddenly; first come the short-term rates, and then the long-term ones. It's very important to see what the common factors are.
--- For example?
--- Being a small or large listed company (less or more than 2,000 million euros) is a common factor. There are also factors like value/growth, the book value that explains the past, and the market value that anticipates the future. Netflix is a growth company because it has a book value, but its market value is twenty times greater. However, a value company has similar book and market values. When rates rise, value companies perform better than growth companies.
--- In which sectors is it worth investing now?
--- Banks, insurers, industries, or tourism benefit from this environment of inflation and rising rates because they can counteract it with more volume and not just by increasing their price. Japan has been waiting for inflation for a long time, and it's a great blessing for them. It depends on the factors, sectors, and geography.
"I am concerned that Barcelona does not have more real decision-making centers"--- How do you see the city of Barcelona?
--- It is a well-regarded and privileged city. When you travel, you realize everything Barcelona means worldwide.
--- "Barcelona's handicap is its low self-esteem," warned Pau Relat, CEO of MAT Holding and president of Fira de Barcelona, in a recent interview in The New Barcelona Post.
--- International investment is very clear. Barcelona has advantages, it has a name, and things need to be done well.
--- Things done well?
--- It worries me that Barcelona does not have more real decision-making centers, and I am not referring to call centers or registered offices. In the financial world, there has been a setback compared to 25 years ago. However, Barcelona is very strong in startups and business initiatives and has a great future beyond its tourism valuation. The city must also consider that the global trend at the highest level is concentration.
--- Do we lack more and better public-private collaboration?
--- Surely. More public-private collaboration must be done. When I talk to German companies that set up in China, they tell me they received great governmental support. I also like to give the example of Amorebieta-Etxano and its automotive industry with small and large companies together. Here, there is above all an individual effort.
--- The previous interviewee of Persona a Persona, Laura Urquizu, asks you the following questions:
--- How do you see the scenario for private companies going public in 2024?
--- The decision to go public also depends on the company's willingness to do so. Many companies never want to go public, and many do. When going public, it is also assessed whether the price is below or above the company's value. This depends a lot on the evolution of the stock markets, if they continue to rise and prices normalize... Stock markets today are well below their correct fundamental value.
--- Will we see a recovery, or should we wait until 2025?
--- Companies go public when they believe they will be paid the share package for the price it is worth. This has been a good stock market year, and next year I hope it will be even better. In 2024, quite a few more companies will go public than in 2023. Last year there were very few because the stock markets were lower. The number of IPOs increases when markets also rise.
"Investment in cryptocurrencies is the dark side due to its volatility and is one of the great speculative bubbles in the market"--- Do you consider investment in cryptocurrencies attractive? Or has it been left behind as a passing fad?
--- Investment in cryptocurrencies is the dark side because they have a volatility of 60%. To understand each other, fixed income and equities have a volatility of 6% and 20%, respectively, in the long term. The long-term investor seeks balance, but with cryptocurrencies, we are very far from it. Large market rallies coincide with low volatility. Cryptocurrencies are not an investment tool, and that is why families do not invest in them. In Spain, there are only 1.3 million people who invest without knowing what the profitability is. A volatile market attracts the trader who lives precisely from that and from the short term. The supply is very weak, and the miner system is very far from the role of central banks, and there is no one who effectively ensures stability. Volatility must be under control. Thus, cryptocurrencies are one of the great speculative bubbles in the market that are always linked to technological novelties. There is also a lot of misinformation in cryptocurrencies. They are not a viable option, at least as an investment.
LIFE'S SEVEN:
- Referent: The academic Roger Ibbotson and certain professors from all my educational stages
- Book: Foundation, by Isaac Asimov; The Grapes of Wrath, by John Steinbeck and always, always Josep Pla, in his complete works.
- Movie: Epic with a historical basis, from The Guns of Navarone or Saving Private Ryan to Schindler's List, Chariots of Fire or Life is Beautiful.
- Song: El Cant de l'Enyor performed by Lluis Llach, María del Mar Bonet and Marina Rossell, at Camp Nou, in 1985
- Favorite spot: La Segarra (spring), Vall Fosca and Alt Empordà (summer), any wooded place in the central regions and the Ebro lands (autumn) and Ciutat Vella de Barcelona (winter).
- Life motto: I have it on WhatsApp: "Glocal ECE`". Glocal from Global and Local at the same time. ECE from Excellence, commitment and ethics. The + sign means always wanting to be positive.
- Dream: I have many, but I would be content if the following generations live better than ours, that well-being increases with each generation.