Episode summary
Don't overlearn lessons: Staying nimble in turbulent markets
Capital Ideas Podcast
· · 32 min · Hosts: Debbie Leow · Guests: Julian Abdey, Mike Gitlin
Summary
Julian Abdey argues that the key investing discipline is to avoid turning past lessons into rigid rules, because markets change and old heuristics can quickly fail. He describes his edge as being willing to change his mind when facts change, while still doing most of his work as a stock picker who uses analysts, scenario analysis, and attention to tail risks rather than a fixed macro call.
A large part of the discussion revisits the global financial crisis, when Abdey became known as “Dr. Doom” for turning sharply bearish on banks and mortgage companies. He explains that his conviction came from painstaking research, cross-checking with fixed-income colleagues and analysts who had seen prior crises, and asking hard questions about what would happen if house prices fell nationally. That same framework later fed into Night Watch, a discussion forum created at Capital Group to connect dots across industries and asset classes without forcing action.
Abdey is constructive on small caps, Japan, Korea, India, and parts of Europe. He says small caps remain cheap versus large caps, and he sees opportunities in companies that can grow into “oaks,” especially as shareholder-focused reforms and AI adoption broaden beyond the biggest winners.
Key takeaways
- Abdey says his biggest lesson is “not to overlearn lessons,” because market rules of thumb often stop working.
- He believes his investment edge comes from changing his mind quickly when facts change and from using analysts to stress-test tail risks.
- He says the GFC thesis strengthened only after deep scenario analysis, research, and input from colleagues across equity and fixed income.
- Night Watch was created as a forum to discuss cross-asset tail risks and scenarios without forcing decisions.
- He is constructive on small caps, especially in Japan, Korea, India, and Europe, where he sees valuation and governance changes creating opportunity.
Notable quotes
“My biggest lesson is not to overlearn lessons. The market's constantly changing”
“If the facts change, I will just move my portfolios and exit a position”
“we wanted to come up with a way of creating a discussion forum for that that would allow us to talk about tail risks and scenarios without forcing anyone to do anything”
“My biggest lesson is not to overlearn lessons. The market's constantly changing. So any rules of thumb you have often turn out to be wrong”
How the episode opens
- My biggest lesson is not to overlearn lessons. The market's constantly changing. So any rules of thumb you have often turn out to be wrong.
And if you keep using them, you're going to get into trouble. - Talk a little bit about what Night Watch is, why was it created? - It's hard within the Capital System where the analysts and PMs make their own decisions, so we wanted to come up with a way of creating a discussion forum for that that would allow us to talk about tail risks and scenarios without forcing anyone to do anything.
- It's hard to believe that the global financial crisis was 17 years ago now. What did you learn from those experiences that help you today? - Yeah, the first one was- - Today, we have Julian Abdey with us.
Julian has been at Capital Group for 22 years. He's a portfolio manager based in San Francisco. Thanks for being in LA today.
- Pleasure. Thank you so much for having me. - So some people enter college and know exactly what they're going to do in life.
I was not one of those people, by the way. But for you, I think you had your mind set on being an academic and then all of a sudden you're a bank analyst. Those are super, super different, Julian, how did we get from A to Z or zed, dependent on where you are in the world?
- Sure. Well, I mean, I use economics every single day of my life in the job so I keep using it and I still love it. When I was 16, my dad kind of nudged me to try A-level economics, and it was love at first sight.
The first lesson I'm like, this is what I need to do.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- nimble investing
- thesis change
- small-cap vs large-cap valuation gap
- global financial crisis lessons
- risk management
Companies and tickers mentioned
- FNMA
- Fannie Mae
Watch the episode
Watch “Don't overlearn lessons: Staying nimble in turbulent markets” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Capital Ideas Podcast
Capital Ideas Podcast, this episode and its artwork belong to Capital Group. Octagon is not affiliated with the show; this page is an independent summary.
