Enterprising Investor Podcast Summary Episode: Dan Boston: Volatility, Valuation, and the International Opportunity Set
Release Date: April 15, 2025
Host: Mike Wahlberg
Guest: Dan Boston, Head of Global Small Company Team at Polar Capital

1. Introduction

In this episode of Enterprising Investor, host Mike Wahlberg engages in an in-depth conversation with Dan Boston, the head of Polar Capital's Global Small Company team and lead manager of their International Small Company Fund. With a background that includes tenures at Brown Capital Management, Baird, and Ensign Peak Advisors, and an MBA from the Yale School of Management where he assisted Nobel Laureate Robert Shiller, Dan brings a wealth of expertise to the discussion.

2. Recent Market Overview

Mike begins by setting the stage with a snapshot of recent market turbulence following President Trump's announcement of sweeping tariffs on April 2nd. As of recording on April 9th, global markets experienced a significant downturn, with declines ranging between 9% to 11%. U.S. treasuries saw an uptick of approximately 40 basis points, and major currencies were adversely affected. Notably, oil prices plummeted to their lowest levels in four years, and even Bitcoin faced declines. However, this period also saw a 90-day tariff reprieve announced later in the week, adding further volatility.

Dan Boston [02:42]: "We've certainly spent a lot of time at night reviewing the day, going over the next day, maybe taking a step back from the headlines. So we're at the heart of what we do—looking for wealth, creating alpha-generating compounders."

3. US-China Trade Relations and the Global Reset

The conversation delves into the implications of the U.S.-China trade tensions, emphasizing the broader phenomenon Dan terms the "great global reset." He outlines three pivotal factors shaping this reset: changes in the terms of trade, shifts in defense policies, and the national and global allocation of stimulus spending.

Dan Boston [06:41]: "We feel like we are truly at the cusp of what we would call a great global reset at the moment for those three items. And they'll have significant repercussions for all markets—U.S., global, emerging markets, everyone."

Dan discusses the precarious situation in China, highlighting issues like capital misallocation and the real estate crisis, which pose risks to both the Chinese and global economies. The interplay between the U.S. and China in setting new trade rules is seen as a critical determinant of future economic momentum.

4. Demographics and the Shift in Global Production

Addressing demographic challenges, Dan compares China's aging population to similar trends in Korea, Japan, and various European nations. He underscores how a higher median age affects consumption patterns, leading to a "consumption hole" that necessitates new market strategies.

Dan Boston [10:32]: "China has around half the people being 53 or older. That's a fairly high age to essentially have it as a median, which puts you in a tough place."

Dan contrasts this with the U.S., which boasts a more favorable demographic profile and a vast consumer base. This dynamic makes the U.S. an attractive market for global trade, as other nations seek to absorb excess production that cannot be sold domestically due to aging populations.

5. Currency Strength and Its Impact on Markets

The strength of the U.S. dollar emerges as a significant theme, with Dan explaining its historical correlation with U.S. market performance. He notes that a strong dollar has often coincided with periods where U.S. equities outperformed international counterparts.

Dan Boston [20:03]: "We've had about a 13-year run in U.S. equities outperforming international equities. When you stack up the data, the currency as well as the outcome of the markets are intertwined."

However, with the dollar losing steam in the current year, Dan anticipates a potential reversal of this trend, suggesting that international stocks might offer more competitive returns moving forward.

6. Real Estate in China: Evergrande and Financial Stability

A significant portion of the discussion focuses on the real estate sector in China, particularly the challenges faced by Evergrande. Dan draws parallels between the 2007-2009 U.S. subprime crisis and the current situation in China, highlighting the risks of over-leverage and speculative investments in real estate.

Dan Boston [25:54]: "There is a demographic cliff that can be described as China having around half the people being 53 or older... But what we're seeing is something like 70% of financial wealth is tied up in real estate."

He explains how misallocated capital, driven by government incentives and consumer behavior, has led to an unsustainable housing market, with "ghost cities" emerging as a testament to overbuilding. The unwinding of this bubble is expected to have prolonged and far-reaching economic implications, both domestically within China and globally.

Mike interjects with a personal anecdote about witnessing the early signs of this overbuilding firsthand during a reporting assignment, underscoring the tangible nature of these economic indicators.

7. Advice for New Analysts

As the conversation wraps up, Dan shares invaluable advice for aspiring analysts entering the investment industry. Reflecting on his own journey, he emphasizes the importance of mentorship and continuous learning.

Dan Boston [30:26]: "Find a mentor quickly, whether this is your boss or not. Find the best person in your industry and make them your mentor and pay."

He recounts his experience with Robert Shiller, praising his ability to focus on practical and widely applicable economic concepts, which not only elevated Shiller's prominence but also provided Dan with profound insights that extended beyond traditional academic learning.

8. Conclusion

Mike wraps up the episode by expressing gratitude to Dan for his insightful contributions. Dan reciprocates the sentiment, hoping that listeners found valuable takeaways from their discussion.

Mike Wahlberg [32:44]: "I've been speaking today with Dan Boston, head of Polar Capital's global small company team and lead manager of their international small company fund. Thanks so much for coming on the show today, Dan."

Dan Boston [32:55]: "Thanks very much for having me. And hopefully your listeners were able to glean some sort of insight useful to their life."

Key Takeaways:

• Global Market Volatility: Tariff announcements have led to significant market downturns, but reprieves can quickly reverse trends.

• Great Global Reset: Shifts in trade policies, defense terms, and stimulus allocation are redefining global economic landscapes.

• Demographic Challenges: Aging populations in key regions like China pose risks to consumption and global production dynamics.

• Currency Impact: The strength of the U.S. dollar has historically buoyed U.S. markets, but its decline may favor international equities.

• Real Estate Risks in China: Over-leveraged real estate markets, exemplified by Evergrande, threaten financial stability and global economic growth.

• Mentorship Importance: Building relationships with industry leaders is crucial for professional growth and gaining deep market insights.

This episode offers a comprehensive analysis of current global economic challenges and opportunities, blending market insights with personal experiences and strategic advice. Listeners gain a nuanced understanding of how geopolitical tensions, demographic shifts, currency fluctuations, and real estate dynamics interplay to shape investment landscapes.