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00:00We are going to get to your book in just a moment but I did want to touch on what Scarlett was talking about. You've been doing the value investing for decades and how do you look at sort of where we are in the precipice and value versus growth . Well that's a very interesting question. It really depends how you define value. We define it and figure out what something's worth. Business and pay a lot less. So under that definition of value of course you know it will never go out of fashion. That's what stocks are. There are no ship shares of businesses that you value try to buy at a discount. Traditional value. The way you're describing it is low price book low price sales investing so beaten down stocks based on certain metrics. And while that has worked over decades. Just doing something simple like that it hasn't worked in the last dozen years or so. It's gone on steroids to the point where the last five years for that definition of value have been very close to before the internet bubble. Although I don't think we're where we are at the Internet bubble I think a lot of the big tech companies are some of the best businesses that have ever existed in the history and they deserve their valuations. And so the question is one of the beaten up stocks that are defined as value that way are going to come back. And I think you know until we get a resolution to what's going to happen in the pandemic when it's going to happen it seems like a certainty as horrible as it is right now that it will get resolved at some point. And then I think that visibility will come back to some of these businesses that do to have good balance sheets . Joel central banks have put equity markets on steroids. Central banks have created huge momentum trades. What do we need to look to central banks to figure out the catalyst for the value trade as well. Or do you think the valley trade will struggle while central banks are doing what they're doing right now . Yeah well that's a good question. I mean we need the central banks to do what they're doing now. I mean there's a big hole in the economy. And you know this this will end the pandemic . And so it's not like this is a permanent add to budgets. In other words it's a one time filling of the hole that we need to happen. And central banks are for the most part are doing what they have to do. And luckily this will end and they'll stop doing it. Hopefully won't be the repercussions. I don't know. But they they have to do it. But to tell you how speculative things have become if you looked at every stock that has over a billion dollar market cap lost money in 2019 those companies the money losers have just bought all of them. What you would've been up 47 percent for six months of this year. So there is a lot of speculation going on. It's not the largest tech stocks. I think those are justified. But there are hundreds of stocks that people think rhyme with those big names. And and that's just not the case . OK. In terms of what you think is the most overvalued and the most undervalued right now what are we looking at . Well I think a lot of the money losing stocks I want to name names but a lot of the money losing stocks that I just mentioned you know the billion and over the Russell 2000 has plenty of them is trading at 70 times earnings with more than half the stocks losing money . You know there's a lot of speculation. They're hoping they'll be the next Amazon of Google or Microsoft but obviously those are rare. So I think that's where you're seeing a lot of speculation. It's not really into Google Microsoft and Amazon sort of. Those are great businesses that for the most part to service their lofty valuations. So Joe let's focus your lens and your expertise as being an investor to how to fix all the problems of the world. And I say that glibly. But you have this a book called Common Sense and you have been in the education system for quite some time. You've also been helping us to start some charter schools. I want to pull a quote from the book. You say Over the last 20 years the forces of globalization and technology and wreaked havoc on the value and pay a retail factory and most semi and low skilled workers across the country. Change is arguably coming faster than ever and there's plenty we can do about it to help the economy's transition. It just may take a little different mindset thinking like a long term investor. So you are a long term value investor. So how do you how do you use that to say fix things like education which we're all in the thick of right now . Sure. You know. Well you know if whether you believe there's a big problem in inequality most people do. There's certainly a problem in equality of opportunity. And that starts with schooling and everyone knows it. Yet the poor the poor and low income kids are systematically assigned to the worst schools. If you live in one of our large urban centers your chance and your poor or low income your chance of graduating college is one out of eleven 11. Yet college degree people with college degrees are 70 percent more than high school graduates . And what you can find in the best charter schools in the best district schools almost everyone can achieve at high levels . And this includes students with disabilities and English language learners. They all can do well. Even children who are currently homeless outperform the wealthiest districts in a state. So with the right supports every child can perform well . And so what can we do with this information. Obviously they're not it's not happening through our current system. But what can we do with this information. With the right supports almost everyone can perform at a high level. And I suggest something called alternative alternative certification. And this is something we can do right now. Leading companies like Google Microsoft J.P. Morgan Facebook should set standards for high paying jobs. These are not college degrees but tests and courses that if passed will these kids will be considered for high paying jobs. And once there's a buyer a whole ecosystem will develop to help students see you know pass these tests or these courses. And and these eco system can be judged like Uber and Airbnb and B being BNP rooms. Basically they'll be crowdsourced and they'll be online resources and local resources and tutors and classes to help these kids meet the standards that are set by these companies . Jill we are going through a huge experiment right now in education not only in the United States but globally. The pandemic has forced many kids to learn from home. But the big kind of division that we are witnessing is do you have access to broadband. Do you have access to some sort of device which is going to allow you to access virtual learning. What can we learn from what we're going through right now that will make education more inclusive. We have a fighting sector that is worth over four trillion dollars. Yet there are kids in America . There are kids around the world who do not have access to the Internet and do not have access to simple devices that will allow them to learn on the Internet. How do we fix that problem and what can we take away from the current crisis . Well I think that's a real issue and I'm really talking about you know just in this country K through college is a 1 trillion dollar a year industry. It's ready for disruption but probably not from within. It's very hard to disrupt the one trillion dollar a year spending that we do on K through college education . So I'm really suggesting an end around where you've gone through the system 10 out of 11 poor and low income from urban centers won't get a college degree. That will be unsuccessful at having access to those high paying jobs. And so this is once you're out of the system what can we do outside of the system. And so you know I can't solve the issues of poverty that way. But you know I make a few suggestions in the book about how to do that. One was to jesting an earned income tax credit that everyone knows about where we supplement people that are low earners. And it's one of our great programs which in 2018 we spend about 68 billion dollars on it. I suggest we take that up to a trillion dollars . And if you think like a long term investor we can actually make money by doing that and solving a lot of childhood poverty that way. And I make the case in the book with lots of good numbers and and support that we should do this right now. And you know you can't you can't solve some of the issues you're bringing about without helping to solve poverty. You know I also talk about what we can do to bring up small businesses and get more jobs and help small banks. And I suggest a banking reform as well .

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Gotham's Greenblatt Says Central Banks Are Filling Holes in Economy

Joel Greenblatt, Gotham Asset Management co-chief investment officer and managing principal, talks about value stocks and central bank monetary policy. He speaks on "Bloomberg Markets." (Source: Bloomberg)

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