How Modern Portfolio Theory Is Abused

In this episode, we are joined by Mark Higgins, an award-winning author and institutional investment advisor, to discuss the power and importance of studying US financial history. Mark brings his wealth of knowledge as a financial historian to the show as he shares the value of studying financial history, the role the financial system plays in the overall success of the US, and the impact Alexander Hamilton made on the country. We unpack government debt, the concerning levels of it in America, and the impact of having a central bank before discussing what happens, historically, when a bank is unregulated. Mark describes some early warning signs of a bubble, touches on the historical origins of flawed financial practices, and shares some important lessons we can learn from the history of the US financial system. Hear all about alternative asset classes, evergreen funds, and red flags in the private market. Finally, our guest tells us how he defines his own personal and professional success. This conversation sheds light on the history of finance in the USA and how we can learn from it, so be sure to tune in now!

Key Points From This Episode:

(0:00:00) An introduction to Mark Higgins and an overview of today's topics of discussion. 

(0:04:16) The value of studying financial history and the role the financial system plays in the USA as a whole. 

(0:06:33) Why Alexander Hamilton stands out in US financial history and the importance of government debt. 

(0:09:29) Mark discusses the concerning debt levels in America and the impact of having a central bank.

(0:12:29) What happens when banking is unregulated, and key themes across major US financial depressions.

(0:16:48) Some early warning signs of a bubble and the problematic nature of speculation and comparison. 

(0:19:42) Historical parallels for crypto and meme stocks and the historical origin of flawed practices in the investment industry. 

(0:24:27) Mark shares some of the most important lessons we can learn from US financial history and what we may have to relearn in the future. 

(0:27:41) Alternative asset classes, why so much has been allocated to them in recent history, and how modern portfolio theory is abused in the promotion of alternative investments. 

(0:33:56) Mark shares his thoughts on 'evergreen funds', why they are so flawed, and their effects. 

(0:39:51) The biggest red flags in private markets today and what he thinks will happen if retail starts taking up private assets. 

(0:43:03) How often Mark sees institutions being sold alternatives, and why trustees of these institutions have to be different. 

(0:49:23) Mark tells us how he defines success in his life on a personal and professional level.  

Links From Today's Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemindRational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.caBenjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://pwlcapital.com/our-team/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark Higgins on LinkedIn — https://www.linkedin.com/in/markhiggins/ 

Books From Today's Episode:

Investing in US Financial History: Understanding the Past to Forecast the Future — https://enlightenedinvestor.com/ 

Security Analysis — https://www.amazon.com/Security-Analysis-Principles-Benjamin-Graham/dp/007141228X 

Pioneering Portfolio Management — https://www.amazon.com/Pioneering-Portfolio-Management-Unconventional-Institutional/dp/1416544690 

Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com).