

Keeping it Simple | Ep. 52: Passive Aggressive—Another One Cites the Bust
Sep 15, 2025
Campbell Harvey, a finance professor at Duke University and expert on yield curves, joins Mike Green and Harley Bassman for a deep dive into today's economic landscape. They discuss the inverted yield curve as a recession indicator and analyze the effects of different investment strategies in a K-shaped economy. The conversation critiques passive investing and its risks, all while emphasizing the need for adaptable investment frameworks. Harvey sheds light on the shifting value from consumers to corporations, providing actionable insights for navigating the current market.
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Yield Curve Is Useful But Not Definitive
- The yield curve has historically forecasted recessions reliably but relies on few observations.
- Campbell Harvey warns the indicator must be interpreted with other economic fundamentals, not alone.
Cap-Weighting Assumes Perfect Prices
- Sharpe implies holding the market portfolio assuming prices are always correct.
- Harvey highlights that even small mispricings make cap-weighted passive allocations mechanically overweight overvalued stocks.
Strategy Stock Example Of Extreme Mispricing
- Harvey used 'Strategy' (a Bitcoin-holding company) to show extreme mispricing is possible.
- He observed that the stock was roughly 90% overvalued at one point, illustrating cap-weighting risks.