Insight is Capital™ Podcast

Cole Smead, CEO & Portfolio Manager at Smead Capital Management joins us for a fascinating conversation. "Investing is not just about buying stocks and hoping they go up in value. It requires strategic thinking, planning, and a willingness to learn about niche industries," says Smead. In this new podcast episode, Smead discusses the importance of seeking out profitable opportunities by investing in industries (the energy sector is their current focus) that other investors are not playing. He calls this "mafia investing," and believes that this strategy can lead to high returns and the possibility of becoming "insanely wealthy."Smead instead chooses to be one among a choice of ten shrewd investors, rather than one among a million average investors.He cites the example of the oil tanker market, where high steel prices have led to a shortage of supply and higher cash rates for those still in operation. He also notes that there are opportunities to become billionaires in commodity businesses that may not be popular, such as the coal business.Smead emphasizes the need for active investors to earn their profits through the learning process and by studying successful capital allocators and billionaires. He recommends the book "The King of Oil" by Daniel Amman, to listeners, which, among others, intensified his interest in commodities.To clarify, Smead Capital Management are 'go anywhere' investors, but one of areas that has become the current focus of their long term strategy is the energy sector.Overall, Smead's investment philosophy emphasizes the importance of strategic thinking, planning, and a willingness to learn about niche industries. By seeking out profitable opportunities in these industries, investors can potentially achieve high returns and become "insanely wealthy."This was a fascinating conversation. Buckle up and thank you for listening.Timestamped Highlights:BackgroundBackground and Investment Philosophy [00:01:54] Cole Smead discusses the genesis of Smead Capital Management and his investment philosophy, including the eight criteria used to find investment opportunities.Starting in the Investment Business [00:02:30] Cole Smead talks about how his father's legacy and teachings inspired him to get into the investment business.Investing in stocks [00:05:16] Cole Smead talks about his early interest in investing in stocks and how it drove him to pursue a career in the investment business.Experience and learningsPsychology of markets [00:06:40] Smead shares his experience of the late 1990s and how it left a huge impression of the psychology of markets and how damaging they can be.Disagreement with markets [00:08:05] Smead discusses the huge rewards of being in disagreement with markets at times with businesses that produce good economics and how people forget about those ideals.Bear Market Rallies [00:10:21] Speaker 1 discusses the nature of bear market rallies and how they can frustrate investors.Top 10 Market Caps by Decade [00:11:49] Speaker 1 talks about how the top 10 market caps by decade have historically underperformed the S&P 500, and how this affects investment probabilities.Active Investing [00:14:28] Pierre and Cole discuss the negative sentiment towards active investing in recent years and how macro and fundamental factors have been overlooked.Active Investing is Dead? [00:15:29] Discussion on the dispersion of returns within the index and the belief that active investing is dead.Flexibility of Investing [00:17:03] Importance of being flexible in investing and not limiting oneself to certain industries or sectors.Sticking to Investment Philosophy [00:20:18] The history of Smead Capital Management and their investment philosophy of active management and concentration.Importance of Reading [00:22:52] Cole Smead and Pierre Daillie discuss the importance of reading and how it inspires their work.Technology is Bullish on OilThe Jevons Paradox [00:24:08] Cole Smead explains the Jevons Paradox and how it relates to energy efficiency and consumption.Efficiency and Energy Usage [00:25:42] Cole Smead discusses how technological efficiency does not necessarily lead to a decrease in energy usage, using the example of LED light bulbs and the laser. In fact, it has tended to lead to maximum use of efficiency - i.e. energy enables more technology and more technology unlocks demand for more energy, and so on.Energy usage and economic growth [00:26:36] Discussion on the relationship between energy usage and economic growth, and the potential consequences of going back to lower levels of economic growth.Electricity usage and technology infrastructure [00:28:58] The potential shortfall in electricity usage versus growth of technology infrastructure, and the risks of having too little energy.Germany's last nuclear reactor [00:32:29] Germany's closure of its last nuclear reactor and the implications of relying on different sources of electricity.Nuclear vs Oil and Gas [00:34:19] Comparison between nuclear and oil and gas as the most economic forms of energy, and the geopolitical risks of nuclear energy.Renewable Energy [00:37:15] Discussion about the economic return of $3 trillion spent globally on renewables, the least concentrated form of energy being solar, and the concentrated form of energy being gasoline.Electric vs Combustion Engines [00:38:54] Cole Smead discusses the benefits and risks of electric and combustion engines, and predicts a hybrid world for cars.Continued Energy Shortages [00:40:20] Cole Smead and Eric Al discuss the inventory shortfalls and the need for more energy, warning against governments' calls for less investment.Long-Term Holdings [00:40:57] Cole Smead shares the story behind his key long-term holdings, including the importance of paying attention to great capital allocators and the value of longer duration assets in the oil and gas industry.Long-dated asset production [00:44:12] Cole Smead discusses the importance of long-dated asset production and the potential for consolidation in the oil and gas industry.Capital allocation [00:44:54] Smead explains the importance of capital allocation in the oil and gas industry and the benefits of buying back stocks.Borrowing KnowledgeInvesting as a liberal art [00:47:29] Smead and Daillie discuss the importance of learning and education in investing, and how it is the last liberal art.Interest and Passion in Investing [00:49:21] Cole and Pierre discuss the importance of being interested and passionate about investing, as it requires a significant investment of time.Underinvestment in Energy [00:50:35] Cole and Pierre talk about the underinvestment in energy over the past 10 years, leading to shortages in new production and the need for significant catch-up investment.The Coming Consolidation in the Energy IndustryConsolidation in the Energy Industry [00:54:08] The speakers discuss the potential for consolidation in the energy industry, with many small Canadian companies having less than $3 billion in market cap, and the benefits of acquiring existing assets versus developing new ones.Fractured dollar system [00:55:39] Cole discusses how the post-pandemic and post-Ukraine world has created niche opportunities to make money in the oil and gas business, such as the oil tanker market.Studying successful investors [00:56:21] Cole emphasizes the importance of studying successful investors and capital caterers, such as John Fredericks and Harold Ham in the oil and gas business, and Jay Gould, the railroad baron.Investing in coal [00:57:40] Cole talks about how he learned about the coal business and how there are good economics in the coal business, which has created billionaires in the last 10 years.Consolidation and Active Investing [00:59:37] Cole Smead discusses how consolidation feeds into the moat idea and how active investors should seek to earn profits.Investment Philosophy: Commodity Businesses [01:00:17] Smead explains how he uses a negative art approach to investing in commodity businesses, particularly in the coal industry.The Glencore / Teck TakeoverTech and Glencore's Bid for Teck [01:04:28] Pierre Daillie asks for Cole Smead's thoughts on Glencore's bid for Tech and how it seeks to take advantage of ESG.The Genesis of Interest in Commodities [01:04:54] Cole Smead discusses his interest in commodities and how reading the book "The King of Oil" intensified his interest.The Dual Commodity World [01:05:44] Smead explains the dual commodity world and how companies like Tech Resources are trying to detach themselves from coal to focus on copper.Glencore's Coal Business [01:08:38] Smead discusses Glencore's coal business and how they plan to spin it off, while still owning it and paying out 100% of the income or free cash flow of the business.ConclusionExtracting High Returns [01:10:15] Cole Smead talks about his investment philosophy of extracting high returns in places where other people don't want to invest.============================================Where to find Cole Smead and Smead Capital Management============================================Cole Smead on LinkedinSmead Capital Management BlogSmead Capital A Book With Legs PodcastCopyright © AdvisorAnalyst.com

In this episode, Mark Noble, Executive Vice President and Head of ETF Strategy at Horizons ETFs, joins us. We dive deep into the benefits of yield producing strategies, fixed income strategies, and the focus of our conversation – covered call ETFs. We dive into the current market volatility and how rising interest rates and inflation are impacting market dynamics, and explore how investors can shift some of their matched equity exposures in this period of economic and market uncertainty to enhance portfolio yield, mitigate risk, discuss their tax advantages, and the idea that these strategies enable you to do all of the above without having to alter core fixed income allocations, or investment policy.Mark discusses the launch of Canada's first ultra-short-term Canadian and US T-bill ETFs, discussing why these weren't previously available. Mark also offers his insights on alternative assets, diversifying strategies, and the role of covered calls as a timely and productive equity alternative strategy.Our conversations turns to Noble's take on the interesting macroeconomic shifts in the gold market and the impact of the financial crisis and Fed's balance sheet expansion.Finally, we wrap up with a discussion on the optimal conditions for implementing covered call strategies, especially in our current uncertain market environment. Tune in for a deep dive into ETFs, market volatility, and timely strategic investment tactics.Timestamped Highlights:Yield Producing Asset Strategies - Why Now? [00:00:00] IntroductionLaunch of Canada's First Ultra-Short-Term Canadian and US T-Bill ETFs [00:02:13] Mark Noble talks about the launch of Canada's first ultra-short-term Canadian and US T-bill ETFs by Horizons ETFs, and why there were no T-bill ETFs on the market before.Current Market Conditions and Volatility [00:03:11] Mark Noble and the host discuss the current market conditions, volatility, and the shift in market dynamics due to rising interest rates, inflation, and investors seeking strategies to outpace inflation and traditional GICs.Short-term T-bills as a cash alternative [00:08:33] Discussion on the attractiveness of short-term T-bills as a cash alternative and a low-risk way to generate income on the bond portfolio.Market conditions and volatility [00:10:09] Talk about the current market conditions, volatility, and the shift in market dynamics.Covered call ETFs [00:14:25] The rise of covered call ETFs as a mainstream investment strategy, their risk-return perspective, and how they can enhance the yield of an overall portfolio.Covered Call Strategy and Premiums [00:17:29] Mark Noble explains how demographic shifts and rising interest rates have increased premiums for covered call strategies, which aim to generate monthly income while maintaining capital appreciation.Tax Treatment of Covered Call Income [00:22:17] Mark Noble discusses the tax treatment of covered call income in Canada, which is viewed as hedging and generally taxed as capital gain. However, there are nuances to this treatment, and in some scenarios, the income may be taxed as return of capital.Alternative Assets and Diversifying Strategies [00:25:22] Pierre and Mark Noble discuss covered call strategies as alternative assets and diversifying strategies, particularly when writing calls at or near the money. They also touch on the importance of considering the total return and the potential impact on the underlying securities.Covered Call ETFs and Equity Alternative [00:25:50] Mark Noble explains the risk-return profile of covered call ETFs and how they can be an equity alternative.Gold Market and Macro Shifts [00:27:27] Mark Noble discusses the macroeconomic shift in the gold market and the central bank gold buying trend.Financial Crisis Contagion and Fed's Balance Sheet [00:33:22] Mark Noble talks about the similarities between the current situation and the financial crisis, and the Fed's balance sheet expansion due to the bailout.Covered Call Strategies Case Wrap-up [00:38:11] Mark Noble and the host discuss the benefits of covered call strategies in the current market conditions, with interest rate volatility and uncertainty around inflation creating an advantage for call writers.Optimal Conditions for Covered Calls [00:39:32] The host and Mark Noble talk about how covered call strategies have always been available, but the current market conditions make them more optimal than ever before.=============Where to find Mark Noble:=============Mark Noble on Linkedin

In this episode, we explore the concept of diversification by way of capital-efficient investing, through a strategy coined 'Return Stacking' and how historically, institutions have traditionally had more access to sophisticated strategies than retail investors and financial advisors. That has changed in the last 2-3 years with the advent of the introduction of ETF wrapped strategies now available to retail investors.We discuss why diversity and prudent use of implicit leverage are important factors in investing, and how adding leverage to an asset that is already expected to outperform cash can increase excess expected returns. We touched on the performance of a 60/40 portfolio and why adding something to the portfolio that will diversify and have positive expected returns may be beneficial, particularly if you don't have to trade down or out of core model portfolio allocations. We also discuss the 2022 market environment as an example of a growth down/inflation up environment and how using capital efficient ETFs can allow investors to introduce a diversifying secondary return stream and enhance returns, without introducing tracking error risks. The episode also covered the lack of building block solutions in the ETF space, led Newfound Research to partner with Resolve to bring several ETFs to market. The ETFs, called "Return Stacked," were launched in February 2022, offering diverse combinations of stocks, bonds, and alternative trading strategies as building blocks for diversified portfolios. Both Newfound Research and ReSolve Asset Management understand deeply the importance of education, which is why we prioritize engaging with the advisor community and providing accessible content. We encourage you to reach out to us via LinkedIn, Twitter, or our websites (Newfound.com, InvestReSolve.com and Returnstacked.com) with any questions or comments. We hope this episode provided valuable insights and tools to help you make informed investment decisions. Thank you for tuning in, and we look forward to bringing you more unique perspectives in future episodes.[00:07:24] "ETFs: Key Driver in Evolution of Investment Strategies"[00:14:10] The Capital Efficiency Strategies of Institutions Explained[00:24:15] "Unlocking Capital Efficiency through Alternative Investments"[00:35:39] "Exploring how investments respond to economic environments"[00:38:34] "Managed Futures and Systematic Macro: Diversification Done Right"[00:43:47] Newfound and ReSolve Launches ETF Building Blocks for Advisors.[00:48:37] The Pros and Cons of Leverage in Investing[00:59:51] "Understanding Hurdle Rates and Leveraging Investments"[01:04:05] "Efficient markets drive fair compensation for risk"[01:16:37] "Maximizing Advisor Allocation with Passive Investments"=======================Where to find Corey Hoffstein, Rodrigo Gordillo, ReturnStackedETFs.com=======================Return Stacked ETFsNewfound ResearchReSolve Asset ManagementCorey Hoffstein on LinkedinCorey Hoffstein on Twitter (@choffstein)Rodrigo Gordillo on Twitter (@rodgordillop)=======================Where to find the Raise Your Average crew:=======================ReSolve Asset ManagementReSolve Asset Management BlogMike Philbrick on LinkedinRodrigo Gordillo on LinkedinAdam Butler on LinkedinPierre Daillie on LinkedinJoseph Lamanna on LinkedinAdvisorAnalyst.com

In this episode we get into an insight-filled conversation about the current state of the markets and economy and analyze the potential risks and opportunities on the horizon with Jeffrey Sherman, Deputy CIO, DoubleLine Capital. Timestamped Highlights[00:07:52] Bond Market Reacts to Economic Slowdown and Banking Crisis[00:14:32] "Regional banks face loan cost hikes and credit contraction"[00:21:06] Banking Crisis Causing Recession Watch to Rise[00:28:16] "Commodities may be key to combating inflation"[00:32:49] "Banks brace for coming regulations amid pandemic"[00:42:21] "Bank Liquidity and Outflows: Understanding the System"[00:49:39] "The Crisis of Confidence: Crypto and Tech Markets"[00:58:19] "Credit Suisse's Risky Business: Warnings Ignored"[01:00:48] The downfall of Credit Suisse: Privacy and Market Punishment.[01:03:42] "Managing Risk and the Fragile Economy: Insights"=======================Where to find Jeffrey Sherman=======================Jeffrey Sherman on Twitter - @ShermanShowPodJeffrey Sherman on The Sherman ShowDoubleLine Capital=======================Where to find the Raise Your Average crew:=======================ReSolve Asset ManagementReSolve Asset Management BlogMike Philbrick on LinkedinRodrigo Gordillo on LinkedinAdam Butler on LinkedinPierre Daillie on LinkedinJoseph Lamanna on LinkedinAdvisorAnalyst.com

On this episode of Raise Your Average™, Dave Nadig - Financial Futurist at VettaFi's ETFTrends and ETFdb.com, joins us to discuss the interconnectedness of the banking system, the increasingly hyper-compliance culture in investment management, and the impact of emerging technologies like Chat GPT and AI. We dive into the recent banking crisis at SVB and how it highlights, for example, the need for better communication between advisors and clients during uncertain times. We also explore the potential of AI tools like Chat GPT to improve advisor services and the long term impacts of AI on the financial industry. Thank you for joining us for this thought-provoking conversation on the future of finance.Highlights[00:04:19] "Polycrisis: Understanding the Interconnectedness of Economic and Market Problems"[00:07:44] "Financial Advisors React to SVB's Collapse – how and when matters!"[00:09:41] Navigating Compliance Culture in Investment Markets.[00:13:08] Navigating Compliance: Finding Middle Ground for Communication.[00:21:02] "The Banking Crisis: A Simple Systemic Issue?"[00:28:36] "Overestimating and Underestimating AI: Mythbusting Explained"[00:37:07] "e.g. Maximizing Chat GPT's Editing Potential"[00:42:03] "Trust and Providence: The Future of Reviews"[00:46:08] "Improv and Humor: Keys to Achieving Sentience? AI is not capable of either, but it is highly capable and extremely useful."[00:47:59] "e.g. Chat GPT and Wolfram Alpha: Creating Connections"Episode Summary- The issue in the banking industry is systemic- Fractional reserve banking allows for asset and liability mismatching, causing systemic risk- Tightening the system is the solution to prevent people asking for their money back- Financial advisors with wealthy clients had a different weekend due to SVB banking crisis- Advisors reassure clients by showing portfolio's exposure- Rules in the investment market create a hyper-compliance culture- Advisors need to find ways to communicate with clients that firms are comfortable with- Multiple factors contribute to the SVB crisis- Investing in high volatility opportunities has risks and rewards- Design collaboration is essential for successful projects- Advisors should stay informed and learn to effectively use AI tools like Chat GPT- AI tools are developing quickly and will disintermediate big chunks of financial services workflows.Where to find Dave Nadig, VettaFiDave Nadig on LinkedinDave Nadig on TwitterETFTrends.comETFdb.comWhere to find the Raise Your Average crewMike Philbrick on LinkedinAdam Butler on LinkedinRodrigo Gordillo on LinkedinReSolve Asset ManagementPierre Daillie on LinkedinJoseph Lamanna on Linkedin

In this episode, Sri Iyer, Head of i3 (i-cubed) Investments™, and Portfolio Manager at Guardian Capital LP, joined us for a provocative conversation about the banking crisis, the Fed, monetary policy, ChatGPT and AI, and the case for dividends as a core and resilient equity allocation for all portfolios. We discussed the current state of regional bank stocks in the US, which took a hit due to the uncertainty surrounding the Silicon Valley Bank meltdown/collapse. However, Federal Reserve Chair Janet Yellen's statement guaranteed all deposits, implying that the US government will guarantee 100% of deposits, providing some relief.Turbulent TimesIn a turbulent period, investors are seeking companies with wider moats and stable or growing dividends, as well as companies whose moats have shrunk. Depositors may pull their money out of lower-tier banks and shift them into tier one banks, while investors default back to high-quality, dividend-paying stocks. So, it's essential to focus on consistent companies with a proven track record of growing dividends during uncertain times.Stagflation?We also discussed the concept of 'stagflation', which is a recession amid high inflation. The market believes that the Fed can engineer a soft landing, but this is a mistake. The main components of inflation are supply chain problems and persistent high labor costs due to labor force participation issues.More Market Volatility AheadGeopolitical issues, such as the Ukrainian war and China's impact on supply chains, are structural issues that cannot be solved by mere rate increases. These structural issues will lead to market volatility and turbulence, making it essential to separate beta and alpha. As a result, many experts believe that active management may be better than passive management right now.Democratization of AIWe discussed the democratization of AI through open source tools such as Pytorch, which is making AI accessible to a wider audience. Chat GPT is one such AI tool that can be used for making decisions. It has the potential to revolutionize several industries such as software development, big data storage, cybersecurity, search engines, media content generation, music, legal sector, healthcare, pharmaceuticals, predictive analysis, and aerospace engineering.Dividend InvestingLastly, we talked about how dividends can provide a good conduit to capture duration visibility and have a mid space between safe deposits and risky duration, playing a vital role in this market. Also, we discussed how the Fed's response to the market cycle is measured, and it's more concerned about protecting the average investor than bailing out failing institutions.Thank you for listening to our podcast. Stay tuned for more exciting episodes!Timestamped Highlights:[00:01:46] The Fed is responding to the market in a measured way, balancing inflation and protecting the average investor; not bailing out failing institutions.[00:06:06] ChatGPT revolutionized the average person's interaction with AI, leading to new levels of "humans and bots merging" and the emergence of new forms of AI like regenerative AI.[00:09:00] AI processing data and training has been drastically changed with the introduction of ChatGPT, leading to democratization of AI.[00:15:30] ChatGPT is a revolutionary AI that can change software development, data centers, cybersecurity, search engines, communication, media content, healthcare, pharmaceuticals, banks, and aerospace engineering.[00:26:32] Dividend paying stocks help investors in turbulent markets with low volatility, downside capture, cash flow visibility and increased yield at cost.[00:31:35] Secular cash flow/dividend growth gives consistency to company/cash flow, allowing for cleaner valuation and better market mismatch detection.[00:39:51] Fed guarantees bank deposits to protect against cascading credit risk and inflation. Dividends provide mid-space between deposits and risky duration.[00:51:59] Recession and high inflation due to labor costs and geopolitical issues, leading to market volatility and the need for active management.[00:55:35] Dividend strategy has no cuts since inception; trained model on COVID data to recognize behavior and infer future trends.[00:59:24] AI using transformers to create abstract data and learn from predictions of other models.Guardian Capital LP is a sub-advisor on numerous funds for BMO Global Asset Management, BMO Exchange Traded Funds, and Horizons Exchange Traded Funds, in addition to managing its own suite of investment funds, and assets for large institutional clients.Copyright © AdvisorAnalyst.com

In this episode of Insight is Capital™, we explore the current state of the market and its reaction to both weak and strong data.Aubrey Basdeo, Head of Canadian Fixed Income at Guardian Capital LP, shares insights on external risks and how they affect the economy. We also discuss the importance of diversification through fixed income and the correlation of equities and fixed income. Basdeo, a pioneer of modern, active, systematic fixed income management, from his beginnings at Ontario Teachers' Pension Plan, and 14 years at BGI/Blackrock iShares, emphasizes his and his team's use of technology to make informed decisions. He also discusses the portfolio management process, including the use of systematic models and the coexistence of scientific and fundamental approaches to manage Fixed Income. Finally, we delve into the delicate balance of the current economic climate and potential risks, such as the recent effects of runs on the banking system (i.e. SVB, First Republic, CS). Finally, Basdeo advises patience and caution when investing for the long term and offers tips for constructing a portfolio for the regime change ahead, where it's critical to consider liquidity and value.Highlights:[00:05:23] Gaining global experience and applying new tools in global markets.[00:08:16] Analyzing markets systematically with models to reduce cognitive bias and take the best of both fundamental and scientific approaches.[00:14:18] Analyze data to make informed decisions.[00:30:23] Potential risk of sharp slowdown, Fed acting decisively to prevent it, need to assess risks and act accordingly.[00:34:06] Investment in fixed income must account for macroeconomic changes and expected monetary policy. Shorten duration and curve-steepening are likely needed. Opportunities lie in observing individual companies.[00:38:56] Looser financial conditions may spur activity, but likely CPI decline until year-end; entering new regime of higher inflation, volatility, and terminal rate.[00:42:29] Terminal rate of 3-3.5%, lower to maintain inflation and employment goals, fracturing of global economy leading to higher production costs.[00:50:19] Need to diversify portfolio with fixed income to reduce risk and volatility, use cash equivalents to earn 5% return.[00:55:23] Market reacts more to weak data than strong data; Fed and other central banks trying to balance supply and demand; external political risks difficult to hedge.[01:01:18] Liquidity, value, patience.Key Takeaways:1/ The market is reactive to weak data more than strong data, and external risks of recent regional U.S. bank instability, Russia, Ukraine and China are difficult to hedge.2/ Aligning with long-term asset management, the Guardian Capital Fixed Income team analyzes markets systematically through building models & interpreting their output to identify opportunities.3/ Aubrey Basdeo advises caution and monitoring portfolios for potential risks, but doesn't believe it's time to make big investments.4/ The delicate balance in the current economic climate means more volatility to come, particularly because of long and variable lags to monetary policy.5/ To construct a balanced portfolio, always pay attention to value and don't deviate from your discipline. Invest for the long term, and don't rush to buy or sell.6/ Lastly, don't forget about the importance of liquidity stress testing - liquidity can disappear quickly in unexpected times.

John De Goey, Senior Investment Advisor and Portfolio Manager at Wellington-Altus Private Wealth joined us for this episode to discuss dangers of complacency arising from the industy's optimism bias, as well as numerous others, threaten to derail the best laid plans of investment and financial planning and the finances of everyday investors. Our conversation covers a range of topics, including John's career in finance, his latest book "Bullshift: How Optimism Bias Threatens Your Finances," and the importance of addressing biases in investing. We also discuss the challenges of introducing new ideas in the financial services industry, the importance of realistic financial planning assumptions, and the need to reassess one's investment strategy regularly. Among the ideas we emphasized here, was the importance of being 'prepared' for potential changes in the market, such as inflation, and building a more balanced portfolio that can withstand unexpected gyrations. Please enjoy our conversation, and thank you for tuning in. HIGHLIGHTSJohn De Goey's career path [00:01:37] John De Goey moved to finance after studying public administration, has written books and articles to help consumers understand the industry and have better relationships with advisors.[00:09:04] Advisors can provide value through behavioral coaching, which helps investors remain grounded and stay invested while being realistic.[00:19:58] Lower expected returns and longer life expectancies may require more savings and a longer working life to achieve desired retirement lifestyle.[00:26:00] 40-year bull market in bonds ended in 2022, rates to stay high, need to reassess investing strategies, widely anticipated recession.[00:40:21] Invest in products with reasonable, risk-adjusted returns and non-correlated weekly returns to maintain optimism for the long run.[00:45:14] Be prepared with two strategies, each less than 5% exposure; consider 15% allocation to alternatives, plan carefully to avoid large losses.[01:06:30] CAPE is not good for timing markets; past experience doesn't dictate future outcomes; risk of not paying attention to valuations.[01:13:18] Central banks need to fight inflation to pivot; pain must be manufactured before pivot is possible.[01:18:09] Investors may be taking on more risk than they think due to optimism bias and need to reassess, prepare for potential issues, and reflect on their portfolio.[01:20:41] Advisors must recognize and reflect on their own biases to give better advice.Where to find John De Goey:John De Goey on LinkedinJohn De Goey at Wellington-Altus Private WealthGet the book:Bullshift: How Optimism Bias Threatens Your FinancesWhere to find the RYA Crew:Rodrigo Gordillo on LinkedinReSolve Asset ManagementPierre Daillie on Linkedinhttps://AdvisorAnalyst.com

Aahan Menon joined us to discuss Prometheus Research's investment framework, which is based on economic forecasting of growth, inflation, and liquidity. He emphasized the importance of market regime confirmation to mitigate the risk of being wrong in economic forecasting.HIGHLIGHTS:Aahan's background and founding of Prometheus Research [00:02:59] Aahan talks about his career journey and how his experiences led him to found Prometheus Research, a systematic macro research firm.Unique approach of Prometheus Research [00:03:27] Aahan explains how Prometheus Research provides real-time insights into the evolution of markets and the economy through a data-driven, rules-based process, and how they aim to help investors of all sizes navigate macroeconomic cycles.Navigating the tension between market and macroeconomic modeling [00:06:31] Discussion on how to navigate the tension between the market's forward-looking discounting mechanism and the utility of macroeconomic series.Opportunity set in macro investing [00:07:48] Explanation of how understanding the likely gap between a potential acceleration and what's discounted in terms of a linear path is the opportunity set in macro investing.Factors driving the forecast [00:19:33] Discussion on the factors driving the current forecast, including monetary tightening and debt service burdens.Housing activity and employment contraction [00:20:45] Discussion on the contractionary condition of the economy, the impact on the housing sector, and the potential for a recessionary condition.Softening of the labor market [00:26:34] The potential for a recessionary contraction despite historically low unemployment rates, and the projection of sub 2% unemployment rate by the end of the year.Employment and Inflation [00:34:25] Discussion on the recent pulse in employment and its impact on inflation, as well as the unlikelihood of it continuing in the future.Productivity and Economic Growth [00:37:42] Mention of a recent McKinsey paper on the potential impact of productivity increases on inflation and debt, and how it could affect economic growth.Retirements and Wealth [00:40:46] Discussion on the excess retirements due to windfalls and wealth, especially in housing, and the possibility of retirees returning to work.Labor Force and Profits [00:43:46] Analysis of the impact of labor force participation and employment growth on the economy, and the squeeze on profits due to businesses' own reinvestment.Recomposition of the economy [00:51:04] Explanation of the shift towards a services-oriented economy and the impact of income injection on the economy.Navigating the cycle [00:53:02] Discussion on navigating the cycle and the relative strength of cyclical sectors.Investment decisions [00:53:46] Explanation of how Prometheus Research's algorithmic work informs investment decisions.Investment Framework [00:54:22] Aahan explains the economic forecasting framework used by Prometheus Research, focusing on growth, inflation, and liquidity. They also discuss the challenges of forecasting and the importance of market regime confirmation.Portfolio Construction [00:56:02] Aahan discusses the timing tools used by Prometheus Research to create stable return streams that are impervious to any particular regime or auto-correlation structure. They also talk about the importance of managing volatility and risk in the current tightening liquidity environment.Current Positioning [00:57:57] Aahan shares Prometheus Research's current positioning, which includes a high level of cash and a focus on relative value trades such as being long the dollar and long T-bills. They also discuss potential trades, such as shorting the two-year and being long bonds.Term Structure Dynamics [01:17:01] Discussion on the impact of the Fed's manipulation of the term structure on asset prices and risk premia.Private sector credit creation and liquidity [01:20:42] Discussion on the impact of private sector credit creation and liquidity on the economy and financial markets.Improvement in banking and corporate activity [01:22:16] Analysis of the improvement in lending and issuance of commercial paper, high yield, and IG in 2022.Factors affecting liquidity creation [01:24:00] Explanation of the rush to issue commercial paper in anticipation of rate increases and the impact of nominal activity and inflation on liquidity creation.Pro-cyclical liquidity and economic activity [01:25:04] Discussion on the potential effects of quantitative tightening and responsible treasury policies.Where to find Aahan Menon:Prometheus Research SubstackWhere to find the RYA crew:Adam Butler on LinkedinPierre Daillie on Linkedin

Advisors are currently facing some significant challenges when it comes to working with millennial clients. The challenge lies in the fact that most high-net-worth clients are around 70 years old, while millennials are looking for advisors who can offer innovative, non-traditional approaches.The idea that millennials don't want professional advice is an under-informed perspective. As a practitioner, it's not about whether millennials want advice or not; the question that begs an answer is, "What kind of advice do millennials want?" and "How do they want to get it?"To stay relevant and attract millennial clients, advisors must adapt their strategies and align them with the clients' objectives. This means that advisors need to change their approach to incorporate new technologies and methods that are in line with the way millennials prefer to manage their finances.Fintech is a challenge that advisors must consider. With the proliferation of apps available today, millennials can manage their finances without intermediaries, all from their smartphones. Advisors should integrate Fintech into their approach to ensure that they remain relevant and useful to their clients.Justin Castelli, Investment Advisor and Founder at RLS Wealth, joined us to share some the ways he's navigated these challenges. One of the reasons he's uniquely qualified to explore this topic is because he realized and envisioned much of the ideas we discuss at the point of breaking away from a larger financial institution after many years, and becoming an independent advisor.Fortunately, most of what we discuss here can be, with some tools (including fintech), thought, and effort, painlessly integrated into your existing practice, so as to grow your book into the millenial market, as well as reduce your practice's potentially high succession risk.Where to find Justin Castelli:Justin Castelli on LinkedinJustin Castelli at RLS WealthJustin Castelli at All About Your BenjaminsFor a Canadian WealthTech resource/solution, one example to check out is AdvisorFlow that allows you to easily and efficiently onboard new clients of all types. (This is not an endorsement. Canadian advisors use AdvisorFlow as a wealthtech solution).AA is looking for a subscription platform that can support advisors looking for a solution for flat rate services for smaller clients seeking professional advice.Copyright © AdvisorAnalyst