One of our favorite things to do on this show is talk with the amazing authors of new books related to sensible investing. Today we do just that, welcoming back Andrew Hallam to the podcast to talk about his new book, Balance. In it, Andrew tackles the relationship between our finances and happiness, looking at the areas of life that need the most attention, and how we sometimes overlook important aspects of our wellbeing. This is Andrew's third book, and we previously hosted him on the show in Episode 99, so make sure to go back and catch up on that if you have not already listened to it. We have a fascinating chat with Andrew again today, getting to grips with some of the main findings in the book, with our guest unpacking his arguments about material purchases, spending on experiences, gratitude, and financial literacy. We also get to hear from him about the importance of staying light-hearted, and how he defines success and failure. Balance is such an eye-opening and illuminating piece of work, which we highly recommend our listeners check out, so tune in today to get a taste of what it's all about.   Key Points From This Episode:   Andrew's explanation of his definition of a successful life. [0:02:53] The questions to ask when prioritizing aspects of one's life. [0:04:35] Worthwhile material purchases and when spending money can truly have a positive impact. [0:06:12] Confusion about real estate and investments; Andrew clarifies the idea of buying property. [0:08:59] Andrew's 'desert island litmus test' for evaluating purchases. [0:12:18] The relationship between social media and our spending habits [0:14:03] Times that more liberal spending might be a good decision; Andrew's emphasis on experiences. [0:17:39] Thoughts on reaching a level of maturity regarding material wealth and satisfaction. [0:24:05] Andrew's reflections on his experiences of cancer in 2009. [0:27:28] The role of gratitude in a good life and increasing its presence in our practices. [0:31:37] How our network and social circles support and enrich our lives. [0:36:39] Index funds and financial literacy; Andrew weighs in on what these allow you to do. [0:37:26] Questions to ask when hiring an advisor; recommended products, financial stories, and more. [0:40:55] Andrew speaks about whether it is smart to have 100% equity. [0:45:59] The ghost story that Andrew uses to illustrate a point about risk assessment. [0:47:48] Deciding between simplified and complicated portfolios. [0:50:11] How parents can approach educating their children on saving and spending. [0:51:39] Andrew weighs in on retirement, career, purpose, and the last phase of life. [0:52:38] Personal finance and good humour; why Andrew embraces the inner child. [0:55:57] Andrew's definition of failure and why it is so important to understand the finite nature of life on a behavioural level. [0:57:04] A round of Talking Cents cards with Andrew. [0:57:38]

As we all know, not all investments are equally exciting, but on today’s show, we make the case that you should not put your money into an ETF just because it is trending. A thematic ETF is a fund that offers the opportunity to invest based on a particular theme, such as climate change or artificial intelligence. The concept behind investment themes is that they ostensibly offer investors the opportunity to participate in potentially disruptive trends with the idea of earning excess returns. The problem we find with these ETFs is that as the markets they are based on attract more attention and an influx of entrants, everybody’s per-share earnings get reduced. By the time a themed ETF becomes investable, it experiences a mean reversion of prices and media sentiment, in contrast to the attractive returns shown in its backtested index. This means that while thematic ETFs are good business for the ETF providers, they do not create value for investors on average. Toward the end of our show, we invite Wes Gray from Alpha Architect to talk about their change from index to active ETFs and more. Wrapping up, Wes along with Robin Taub join us for a lively round of Talking Sense. Tune in today!

Episode 184: Robin Wigglesworth: Unpacking and Understanding Trillions   Episode 184: Show Notes.   We have often spoken about the book Trillions on the show, and in today's episode, we are lucky enough to interview the author, Robin Wigglesworth. We get to speak to Robin about his book and some of its central and most interesting ideas, while touching on other subjects too. Listeners will definitely come away with some enriched perspective, and hearing Robin's thoughtful and articulate answers was an absolute pleasure for us. Our guest is also the Global Financial Correspondent for the Financial Times, with his contributions to the publication being well worth keeping up with. After distilling some of the history of index investing, Mac McQuown, Jack Bogle, and the building blocks of what we do here at the Rational Reminder, Robin is generous enough to also comment on crypto, tech disruption, private equity, ESG investing, and more. This episode ties in so well with previous conversations we have had and Robin's dedication to his craft as a financial writer is truly inspiring, join us to hear it all.   Key Points From This Episode:   Simple reasons for why index funds are the best option for investors. [0:02:40.1] Tracing the roots of the culture of stock picking. [0:05:52.7] The initial intellectual push that the idea of index fund received from Wells Fargo. [0:10:44.4] Touching on some of the important yet lesser-known characters in the history. [0:15:05.8] Robin unpacks the evolution that Jack Bogle went through in the 1960s. [0:17:40.1] Jack Bogle's real superpower and getting to grips with the essence of his philosophy. [0:22:33.4] The important relationship between Dimension and Vanguard. [0:25:42.7] Differentiating between factor investing and total mark indexing. [0:29:24.5] Robin's thoughts on where we are currently with an imaginary alpha. [0:32:46.3] Reasons for Jack Bogle's decision to avoid embracing ETFs early on. [0:35:28.7] Why Robin stands by the idea that markets are not efficient. [0:37:31.8] The impact of bond ETFs on the future of the market. [0:42:48.1] Concerns around proxy votes at bigger asset managers. [0:48:34.4] Some thoughts from Robin about ESG investing and its value. [0:52:17.7] The skepticism that Robin still holds about cryptocurrency and its disruptive characteristics. [0:57:45.2] The example of Albania that Robin has used in his book to illustrate a point about crypto. [1:02:47.6] Looking at the trend towards private equity in the financial world. [1:09:23.4] Robin's own definition of success: the feeling of doing a good job. [1:17:46.6]  

While there is certainly room for rigorous debate regarding market efficiency versus inefficiency, there are many who dismiss Eugene Fama’s Efficient Market Hypothesis (EMH) as an incorrect model without understanding what the implications are or how to test it. In today’s episode of the Rational Reminder Podcast, we tackle some common market efficiency myths and misconceptions using Fama’s 1970 paper on EMH as well as supporting papers by Kenneth French, Lubos Pastor, José Scheinkman, and many others. You’ll also hear about behavioural finance, quantitative investing, human bias, and momentum as they relate to market efficiency before debunking some anecdotal misconceptions about EMH involving Warren Buffet and Renaissance Technologies. In addition to our fascinating main topic for today, you’ll get a glimpse into the four waves of a career in Cameron’s review of The Long Game by Dorie Clark and Benjamin shares some notes and corrections regarding the user cost model from Episode 180: Is Canada Really in a Housing Bubble? We also discuss housing as a depreciating asset, innovation stocks in deep value territory, and the size of innovation platforms relative to global market cap and what that means for investors, plus a whole lot more. Make sure not to miss this jam-packed episode for everything you need to know (and forget) about market efficiency!   Key Points From This Episode:   Kicking off with a book review of The Long Game by Dorie Clark. [0:10:53] Four waves of a career as per Dorie Clark: learning, creation, connecting, reaping. [0:13:04] Benjamin readdresses the user cost model from Episode 180 on the Canadian housing bubble (or lack thereof). [0:16:06] Insights from the user cost model regarding price sensitivity and rate changes. [0:20:13] Addressing common confusion regarding housing as a depreciating asset. [0:22:53] Speaking of bubbles: innovation stocks in deep value territory as per Cathie Wood. [0:26:08] ARK’s forecast for innovation platforms and the 30-40 percent compound annual rate of return their strategies could deliver in five years. [0:32:01] What deep value looks like according to ARK; prices to book, sale, and earnings. [0:33:30] Thoughts on the size of innovation platforms relative to global market cap. [0:34:47] Why growth in earnings per share, not market cap, results in growth in returns. [0:36:14] The impetus for today’s topic: Market Efficiency Myths and Misconceptions. [0:40:03] Eugene Fama’ himself on why the market isn’t expected to be perfectly efficient. [0:41:44] Testing market efficiency categorized by weak, semi-strong, and strong forms. [0:42:29] Why applied micro-economist and market design specialist Eric Budish believes the market is objectively inefficient at the millisecond horizon. [0:43:35] What EMH has to say about information markets, competition, and actual prices. [0:45:11] Some ways to test market efficiency taking different models into consideration. [0:47:22] Understanding what EMH does not say, including that prices are right at all times. [0:50:43] Alternative models to EMH; behavioural finance as explained by Professor Hersh Shefrin in Episode 167. [0:53:18] What Wes Gray says about quantitative investing and human bias in Episode 69. [0:59:09] Market efficiency and given anomaly: seasonality, momentum, and more. [1:02:12] Ken French on how momentum relates to market efficiency in Episode 100. [1:03:40] Anecdotal misconceptions involving Warren Buffet and Renaissance Technologies. [1:08:54] Whether or not people with specialized knowledge earn excess returns. [1:13:13] Overconfidence as per Ben-David, Graham, Harvey, Scheinkman, and Xiong. [1:17:18] Talking Cents: we share our comfortable and uncomfortable responsibilities. [1:23:53]

One of the pillars of our approach at The Rational Reminder Podcast and PWL Capital is the idea of index investing, a concept that is both fundamental and deeply embedded. Today we are very lucky to have John 'Mac' McQuown on the show, who was behind the creation of the first equity index fund. It is hard for us to overstate just how important this contribution has been to the world of finance and any fund managers and investors that share our philosophy. Mac's work back in the 1960s, his position at Wells Fargo, and his contribution to the founding of Dimensional Fund Advisors all speak for themselves, and we are extremely grateful to get some perspectives from this titan of the world of rational and data-driven investing. In our chat, we get to hear about some of the key points in Mac's career and the general arc of the rise of indexing and diversified investing, the key figures that he worked alongside, his thoughts on the future, and the importance of environmentalism in today's world. So, to hear it all from a hero and giant in the space, be sure to listen in with us today.   Key Points From This Episode:   Looking back at the role of data at the beginning of Mac's career. [0:03:00.2] Wall Street in the 1960s, and the amusing experiences Mac had early on. [0:04:20.6] Mac's initial findings when he started analyzing institutional portfolios. [0:07:44.5] Joining Wells Fargo and the team that Mac found himself on. [0:08:28.1] The strong support that Mac and the quantitative approach were given at Wells Fargo. [0:13:36.7] Early tracking of index funds and Mac's memories of the first index they tracked. [0:18:21.3] The initial institutional responses that Mac received to his work with data. [0:20:46.5] How Wells Fargo contributed to the first commercially available index fund. [0:22:24.6] Mac's connection to Jack Bogle and the results of their relationship. [0:27:18.2] The seeds of iShares; Mac traces the beginnings at Wells Fargo. [0:29:57.7] Perspectives on why people still have belief in active investing. [0:33:19.4] Mac's memories of working with David Booth during the founding of Dimensional. [0:34:41.8] Differentiating between Dimensional funds and index funds. [0:36:44.3] Weighing concerns about the growth of indexing and how this may affect pricing and governance. [0:39:52.5] Mac's environmentalist philosophy and his thoughts on practical steps against climate change. [0:42:10.6] How Mac defines success in his life and its relationship to increased curiosity. [0:45:00.2]

We have reached the end of another year, our third while doing this podcast. We are spending this episode on our customary year-end review, and we will be pulling segments from some of the great interviews we hosted over the course of 2021. In doing so, we hope to create a bit of summary of the year and the biggest lessons we all learned together. The podcast has continued to grow beyond our wildest expectations and we are so grateful to be on this journey with our ever-increasing community and audience. We touch on many themes in this recap, moving from general ideas about life, goals, happiness, abundance, and purpose, to more financial subjects of money values, retirement, and crypto, and then into the deeper technical aspects of investment such as value premiums, factors, bonds, and much more. We have tried our best to focus on the segments that we found most enlightening and that changed our perspective, and have highlighted them with reflections and commentary. So to hear it all, join us today, and we'll see you next year, for more of the Rational Reminder Podcast.   Key Points From This Episode:   Looking at some of the amazing numbers around the growth of our community. [0:02:37.2] A few shoutouts to the wonderful people who make this podcast possible. [0:04:27.8] Bill Schultheis on how to find and fund a good life. [0:08:34.5] Hal Hershfield's thoughts on making better decisions with your future wellbeing in mind. [0:10:44.3] Ashley Whillans on the relationship between time-poverty and wellbeing, and increased leisure time. [0:13:39.7] Jennifer Risher weighs in on the importance of performing meaningful work. [0:17:24.5] Robin Taub's family money value's from her book, The Wisest Investment: [0:20:04.1] Jennifer Risher's approach to managing money values at home. [0:22:27.7] Katy Milkman applies the central idea from How to Change to saving money. [0:23:22.7] Johanna Peetz on how to use the idea of a future self to reach a goal. [0:26:38.6] Paul Merriman shares his experiences of the relationship between money and a good life. [0:28:27.7] Adriana Robertson's legal perspective on the rise of index funds. [0:33:48.4] Jay Ritter on the question of market efficiency. [0:36:41.8] Hersh Shefrin's emphatic and nuanced advice about how to act in relation to the market. [0:38:20.3] John Cochrane on the shifting relative value of stocks. [0:39:43.3] Rob Arnott shares his thoughts on the drawbacks of cap-weighted indexing. [0:42:31.5] Antonio Picca on the drawbacks of a factor-based investment strategy. [0:47:01.6] John Cochrane on making decisions around owning value stocks. [0:48:10.7] Campbell Harvey talks about conditions for concentrated portfolios. [0:52:20.2] Bill Schultheis on tilting for factors versus sticking with market cap indices. [0:54:02.6] Adriana Robertson shares what the research tells us about the basis for investment decisions. [0:54:46.1] Hersh Shefrin on what really matters with regards to portfolio construction. [0:57:33.0] Antonio Picca on more active approaches and capturing premiums through rebalancing. [0:41:26.0] Brad Cornell explains the differences between a factor and a characteristic. [1:01:52.2] Rob Arnott, David Booth, and Antonio Picca weigh in on the question of value stocks at present. [1:04:22.6] Robert Novy-Marx's approach to cheap stocks and high profitability. [1:11:54.1] Dave Plecha on owning bonds today, in light of historically low interest rates. [1:15:12.0] Anna Lembke on how our daily and long-term decisions are influenced by dopamine. [1:18:20.0] Cullen Roche shares his thoughts on the future of market inflation. [1:22:57.2] Don Ezra's lessons for retirement and better preparation. [1:24:57.6] Anna Lembke on the results of increases in leisure time. [1:27:37.1] David Blanchett's thoughts on the evolving role of the financial advisor. [1:30:50.0] Don Ezra 'seven asset classes of life's abundance portfolio'. [1:33:42.9]

There is no doubt that housing in Canada is expensive, but are we really in a bubble? Today on the show we explore the user cost equation and how it can help us answer this question. Before the main topic, we get warmed up with a behind-the-scenes look at Dell’s growth path in Cameron’s review of Play Nice But Win. From there we address Peter Lynch’s recent warning against passive investing as well as reiterate our position on the performance of small-cap value versus large-cap growth. Heading into our discussion on housing in Canada, we provide a working definition of a housing bubble and present the model used to work out user cost, addressing each factor in some detail. We discuss the risk premium for owning versus renting and highlight an interesting point on high price sensitivity during low-interest rates. The major takeaway after looking at Canada from within this framework is that user costs are in line with what they should be historically, and that saying we are in a housing bubble would be a little drastic!   Key Points From This Episode: The effects of the plot of Sex and The City 2021on Peloton stocks. [0:00:20.1] A book review on Play Nice But Win which tells the story of Dell. [0:08:01.1] Mixed responses to the paper, ‘Want to Be Happy? Hire a Financial Advisor’. [0:13:01.1] Active fund performance and thoughts on Peter Lynch’s recent warning against passive investing. [0:17:14.1] Responding to listener disagreement with our research on the high returns of small-cap value ETFs. [0:22:46.1] The huge delta between the performance of ARC versus AVUV. [0:30:27.1] Using the concept of user cost to assess whether there is a housing bubble in Canada.[0:33:52.1] The different inputs into the model used to work out user cost. [0:38:22.1] The definition of a housing bubble and how the facts hold up. [0:39:36.1] The risk premium for owning instead of renting; why owning could be risky. [0:43:39.1] Perspectives on the chance that high prices could be driven by real estate investors.[0:47:03.1] An offsetting factor in the form of a reason for why owning is not risky. [0:49:06.1] If owning a home in Ontario is expensive from a user cost perspective.[0:52:45.1] Whether homeowners are willing to pay inflated prices for housing because they expect unrealistically high housing appreciation in the future. [0:53:54.1] Prices are sensitive to interest rates when interest rates are already low. [0:55:59.1] Tradeoffs, insurance, and taxes in this week’s iteration of Talking Sense. [0:59:27.1]

Of all of the possible disruptive uses of cryptocurrency and blockchain, decentralised finance (or DeFi) might be the one most likely to bring this technology to a wider audience; and challenge the established finance industry in the process. For this week’s episode on crypto-based decentralised finance, we welcome economist and faculty member in the Finance Unit at Harvard Business School, Professor Marco Di Maggio. Tuning in, you’ll learn everything you need to know about DeFi and cryptocurrency, from the most basic definitions to the potential macroeconomic and geopolitical implications of a decentralised reserve currency and the effects  of decentralisation on monetary policy transmission. Tuning in, you’ll learn the definitions for DAOs, DEX, NFTs and more, and Marco elaborates on some of the reasons that decentralisation is seen as an improvement over central systems as well as some of the issues that it represents. Make sure not to miss this enlightening conversation with Professor Marco Di Maggio as he shares his powerful contrasting perspectives on this inherently libertarian technology.   Key Points From This Episode:   Marco defines cryptocurrency; simply put, it’s digital currency. [0:02:59] Find out what a DAO is; a community-led entity with no central authority. [0:03:58] How a DAO is different from a corporation in the way it values decentralisation. [0:05:56] Stablecoins as cryptocurrency pegged to fiat currency and backed by collateral. [0:07:07] Learn about decentralised exchanges or DEX, the bonding curve, and Uniswap. [0:09:28] Why decentralisation is seen as an improvement over centralisation; greater transparency and access requiring no counterparty. [0:12:32] When decentralisation is not a good solution given the lack of accountability. [0:14:40] Marco expands on some other issues with the technology, including its environmental impact, volatility, and regulatory uncertainty. [0:16:07] Understanding counterparty risk, returns, and interest rates in the DeFi space. [0:18:39] Why Marco considers blockchain and crypto DeFi a technological revolution. [0:21:41] How someone who owns a total stock market index fund, for example, can benefit from the potential economic gains of this revolution. [0:23:45] Bitcoin versus Ethereum and how Ethereum is used to develop DeFi apps. [0:26:06] Whether Marco predicts a winner-take-all outcome for blockchain technology. [0:28:23] Why rubber stamp regulation and clarity are important for the success of DeFi. [0:29:37] How to approach investing in the DeFi space, looking at risk, exposure, and value. [0:31:30] Marco explains why the Chinese central bank has launched the digital yuan and how the US is lagging behind this innovation [0:34:21] Find out how DeFi ‘super apps’ provide better solutions than online banks. [0:38:33] Distinguishing crypto from fiat currency and the macroeconomic and geopolitical implications of a decentralised reserve currency. [0:40:17] Marco on the potential effect of crypto-based DeFi on monetary policy transmission. [0:42:44] What NFTs are, why they sell for such high prices, and how they can be useful. [0:46:22] How Marco defines success: through the lens of others in his life. [0:49:30]  

In today’s episode of The Rational Reminder, we tackle the subject of inflation in a twofold manner. Firstly, there are details around how people perceive inflation that often get overlooked, and secondly, these expectations have investment implications that are worth unpacking. Before diving into the main topic, we talk about Colin Bryar’s Working Backwards which tracks the role of failure and customer obsession in Amazon’s growth path. After getting into this week's news and listener question, we begin the first part of our session on inflation. Some of the main points we make here are that everybody experiences inflation differently, that perceptions of inflation are connected to experience, and that biased inflation estimates can explain household borrowing and investing behaviour. This leads us to part two of our discussion, where we unpack how expected inflation influences asset pricing and the role of unexpected inflation in the performance of stocks and bonds. We attempt to locate other asset classes that can act as inflation hedges, but find that with the tradeoffs and poor correlations involved, it makes the most sense to vouch for a properly diversified portfolio of stocks and bonds with exposure to multiple sources of expected return. So before you base too much of your decision-making on inflation, be sure to consider some of the points we make in today’s show.   Key Points From This Episode: TV shows, listener feedback, Peloton’s stock price, and RRP updates. [0:00:19.2] Lessons from Amazon’s growth story in this week’s book, Working Backwards. [0:07:55.2] News: Vanguard’s ‘High-Conviction Active Funds’ and Wealthfront’s intention to sell. [0:14:23.1] Whether size premium is influenced by a reduction in IPOs and publicly traded companies. [0:17:36.2] Main topic: Overlooked aspects of inflation and their implications on investing. [0:23:46.2] Metrics from the CPI and how everybody experiences inflation differently. [0:26:36.2] How to work out your personal inflation rate and what Ben and Cameron’s are. [0:28:07.2] Inflation expectations are influenced by inflation experiences. [0:30:43.2] Biased inflation estimates can explain household borrowing/investing behaviour. [0:34:03.5] The implications of the fact that the CPI doesn’t account for substitution. [0:36:07.2] Debunking the assumption that those close to retirement are most exposed to inflation. [0:39:13.2] How financial assets are priced using discount rates and the effects of unexpected inflation on them. [0:43:36.2] The effects of high, low, and expected inflation on stocks and bonds. [0:45:41.2] Whether other asset classes than stocks can be inflation hedges. [0:48:15.2] The relationship of different commodities to inflation at different periods and regions. [0:53:05.2] Questions of status, greed, and decisions in this week’s Talking Sense. [0:56:54.2]

The contemporary world is saturated with ways in which we can experience rewards that were historically much more difficult to access. Although this idea of a world filled with dopamine fixes is not new, it can be continually surprising just how extreme this reality has become. Here on the show today to talk about this issue and her most recent book, Dopamine Nation, is Dr. Anna Lembke, and we have a fascinating and important conversation in which she unpacks the human body and mind in relation to the world around us at present. One of the main points from this chat is the weakness of humans, and how unaware we can be of the way our brains compel us to engage in behaviours and seek pleasure. We get into some strategies and solutions for healthier ways to exist, talking about mindfulness, awareness, and dopamine fasting, in the face of accelerating tech and overabundance. Dr. Lembke gives us a great introduction to dopamine and how it functions in our bodies, unpacks the four properties of addictive substances and activities, the different ways to frame and understand addiction, and shares some realistic ideas about moderation. So to hear all this and much more, tune in to this great episode of the Rational Reminder Podcast.   Key Points From This Episode: An introduction to dopamine and its functions in the human body. [0:03:03.2] The human brain and the current overabundance of addictive experiences and substances. [0:05:36.1] Contemporary increasing in different types of addiction. [0:08:13.8] Considering the inherently negative connotation of the word 'addiction'. [0:11:44.4] The reasons that make gambling so addictive to the human mind. [0:14:12.7] Applying what we know about addiction and gambling to speculation and the stock market. [0:18:03.2] Why working also falls into the category of addictive behaviours. [0:21:46.8] Looking at the addictive nature of spending money and shopping. [0:24:01.5] A shocking story about water addiction from Dr. Lembke's practice. [0:25:12.1] Thoughts on recognizing addiction and possible ways to stop the behaviours. [0:26:22.2] Using in moderation; Dr. Lembke comments on the realities of this idea. [0:29:32.7] Long-term decision making versus a dopamine-laden environment; the battle of our time. [0:31:00.4] Understanding hormesis, seeking pleasure through pain, and embracing volatility in a portfolio. [0:34:54.6] The impacts of increased leisure time and the question of what we need. [0:38:47.6] Lembke's advice around retirement and the dangers of dopamine deficit states. [0:42:43.3] How the era of the pandemic has affected these trends in addiction. [0:45:20.2] The relationship between radical honesty and dopamine; how lying is related to reward pathways. [0:48:39.6] Radical honesty and better parenting; Dr. Lembke's thoughts on transparency. [0:54:01.3] Weighing the value of shame and its power as a socially regulating force. [0:55:51.2] Lembke's definition of success and its connection to being a good parent and becoming a positive force in the world. [1:00:01.6]