Money For the Rest of Us

How a liquidity crunch in the short-term lending markets sent interest rates soaring. Why this is a huge blunder on the part of the Federal Reserve, and what it means for us as individual investors.Topics covered in this episode include:What are repurchase agreements and how are they used to finance U.S Treasuries.How outflows from money market funds and hoarding by banks led to a liquidity crunch that caused repo rates to spike to 10%.Why banks are hoarding reserves held at the central bank even though there are over $1.4 trillion of them, up from $20 billion in 2007.How quantitive easing increases reserves and quantitative tightening reduces reserves.How the Federal Reserve was able to stop the disruption in the repo market, even though the central bank was caught off guard and could have prevented it.How individual investors can protect themselves from unintended consequences arising from the unconventional policies and experiments being conducted by the Federal Reserve and other central banks.Thanks to The Great Courses Plus and LinkedIn for sponsoring the episode.For show notes and more information on this episode click here.[0:20] The Fed loses control over policy rates, and repo interest rates soar.[2:19] What is a repurchase agreement (repo)?[5:02] Why the big players in repos pulled back on Sept. 16th.[8:38] Banks need more liquidity because of regulations.[12:53] Why reserves have fallen so low.[17:43] How does the reserve balance get reduced?[19:23] The Fed may have shrunk it’s balance too far.[21:36] What can be done about the reserve shortage?[24:17] What can we learn from the repo rate raise?See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Why most state and municipal pension plans are underfunded and why that could lead to higher taxes and reduced government services. Why participants in state government retirement systems have greater protection against benefit cuts than participants in municipal retirement systems.Topics covered include:How defined benefit plans work.Why there is more subjectivity regarding valuing a pension plan's liabilities compared with its assets.What does it mean for a pension plan to be underfunded, and why are so many public sector pension plans in that situation.Under what circumstances can a pension plan cut benefits to beneficiaries.Why underfunded pension plans will most likely lead to higher taxes and reduced government services.Thanks to WIX and Peloton for sponsoring the episode.For show notes and more information on this episode click here.[0:18] The crisis of underfunded defined-benefit state and city pension plans.[2:32] Calculating the financial value of a public pension plan.[4:46] What rate of return should public pension plans use?[8:44] Why public pension plans are highly underfunded.[11:34] Kentucky’s 13%-funded pension plan raises red flags.[13:37] Failing to meet the needs upfront causes a funding crisis down the road.[15:33] Why states cannot go bankrupt but cities can.[17:52] How do public sector pension plans affect tax-payers?[20:18] How states and cities are trying to solve the crisis.[21:45] Considering underfunding when deciding what to invest in or where to live.[24:09] How private-sector pension plans could possibly affect tax-payers.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

What are the three steps to better manage risk and get what you really want.Topics covered in this episode include:Why goods and services that lessen risk tend to cost more.What is the three-step process for assessing and managing risk.Why defining the risk-free option or asset is critical to managing risk.Why immediate annuities are the retirement risk-free option rather than a conservative investment portfolio.What are the two types of risk and how do we mitigate them.What is the difference between hedging and insuring against risk.Thanks to Dashlane and The Great Courses Plus for sponsoring the episode.For show notes and more information on this episode click here.[0:17] Weighing the risk and knowing how to make a decision under uncertainty.[5:00] Three steps for assessing and managing risk.[9:11] Finding the risk-free asset in a retirement plan.[14:36] Idiosyncratic & systemic risk.[16:40] De-risking and using hedges to create a risk buffer.[20:22] Identifying a sound insurance operation.[23:36] Using flexibility as a risk management strategy.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

How inequitable business models like those in the gig economy can lead to a financial crisis, more regulation, and doubts about the viability of the free-market system.Topics covered in this episode include:What is the expanded role of corporations according to leading chief executive officers.What is the gig economy.Takeaways from David’s recent experience delivering restaurant meals for Doordash including the huge liability many independent delivery drivers are unaware of.Who covers the shortfall when the cost of operating a business is less than what consumers are willing to pay for the goods and services the businesses offer.How more regulation results from businesses unfairly passing on costs to others.How income inequality and debt can lead to a financial crisis.Thanks to Policygenius and Sleep Number for sponsoring the episode.For show notes and more information on this episode click here.[0:18] Is Capitalism still working for everyone?[2:12] David’s disappointing gig economy experience.[6:53] The hidden cost of insurance in gig jobs.[9:04] Who pays to close the financial gap created by gigs?[14:27] The pitfalls of the gig economy.[16:17] What makes capitalism work?[19:29] Income inequality is a drag on the economy.[23:09] The importance of calculating the entire cost.[25:36] How your decisions can impact the health of the capitalist economy.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

How momentum investing works, what are some of the challenges in implementing it, and how can individuals use momentum in their investment portfolios.Topics covered in this episode include:What is momentum investing and why does it theoretically deliver excess return.Why do momentum strategies suffer through periods of horrendous losses.Why high trading costs and selling a position can be challenges to successfully implementing momentum strategies.What are examples of momentum oriented funds and ETFs.How momentum can be used for making asset allocation decisions and adjusting portfolio risk.Thanks to The Great Courses Plus and Netsuite for sponsoring the episode.For show notes and more information on this episode click here.[0:18] Momentum investing consistently outperforms the market.[5:04] Why does momentum investing work?[7:31] The three challenges of the momentum investing phenomena.[12:50] What happens if investor behavior changes?[14:24] Tactics for implementing momentum into your own portfolio.[20:02] Using dual momentum to move in and out of asset classes.[23:55] Utilizing momentum investing as a swing vote.[28:01] How David uses momentum investing in his portfolio.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

How the composition of Tesla's autopilot software gives clues to how we should invest, recognizing there are no perfect algorithms for driving or investing.In this episode you will learn:Why Americans are afraid of self-driving cars.How autonomous automobile software works.Why people reject even the best possible algorithms.What are examples of safety features and rules of thumb we should build into our investing process.Why does everyone think a recession is coming soon even though there is little evidence currently.Thanks to WIX and Dashlane for sponsoring the episode.For show notes and more information on this episode click here.[0:17] The pervading fear of self-driving cars, despite their safety features.[3:33] Why do people fear algorithms and prefer human decision-making?[7:45] Algorithmic decision-making has proven to be most accurate.[10:10] Automating your investing is like choosing an automated vehicle.[12:06] Keeping within the guardrails of investing strategy.[15:44] How to diversify your portfolio as an additional guardrail.[17:31] Is a recession really looming on the horizon?[20:16] Don’t maximize for perfect answers.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

What are negative interest rates, why they could come to the U.S. and what investors can do about it.In this episode you will learn:How negative interest rates are even possible.How longer life spans, central bank actions, changing time preferences and the FIRE movement are contributing to negative interest rates.What is the paradox of thrift.How investors can earn a positive return on bonds even if interest rates are negative.What are some indicators to watch for that could signal imminent negative interest rates in the U.S.How individuals need to adjust their lifestyles in an era of negative interest rates.Thanks to Peloton and The Great Courses Plus for sponsoring the episode.For show notes and more information on this episode click here.[0:20] Germany government bonds go negative for the first time.[2:38] Understanding savings: the paradox of thrift. [6:35] The concept of the individual choice and the perceived expense of saving. [11:05] The savings glut could lead to negative interest rates in the U.S.[14:40] Three reasons one would invest in negative-yielding bonds. [18:38] Central banks are influencing the spread of negative-yielding bonds.[20:29] What could happen to the U.S. economy if interest rates fell.[22:11] Three factors David is looking at for an indication of falling interest rates.[25:49] What we can do if U.S. interest rates go negative. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Explore the pros and cons of investing in gold, its historical performance, effectiveness as an inflation hedge, and role as a safe haven asset. Delve into gold's relationship with fear and momentum, the challenges it faces as a safe haven, and why it is considered a speculation. Learn how to invest in gold via ETFs, physical coins, or futures market, and why experts like Ray Dalio recommend it while Warren Buffett remains skeptical.

How a less energy intensive and more regenerative economy will allow the developing the world to advance without breaching ecological boundaries.In this episode you’ll learn:What is the difference between circular and linear supply chains.What is doughnut economics?What are adaptive preferences and how they led David to trade in a BMW 650i for a Toyota Prius.How electric vehicles and the proliferation of solar panels are leading to a less energy-intensive economy.How the reduction of litter is an example of changing culture.Thanks to NetSuite and Dashlane for sponsoring the episode.For show notes and more information on this episode click here.[0:20] Creating a global economy that is better—not bigger.[3:18] A circular economy is better than a linear one.[6:20] The growth constraints of a circular economy.[9:08] Being wise in our aspirations.[12:55] David’s Tesla experience changed his perspective on investments.[14:52] The power of energy transitions.[18:02] Making more economical choices concerning energy transitions.[20:04] How are we judging our well-being?[23:07] Redefining what we consider beautiful.[24:17] Making a better global economy begins with you.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Why has value investing underperformed growth investing for over twelve years and how to position your portfolio for the eventual rebound in value investing.In this episode you will learn:The difference between growth and value investing and why value investing outperforms growth investing over the long-term.How value and growth indices are constructed and how they differ from fundamental indexing.What are the risks and opportunities of investing in concentrated, deep-value managers.Why value investing will eventually rebound.Thanks to WIX and Sleep Number for sponsoring the episode.For show notes and more information on this episode click here.[0:18] What is value investing?[2:07] A historical look at growth vs. value yields. [5:41] The return of the value stock in the early 2000s. [11:07] The twelve and a half years of underperforming value stocks. [13:09] The sectors controlling the performance of value and growth stocks. [15:01] Better understanding the indices. [20:31] Using fundamentally weighted indices to balance your portfolio. [23:10] Are underperforming managers struggling because of poor skills or because of unfavored strategies?[29:20] While value may be difficult to predict, it isn’t dead.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.