Episodit
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Unlocking the power of education savings is often a complex task, but with the right strategies, a Registered Education Savings Plan (RESP) can be a game-changer for Canadian families planning their children's future. In this episode, Ben Felix, Dan Bortolotti, and Mark McGrath take a deep dive into the mechanics of the RESP, covering everything from optimal contributions and grant maximization to tax-efficient withdrawals and asset allocation. They discuss critical factors like the Canada Learning Bond (CLB) for low-income families and the intricacies of group RESPs, noting how pooled plans, though easy to join, can financially penalize those who don’t stay the course. With the RESP’s unique 35-year lifespan and its flexible range of education options, this in-depth conversation brings clarity to a valuable tool often overshadowed by its complexity. Tune in to discover practical strategies that could transform how you fund education, optimize your investments, and make the most of Canada’s RESP benefits.
Key Points From This Episode:
(0:02:43) Purpose and structure of the RESP as a tool to fund post-secondary education.
(0:06:25) Insight and tips for how contribution limits and government matching grants work.
(0:07:13) How the CLB supports low-income families with up to $2,000 without contributions.
(0:10:13) Family RESPs, which allow multiple beneficiaries to share contributions and earnings.
(0:11:54) Distinguishing between Education Assistance Payments (EAP), Post-Secondary Education Payments (PSE), and their tax implications for beneficiaries.
(0:14:27) Front-loading versus annual contributions: optimal contribution strategies to maximize grants and investment growth.
(0:23:22) Tips for tax-efficient RESP withdrawals, especially if beneficiaries have other income.
(0:35:28) Education outside of Canada, over-contribution penalties, and other considerations.
(0:37:28) RESPs and estate planning, including naming a successor subscriber in your will.
(0:42:54) Asset allocation advice: prioritize growth early and stabilize as educational costs near.
(0:48:00) Constructive criticism of RESP policies to increase access for low-income families.
(1:02:02) Summing up the benefits and challenges of RESPs and encouraging families to use them wisely as part of their education savings plan.
(1:07:39) The aftershow: reviews, praise for Dan, and a community debate on expected returns.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://pwlcapital.com/our-team/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPDan Bortolotti — https://benderbenderbortolotti.com/about/our-team/
Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/
Registered Education Savings Plan (RESP) — https://www.canada.ca/en/services/benefits/education/education-savings/plan.html
Canada Learning Bond — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-learning-bond.html
Aaron Hector: ‘Optimal RESP funding strategies if you have $50,000 to invest’ — https://x.com/AaronHectorCFP/status/1787188396248731967
Aaron Hector: ‘How to draw down a $200k RESP over a 4 year university program’ — https://x.com/AaronHectorCFP/status/1788196751821738360
Employment and Social Development Canada (ESDC) — https://www.canada.ca/en/employment-social-development.html
'How to Invest Your RESP’ — https://benderbenderbortolotti.com/how-to-invest-your-resp/
‘The Regulation of Group Plan RESPs and the Experiences of Low-Income Subscribers’ — https://seedwinnipeg.ca/wp-content/uploads/2024/09/The_Regulation_of_Group_Plan_RESPs_and_the_Experiences_of_Low-income_Subscribers.pdf
Episode 326: Dr. Sunil Wahal: Exploring the Nuances of Financial Science — https://rationalreminder.ca/podcast/326
Papers From Today’s Episode:
‘The Anatomy of Value and Growth Stock Returns’ — https://dx.doi.org/10.2139/ssrn.806664
‘Migration’ — https://dx.doi.org/10.2139/ssrn.926556
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Have you ever wondered how the world's top financial thinkers shaped the way we invest today? In this episode, Ben and Cameron sit down with Professor Stephen Foerster from the Ivey Business School to explore the evolution of modern investing. As a distinguished financial expert and co-author of In Pursuit of the Perfect Portfolio, Professor Foerster dives into the groundbreaking work of financial pioneers like Harry Markowitz, Bill Sharpe, Gene Fama, and others, unpacking their remarkable contributions to portfolio management, risk assessment, and market efficiency as we know it today. Tuning in, you'll gain a deeper understanding of Markowitz's revolutionary diversification theory, Sharpe's introduction of beta as a risk measure, and Fama’s Efficient Market Hypothesis, as well as each of their perspectives on the “perfect portfolio,” tying together the history, theory, and practical application of modern investment strategies. Whether you're looking to sharpen your strategy or build your investment knowledge from the ground up, this conversation with Professor Foerster is packed with actionable takeaways and fascinating stories that could change the way you approach your financial future. Don’t miss this opportunity to learn from the thought leaders who shaped the market!
Key Points From This Episode:
(0:03:29) Contrasting the historical art of investing with the modern science of investing.
(0:04:44) Markowitz’s diversification theory and the importance of balancing risk and return.
(0:09:39) Sharpe’s capital asset pricing model (CAPM) and his contribution to measuring risk.
(0:16:13) Insight into Fama’s Efficient Markets Hypothesis and the joint hypothesis problem.
(0:19:13) The rise of factor investing and the significance of Fama-French’s three-factor model.
(0:23:26) Unpacking Shiller and Fama's main point of disagreement on bubbles.
(0:26:50) Bogle’s perfect portfolio and persistence about the index fund, despite resistance.
(0:29:37) How the Black-Scholes-Merton (BSM) option pricing formula changed the world.
(0:34:37) Ways that Merton contributed to portfolio theory and his take on TIPS.
(0:36:20) Key takeaways from talks with Martin Leibowitz, Charlie Ellis, and Jeremy Siegel.
(0:37:35) An interesting analogy for Professor Foerster’s take on the “perfect portfolio.”
(0:40:53) Correlation vs. causation in stock pricing and how it applies to factor investing.
(0:46:38) Examples of masterly inactivity and investor lessons from Madoff's Ponzi scheme.
(0:52:07) The dangers of FOMO, a SPACs cautionary tale, and lessons from value investors.
(1:00:43) Winning at tennis vs. investing and risks of over-reliance on automated decisions.
(1:06:02) Long-term lessons from pioneers in finance to improve investment strategies today.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — https://www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin 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/
Professor Stephen Foerster — https://stephenrfoerster.com/
Ivey Business School — https://www.ivey.uwo.ca/
Stephen Foerster on LinkedIn – https://www.linkedin.com/in/stephen-foerster-26b85319/
Stephen Foerster on X – https://x.com/profsfoerster
Stephen Foerster Books — https://www.amazon.com/stores/author/B001KDO1L0
‘Cristiano Ronaldo snubbed Coca-Cola. The company’s market value fell $4 billion.’ — https://www.washingtonpost.com/sports/2021/06/16/cristiano-ronaldo-coca-cola/
Books From Today’s Episode:
In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest — https://www.amazon.com/dp/0691229880
Trailblazers, Heroes, and Crooks: Stories to Make You a Smarter Investor — https://www.amazon.com/dp/B0DHLVYK1Q
In Pursuit of the Unknown: 17 Equations That Changed the World — https://www.amazon.com/dp/0465085989
A History of Interest Rates — https://www.amazon.com/dp/0471732834
Winning the Loser's Game: Timeless Strategies for Successful Investing — https://www.amazon.com/dp/0071813659
Stocks for the Long Run — https://www.amazon.com/dp/1264269803/
Extraordinary Tennis For The Ordinary Player — https://www.amazon.com/dp/0517511991
Papers From Today’s Episode:
‘Efficient Capital Markets: A Review of Theory and Empirical Work’ — https://doi.org/10.2307/2325486
‘The Loser’s Game’ — https://doi.org/10.2469/faj.v31.n4.19
'The Pricing of Options and Corporate Liabilities’ — https://doi.org/10.1142/9789814759588_0001
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What does it take to manage a $60 billion wealth management firm while keeping investment strategies grounded in scientific thinking? In this episode, we’re joined by Don Calcagni, Chief Investment Officer at Mercer Advisors. Don chairs the firm’s investment committee and provides guidance on mergers and acquisitions, investment integration, and long-term strategic planning. His expertise spans fiduciary oversight, portfolio management, private equity, and financial mathematics. In our conversation, we discuss how his firm constructs client portfolios, engages with academic and industry experts, and leverages a factor-based investment approach. He also explains the importance of having an investment philosophy rooted in fiduciary principles and delves into how Mercer Advisors manages fiduciary oversight for billions of dollars in assets across thousands of families. Explore the details of portfolio governance and the role of the firms’s alternative investment platform space. Gain insights on value metrics, factor investing, and how Mercer works to provide a family-office experience for everyday clients. Tune in for a deep dive into portfolio construction and the evolving landscape of wealth management with Don Calcagni!
Key Points From This Episode:
(0:05:22) Learn about Mercer Advisors and the range of services it has on offer.
(0:07:10) Unpack Mercer Advisors’ approach and philosophy to portfolio construction.
(0:11:55) The Building Better Portfolio Summit and the purpose of the event.
(0:17:08) How the meetings are structured and the main takeaways from the last event.
(0:24:45) What topics cause extreme points of agreement and disagreement at the meetings.
(0:29:21) Find out how takeaways from the events are implemented into client portfolios.
(0:31:19) Mercer Advisors’ recently launched alternative investment platform space.
(0:40:23) Don shares valuable recommendations and advice for the average investor.
(0:42:23) Aftershow: the controversy surrounding the RBC options trading incident.
(0:49:57) Listener feedback, reviews, updates, and upcoming events.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin 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 McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPDan Bortolotti on LinkedIn — https://linkedin.com/in/dan-bortolotti-8a482310/
Canadian Couch Potato — https://canadiancouchpotato.com/blog/
Don Calcagni on LinkedIn — https://linkedin.com/in/donald-calcagni-8104b546/
Mercer Advisors — https://merceradvisors.com/
‘Building Better Portfolios | 2023 Summit’ — https://youtu.be/TWYukQogQPA
Dimensional Fund Advisors — https://dimensional.com/
BlackRock — https://blackrock.com/
Avantis — https://www.avantisinvestors.com/
AQR — https://aqr.com
Carlyle — https://carlyle.com/
Royal Bank of Canada (RBC) — https://www.rbcroyalbank.com
Future Proof Festival — https://futureproofhq.com/festival/
Episode 316: Andrew Chen — https://rationalreminder.ca/podcast/316
Episode 323: Renting Versus Buying a Home in Canada 2005-2024 — https://rationalreminder.ca/podcast/323
Episode 325: Addressing 200+ Comments on Renting vs. Owning a Home — https://rationalreminder.ca/podcast/325
Papers From Today’s Episode:
‘Portfolio Selection’ — https://doi.org/10.1111/j.1540-6261.1952.tb01525.x
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What are the critical factors driving investment success? How can investors balance profitability and risk? In this episode, we sit down with Dr. Sunil Wahal, the Jack D. Furst Professor of Finance and Director of the Center for Responsible Investing at the W.P Carey School of Business at Arizona State University, to delve into the intricacies of financial science. With over 25 years of academic and practical experience, Dr. Wahal shares his unique perspective on factor investing, profitability premiums, and how to approach value investing in today’s complex financial environment. He talks about the joint distribution of value and profitability, explains how profitability premiums work, and discusses the challenges faced when integrating academic research into practical investing strategies. Dr. Wahal also touches on common misconceptions in financial theory, the long-term benefits of maintaining a diversified investor base, and why understanding the nuances of financial risk is key to avoiding costly mistakes. Gain insights into building a successful investment portfolio grounded in the principles of financial science and how to avoid common pitfalls in factor investing. Join us to hear actionable strategies for balancing risk, understanding factors, and applying academic research to real-world scenarios with Dr. Sunil Wahal!
Key Points From This Episode:
(0:04:15) Dr. Wahal’s work on profitability, data sourcing challenges, and its significance.
(0:08:01) The impact of controlling the value of the profitability premium.
(0:10:08) Correlations between value and profitability and the benefits of “tilted” portfolios.
(0:14:48) Steps for unleveraged long-term investors to build profitable portfolios.
(0:17:27) How the joint distribution of value and profitability differs from a profitability screen.
(0:20:43) Approaches of large financial firms to implementing value and profitability in portfolios.
(0:24:41) Time horizons for tiled portfolios and their expected returns after cost.
(0:30:53) Insight into how institutions decide on which investment managers to hire and fire.
(0:38:00) Exploring how the hiring and firing of managers affects institutional performance.
(0:40:16) Ways the relationships with institutions influence hiring decisions and performance.
(0:44:35) Uncover how institutions select which private market firms to invest in.
(0:48:58) Key takeaway lessons from Dr. Wahal’s research for institutional investors.
(0:50:52) Why frequently hiring and terminating managers may not be the best approach.
(0:52:32) Advice for retail investors and the importance of cost in managing portfolios.
(0:59:22) Reasons that institutions avoid indexing and the competitiveness of mutual funds.
(1:02:29) How diversification among mutual fund investors affects performance.
(1:09:19) Performance overview of actively managed global equity mutual funds.
(1:12:35) The role of practitioner interaction and his concept of success.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin 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/
Sunil Wahal on LinkedIn — https://www.linkedin.com/in/sunil-wahal/
W. P. Carey School of Business — https://wpcarey.asu.edu/
Avantis Investors — https://www.avantisinvestors.com/
Dimensional Fund Advisors — https://www.dimensional.com/
UpWork — https://www.upwork.com
NVIDIA — https://www.nvidia.com
Episode 316: Andrew Chen — https://rationalreminder.ca/podcast/316
Books From Today’s Episode:
The Interpretation of Financial Statements — https://www.amazon.com/dp/0887309135
Papers From Today’s Episode:
‘Long-Term Shareholder Returns: Evidence from 64,000 Global Stocks’ — https://doi.org/10.1080/0015198X.2023.2188870
‘Long-Run Stock Market Returns: Probabilities of Big Gains and Post-Event Returns’ — https://dx.doi.org/10.2139/ssrn.3873010
‘Prudential Uncertainty Causes Time-Varying Risk Premiums’ — https://dx.doi.org/10.2139/ssrn.2176896
‘A Five-Factor Asset Pricing Model’ — https://dx.doi.org/10.2139/ssrn.2287202
‘Do Institutional Investors Exacerbate Managerial Myopia?’ — https://doi.org/10.1016/S0929-1199(00)00005-5
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There are many different considerations behind housing when you are in the position to choose between renting or buying. During this episode, hosted by Ben Felix and Dan Bortolotti, we address user questions and comments on homeownership, rentals, and the factors that may lead to choosing one over the other. We discuss what makes homeownership more attractive as your financial situation evolves, consider whether or not landlords are making money on their properties in 2024, and explore the explanations behind whether or not renters are less wealthy than owners. This conversation also touches on one of the most common misconceptions about housing, why it is untrue, and how to make this key decision of renting or buying based on both lifestyle and financial considerations and the difference in mindset between renters and buyers. Join us today to hear all this and more.
Key Points From This Episode:
(0:02:06) Homeownership versus renting with renovations and rental evictions in mind.
(0:08:40) Understanding the risks and rewards associated with securitive tenure.
(0:10:09) Factors that may influence changing needs that may influence whether you rent or buy.
(0:15:58) Three factors that one user would include in an argument of renting versus buying.
(0:18:25) Addressing the idea that it is equally expensive for a family or landlord to own a home.
(0:21:00) How the cost of homeownership evolves with time and other factors.
(0:24:50) Why owning a home is not above and beyond better than renting or owning with a mortgage.
(0:27:50) Understanding factors beyond financial considerations when it comes to renting versus owning.
(0:34:10) The difference in mindset between homeowners and renters and the benefits of both.
(0:38:10) Why it is so beneficial to be open-minded and add to conversations rather than rejecting other people’s ideas.
(0:40:25) Ben tells the story from the start of his career and Dan shares his experience of feedback on the Canadian Couch Potato blog.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://pwlcapital.com/our-team/?team-search=benjamin+felixBenjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/
Canadian Couch Potato — https://canadiancouchpotato.com/blog/
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Have you ever wondered how financial markets performed centuries ago or how world events impacted stock prices? Today, we sit down with Dr. Bryan Taylor, President and Chief Economist at Global Financial Data, to unpack the world’s fascinating financial history. Dr. Taylor is known for his extensive work in collecting and analyzing historical financial data that spans several centuries and his valuable knowledge of stock, bond, and commodity market trends, which led to the creation of Global Financial Data. In our conversation, Dr. Taylor shares insights from his extensive research, covering stock and bond returns from as far back as the 1600s. From the impact of the French Revolution on financial markets to the performance of commodities, Dr. Taylor provides a rare view of the long-term trends shaping today’s financial decisions. Learn about the value of historical financial data, its importance for investment decision-making, and how long-term trends can provide insights into future market behaviour. We discuss the creation of Global Financial Data's extensive historical financial database, the challenges of gathering centuries-old data, and the long-term performance of stocks versus bonds. Explore the impact of major geopolitical events on financial markets, the importance of studying historical market trends for modern investment decisions, and how his data-driven research has been utilized. Join us as we delve into the world’s financial history and its relevance to today’s investment landscape with Dr. Bryan Taylor. Tune in now!
Key Points From This Episode:
(0:03:41) Background about Global Financial Data, their data sources, and the challenges of collecting historical data.
(0:09:27) What he finds fascinating about historical data, who uses the database, and the role of historical data in financial decision-making.
(0:14:49) How stocks have performed relative to bonds throughout the financial records.
(0:17:34) Uncover the main historical factors that limit returns and increase risk for investors and the five financial eras.
(0:23:18) Explore the trends in stocks and bonds during the five financial eras and the impact of government debt and inflation on returns.
(0:29:04) Common characteristics of countries that have had bad long-term market outcomes and the effect of world events on markets.
(0:35:11) Learn about the best and worst-performing markets and what makes the US market so resilient.
(0:38:36) His outlook for stocks and bonds and how the recent bear market compared to past market upheavals.
(0:41:36) Compare past and current interest rates and the return on commodities versus stocks and bonds.
(0:46:20) Overcoming the lack of historical data for emerging market returns and what defines an emerging market.
(0:52:29) Find out how emerging markets have performed throughout history and how often they make the transition to developed.
(0:59:04) Unpack the historical market concentration in the US and his thoughts on the expected returns of the US stock market.
(1:03:42) Final takeaways and Dr. Bryan Taylor shares his definition of success.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPDr. Bryan Taylor — https://www.linkedin.com/in/bryan-taylor-46a92032/
Global Financial Data — https://globalfinancialdata.com/
Dr. Bryan Taylor on SSRN — https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=4320002
Papers From Today’s Episode:
‘France and the Four Horsemen of the Market’ — https://globalfinancialdata.com/france-and-the-four-horsemen-of-the-market
‘The Financial History of Emerging Markets: New Indices’ — https://dx.doi.org/10.2139/ssrn.4193062
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Is renting just “throwing money away,” or could it be the smarter financial choice? In this episode, we dive deep into one of the most debated topics in personal finance: renting versus owning a home. In our conversation, we discuss the nuances of renting versus owning, the hidden costs of buying a home, and the importance of saving discipline. Tuning in, you’ll discover how emotional biases may inflate real estate prices and how societal pressures influence housing decisions. Then, we shift our focus to a listener's question about interest rates and bonds. Dan explains how bond prices and yields work inversely and delves into the concept of bond duration. He also breaks down how long and short-term bonds react to interest rate changes and why the Bank of Canada’s influence on bond markets may not always be straightforward. Join us as we investigate the pros and cons of renting versus buying and how to leverage bonds effectively in a dynamic interest rate environment!
Key Points From This Episode:
(0:03:54) Exploring the common belief that owning a home is universally better.
(0:09:13) How buying and renting in Canada compares to other countries.
(0:10:58) Some of the inherent risks of renting versus buying in Canada.
(0:17:01) Methods to test how housing performed as an asset with examples.
(0:21:04) The importance of analyzing real data, and Ben presents his findings.
(0:31:03) How housing costs influence the financial outcome of renting versus owning.
(0:35:51) Ways that mortgages, housing costs, and forced savings affect wealth accumulation.
(0:47:34) Unpacking how maintenance costs serve as a proportion of the building value.
(0:52:45) Renting versus buying takeaways and the associated psychological factors.
(1:00:37) Dan’s take on whether long-term bonds can take advantage of falling interest rates.
(1:10:55) Insight into how various market-driven factors influence the long-term return on bonds.
(1:13:30) Aftershow: final takeaways, catch-up, news, and more.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPDan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310
Canadian Couch Potato — https://canadiancouchpotato.com/
Future Proof Conference — https://futureproofhq.com/
CMHC (Canada Mortgage and Housing Corporation) Rental Market Survey Data — https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-data/data-tables/rental-market/rental-market-report-data-tables
Episode 196: Sebastien Betermier — https://rationalreminder.ca/podcast/196
Episode 308: Dan Bortolotti — https://rationalreminder.ca/podcast/308
Statistics Canada — https://www.statcan.gc.ca/
Bank of Canada — https://www.bankofcanada.ca/
National Council of Real Estate Investment Fiduciaries (NCREIF) — https://www.ncreif.org/
REALTOR.ca — https://www.realtor.ca/
Kevin Prins — https://www.bmoetfs.ca/specialists/kevin-prins
BMO Canadian ETF — https://www.bmoetfs.ca/
Financial Planning Association of Canada — https://www.fpassociation.ca/
Papers From Today’s Episode:
‘Assessing High House Prices: Bubbles, Fundamentals and Misperceptions’ — https://www.aeaweb.org/articles?id=10.1257/089533005775196769&ref=josephnoelwalker.com
‘Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise?’ — https://doi.org/10.1111/j.1540-6229.2011.00321.x
‘Perception of House Price Risk and Homeownership’ — https://www.nber.org/papers/w25090
‘Owner-Occupied Housing as a Hedge Against Rent Risk’ — https://doi.org/10.1093/qje/120.2.763
‘To Rent or Buy? A 30-Year Perspective’ — https://www.financialplanningassociation.org/article/journal/MAY18-rent-or-buy-30-year-perspective
‘Are Renters Being Left Behind?: Homeownership and Wealth Accumulation in Canadian Cities’ — http://hdl.handle.net/2429/50413
‘The Life-Cycle Effects of House Price Changes’ — https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2005/wp05-7.pdf
‘Depreciation of Housing Capital, Maintenance, and House Price Inflation: Estimates From a Repeat Sales Model’ — https://doi.org/10.1016/j.jue.2006.07.007
‘Characteristics of Depreciation in Commercial and Multifamily Property: An Investment Perspective’ — https://doi.org/10.1111/1540-6229.12156
‘Homeownership and Psychological Resources Among Older Adults: Do Gender and Mortgage Status Moderate Homeownership Effects?’ — https://doi.org/10.1177/08982643211029174
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Can we really understand the impact of passive ownership on the US market? Marco Sammon is an Assistant Professor in the Finance Unit at Harvard Business School. During this episode, he joins us to share deep insights into the complex and counter-intuitive nature of the index fund revolution. To kick off our conversation, we discuss some of the challenges associated with getting a true understanding of the scope of passive ownership across the US. Distinguishing between different approaches to investment, we begin to unpack Marco’s paper with Alex Chinco, titled ‘The Passive-Ownership Share Is Double What You Think It Is’. We touch on the relevance of Grossman Stiglitz in 2024, pricing and reconstitution, and the ins and outs of employee stock and compensation. Using the case studies of huge global firms, we consider how to best accommodate passive demand. Lastly, as an index investor who does not own index funds, Marco shares his opinion on whether index funds have had a net positive or negative impact on financial markets. Tune in today to get a more dynamic view of the complex world of index funding and investment.
Key Points From This Episode:
(0:00:45) Index funds, index and passive investments, and why Professor Marco Sammon is perfectly positioned to unpack these concepts.
(0:03:36) The challenges of understanding just how big passive ownership is in the US market.
(0:08:16) Distinguishing between partial investment, direct investment and passive funds.
(0:10:14) Important concepts on the closing auction and which indexes Marco focuses on.
(0:15:50) Defining the Grossman-Stiglitz framework and its validity in 2024.
(0:20:36) Evolving ideas around pricing and reconstitution over time.
(0:23:05) Why indexing is a fixed-point problem and how to measure market efficiency.
(0:32:19) Nuances of security demands around indexing and how it differs from other investors.
(0:38:02) Employee compensation and reverse causality as illustrated by Marco’s friend.
(0:42:10) Why it is important to distinguish between equal-weighted and value-weighted.
(0:44:13) How huge firms like Facebook and Tesla accommodate passive demand.
(0:48:19) Conditions that affect the responsiveness of firms in accommodating passive demand.
(0:51:13) The ‘Dead Reckoning’ metaphor to describe how we can know who is clearing the market.
(01:02:22) Marco’s thoughts on whether index funds have had a net positive or negative impact.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Marco Sammon — https://marcosammon.com/
Marco Sammon on X — https://x.com/mcsammon19
Episode 302: Michael Green — https://rationalreminder.ca/podcast/302
Papers From Today’s Episode:
‘The Passive-Ownership Share Is Double What You Think It Is’ — https://www.hbs.edu/ris/Publication%20Files/double-what-you-think-it-is%20may%2023_3c1ae213-5aec-407d-b656-13e3822f0b8b.pdf
‘On the Impossibility of Informationally Efficient Markets’ — http://www.dklevine.com/archive/refs41908.pdf‘Capital Asset Prices With and Without Negative Holding’ — https://ideas.repec.org/p/ris/nobelp/1990_003.html
Do Demand Curves for Stock Slope Down? — https://www.jstor.org/stable/2328486/
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How can the Rational Reminder Podcast get even better? By bringing back one of its most beloved voices, Dan Bortolotti, also known as "The Spud." In this exciting episode, hosts Ben Felix, Cameron Passmore, and Mark McGrath announce that Dan, the mind behind the Canadian Couch Potato Podcast, will now be a regular guest, contributing segments like "Bad Investment Advice" or "Ask the Spud.” Before Dan joins the conversation, we have an insightful discussion with Håkon Kavli, CIO of Reitan Kapital. Håkon shares how his team manages the wealth of one of Norway’s most prominent families, comparable to Canada’s Weston family. We discuss Reitan Kapital’s evidence-based investing approach, their robust methods for overcoming portfolio optimization challenges, and much more. Håkon also sheds light on their upcoming investing conference in Norway, featuring speakers like our very own, Cameron Passmore, and Marcos López de Prado. Following this, Dan kicks off his return by dissecting an article that advocates going all-in on the QQQ ETF in an RRSP, exposing the dangers of such a concentrated and risky strategy. He contrasts this approach with the wisdom of diversifying across global markets, using examples like Vanguard’s VEQT ETF, which offers exposure to over 13,000 stocks worldwide. Additionally, if you’re a financial advisor interested in joining a planning-focused, fiduciary firm like PWL Capital, we encourage you to reach out. Our team is growing, and we’re looking for like-minded individuals to join our mission. Tune in for a rich mix of expert advice, thoughtful discussions, and exciting announcements!
Key Points From This Episode:(0:00:28) Announcements: a new regular guest, PWL’s call for like-minded advisors, and more.
(0:04:15) Introducing Håkon Kavli, the Reitan family, and the origins of Reitan Kapital.
(0:08:06) Reitan Kapital’s investment philosophy and asset allocation strategy.
(0:10:29) The biggest differences between a Reitan Kapital portfolio and a market portfolio.
(0:13:19) Capital market assumptions; how they influence Reitan Kapital's investment process.
(0:20:38) Portfolio optimization challenges and Reitan’s robust methods for addressing these.
(0:35:06) The role of private equity in a diversified portfolio and how it differs from public equity.
(0:38:40) Fee structure significance in private equity investments and their impact on returns.
(0:40:38) Risks associated with private equity and how they compare to public markets.
(0:43:36) Reitan Kapital’s view on how private equity fits into a diversified portfolio.
(0:49:08) Challenges of investing in private equity for retail investors.
(0:50:26) Why so many institutions and firms have substantial allocations to private markets.
(0:53:58) An overview of the research Håkon is most excited about.
(0:56:20) Details for the upcoming conference in Norway, featuring Cameron Passmore.
(0:59:16) Dan’s Bad Investment Advice segment; going all-in on the QQQ ETF in an RRSP.
(01:13:12) Our aftershow segment: listener feedback, our next meetup in Ottawa, a shoutout to Jason Pereira, and more.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPDan Bortolotti — https://www.canadianmoneysaver.ca/authors/dan-bortolotti
Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/
Canadian Couch Potato Blog — https://canadiancouchpotato.com/
Canadian Couch Potato Podcast — https://canadiancouchpotato.com/podcast/
Episode 308: Dan Bortolotti — https://rationalreminder.ca/podcast/308
Håkon Kavli on LinkedIn — https://www.linkedin.com/in/haakonkavli/
Reitan — https://reitan.no/noReitan Kapital — http://www.reitankapital.no/
Weston — https://www.weston.ca/en/Home.aspx
Marcos Lopez de Prado — https://www.orie.cornell.edu/faculty-directory/marcos-lopez-de-prado
Antti Ilmanen — https://www.aqr.com/About-Us/OurFirm/Antti-Ilmanen
Episode 224: Prof. Scott Cederburg — https://rationalreminder.ca/podcast/224
Sharpe ratio — https://www.investopedia.com/terms/s/sharperatio.aspEpisode 210: Prof. Ludovic Phalippou — https://rationalreminder.ca/podcast/210
Reitan Kapital Conference —
‘An interesting RRSP idea – all in on QQQ?’ — https://www.tawcan.com/all-in-on-qqq/VEQT Vanguard All-Equity ETF Portfolio — https://www.vanguard.ca/en/investor/products/products-group/etfs/VEQT
Mark Mid Graph on X —
Jason Pereira — https://jasonpereira.ca/
Papers From Today’s Episode:
‘Estimating Private Equity Returns from Limited Partner Cash Flows’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2356553
‘Mutual Fund Flows and Performance in Rational Markets’ — https://www.nber.org/papers/w9275
‘What are Stock Investors' Actual Historical Returns? Evidence from Dollar-Weighted Returns’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=544142 -
Have you ever wondered how vibes can shape the economy? Or how the economy differs from financial markets? Or even how meme stocks operate? In this episode, we dive into the intersection of economic theory, social media, and public sentiment with Kyla Scanlon, an insightful economic commentator known for her relatable approach to explaining complex economic concepts. Kyla is a prolific content creator and founder of the financial education company, Bread. She produces a weekly newsletter, informative YouTube videos, the Let’s Appreciate Podcast, and (almost) daily short-form videos that break down complex economic concepts into engaging, bite-sized content. She’s also the author of In This Economy?: How Money & Markets Really Work, an indispensable guide to the “mad math and terrible terminology” of economics. Join us as we explore her unique vibecession concept, discuss the impact of social media-driven market movements, examine the housing crisis through the lens of generational wealth transfer and zoning laws, and much more. As Kyla explains it, economics isn't just about numbers. It’s about the stories we tell and how they influence the world around us. For a fun, fascinating, and highly accessible look at the state of the economy today, don’t miss this conversation with one of the internet’s favorite financial educators!
Key Points From This Episode:
(0:03:19) Kyla’s definition of economics, who the main players are, and how it's understood.
(0:05:04) How "vibes" influence the economy and intersect with economic theory and reality.
(0:07:07) Money, its impact on the economy, and whether GDP reflects economic health.
(0:09:45) Ways that expectations about inflation affect vibes in the economy.
(0:10:50) Kyla’s take on housing, what people get wrong about it, and renting versus owning.
(0:15:16) Surprisingly simple reasons for the housing crisis in the US and beyond.
(0:17:48) Key distinctions between financial markets, the economy, and the stock market.
(0:20:53) The difference between investing, speculating, and gambling.
(0:22:08) GameStop, meme stocks, and the power of social media.
(0:24:43) Reasons that “new era” thinking is dangerous and where crypto went wrong.
(0:29:49) How to know when we’re in a recession and what a “vibecession” is.
(0:33:52) Why US national debt isn’t always bad and why the Federal Reserve exists.
(0:39:43) Problems that can arise from strictly adhering to economic beliefs.
(0:42:53) Ways that the economy is connected to the mental health of individuals.
(0:45:10) The impact of social media and media business models on vibes.
(0:48:45) Kyla’s biggest learnings from her work and how she defines success.
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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPKyla Scanlon — https://kylascanlon.com/
In This Economy?: How Money & Markets Really Work — https://www.penguinrandomhouse.com/books/737854/in-this-economy-by-kyla-scanlon/
Let’s Appreciate Podcast — https://open.spotify.com/show/6ziXCBAojpLDKtexx8bxds
TLDR Podcast — https://wealthsimple-tldr-podcast.simplecast.com/
Kyla Scanlon Newsletter — https://kyla.substack.com/
Kyla Scanlon on LinkedIn — https://www.linkedin.com/in/kylascanlon/
Kyla Scanlon on YouTube — https://www.youtube.com/@KylaScanlon/
Kyla Scanlon on Instagram — https://www.instagram.com/kylascan/
Kyla Scanlon on TikTok — https://www.tiktok.com/@kylascan
Kyla Scanlon on X — https://x.com/kylascan
‘The Vibecession: The Self-Fulfilling Prophecy’ — https://kyla.substack.com/p/the-vibecession-the-self-fulfilling
Federal Reserve DFA (Distributional Financial Accounts) Chart — https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/
Federal Reserve SLOOS Report — https://www.federalreserve.gov/data/sloos.htm
Michael Mauboussin — https://www.michaelmauboussin.com/
FedNow — https://www.frbservices.org/financial-services/fednow
National Bureau of Economic Research — https://www.nber.org/
Justin Wolfers on X — https://x.com/JustinWolfers
‘Why Gen Z is Rewriting the Rules of Work’ — https://www.fastcompany.com/90911399/kyla-scanlon-on-why-gen-z-is-redefining-the-concept-of-job-satisfaction
‘Loneliness as a "market opportunity”’ — https://youtu.be/UL9QiHYtajw
Journal of Economic Teaching Symposium on Economics Teaching (JETSET) — https://journalofeconomicsteaching.org/symposium/
Kyla’s Tweet about #JETSET24 — https://x.com/kylascan/status/1820242645672738938
Books From Today’s Episode:
The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing — https://www.amazon.com/dp/1422184234
Papers From Today’s Episode:
‘Why Do We Think That Inflation Expectations Matter for Inflation? (And Should We?)’ — https://www.federalreserve.gov/econres/feds/why-do-we-think-that-inflation-expectations-matter-for-Inflation-and-should-we.htm
‘Negativity drives online news consumption’ — https://www.researchgate.net/publication/369301406_Negativity_drives_online_news_consumption
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Which account should you choose, a registered retirement savings plan (RRSP) or a Tax-free savings account (TFSA)? This is one of the most common decisions that Canadians must make when it comes to investing, but it will also elicit some of the most passionate responses. RRSPs especially get a lot of undue skepticism, with some even labelling it as a scam. Today we take a deep dive into both of these savings accounts, exploring the downsides and benefits of each, and how to decide which account is right for you based on your savings goals. With the help of Conquest Planning, a specialized, in-depth modelling tool, we look at a range of scenarios incorporating different variables, like income and family size, and break down our analysis regarding the RRSP vs. TFSA decision for each scenario. We discuss key factors to consider, including the basic personal amount tax credit, which allows RRSPs to act as a tax flow-through, and the guaranteed income supplement (GIS), which can impact retirement planning. Our conversation also examines how to approach family size and longevity, as RRSPs become more advantageous with longer lifespans. Join us today to learn about the benefits and flexibility of each of these accounts, the surprising ways RRSPs often outperform TFSAs, and find out which one is right for you!
Key Points From This Episode:
(0:00:20) An introduction to the RRSP vs. TFSA debate.
(0:08:11) How we used the Conquest Planning tool and the scenarios we analyzed.
(0:10:34) Taxation and contribution considerations and strategies for RRSPs and TFSAs.
(0:20:11) An analysis of scenario one; $60,000 income and no children.
(0:22:38) Basic personal amount tax credit; how it allows RRSPs to act as a tax flow-through.(0:27:20) The Guaranteed Income Supplement (GIS) and its impact on RRSP vs. TFSA analysis in different scenarios.
(0:36:16) How GIS is tied to Old Age Security (OAS) payments.
(0:41:12) An analysis of scenario two; a couple with two children, and the impact of the Canada Child Benefit on RRSP vs. TFSA contributions.
(0:45:21) The impact of mortality and longevity on RRSP and TFSA in various scenarios.
(0:47:01) Main takeaways from today’s scenarios and the advice our hosts would give to different clients regarding TFSAs and RRSPs.
(0:50:50) Why RRSPs are of greater benefit if you live longer compared to TFSAs.
(0:52:13) Our aftershow section: listener feedback, what Ben is working on regarding renting versus buying, the zombie apocalypse, and more.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPBrady Plunkett on LinkedIn — https://www.linkedin.com/in/brady-plunkett-712489105/
Lukas Fleck on LinkedIn — https://www.linkedin.com/in/lukasfleck/
Flossing for your Finances, Personal Financial Strategies for Dentists — https://us06web.zoom.us/webinar/register/9017236574029/WN_7O_JdvejRhmh-_LleBNRmQ#/registration
Episode 317: Kevin Milligan — https://rationalreminder.ca/podcast/317Papers From Today’s Episode:
‘Tax Uncertainty and Retirement Savings Diversification’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2799288 -
If you’re in the Canada Pension Plan (CPP), then you won’t want to miss today’s conversation with Canada's Chief Actuary, Assia Billig. Assia’s knowledge of the CPP is extensive, having joined the Office of the Chief Actuary (OCA) in 2008, where she was involved in the preparation of statutory actuarial reports on the Canada Pension Plan and Old Age Security Program. She has served as Chief Actuary of the Government of Canada since 2019, and, before joining the OCA, she worked in private pension consulting. She is also a Fellow of the Society of Actuaries and the Canadian Institute of Actuaries. Assia joins us today for a deep dive into the most common questions about the Canada Pension Plan, from the inner workings of its financial components to the quality of governance that drives it. Discover the world-leading topics she and her team investigate, the immense power and research behind their analysis, and why the CPP is set to be sustainable for the next 75 years. We also discuss the concerns some people have about the CPP’s longevity, before examining how the actuarial report on the sustainability of the CPP, conducted every three years, reliably addresses this. If today’s conversation with Canada’s chief actuary does not instill confidence and pride in Canada’s investment in our collective retirement, then we don’t know what will! Tune in, to hear all of Assia’s keen insights and discover why she is unequivocally the best person to talk about the sustainability of the CPP.
Key Points From This Episode:
(0:00:18) Introducing today’s guest, Assia Billig and the Canada Pension Plan (CPP).
(0:04:53) What the main function of the Office of the Chief Actuary is.
(0:06:28) The independence of Assia’s office and the work that they do.
(0:07:09) Unpacking the main purpose of the actuarial report on the Canada Pension Plan.
(0:09:22) Changes that the report triggers to contribution or benefit rates.
(0:13:04) Main revenue sources for the CPP and how base CPP benefit payments are funded.
(0:14:56) Base CPP’s funded status and how funding differs for additional CPP.
(0:20:32) The sustainability of base and additional CPP and how sustainability is measured.
(0:23:22) Primary assumptions that go into sustainability analysis at the high level.
(0:27:31) Estimating expected returns for assets managed by CPP investments.
(0:30:37) The plan’s level of sensitivity to lower realized returns and other variables.
(0:35:22) How lower overall economic growth and inequality affect the plan’s sustainability.
(0:37:15) Measuring the impact of variables like climate change and other catastrophic events.
(0:43:01) When the minimum contribution rate exceeds the current legislated contribution rate.
(0:44:12) Assia’s response to people who are skeptical of the CPP's future sustainability.
Links From Today’s Episode:
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3pRational 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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminderRational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPAssia Billig — https://www.osfi-bsif.gc.ca/en/oca
Assia Billig on LinkedIn — https://www.linkedin.com/in/assia-billig-9b861587/?originalSubdomain=ca
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Today, we sit down with Professor Kevin Milligan to unpack the recent capital gain changes and the complexities of the Canadian tax system. Kevin Milligan is a Professor of Economics at the Vancouver School of Economics, University of British Columbia. He holds positions as a Scholar-in-Residence at the C.D. Howe Institute and a Research Associate at the National Bureau of Economic Research. A two-time recipient of the Purvis Prize, Professor Milligan’s work is recognized for its significant contributions to Canadian economic policy. His research focuses on public and labour economics, particularly concerning the economics of children and the elderly, along with tax and labour market policy issues. In our conversation, we dive deep into capital gains tax, the progressivity of the tax system, and the distribution of tax burdens among different income groups. We explore the intricate details of who bears the burden of corporate taxes, the impact of recent capital gains changes, and the intriguing relationship between income and longevity in Canada. Professor Milligan also shares insights from his research on longevity and the implications of tax policies on economic behaviour. Join us and uncover the truths about Canada's tax system, capital gains changes, and their profound impacts on Canadians. Tune in now!
Key Points From This Episode:
(0:07:20) Background about Professor Milligan and an outline of today’s topic.
(0:10:10) Complexities behind tax policy and recent capital gains changes in Canada.
(0:14:22) Distribution of tax rates in Canada and how progressive the tax system is.
(0:20:12) Analysis of how the Canadian tax system is applied to the top 1% of earners.
(0:22:28) The theory behind capital income and how it relates to personal income tax.
(0:26:40) Explanation of tax integration and how income tax accounts for corporate taxes.
(0:29:53) Impact of the capital gains tax changes and Canada’s overall tax progressivity.
(0:40:55) How the new capital gains inclusion rate affects integration for incorporated business.
(0:46:32) The interplay between corporate investment, capital taxation, and productivity.
(0:54:11) Historical changes in tax rates and the shift of average tax rates over time.
(0:57:14) His perspective on the increase of the capital gains inclusion rate in Canada.
(0:58:35) Explore the correlation between income levels and longevity in Canada.
(1:03:30) Geographic longevity differences and policy implications for longevity.
(1:07:55) Implications of longevity trends on personal financial planning.
(1:13:24) Takeaways from a past episode, an update on Mark’s book, and more.
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/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPProfessor Kevin Milligan — https://sites.google.com/view/kevin-milligan/home
Professor Kevin Milligan on X — https://x.com/kevinmilligan
The Vancouver School of Economics — https://economics.ubc.ca/
C.D. Howe Institute — https://www.cdhowe.org/
National Bureau of Economic Research — https://www.nber.org/
Canadian Tax Journal — https://www.ctf.ca/EN/EN/Publications/CTJ.aspx
Episode 316: Andrew Chen — https://rationalreminder.ca/podcast/316
Papers From Today’s Episode:
‘How Progressive is the Canadian Personal Income Tax? A Buffett Curve Analysis’ — https://utpjournals.press/doi/10.3138/cpp.2021-087
‘The Evolution of Longevity: Evidence from Canada’ — https://onlinelibrary.wiley.com/doi/10.1111/caje.12497
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Are you curious about the hidden factors driving your investment decisions? Today’s guest is Andrew Chen, a Principal Economist at the Federal Reserve Board who focuses on monetary policy and financial stability. Published in leading journals, his research informs key policy decisions and helps shape the Federal Reserve’s strategy for managing economic challenges effectively. In this episode, Andrew delves into the intricacies of meta-research and asset pricing, focusing on cross-sectional asset pricing predictors, replication, and out-of-sample performance in factor investing. We discuss the significance of open-source data and transparency, highlighting Andrew's creation of the Open Source Asset Pricing project, an indispensable and comprehensive dataset for asset pricing predictors. We also address the challenges of replicating financial studies, publication bias, data mining, and false discovery rates, with Andrew offering practical insights on how these factors impact financial research and investment decisions. For actionable insights that could refine your investment strategies and enhance your understanding of financial research, don’t miss this fascinating conversation!
Key Points From This Episode:
(0:03:43) What an asset pricing factor is and how it differs from a predictor.
(0:04:25) Three plausible explanations for why cross-sectional predictors exist.
(0:05:45) Insight into Andrew’s Open Source Asset Pricing project and why it’s so important.
(0:09:49) Where the results of his research diverge from other papers on the subject.
(0:11:42) How the returns on anomalies in his data sample change post-publication.
(0:12:33) Implications of this research for the “replication crisis” in cross-sectional asset pricing.
(0:14:14) Challenges of false discovery rates, publication bias, and out-of-sample returns.
(0:18:37) The effect of transaction costs on expected returns from factor investing.
(0:22:02) Problems with estimating factor expected returns using historical data.
(0:26:08) A big-picture view of the factors with the strongest investable expected returns.
(0:29:12) The relative value of peer-reviewed factors with strong theoretical underpinnings.
(0:35:13) Whether or not machine learning can be useful for asset pricing research.
(0:37:39) Practical advice for using financial research to inform your investment decisions.
(0:40:08) Andrew’s take on the current state of cross-sectional asset pricing.
(0:42:58) The simple way that Andrew defines success for himself.
Links From Today’s Episode:
Rational Reminder on Apple Podcasts — https://podcasts.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/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/@rationalreminder/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFPAndrew Chen — https://sites.google.com/site/chenandrewy/
Federal Reserve Board — https://www.federalreserve.gov/
Andrew Chen on LinkedIn — https://www.linkedin.com/in/andrew-chen-63394169/
Andrew Chen on X — https://x.com/achenfinance
Open Source Asset Pricing Project — https://www.openassetpricing.com/
Center for Research in Security Prices — https://www.crsp.org/
Books From Today’s Episode:
The Adaptive Markets Hypothesis: An Evolutionary Approach to Understanding Financial System Dynamics — https://www.amazon.com/dp/0199681147
Papers From Today’s Episode:
Andrew Chen, Tom Zimmermann, ’Open Source Cross-Sectional Asset Pricing’— https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3604626
Kewei Hou, Chen Xue, Lu Zhang, ’Replicating Anomalies’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3275496
R. David McLean, Jeffrey Pontiff, ’Does Academic Research Destroy Stock Return Predictability?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2156623
Ilia D. Dichev, ’Is the Risk of Bankruptcy a Systematic Risk?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=99868
Campbell R. Harvey, Yan Liu, Caroline Zhu, ‘…and the Cross-Section of Expected Returns’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2249314
Andrew Chen, Mihail Velikov, ‘Zeroing in on the Expected Returns of Anomalies’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3073681
Andrew Chen, Alejandro Lopez-Lira, Tom Zimmermann, ‘Does Peer-Reviewed Research Help Predict Stock Returns?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4308069
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During this episode, we welcome back Eduardo Repetto, Chief Investment Officer of Avantis Investors. In his leadership capacity, he directs research design and the implementation of strategies and oversees the investment team and marketing initiatives. Our conversation kicks off with Edoardo’s explanation of how Avantis systemizes active management before we dive into strategies for launching in Europe and beyond. He weighs in on the most significant capacity issues that people face today, offering solutions to tweak your approach. We touch on what makes Avantis strategies preferable for advisors and Eduardo shares his insights on the future of small-cap value strategies for emerging markets. We discuss short-term reversals, towing the line between growth and value and factors that should inform asset allocation before diving deeper into small-cap value in the US and Canada. Tune in today to hear more.
Key Points From This Episode:
(0:05:51) What sets Avantis Investors apart from other investment firms.
(0:09:26) Five strategies for launching in Europe starting with free and equity UCITS.
(0:14:00) Accessing UCITS and adapting strategies in accordance with currencies, geographical regulations and restrictions.
(0:22:49) The most significant capacity issue: an inability to invest cashflows.
(0:27:59) Feedback from the advisor community on why they are choosing Avantis strategies.
(0:32:43) Eduardo’s view on the future potential for the emerging markets small cap value strategy.
(0:35:58) Improvements and adaptations to portfolio implementation at Avantis since 2019.
(0:39:01) The controversial nature of short-term reversals and advice for investors thinking about growth and value.
(0:44:40) What should inform asset-allocation decision-making.
(0:45:46) The potential of expanding into a Canadian base.
(0:50:16) Mark’s thoughts on small-cap value in the US and Canada.
Quotes:
“We have to adapt to the regulatory framework. But the strategies are the same. We manage the strategies in the same way, with the same people, with the same philosophy.” — Eduardo Repetto (0:17:44)
“Just expand the offering. Anywhere we go, we do the same because that's the right thing to do. That's the right thing to help people that trust you on day one.” — Eduardo Repetto (0:21:52)
“So, if you think about our valuation, we are using today's profits as a proxy for future profits. Can you improve that proxy? Can you have something better to say, about not level, but changes in level?” — Eduardo Repetto (0:41:16)
Links From Today’s Episode:
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/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Eduardo Repetto on Linkedin — https://www.linkedin.com/in/eduardo-repetto-653231155/Avantis Investors — https://www.avantisinvestors.com/
Episode 313 — https://rationalreminder.ca/podcast/313
Econompic — https://econompicdata.blogspot.com/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP -
In this episode, we sit down with Professor Valentin Haddad to unpack the intricacies of market elasticity, passive investing, and the dynamic nature of financial markets. Valentin is an Associate Professor of Finance at UCLA Anderson School of Management and a research fellow for the National Bureau of Economic Research’s Asset Pricing Program. His research focuses on how financial institutions trade, and manage risk, and their impact on market prices and the broader economy. Notably, his work challenges traditional assumptions, such as the perceived safety of life insurance companies' investments in Treasuries. In our conversation, we delve into the impact of index funds on the market, stock market bubbles around the development of new technology, and the response of investment-grade corporate bonds to the COVID-19 crisis. Discover the definition of demand elasticity, strategic interaction, and how market elasticity has changed over time. Explore how he defines a market bubble, ways stock market bubbles are related to new technology, and how to measure the value of innovation. We also discuss the impact of COVID-19 on investment-grade corporate bonds, the Federal Reserve’s response, the implications for bond safety, and much more. Tune in and join us as we uncover the mess of the market with Professor Valentin Haddad!
Key Points From This Episode:
(0:03:10) The impact of passive investing on financial markets, what investors’ demand elasticity is, and the role of index funds.
(0:06:07) Learn about strategic interactions, their influence on financial markets, and how they react to rising passive investing.
(0:10:10) Why active investors’ options are limited in a passive investment landscape and how demand elasticities influence asset prices.
(0:13:05) How individual investor elasticities are related to aggregate market elasticity and the ways investor elasticity has changed.
(0:20:54) Large and small stock elasticity trends, the implications of his research for asset prices, and the relationship between elasticity and information.
(0:25:32) His opinion on a bubble in large stocks forming due to flows into index funds and how market bubbles drive innovation.
(0:29:31) Potential measures to address the issues with index funds and how individual investors should be reacting to the situation.
(0:34:46) Unpack how he defines a market bubble, measuring the value of innovation, and their effect on the value of technology.
(0:42:29) What his research findings mean for innovation policy and what to consider before investing in innovative companies.
(0:46:33) Insights from his paper examing the impact of COVID-19 on fixed-income and the different market reactions.
(0:53:40) Explore the Fed’s intervention during the pandemic, what effect it had, and the safety that bonds offer during a crisis.
Quotes:
“You choose how you trade based on how other people are trading. So, it's not really just what you like to do, but how you react to others in the market.” — Professor Valentin Haddad (0:06:40)
“If nobody's acquiring information, then markets are very inefficient. Then, you should step in, in a way. So, if everybody is becoming passive, there are more gains for being not passive.” — Professor Valentin Haddad (0:22:59)
“Speculation often comes with innovation.” — Professor Valentin Haddad (0:28:30)
“I think these concerns with passive investing are meaningful. I don't think it's quite yet the time for a very strong regulatory call. Regulators should keep track of this evolution.” — Professor Valentin Haddad (0:31:42)
“You can gain from bubbles, but at the end, the end of the bubble comes. The long-term gains of innovation are still there, but many people who partake in the bubble are going to suffer a lot.” — Professor Valentin Haddad (0:43:57)
Links From Today’s Episode:
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/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Professor Valentin Haddad — https://sites.google.com/site/valentinhaddadresearch/
Professor Valentin Haddad on LinkedIn — https://www.linkedin.com/in/valentin-haddad-0056843/
Professor Valentin Haddad Email — [email protected]
UCLA Anderson School of Management — https://www.anderson.ucla.edu/
National Bureau of Economic Research (NBER) — https://www.nber.org/
Episode 212: Prof. Ralph Koijen — https://rationalreminder.ca/podcast/212
Papers From Today’s Episode:
‘How Competitive is the Stock Market? Theory, Evidence from Portfolios, and Implications for the Rise of Passive Investing’ — https://dx.doi.org/10.2139/ssrn.3821263
‘Concentrated Ownership and Equilibrium Asset Prices’ — https://www.stern.nyu.edu/sites/default/files/assets/documents/Princeton- Haddad - Concentrated ownership.pdf
‘Bubbles and the Value of Innovation’ — https://drive.google.com/file/d/1tnvZ5L_zUcehn5hR720Nl1vtsTv4VgK0/view
‘When selling becomes viral: Disruptions in debt markets in the COVID-19 crisis and the Fed’s response’ — https://doi.org/10.1093/rfs/hhaa145
‘How Speculation Affects the Market and Outcome-Based Values of Innovation’ — https://ideas.repec.org/a/fip/fedreb/94686.html
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Low-cost index funds and digital tools have revolutionized wealth-building, making it easier than ever before to manage your own investment portfolio. However, additional support and expert advice can be critical to help you reach your financial goals, especially when facing complex financial decisions, feeling overwhelmed, or deciding to change your investment strategy. Today on the Rational Reminder Podcast, we discuss when it makes sense to hire a full-service financial advisor, whether or not every investor needs one, and how professional guidance can enhance your financial outcomes. You’ll find out how delegating your financial decision-making can not only boost your wealth but also improve your wellbeing, increase your peace of mind, and mitigate the impact of cognitive decline on your financial decisions as you age, plus so much more. For valuable insights that could transform your financial future, tune in today!
Key Points From This Episode:
(0:02:15) Why you would hire a financial advisor when DIY investing is so easy.
(0:06:35) The services that financial advisors offer and how you can benefit from them.
(0:10:09) What investor inertia is, how to overcome it, and what the trade-offs are.
(0:16:31) How delegating financial decision-making can improve wealth and wellbeing.
(0:18:16) Insight into the value of financial advice for retirement planning.
(0:22:17) Your Trusted Contact Person (TCP) and why they matter.
(0:23:05) Ways that financial literacy shapes demand and expectations for financial advice.
(0:24:21) Common reasons that people seek professional financial advice.
(0:26:22) How financial advisors act as a commitment device for good financial behaviours.
(0:27:47) Important considerations and questions to ask when hiring a financial advisor.
(0:32:43) Our after-show observations, feedback, banter, updates, and more!
Links From Today’s Episode:
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/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP‘Why Do Investors Hire Their Financial Advisor?’ — https://www.morningstar.com/financial-advisors/why-do-investors-hire-their-financial-advisor
‘Why Do Investors Keep Their Financial Advisors Around?’ — https://www.morningstar.com/financial-advisors/why-do-investors-keep-their-financial-advisors-around
Center for Fiduciary Excellence (CEFEX) — https://www.cefex.org/
Papers From Today’s Episode:
‘Time Is Money: Rational Life Cycle Inertia and the Delegation of Investment Management’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2350785
‘The Use and Value of Financial Advice for Retirement Planning’ — https://www.pm-research.com/content/iijretire/7/3/46
‘Professional Financial Advice and Subjective Well-Being’ — https://www.researchgate.net/publication/359635224
‘Smoking Hot Portfolios? Overtrading from Self-Control Failure’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3347625
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Discover the hidden underbelly of financial markets in today’s episode featuring Professor John M. Griffin, a leading forensic finance expert and the James A. Elkins Centennial Chair in Finance at McCombs School of Business at the University of Texas at Austin. Tuning in, you'll learn how forensic finance exposes illicit activities in crypto markets, revealing how entities like Tether (a cryptocurrency pegged to the US dollar) facilitate scams and money laundering. We also delve into the disturbing world of pig butchering scams, which have stolen more than $75 billion from victims globally, and how the victims of these scams have helped John study the flow of illicit funds in crypto markets. Find out how John uncovered massive fraud in the Paycheck Protection Program during the COVID-19 pandemic, and how this exposed the central role of fintech lenders and social networks in spreading fraud. We also discuss the importance of rigorous academic research and its practical implications in uncovering financial fraud, emphasizing the need for robust oversight and transparency in both emerging and traditional financial systems. Tune in for a thought-provoking discussion that challenges established practices and calls for greater scrutiny in financial systems!
Key Points From This Episode:
(0:05:23) An overview of John’s research, the definition of forensic finance, and what sets forensic finance research apart from more traditional finance papers.
(0:09:55) The economics of pig butchering scams and how the victims of these scams help John study the flow of illicit funds in crypto markets.
(0:14:42) How crypto exchanges fail to monitor for potential scammer activity.
(0:18:44) The role of so-called legitimate crypto exchanges in criminal activity; why Tether (a cryptocurrency pegged to the US dollar) is the most important cryptocurrency in scam activity.
(0:21:43) Unpacking the $75 billion figure in John and Kevin Mei’s paper on Pig Butchering and how it finances slavery; how this compares to fraud estimates from firms like Chainalysis.
(0:26:25) How the methods in John and Kevin’s paper can be used to improve the monitoring of crypto exchanges, and how the crypto community has responded to their paper.
(0:29:14) An overview of John’s paper on Tether with Amin Shams and how often fraud and misinformation are associated with asset price bubbles.(0:30:52) What Tether is, the difference between it being demand-driven or pulled, and supply-driven or pushed, and why Tether creators want to inflate the price of Bitcoin.
(0:34:46) Decentralization in the crypto space and why decentralized finance is a misnomer, how to test whether Tether is pushed or pulled, and investigating Tether’s relationship to Bitcoin.
(0:35:56) How to test whether Tether is pushed or pulled; investigating Tether’s relationship to Bitcoin and how it can be exploited by bad actors.
(0:42:05) Tether’s response to John’s paper and why he tries not to listen to nay-sayers with vested interests.
(0:46:10) John and his co-writers’ findings on the prevalence of fraud in the Paycheck Protection Program (PPP) during the COVID-19 pandemic.
(0:48:05) The role of fintech lenders and social networks in the propagation of PPP fraud and the impact PPP fraud had on real estate prices.
(0:56:07) Policy implications and recommendations for future financial relief efforts.
(0:59:47) John’s personal journey and his profound definition of success.
Links From Today’s Episode:
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/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Prof. John M. Griffin — https://www.mccombs.utexas.edu/faculty-and-research/faculty-directory/john-griffin/
Episode 260: Prof. James Choi: Practical Finance — https://rationalreminder.ca/podcast/260
Papers From Today’s Episode:
‘Is Bitcoin Really Un-Tethered?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066
‘How Do Crypto Flows Finance Slavery? The Economics of Pig Butchering’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4742235
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When witnessing the dramatic payouts of miracle trades, it's easy to be lured into thinking that your big score is just a few trades away. But as is evident in trading options for retail investors, it is neither quick, simple, nor easy to make guaranteed returns on your investments. In today's episode, Ben and Cam walk us through the many reasons why trading options is a losers’ game; especially for retail investors. Trading options is definitely today's hot topic and we unpack how the recent resurfacing of Roaring Kitty affirms how life-changing payouts are the exception rather than the rule. We dive deeper into trading options and their uses, the trading demographics of the current market, why trading options are an expensive choice for retail investors, and why people still choose to trade even when doing so at a loss. To end, Ben and Cam highlight the dangers of being a copycat and how social media adds fuel to the fire and we hear some heartwarming Rational Reminder Podcast reviews from a few of our dedicated listeners.
Key Points From This Episode:
(0:00:48) Why today's topic is widely discussed in the current financial climate.
(0:03:34) What we can learn from the resurfacing of Roaring Kitty.
(0:05:35) A brief background on stock options and their various uses and the current state of retail trading.
(0:08:13) Understanding the trading demographics at play in today's markets.
(0:10:24) Discussing why trading options are expensive for retail investors.
(0:12:35) Why people keep trading despite losing on average.
(0:16:16) Exploring the dangers of copying successful traders and the role of social media.
(0:17:17) The after show, headlined by inspirational Rational Reminder Podcast reviews from you, our dear listeners.
Links From Today’s Episode:
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/Rational Reminder Email — [email protected]
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Books From Today’s Episode:
Wealthier: The Investing Field Guide for Millennials — https://wealthierbook.com/
Papers From Today’s Episode:
‘Retail Trading in Options and the Rise of the Big Three Wholesalers’ — https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.13285
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There is a huge range of factors that can impact our investment decisions, whether we realize it or not, from our level of financial literacy to our political affiliations. This is borne out in research conducted by today’s guest Professor Antoinette Schoar, the Stewart C. Myers-Horn Family Professor of Finance at MIT Sloan. Today, Antoinette joins us to share her insights and challenge conventional wisdom on various topics from target date funds to cryptocurrencies. Tuning in, you’ll learn about the transformative impact of target date funds on investment behaviours and asset allocation, before delving into the subject of financial literacy and financial advisors. Antoinette also sheds light on the unique dynamics of crypto trading and breaks down why retail investors' strategies in crypto differ significantly from those in traditional markets. We also discuss the complexities of private equity and venture capital, focusing on why these asset classes might not be suitable for retail investors due to high barriers and risks. Our conversation also covers the critical role of regulation in maintaining market stability and protecting investors. Join us for a thought-provoking discussion that promises to deepen your understanding of financial markets and enhance your investment decisions!
Key Points From This Episode:
(0:00:18) An introduction to today's guest, Antoinette Schoar, and her extensive research.
(0:03:44) The rise of target date funds in the American retirement system: how it’s affected asset allocation and trading behaviour of retail investors.
(0:09:39) The impact of target date funds: how they have affected mutual fund flows, arbitrage opportunities, market efficiency, the elasticity of aggregate demand, and trend-chasing anomalies.
(0:16:48) The influence of individual beliefs, like political affiliation, on financial decision-making and portfolio adjustments, and how to counteract it.
(0:21:54) Perceptions of risk in housing investments: how this affects the rent versus buy decision, what changes people’s housing risk perceptions, and how to make better housing decisions.
(0:29:29) Findings from Antoinette’s study on financial advisors and their effectiveness at undoing bias in their prospective clients.
(0:33:51) How investors' prior beliefs affect their receptiveness to receiving financial advice and why better financial literacy is essential.
(0:41:38) What consumers need to know about advisor compensation structures and what they should look for when seeking out financial advice.
(0:47:05) How Antoinette’s students motivated her to research cryptocurrency and teach it.
(0:49:40) Antoinette’s insights on the applications of cryptocurrency and blockchain, and some of the surprising positive outcomes from the rise in cryptocurrency.
(0:52:13) The trading behaviours of retail investors in cryptocurrencies compared to traditional asset classes.
(0:57:30) An analysis of the Terra Luna collapse explaining the systemic issues and resulting financial impact on smaller investors.
(01:02:14) The broader implications of cryptocurrency trading and the need for regulatory oversight to protect investors.
(01:06:05) An overview of the challenges and risks of investing in private equity and venture capital for retail investors.
(01:11:56) Antoinette’s reflections on success, professional goals, and the broader impact of research on financial markets and investor behaviour.
Links From Today’s Episode:
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/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — [email protected]
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Antoinette Schoar — https://mitsloan.mit.edu/faculty/directory/antoinette-schoar
Monika Piazzesi — https://economics.stanford.edu/people/monika-piazzesi
Papers From Today’s Episode:
‘Belief Disagreement and Portfolio Choice’ — https://www.nber.org/papers/w25108
‘Credit Supply and House Prices: Evidence from Mortgage Market Segmentation’ — https://www.nber.org/papers/w17832
‘Retail Investors’ Contrarian Behavior Around News, Attention, and the Momentum Effect’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3544949
‘Anatomy of a Run: The Terra Luna Crash’ — https://www.nber.org/papers/w31160 - Näytä enemmän
