Episódios
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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 -
When robo-advisors first came onto the scene, they were pitched as an easy way to access index funds. These digital platforms provide algorithm-driven financial planning and investment services, with little to no human supervision, and typically use passive investment strategies. But while this technology has revolutionized access, not all robo-advisors are created equal. In today’s episode, Mark, Ben, and Cameron sit down to discuss the role of robo-advisors as passive investors, and the performance disparity in robo-advisor returns, as they investigate different robo-advisors, from Wealthsimple to Wealthfront. Next, in this week’s version of ‘Would you rather?’, we have robo-advisors pairing off against active bank mutual funds, with each of our hosts debating the pros and cons of these two approaches. For our aftershow section, we discuss listener feedback, interesting community discussions, Ben’s addiction to Excel, and much more. Tune in for a deep dive into robo-advisors and how to navigate this technology!
Key Points From This Episode:
(0:04:20) The history of robo-advisors and how they are used today.
(0:08:30) Why there is such a marked dispersion among robo-advisor portfolios; an overview of Wealthsimple’s portfolios and the changes they’ve made over time.
(0:16:00) Wealthsimple's investment returns, fees, and an attribution analysis.
(0:24:19) Why Wealthfront pulled value out of their factor-tilted portfolios in 2022.
(0:26:13) PWL’s investment approach and why no strategy is truly passive.
(0:30:43) What the average investor needs to understand when using a robo-advisor.
(0:32:02) Wealthsimple’s value proposition and why people are drawn to it.
(0:33:33) Our ‘Would You Rather?’ Question: Would you rather put all your money with a robo-advisor or in a big bank actively managed mutual fund?
(0:40:30) The growth of passive investing vs active management in the financial industry.
(0:44:12) AI's impact on financial planning and an update on new calculators we’ve released.
(0:52:38) Aftershow section: listener feedback, community discussions, leasing versus buying vehicles, Ben’s addiction to modelling, 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
Wealthsimple — https://www.wealthsimple.com/en-caWealthfront — https://invest.wealthfront.com/
Rational Reminder Episode 308: Dan Bortolotti —
Episode 299: The Most Important Lessons in Investing — https://rationalreminder.ca/podcast/299The Money Scope Podcast — https://moneyscope.ca/
Episode 251: Covered Calls — https://rationalreminder.ca/podcast/251Ashleigh Madison: Sex, Lies & Scandal — https://www.netflix.com/za/title/81602884
—
Papers From Today’s Episode:
‘Are Banks Better Money Doctors?’ — https://www.researchgate.net/publication/377037694_Are_banks_better_money_doctors_An_analysis_of_mutual_fund_flows_of_bank_and_non-bank_funds_using_Canadian_data
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When it comes to DIY investing, there’s always a temptation to make things more complicated than they need to be. But, in reality, embracing simplicity is one of the best ways to ensure good investment outcomes. Today’s episode features an exceptional conversation with our long-time friend and colleague, Dan Bortolotti, who has worked alongside us as an Portfolio Manager at PWL Capital for over ten years. Some of our Canadian listeners might recognize Dan as the man behind the Canadian Couch Potato blog (one of the most popular resources for Canadian investors) and the voice behind the Canadian Couch Potato podcast. Dan is a consummate communicator, both on paper and in person; beyond his extensive blogging, he has also written a number of books, both fiction and non-fiction, the most recent of which includes Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs. Dan has played a pivotal role in making PWL Capital what it is today, and in this episode, we learn about his surprising journey to becoming an advisor, before hearing his wide-ranging insights on DIY investing. Dan breaks down key components for investors, from how to approach your asset allocation and picking index funds to navigating fees, taxes, and performance. We also discuss how the investing landscape has changed since Dan started writing and essential lessons he has learned over the years. To hear all about investing from the Canadian Couch Potato himself, be sure to tune in for this expansive conversation!
Key Points From This Episode:
(0:03:52) The origin story of the Canadian Couch Potato blog, by Dan Bortolotti.
(0:08:17) How the availability of index funds in Canada has changed since Dan started writing about them in 2010, and his role in the index fund revolution.
(0:10:01) Why Canadians have been slower to adopt index funds than Americans.
(0:12:09) How the model portfolios on his site have changed over time.
(0:14:20) Why simplicity is so important to a good investment outcome.
(0:16:38) The biggest obstacle Dan has observed when it comes to successful investing.
(0:19:40) Advice on how to approach decisions around stocks, bonds, and asset allocation.
(0:24:34) How to select the ideal ETF or index fund to express your asset allocation.
(0:27:22) Some of the ways that Dan’s views have changed since starting the Couch Potato portfolio, and the evolution of his blog.
(0:31:46) Why you should be clear on your financial goals before investing and the importance of saving rate relative to fees and performance.
(0:37:32) Understanding the value of financial advice if we consider investing to be effectively solved by low-cost ETF mutual funds.
(0:40:23) Why it’s so important to close the gap between providing a financial plan and implementing it.
(0:43:25) What surprised Dan about his clients during his transition from blogger to advisor, and what he has learned about earning his clients’s trust.
(0:48:22) Dan’s thoughts on how people should make the decision between DIY investing or hiring an advisor, and what people should look for in a financial advisor.
(0:55:46) The story of how Dan connected with PWL Capital and the key ways he has helped shape the company.
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://twitter.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://twitter.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://twitter.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Dan Bortolotti — https://www.pwlcapital.com/profile/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/
Larry Swedroe on LinkedIn — https://www.linkedin.com/in/larry-swedroe-18778267/
Larry Swedroe books on Amazon — https://www.amazon.com/Larry-E-Swedroe-Books/s?k=Larry+E.+Swedroe&rh=n%3A283155
Books From Today’s Episode:
Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs — https://www.amazon.ca/Reboot-Your-Portfolio-Successful-Investing/dp/1988344328
Wild Blue — https://www.amazon.com/Wild-Blue-Natural-History-Largest-ebook/dp/B005BP0E3W
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Are you confident about the amount of life insurance coverage you have? Are you maximizing your tax savings with the principal residence exemption? In this episode, we delve into life insurance and optimizing capital gains to answer these essential questions. In our conversation, we unpack the nuanced topic of life insurance, what people get wrong about it, and how to effectively calculate your life insurance policy needs. Using his own experience as the lens for the conversation, Mark shares how he calculated his life insurance and incorporated costs such as funeral cover, emergency funds, short-term expenses, and income replacement. Learn about using the safe withdrawal rate shortcut, free resources for calculating life insurance costs, and the best financial tools for getting the most out of your policy. He also delves into capital gains and how to use a lesser-known exemption to reduce the amount owed significantly. Mark walks listeners through how the principal residence exemption works and how it impacted the sale of his rental properties. Then, jumping to a brand new segment on the Rational Reminder Podcast, Ben introduces his financial decision-making iteration of the game of ‘Would you rather’. Finally, we share listener reviews and feedback on previous episodes and debate whether to lease or buy a car in our after-show segment. Tune in now!
Key Points From This Episode:
(0:03:13) Mark explains how he and his wife calculated their life insurance needs.
(0:06:55) Learn how to plan for income replacement and why it is so complicated.
(0:12:10) Ben’s perspective on Mark’s approach to calculating his life insurance coverage.
(0:13:54) Find out why there are differences between Ben and Mark’s calculations.
(0:18:17) How Mark factored in retirement costs into his life insurance calculations.
(0:22:30) Free resources and tips to accurately calculate your life insurance needs.
(0:27:04) Why Mark considers whole life insurance as a separate asset class.
(0:31:25) The principal residence exemption and how Mark applied it to his situation.
(0:39:19) How we would choose to invest $1 billion in today’s market.
(0:42:26) Would You Rather segment: only life insurance versus only disability insurance.
(0:45:02) The exciting development of a tool for realizing capital gains in a corporation.
(0:51:06) Trends in the awareness of corporate notional accounts and tax planning intricacies.
(0:54:12) Listener reviews, episode feedback, and leasing a car instead of buying.
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‘How Much Life Insurance Do You Need?’ — https://www.linkedin.com/pulse/how-much-life-insurance-do-you-need-mark-mcgrath-cfp-cim-clu--tjwwe/
InsureRight — https://www.insureright.ca/
Episode 65: Dr. Wendall Mascarenhas — https://rationalreminder.ca/podcast/65
Dimensional Fund Advisors — https://www.dimensional.com/
Money Scope Podcast — https://moneyscope.ca/
Braden Financial Services — https://www.bradenfinancialservices.com/
Hendry Warren on LinkedIn — https://www.linkedin.com/company/hendry-warren-llp/
Brady Plunkett on LinkedIn — https://www.linkedin.com/in/brady-plunkett-712489105/
Capital Gains Calculator for Non-Corporations — https://research-tools.pwlcapital.com/research/realize-gain
Episode 305 - Is Private Credit Special? — https://rationalreminder.libsyn.com/episode-305-is-private-credit-special
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Designing a robust portfolio requires considerable expertise, data, and experience. And while there are plenty of published articles that can guide how you build your portfolio, they are not investment solutions by themselves. Wei Dai is the Head of Investment Research and Vice President at Dimensional Fund Advisors, and she joins us today for a comprehensive and informative conversation on portfolio design for higher returns. Her background includes a Doctor of Philosophy degree in Statistics, Operations research, and Financial Engineering from Princeton. She has also earned a bachelor's degree in mathematics and applied mathematics from Zhejiang University. Her work has been published in multiple journals, including The Financial Analysts Journal. She has also collaborated on articles with esteemed figures such as Professor Robert C. Merton and Robert Novy-Marx. In our conversation with Wei, we explore the contents of these articles, key findings from research conducted by Dimensional Fund Advisors, and how they are implementing this knowledge in their portfolios. We discuss the fundamental aspects of portfolio design, like expected return, risk, and costs, with Wei providing a detailed breakdown of each subject. There’s a lot to be learned from today’s conversation, and while things get pretty technical, you are in very capable hands! Tune in for a fascinating dive into the latest research on portfolio design and much more.
Key Points From This Episode:
(0:03:37) The main risk premiums that Dimensional Fund Advisors target in their portfolios.
(0:05:42) How long-term drivers of returns vary across different regions: an overview of the tests and outcomes they’ve seen at Dimensional Fund Advisors.
(0:07:15) Unpacking whether the value premium differs from the profitability premium across regions; why it makes sense to be globally diversified.
(0:08:57) Typical approaches to a multi-premium strategy in a portfolio: a rundown of the three approaches they take at Dimensional and the trade-offs between each.
(0:13:44) How they evaluate portfolios at Dimenstional: the benefits of taking a holistic, integrated approach, and instances where that doesn’t make sense.
(0:17:24) Weighting schemes: Dimensional’s approach to assigning individual security weights to achieve the desired level of exposure and how investments factor into weights.
(0:26:46) Advice on how investors should decide whether to currency hedge their foreign asset exposures, and insights on how to approach currency hedging.
(0:30:42) Premium timing: Why timing exposure to premiums is so tempting; parameters that must be defined to implement timing strategies; and which strategies worked in their research.
(0:39:21) Valuation ratios: why it theoretically makes sense that they would be related to differences in expected returns and why they aren’t useful in timing premiums.
(0:42:11) An overview of the main implications for pursuing premiums that arise from Dimensional’s research.
(0:44:10) Diversification and how to improve your odds of capturing return premiums.
(0:46:38) The tradeoff between concentration and expected returns, and defining the optimal balance.
(0:49:06) What investors should look for when choosing a systematic investment manager, why not all systematic strategies are created equal, and Dimemsional’s approach.
(0:52:52) The downsides of performance fees, specifically for systematic managers and what it was like writing a paper with Robert Merton.
(0:57:41) How short-term reversals differ from momentum, ways that reversals are related to liquidity, and how reversals vary across different stocks.
(01:03:12) The ways that Dimensional is implementing this knowledge in their portfolios; how their ideas go from research to publication to implementation.
(01:08:18) What sets Dimensional apart, and the value that they add, despite their research being available online.
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://twitter.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://twitter.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://twitter.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Wei Dai on Linkedin — https://www.linkedin.com/in/wei-dai-64a3071a/
Wei Dai’s Academic Papers — https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2888456
Dimensional Fund Advisors — https://www.dimensional.com/
Episode 234: Prof. Robert C. Merton — https://rationalreminder.ca/podcast/234
Papers From Today’s Episode:
Assessing the Relative Magnitude of Premiums — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3981766
Pursuing Multiple Premiums: Combination vs. Integration — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3793594
Weighting for the Right One: Weighting Scheme Design for Systematic Equity Portfolios — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4016481
To Hedge or Not to Hedge: A Framework for Currency Hedging Decisions in Global Equity & Fixed Income Portfolios — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3703333
Another Look at Timing the Equity Premiums — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4586684
Premium Timing with Valuation Ratios
How Diversification Impacts Investment Outcomes: A Case Study on Global Large Caps
How Diversification Impacts the Reliability of Outcomes — https://carlsoncap.com/wp-content/uploads/DFA_-How-Diversification-Impacts-the-Reliability-of-Outcomes.pdf
On the Valuation of Performance Fees and Their Impact on Asset Managers’ Incentives — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3686987
Reversals and the returns to liquidity provision — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4339591
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Private credit is one of the fastest-growing asset classes, and today we take a closer look at why that is, and if it’s really worth the hype. When you invest in private credit, you are essentially lending money to borrowers who might have difficulty accessing loans elsewhere. While these assets may be profitable, they can also incur a lot of risk and typically come with illiquidity. It is traditionally traded among institutional and accredited investors, rather than retail investors, namely, non-professional investors. Since private credit has gained so much popularity in recent years, we use today’s conversation to unpack how private credit works, the role of private credit funds, the associated performance fees and risks, and what retail investors should know about this asset class before deciding to invest. Our conversation investigates one of the top reasons for private credit’s rise in popularity, namely risk-adjusted returns, before evaluating whether this is a worthwhile reason to invest, depending on who you are. Stay tuned for our after-show section where we discuss the proposed changes to the capital gains tax, why the death of value could be exaggerated, and more!
Key Points From This Episode:
(0:00:18) Today’s main topic, private credit, and our upcoming webinar on May 22nd.
(0:02:18) An introduction to private credit as an asset class.
(0:05:33) Private credit funds: how they work, interest rates, performance fees, and valuations.
(0:08:14) Who does valuations on private credit funds and related risks.
(0:10:01) Unpacking the underlying risks of private credit and how investors are compensated.
(0:11:02) Insights from the paper ‘Direct Lending Returns’ related to publicly listed business development companies (BDCs).
(0:16:15) Takeaways from the paper ‘Risk Adjusting the Returns of Private Debt Funds’.
(0:18:16) Private credit funds, equity exposure, how private credit gets misrepresented, and what investors need to know about high-fee investment products.
(0:25:09) Illiquidity and what retail investors can expect from private credit.
(0:30:15) Our aftershow segment, starting with the proposed changes to capital gains tax.
(0:33:55) Ben’s conversation with David Chilton.
(0:36:55) The value premium and why the death of value could be exaggerated.
(0:40:45) Unpacking the heated response to our conversation with Scott Galloway.
Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p
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://twitter.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://twitter.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://twitter.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://twitter.com/MarkMcGrathCFP
Webinar May 22nd: Optimal Compensation Strategies for Business Owners — https://us06web.zoom.us/webinar/register/3317145039436/WN_GYudVJCYSnyF8HfUx9UbJQ
Money Scope Episode 12 — https://moneyscope.ca/2024/04/19/episode-12-paying-yourself-as-a-canadian-business-owner/
Money Scope Episode 13 — https://moneyscope.ca/2024/04/26/episode-13-optimal-compensation-from-a-ccpc/
Rational Reminder Episode 220: Jonathan Berk and Jules van Binsbergen — https://rationalreminder.ca/podcast/220
Rational Reminder Episode 210: Ludovic Phalippou — https://rationalreminder.ca/podcast/210
David Chilton — https://thewealthybarber.com/
David Chilton on X — https://twitter.com/wealthy_barber?lang=en
Rational Reminder Episode 303: Scott Galloway — https://rationalreminder.ca/podcast/303
Books From Today’s Episode:
The Wealthy Barber: Everyone's Commonsense Guide to Becoming Financially Independent — https://www.amazon.com/Wealthy-Barber-Updated-3rd-Commonsense/dp/0761513116
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Papers From Today’s Episode:
‘Direct Lending Returns’ — https://rpc.cfainstitute.org/en/research/financial-analysts-journal/2023/direct-lending-returns
‘Risk Adjusting the Returns of Private Debt Funds’ — https://www.nber.org/papers/w32278
‘An Inconvenient Fact: Private Equity Returns & The Billionaire Factory’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3623820
‘Reports of Value’s Death May Be Greatly Exaggerated’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3488748
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The Canadian government has recently proposed significant changes to how capital gains are taxed, but how will this impact Canadians? In this episode, we delve into the proposed capital gains tax changes and their impact on financial planning. We unpack the definition of capital gains tax and the complexity of the proposed changes. Explore the historical trends of capital gains tax rates in Canada, how capital gains tax works, and who will be impacted by the proposed changes. We discuss the intricacies of the alternative minimum tax (AMT), its relevance to capital gains tax, and whether the old or new AMT rules apply to the upcoming changes. Gain insights into tax considerations for long-term investment strategies, the importance of tax diversification in mitigating risk, lifetime capital gains exemption, tax planning ramifications, and more! Although this episode is Canadian-focused, it offers many useful takeaways for non-Candaians as well. To gain a comprehensive understanding of the complexities surrounding capital gains tax and strategies to navigate the proposed changes effectively, tune in now!
Key Points From This Episode:
(0:00:00) Introduction and outline of today’s topic: proposed capital gains tax changes.
(0:03:07) Overview of the topic, what capital gains tax is, and the proposed changes.
(0:08:10) Historical trends in capital gains tax rates in Canada.
(0:10:59) Find out who will be impacted by the proposed changes.
(0:14:45) Advice on how to plan for the proposed changes with an example.
(0:17:13) Model results and we unpack the nuance of AMT (alternative minimum tax).
(0:25:35) How the changes to AMT impact the proposed capital gains tax changes.
(0:32:05) Whether the new or old AMT rules apply to the proposed capital gains changes.
(0:34:27) Important tax considerations for long-term investment strategies.
(0:36:30) Insights into why tax diversification is essential to reduce the tax rate risk.
(0:39:25) Interesting budget proposals and their tax planning implications.
(0:41:17) Our perspectives on the media response to the proposed tax changes.
(0:45:40) After-show: listeners’ reviews, upcoming guests, an update on Mark’s book, 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://twitter.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://twitter.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://twitter.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://twitter.com/MarkMcGrathCFPCapital Gains Calculator — https://research-tools.pwlcapital.com/research/realize-gain
Episode 224 — https://rationalreminder.ca/podcast/224
Episode 284 — https://rationalreminder.ca/podcast/284
Episode 299 — https://rationalreminder.ca/podcast/299
Episode 302 — https://rationalreminder.ca/podcast/302
Canadian Medical Association — https://www.cma.ca/
The Money Scope Podcast — https://moneyscope.ca/
The Most Important Lessons in Investing — https://www.youtube.com/watch?v=MOjS2zuQMdo
Dan Solin — https://danielsolin.com/
Compensation Strategies for Canadian Business Owners — https://www.pwlcapital.com/compensation-strategies-for-canadian-business-owners2/
Books From Today’s Episode:
The Wealthy Barber — https://www.amazon.com/Wealthy-Barber-Updated-3rd-Commonsense/dp/0761513116
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