The hype to invest in high-cap tech companies is deafening. In this episode, we share what you need to know before buying FANG company stocks. Although FANG is the popular term, our analysis includes Facebook, Apple, Amazon, Alphabet, Tesla, and Microsoft — so it’s closer to the less slick-sounding FAAATM. Before we dive into that, we talk about the show’s books of the week and how ETFs and mutual funds have been performing compared to July of 2019. We then set the scene for how FANG businesses fit into the market-place and how we measure their success by their size and relative price. As these are the companies that are changing the fabric of society, we discuss how it is fitting that companies like Apple represent a whopping 6% of the US market. To put this in historical context, we explore AT&T’s past and how market-share tends to reflect the level of innovation introduced by businesses. The upshot of this is that the huge market-share that FANG companies have carved out is not as new of a phenomenon as it may seem. We then unpack how stock prices are valued and the impact that expectation has on stock valuation and returns. After talking about why we might be overpaying for growth stocks, we commiserate over the pain of being a value-titled index investor at times when large-cap growth stocks dominate both the discussion and the marketplace. We round this section by touching on the US stocks’ performance compared to US treasury bills, whether you should be looking for the next Amazon, and why you need to quantitatively look at a company’s business quality. From FANG we jump into our planning topic of the week — a review of the withdrawal rules for the Registered Education Savings Plan (RESP). Near the end of the episode, we share some bad financial advice for the week courtesy of TMZ and the idea that you should start your portfolio with 100% gold. Tune in to hear more from the world of rational investing.

Key Points From This Episode:

• From Blackstone to Bloomberg, hear about the books of the week. [0:01:23]

• Why success is often driven by luck and not by ‘being the best.’ [0:06:19]

• Listener feedback on Assuris — the insurance industry’s insurer. [0:07:32]

• Comparing Canadian ETF and mutual fund performance from July 2019. [0:08:52]

• Introducing our investment topic; should you add FANG mega-caps to your portfolio? [0:12:37]

• Measuring the unreal success of the top FANG companies. [0:14:28]

• Contextualizing Apple’s market-share within US history. [0:16:44]

• Exploring AT&T’s history to unpacking flaws behind the ‘this time, it’s different’ line of thinking. [0:18:07]

• How developing life-changing technology can earn you high market share — until it doesn’t. [0:22:19]

• Understanding mega-cap stock prices and factors to consider before buying. [0:25:25]

• How high market expectations are linked to low stock returns. [0:27:59]

• The connection between paying low prices for higher stock returns. [0:31:04]

• Rational versus irrational views on high-growth stock prices. [0:32:13]

• The pain of being a value-tilted investor at times when large-cap growth stocks outperform. [0:35:36]

• How most US stocks trail underperform compared to US treasury bills whether you should be looking for the next Amazon. [0:37:43]

• Business quality and how the relative expensiveness of growth stocks is bigger than ever. [0:41:01]

• We dive into your planning topic on the Registered Education Savings Plan withdrawal rules. [0:45:12]

• What to consider before coming up with an RESP withdrawal strategy. [0:47:57]

• Our bad advice for the week; become the Wolf of Wall Street by reading TMZ and starting your portfolio with 100% gold. [0:51:01]

Read the Transcript:

Benjamin Felix: This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making for Canadians. We are hosted by me, Benjamin Felix and Cameron Passmore.

Cameron Passmore: Yeah, the duo is dressed in black, on black, on black this week. So we had new sweatshirts since, I have one of them on. You're wearing your black shirt, you got the black Rational Reminder sign behind you. And I got my black water bottles, so it's just a black look.

Benjamin Felix: Oh, it's more of a Rational Reminder look than it is the black one. There's a lot of dark-

Cameron Passmore: Even dark t-shirts. So yeah, and we had a serious dark storm roll through where I live, not where you are. You said it was beautiful down there. So you'll hear like to hear some thunder through this episode and you will also hear the power went out partway through, so there's a bit of a break there.

Benjamin Felix: I didn't hear the thunder at your house.

Cameron Passmore: You didn't hear it. Well, it was pretty loud. Anyways, I want to give a shout out to some recent kind reviewers. Very, very nice. So shout out to Daniel AF, WZ Life and Bin Yu Chen for some great reviews and feedback, so thank you very much. Anything else to add?

Benjamin Felix: No, I think that's good. I think we can go ahead and go to the episode.

Cameron Passmore: Let's fire it up and go over to it. It was a lot of good stuff so please enjoy episode 113... Okay, so let's get going with episode 113. A couple of books for you again this week, Ben, because I know you're looking for some more reading material. So lately, I've been getting a lot into auto-biography business books and had some great feedback from a number of listeners with some ideas. So I think I'm up to six book ideas from listeners, which I appreciate. If you have ideas how to get more time, that'd be also great, but for now we'll take that as some good ideas.

So number one is the Steve Schwarzman story. He's the founder of Blackstone. The book is called What It Takes. So Blackstone is a company that I found fascinating for a long time. So I wanted to understand him and learn more about the companies. So Blackstone is the largest alternative asset manager in the world. It's well-known, of course in our world, they are massive like $550 billion of assets, they are active in investment banking, real estate, private equity, hedge funds.

He does a very good job of telling his story. He used to work at Lehman for, I think, 12 years than him and his boss at the time left with $400,000 of their own money. I think at the time in Wall Street he was a pretty big deal. But I think he talks about how, when they went on their own, it was almost eerily quiet. They thought it'd be a lot easier to get it going than what it was. And he tells the story in great detail of how the deal started, how he put together the deals, how he convinced people to sell to him, and how he saw opportunities to do these large type deals. And here we are 35 odd years later, and they're $500 billion plus of assets and all kinds of different types of deals, hotels and storage.

It didn't really matter necessarily what the type of business was, but if he found interest in it and a way to buy the whole thing and turn it around and get some great returns, they would do it. He's also talked about, remember we talked about Sam Zell a couple of weeks ago. So Sam Zell was a very first person. I believe that came in to see them when they set up the company, how's that again for a small world. And then at the end of that, remember we talked about how they're the ones that bought Sam Zell's equity deal at the peak in 2007. So really enjoyed the book. He gets a little long on the stories, but I guess what would you expect from someone writes a book about themselves in business? I do recommend it though, interesting read.

Also interesting to know, I think a lot of people might be thinking what Blackstone BlackRock, which is the large asset manager, $7 trillion asset manager. So Blackstone actually owned part of BlackRock in the beginning, like 40% of it, but that's gone.

Benjamin Felix: I didn't know that, wow.

Cameron Passmore: So there's one book for you, the other one is Bloomberg by Bloomberg. So Michael Bloomberg, who I'm sure most people know about, wrote the book of his story. And his story started when he was terminated as a partner at Solomon's in the '80s. And he had a lot of money then. So he was a partner, so they merged he ended up getting bought out of the partnership for $10 million. So he was out of a job and had an idea that he can create something that would do data as he put it better than the competitors, so he believed because he was in the data business inside of Solomon's.

I mean, now, Bloomberg is of course about data. I mean they are the data provider on the street. So this is another really interesting story about how someone with a vision and a little bit at guts created a company. And he talks about how they got their first contract from Merrill Lynch and they were literally finishing the presentation, hoping the software would work, and the machine would work on the way to the Merrill Lynch office.

Benjamin Felix: Wild.

Cameron Passmore: It's a wild story. So currently estimated to have about $10 billion of annual revenue. Michael Bloomberg is estimated to be worth about $65 billion and still owns 80% of the company. Not crazy about the book. I would have liked to have more details about the deals and how he pulled it off much like what Steve Schwarzman described, but get this, at the end, he talks about being involved in two crashes. First was a helicopter crash off the coast in the middle of winter, near New York City, actually went down near an island in the water. Survived, obviously. Another one, he was in a small plane above Manhattan had to go back to, what's the name of the small airport near New York City. He was with his grandson I believe and they landed safely. But two near death incidents.

Benjamin Felix: I don't tend to read business biographies like that. You mentioned some of the advice in the book not being the best and the comment you just made at the end there about the luck of surviving those accidents almost puts a magnifying glass on why I don't read business books. It's like this stories of how outcomes happened are cool. Now I've got a book recommendation too, I guess. I don't know if I'm recommending it, but there was a book, and I never read the book, but there was a bunch of media that this guy did at the time. It was by a guy named Robert Frank and the book is called Success and Luck. It's not the full title, Success and Luck: Good Fortune and the Myth of Meritocracy. And it basically talks about how so much of the success that individuals have is driven by luck. So anytime that I've read like an amazing business story or bought a book from someone who has been very successful, it's always interesting as almost a curiosity, but in terms of gaining insight, I'm always skeptical.

Cameron Passmore: I couldn't agree more. I remember Gene Fama talking about that once where he said, "Look, this information was coming out. I happen to be the right guy, at the right time, and the right place, with the right technology to have furthered these discoveries, but it's not like I discovered this or created it." He discovered it, but he didn't create it. So it was coming regardless of if he was there or not. And you can say the same thing perhaps about Bloomberg. I mean, both of these names are just so huge in our industry, that's one of the reasons why I wanted to read them.

Benjamin Felix: And it doesn't take away from the story. The stories are still fascinating, I've just always had trouble sitting down and reading it because like, what are you get-

Cameron Passmore: Some information.

Benjamin Felix: Yeah. Sure, you do get information.

Cameron Passmore: Some listener feedback. Jason shared some comments regarding Assuris, the insurance industries, insurance we've talked about two weeks ago, so I thought I'd quickly pass this along. He added some information to help our listeners. So he wanted to highlight that Assuris was founded in 1990 and it was originally called CompCorp, which we knew, I just left it out of the description last time. The name was changed from CompCorp to Assuris in 2005. He says it was founded in response to the failure of the principal group in 1987. The insurance executives and the CLHIA realized that if they didn't form an industry association, that the government would likely force some sort of CDIC-type solution on them.

So in the list of insurance company failures that we mentioned, there's been one more in addition, Jason highlights on Assuris, it was a small Ontario incorporated insurer called the Union of Canada Life Insurance, which failed in 2012. They liquidated work with Assuris to select you UL Mutual as the successful purchaser. Another thing that we didn't highlight that I did not know is that fraternal benefits societies that sell insurance do not have to be members of Assuris. So the two best fraternals he describes in Canada are the Knights of Columbus Insurance and FaithLife Financial, formerly Lutheran Life, and neither are Assuris members.

Benjamin Felix: Two best, no, and not best. I don't think Jason was endorsing them.

Cameron Passmore: No, best, no.

Benjamin Felix: It's funny. I've seen those names a few times, like with new clients at PWL, seeing products from those guys, I would never have guessed that they were not included in Assuris.

Cameron Passmore: So shout out to Jason for sharing the information. In other news, I was looking over the ETF sales numbers for July. So net ETF sales in July were just over seven billion, July 2019 at 1.6 billion. So a pretty big jump over last year, and just about half of July sales going into bond ETFs, net fund sales were 3.4 billion, so less than half of ETF sales, and there were 3.9 billion, July 2019, with about two thirds going to fixed income funds. But in terms of how much are in each of these buckets now in total, so total ETF assets are about 231 billion, and mutual funds are still seven times bigger at 1.6 trillion.

Benjamin Felix: Unbelievably large, wow.

Cameron Passmore: Isn't that amazing.

Benjamin Felix: And this is all for Canada specifically.

Cameron Passmore: These are just Canadian products, that's right. So then I looked at our ETF providers in Canada, just to get a sense of how big are the big ones. So pretty easy to find that list. So BlackRock, of course, is the biggest with 73 billion. So remember, the total is 231 billion. So BlackRock has 73 billion, BMO with 67 billion, two and half times bigger than Vanguard at 27 billion in Canada.

Benjamin Felix: Vanguard was kind of late to Canada, right?

Cameron Passmore: They were late, certainly later. Not more later than BMO, I don't think. BMO, hats off, that's a lot of assets, as you'll see compared to others. So number four, Horizon's at 14 billion, number five CI First Asset at 10 billion, number six McKenzie at seven billion, number seven Invesco at four billion. So those three, I find interesting. See CI, McKenzie and Invesco. So Invesco used to be Trimark. It took over the Trimark brand a number of years ago when they bought Trimark, then they retired the brand in 2018 at the same time that they had retired the PowerShares brand.

So those three were big names back in the 90s in the mutual fund business when I started out, McKenzie, Trimark and CI were huge, so that's five, six and seven, but Invesco only has $4 billion in ETFs, Purpose, 4 billion, number nine RBC at 3 billion. But of course, RBC is a partnership with BlackRock, so I'm not sure that the distinction between that three billion number, one at 73 billion, Franklin Templeton, another big name from the '90s at two billion. And then this, I was surprised at number 11, TD comes in at 11 spot with just over three billion. And this afternoon, this week, our inboxes received a number of promotions promoting their new, what are they called? One click portfolios, which are ETFs that are combined of TD ETF index products as well as active products. But I was quite surprised that 11th spot is $3 billion, very small, and I'm not sure as viable at that level yet.

Benjamin Felix: You look at a lot of these companies, I mean, I've seen some McKenzie products. I've seen some Invesco products, CI First Asset, I've seen some of their products too, but I think across the board, there's a mix of, still very low fee, but relatively higher fee sort of niche type products. But then they're also trying to compete in the broad asset class, super low cost product. It doesn't make sense to me how that's viable for all of these guys.

Cameron Passmore: You needs so much scale when you're charging these low levels it's a scale game. I also think it's interesting to see those old names in here, but boy, you compare their revenue off these ETFs compared to the MERs of 2% and more back in the golden days, golden days for providers, not for investors. For providers.

Benjamin Felix: Yeah, it's kind of what I'm saying. Even the sort of actively managed, more expensive ETFs are going to be way, way cheaper than traditional actively managed mutual funds.

Cameron Passmore: Right, onto the investment topic.

Benjamin Felix: Sounds good. So we've been hearing a lot about mega caps, used to be FAANG with Netflix in there, but I think it's a FAAMG now, not as catchy, I don't think, but Microsoft replacing Netflix there. So you've got your Facebook, Apple, Amazon, Alphabet, which is Google, and Microsoft. So I guess that's FAAAM when you list it like that.

Cameron Passmore: It does come up a lot, and there's a ton of discussion about this on Twitter.

Benjamin Felix: Yeah. I mean it makes a lot of sense. And I think, even though Tesla's not one of the biggest five, like those Facebook, Apple, Amazon alphabet, Microsoft are the biggest five companies, and Tesla, as of Friday anyway, was number 15, I think, in the US. So it's still obviously way up there. In the list, I'm looking at a Morningstar director, a couple of ADRs in there for Alibaba and Tencent, so Tesla's bigger than 15, whatever that makes it, 11 or something, anyway.

Cameron Passmore: Just under $400 billion US market cap.

Benjamin Felix: In the numbers that I looked at for this, I lumped Tesla in there, just because even though it's not one of those biggest ones, it's one of the ones everybody's talking about. So if we take that group of stocks, so that's again, Facebook, Apple, Amazon, Alphabet, Microsoft and Tesla, over the last five years, so ending July 2020, the US markets returned 10.89% per year on average, which is phenomenal for any 10 year period. But that group of companies, the portfolio equal weighted of those companies has returned, on average per year, 31.46%, which is crazy. So in terms of ending wealth, that's two and a half times more if you had held that small group of stocks instead of holding the US market as a whole.

Cameron Passmore: Which of course now seems so obvious.

Benjamin Felix: Oh yeah, of course it does. And I think one of the tricky things about it too, is that when you look online, there are the small subset of people who have actually held those stocks and every now and then you see a post about it. I see that on Reddit often enough, and it makes everybody else think that they can repeat the same thing. So anyway, just to break it down in a broad context, like the Morningstar style box that people might be familiar with, the market can be sorted by size and relative price. So two dimensions of a sort. And when you do that, the smallest third of companies are small, the biggest third are large, the most expensive. And expensive could be in different things but if we could use price relative to book, price relative to earnings, the most expensive companies are growth companies and the cheapest companies, again, the most expensive third and the cheapest third, the cheapest third are our value. So growth are expensive companies, value are cheap companies.

So when we're talking about the FAAMG stocks, I mean, they're probably not even large cap, they're mega cap, the largest of the large cap and their growth stocks, because they've all got very high prices relative to basically any fundamental measure that you can use. Now, you mentioned Twitter. One of the things that I see on Twitter, or have been seeing on Twitter a lot, is not only the dominance in their returns recently, like how much of the market's return has come from these stocks, but also how much of the capitalization, how much do these guys make up of the stock market as a whole, which is, as of now, about 20% of the market cap. Which makes sense, I mean, these companies are literally changing the world, and how humans interact and operate and how the economy works, so it makes sense. I mean, Apple just crossed $2 trillion in valuation, that's unbelievable.

Cameron Passmore: 200 billion of cash.

Benjamin Felix: I remember when we were talking about the first trillion dollar valuation and now Apple is at 2 trillion.

Cameron Passmore: And I think the market cap has gone up six times since Steve jobs passed away. I think it was just under 400 billion, I believe, when he passed away.

Benjamin Felix: I believe you're correct, yeah. That actually makes Apple 6% of the US market today, which again, one company, 6% of the market seems pretty crazy.

Cameron Passmore: Until you look at Nortel in Canada in the late '90s.

Benjamin Felix: Well, until you look at market history in the US which is a bigger and more diverse market than Canada, nothing as extreme as, as Nortel, which for sure that is the most extreme. Maybe other countries have more extreme examples, I don't know. But when you look at the US, if you go back from 1927 through until now, if you look at the chart of how much the largest company made up of the overall market, until about 1979, it was pretty routine to have the biggest stock make up 6% or more of the market. And over that time period, it was really a rotation of General Motors, AT&T and IBM. AT&T for most of the time period, but GM and IBM had their turns in there. But over that time period, and I only have the chart, I don't have the actual raw data. So I can't say what the average is, but it's around 6%, over that time period. So Apple's size relative to the overall US market today is not that crazy relative to US market history.

Post 1979 though, the largest one stock in the US market has been smaller. So relative to more recent history, this is like, "Oh, wow, it's so big." But relative to the broader US market history, it's actually not abnormal at all.

Cameron Passmore: Interesting.

Benjamin Felix: Yeah. So I thought that was interesting. And then the data are pretty similar for the largest five and the largest 10 stocks relative to the market. So again that's one of the other things people keep talking about is how much of these biggest stocks make up of the market and how much they make up of the S&P 500 index. But again, when we step back and use the broader historical context, it's not a whole lot different, those largest five or largest 10 companies are making up about the same proportion of the market as they have in the past.

And in a lot of cases, historically, those largest companies have actually made up a lot more of the value of the market than they're making today. So nothing to see here, I guess. But that's only part of the argument or the dialogue that's going on out there, is that, "These companies are big. Okay. We've seen that before, but a lot of people are also saying that this time is different." And Cameron, we've talked about this in the podcast before a whole bunch of different ways, but I don't know, maybe this time this different line of thinking comes from how world changing and infinitely scalable the technologies that these companies are creating are.

So again, if we look back at history, if you just look at some of the companies that have been the biggest companies in the US market in the past, and then look at what they were doing at the time, in the context of what the world looked like then, companies like Facebook, for example, start to seem less revolutionary. For today, yes, they are. They're at the leading edge of how we communicate and network.

But if we look back, so in the 1930s AT&T that I mentioned was that it was the largest US company. If you look at the history of AT&T, so Alexander Graham Bell invented the telephone in 1876 and then created the Bell Telephone Company. So that's telephones that we use today still, which before that didn't exist. So that's kind of a big deal, I would say. The company changes names a couple of times, but the company that over the longterm was effectively AT&T. By 1885, a subsidiary had began to build out the telephone network. Now that's the telephone network, not a telephone network, not one of the telephone networks, but the telephone network, the only one.

It became a monopoly because competitors, I guess weren't able to start it up and create competing networks. So that became a bit of an issue, in the US they don't love their monopolies. So the justice department in 1913 kind of stepped in and nudged them a little bit. AT&T agreed to spin off Western Union. You look at the companies that come from what AT&T started as, you look at the companies that were sort of derived from that, and from the breakup, they did eventually get broken up for real. But yeah, a ton of companies that we know today came from what was then Bell Telephone Company, what started as Bell Telephone Company.

Anyway, so AT&T spins off Western union, and they allow other companies to use their long distance network, but they don't have to give it up, but they don't have to let other people in, and they also agreed not to acquire any of the independent telephone companies without government approval. So effectively, what that became was a government sanctioned check the box and you're good to go monopoly, which they operated with for decades. So this is 1930 and it was, I think, I didn't take note of the dates, but I think it was not until the '80s that they were actually broken.

Cameron Passmore: I remember when that happened, the regional Bells were all broken up.

Benjamin Felix: And so they were this massive company, well, the biggest company, except for a few instances where GM or IBM took their top spot. But for the most part, they were the biggest company, which makes sense, because they were changing the world, they were changing the way people communicate and they owned the network. It's like owning the internet, kind of, I don't know if that's actually a good comparison, maybe the internet is a little different/ But as an example, it's interesting. So when you compare what they were doing to what did it today's companies are doing, I don't know what have you gained from that, I think it's just an interesting example to think about. There were companies in the past that were doing things that were changing the world and those companies were commensurately valued as the most expensive companies in the market.

Cameron Passmore: It's interesting to think about the time though, which change is the bigger change to society, phones back then or Facebook today, it's a very fair question.

Benjamin Felix: Yeah. And cars, we've mentioned GM's name a few times. So General Motors, they created the electric car starter, they created airbags, they created the automatic vehicle transmission. So it's like, what does that mean to the world? A lot. In the end, it probably wasn't the best because I think we kind of are getting the idea that all those vehicle emissions probably weren't too good, but at the time, and even today, where would we be without vehicles? And even airplane engines, GM was big in that too. I think they sold that division in 2005, but for years they were pushing forward all this technology, that's literally changing the world, which earns them, that sort of top spot in the market. And keeping in mind that over these time periods that we're talking about, when these companies were the biggest companies, they were as big or bigger than Apple is now relative to other publicly listed companies at the time.

And again, you think about GE, they took the light bulb and turned it into a widely accessible technology, which they continue to innovate by the way. And they were one of the largest companies until pretty recently, one of the largest 10 companies. We've talked about three major companies. If you look at the start of 1930, so the start of the decade, the 10 largest companies at the time, we've already mentioned a bunch of them, but AT&T, General Motors, General Electric, Exxon, Marathon Oil, DuPont, Consolidated Edison, Philadelphia Company, New York Central Railroad, and Penn Central. So all those 10 companies together, at the start of 1930, they made up 26.8% of the US market. Currently today, the largest 10 companies make up about 25% of the US market by capitalization, so similar-ish.

But you think about all of the companies that I just named. And again, we've already kind of gone over this, but they're companies that have the types of technologies that, at the time, were changing the world. Now, those companies, so starting in 1930, those 10 largest companies, over the next 10 years, so decades starting in 1934, that decade, how do you think they did in terms of stock returns?

Cameron Passmore: And this is where you'll realize that I haven't read the notes ahead of time, this is all new to me as well. But I think along with the listeners, we're going to guess that they underperformed in the subsequent decade.

Benjamin Felix: Yeah. They trailed for the next decade. Now that wouldn't be that interesting if it were the only example where that happened. But if you look at each decade, starting in 1930 and going right through until 2010, so right through until the decade ending just now, 2020, the 10 largest companies at the start of each decade have made up, on average, 23.6% of the US stock market, which is about what it looks like today. And the average annual return of those 10 largest companies for the decade following has been an annualized, and this is relative to the market, not the absolute return, sorry, they've trailed the market by 1.51%, annualized for the decade on average.

Cameron Passmore: Wow. So what do you chalk that up to? Is it a behavior story? Is it a value story? Is it-

Benjamin Felix: Well, we know that these are typically going to be large cap growth companies. I don't have access to the data to figure out for what period of time with AT&T a growth company as opposed to a value company, so I don't know that for sure. But I think it's safe to say that over a lot of those periods, when a company has become the largest company in the market, or when it's cracked the top 10, there's a good chance that it's going to be a growth stock, which we know have lower expected returns, and we'll talk a little bit about the theory around why that is in a sec, but we also know they're the largest companies, and we know that large companies have lower expected returns than smaller companies. So those are two, what are today, well known factors that are working against the expected returns of those larger stocks.

They probably have high prices as they do today, as the largest companies do today. And even if they didn't, they're large companies. So those are two things that are working against them. When we think about the question of, "Is this time different? Is it different for these businesses?" I think it's really important to separate whether or not this time is different from the perspective of these businesses. Are these businesses going to continue to grow and scale like nothing we've ever seen before? That's a separate question from what are their stock returns going to be?

Cameron Passmore: Well, that's what I was thinking about. If you think about the start of those decades, the biggest companies, people that are investing in those companies, and this is something Ken French talked about in episode 100, they're looking forward to future earnings and doing a present value of those earnings. Is there something different going on? Why were those expectations be continued to be high? Why would you continue to expect higher than expected, unexpected returns above a normal return for that type of stock?

Benjamin Felix: That's a great way to describe it. So a stock's value, like you just said is theoretically, the discounted price that the market is willing to pay for expected future profits. And prices change day-to-day based on changes in those two things. We cannot know with certainty, and this is one of the challenges with figuring out whether asset pricing is rational or not. We can never know if price changes are driven by changes in the discount rate or changes in expectations about future profits, that's unknowable, differentiating the two is not possible. But there is a relationship, it's like if a stock's price goes up, one of those two things happen, the discount rate went down or the expected future profits went up. And the implications from a theoretical perspective on asset pricing are important. But like we said, we can't split them up. We can't say which was which.

Cameron Passmore: Or someone on the sell side made a mistake and sold it too cheap.

Benjamin Felix: Yeah. Which I would lump in with a pricing error. So even if these massive companies have competitive advantages from a business perspective that are only going to get stronger over time, these companies are only going to get bigger and more profitable over time for their stock returns. I'm basically just repeating what you said, Cameron. For their stock returns to continue to be as high as they've been in recent history over the last decade or whatever you want to use, last five years, 10 years, which has been crazy over both time periods. And you just said it, again, I'm just repeating what you said. They'd have to continue to deliver surprisingly strong financial results, not just meeting the expectations that the market currently has, which, by the way, are extremely high. If these companies go out and meet the currently high financial expectations that the market has for them, they should perform like the large cap growth asset class as a whole.

If they trail the expectations, we'd expect the prices to drop. And we'll talk more about that in a minute. But one of the theories about why large cap growth stocks, well growth stocks, actually, is what the theory talks about, why growth stocks tend to have lower returns than value stocks, the sort of non rational behavioral side of the theory is that their prices get bid up too high, and that there's eventually a correction, which leads to their prices to become more reasonable, but it also hurts investor returns. That's all really important, understanding that the market has very high expectations for these companies. And if they meet those expectations, which would be phenomenal because the prices are so high, for these companies to actually deliver on those financial results that are currently in the price, that would be a feat in itself.

Cameron Passmore: Let alone surprise to the upside.

Benjamin Felix: That's the key they have to surprise to the upside for their stock returns to be phenomenal. They can have phenomenal business results, but that's already included in their high prices. That's all really fundamental to understanding whether or not, or why these companies have not historically been good investments.

Obviously, that last piece that, "Are they going to meet expectations or are they going to give us a surprise?" That's unknowable, that's the gamble, that's the random outcome. It's not a priced risk we like to talk about wanting to take. So if we tie all this back to asset pricing theory and where do expected returns come from, it's all about how much you pay for expected future profits. If you pay a lot for expected future profits, you have lower expected returns. I think that's fairly intuitive. When you look at the data, so just take an empirical view for a second, in the US from full period of US data that we have from, July 1926 through June 2020, the Fama/French US value research index. So that's a US total market value index had beaten the Fama/French US large growth research index by an annualized 2.42% in US dollar terms. Now, I did not take note of what that would mean in terms of the difference in ending wealth over that time period, but it would be massive, massive.

Cameron Passmore: No doubt.

Benjamin Felix: Now that's a simple example that I just pulled from index returns, but in a more sort of academic sense, there's the 1985 paper in the journal of portfolio management by Barr Rosenberg, Kenneth Reid, and Ronald Lanstein, which actually ended up being the basis for the Fama/French cross-section of expected stock returns paper. So they documented, for the first time, that there is a relationship between low prices and higher average returns for US stocks and Fama and French documented the same for international stocks in a 1997 paper.

Now we've briefly mentioned the theory, and we've kind of alluded to it just in talking about where stock returns come from. If you take the rational perspective, and actually, for this one, for the value premium, I kind of liked the irrational one better, which people might be surprised to hear, but if we take the rational view, that investors are sort of rationally assigning some expectation for future profits and then paying a price based on a low discount rate, because those stocks are viewed as riskier, that's kind of the traditional asset pricing view.

You'd expect low returns though. So you're paying a higher price because the discount rate is lower, because it's a safer bet would be the best way I could describe that. Now the irrational view, and like I said, this is the one that I like a little bit better in this case. And then realistically, as we've talked about, I think, in a couple episodes ago, it's probably, it's probably a mix of both. And we can't definitively say whether it's one or the other, but the irrational view is that people extrapolate the high growth of these successful firms way too far into the future. A firm can have high growth for a period of time, but growth can't stay that high forever, it's just not economically possible.

So when people extrapolate extremely high growth too far into the future, they end up paying too much for shares. It's got nothing to do with the discount rate in that case, it's just overpaying. Then there's a paper, and this is probably where I was going to call it a bias, but I don't know if it's a bias I've taken in peer reviewed papers and decided which one makes more sense, is that still a bias? I don't know. I don't think it is. In my assessment of the academic literature, I found that this one paper, a 2012 paper titled Identifying Expectation Errors in Value/Glamor Strategies; A Fundamental Analysis Approach. I find the way that they described it, just to make it a ton of sense. They documented the evidence a few different ways, that the glamor effect is an artifact of a reversal of erroneous expectations where expectations in the price are incongruent with current trends in the firms fundamentals.

It's basically like in some cases, with the benefit of hindsight, I guess, they looked at firms that were just not that great of businesses, but had high prices. And they looked at firms that were really good businesses and had high prices. And they found that the under-performance of growth stocks tends to come from the not so great firms that ended up with really high prices, and that kind of drags down the average returns of growth stocks.

And in the paper, they actually also found that the glamor effect, so the under-performance of growth stocks was close to zero for great businesses that did have high prices. So evidence points to, and in their conclusion, they use some pretty strong words around this, basically disproving risk-based frameworks, I don't know if I'd go that far. But in any case, this idea that potentially you're overpaying for growth stocks I think is important when we're thinking about what the stock market looks like today, and when people are thinking about, "Should I invest in Amazon before it doubles again?"

Cameron Passmore: I mean, Amazon's a great example. Tesla's another great example. Many listeners will have seen these charts showing that Tesla's were worth more than this whole collection of car companies together. It might be.

Benjamin Felix: But the revenue's not there.

Cameron Passmore: The revenue's not there.

Benjamin Felix: Yeah. Now, it's important to note that I'm not predicting, or we're not predicting that these prices are going to tank, and there's going to be some kind of massive correction. And you know what, the historical data that I was talking about with the largest firms at the beginning of each decade, keeping in mind that they underperformed, they underperformed the market on average. But in a lot of cases, those largest firms stayed within that top 10. So it's not like these companies are going to blow up and disappear and you're going to lose all your money. But once companies become the largest companies in the market, their future expected returns tend to be lower and their future average returns, historically, have been lower. So I mean, that that's a much more likely outcome, I think, than some big catastrophe like we had in 2000, 2001. Well, who knows, I guess. What am I saying? One's more likely than the other.

Cameron Passmore: Yeah. Actually the exercise to do is look around today and say, "Okay, what is going to be the Amazon in 20 years?" So many people have talked about Amazon went public in what, '94 or something, this week, I saw posted the very first job description application for Amazon. Well, it's so obvious now, well, what is the one going to be the giant 2035, look around today and tell me, and then bet on that horse right now.

Benjamin Felix: And that ends up being the key, which I had a couple of notes about, but I wanted to bring up that example of, I mentioned March 2000 and March 2001. We're talking about the biggest stocks, the major mega cap growth stocks, what we've been talking about. But I think the trend or the out-performance of large cap growth as an asset class relative to small cap value or even large cap value or market wide value has been unbelievably amazing if you've been in large cap growth, painful if you haven't. And large cap growth tends to influence the market a lot, because it makes up such a big part of the market, which also means that as an index investor, you've done okay, because you've got so much exposed to large cap growth, but if you're sort of short large cap growth by being a value tilted index based investor, kind of like we advocate for our clients and ourselves, that's been painful.

And we've talked about this in the podcast in the past, the pain of being a value investor. I think that's another thing you can see on Twitter, lots of people lamenting the pain. But so in March 2000, US large cap growth stocks, so this isn't the mega caps anymore, just large cap growth had beaten US value stocks by a large amount for the trailing one, three, five, and 10 year periods. And this is large cap growth relative to US market wide value.

Now like today, people were talking down about how value investing was dead and everyone's given Buffet a hard time because he's not adapting to the new world one year later, 12 months later, so just boom, move forward 12 months in time, and again, look at the one three, five, 10 year trailing returns by moving forward one year. So massive overlap obviously between the periods. And by moving forward one year, the one, three, five and 10 year periods, value had beaten growth overall.

Cameron Passmore: Yeah. And we've given that example before, it's one of my favorite examples ever.

Benjamin Felix: It's a great example. And I think it's important to think about, not that it's going to happen again, and I'm not predicting that, but the important takeaway is how quickly things can change or alternatively, how meaningless 10-year returns are, which is something that I think Ken French talked about how meaningless five-year returns are, but similar idea. Now, Cameron, you mentioned picking those biggest stocks before they get there, what's the next Amazon? And I think that's a really important when you're looking at the outcome, because we're sitting here now, we see how big Microsoft is, we see how big Amazon is, we know what the world looks like today. It makes me think about the 2019 paper Do Global Stocks Outperform US Treasury Bills by a Hendrik Bessembinder and a few other people.

So they show that there's a massive positive skew in individual stock returns, most stocks trail the market, most being in the case of US stocks, 56%, sorry, this isn't trailing the market actually, it's even worse trailing T-bills, 56% of US stocks and 61% of non-US stocks underperform one month US treasury bills from 1990 to 2018.

Cameron Passmore: Wild.

Benjamin Felix: Wild, right? And then to get the market return. So to get the market return in excessive T-bills, you had to own the top 1.3% of firms, the remaining 98.7 collectively delivered the returns of one month US treasury bills, 98.7% of the firms delivered the returns of one month US treasury bills. And then you had to capture that top 1.3% in order to get the same wealth creation that the market as a whole delivered over that time period.

Now those mega caps today, especially the ones that we're talking about today, because the growth has been so exceptional, their share price growth, it's a good chance they're part of that 1.3%, or companies like that were part of that 1.3%. But that was on their way there. Once they've gotten there, we've talked with the data around that, once they've gotten to be the biggest, the future expected returns are not so good. I don't have the data to truly give commentary on it, but I would bet, I think it's reasonable to say how about that 1.3% were probably the companies that were, or in some cases where the companies that were on their way to being large cap growth stocks. Once they become the biggest companies, I'm pretty skeptical that they're contributing to the net wealth creation of the market.

Now, one more thing on this. So I think one of the things that's important about thinking through this today, and it would have been similar in the 2000 I guess, when they had tech, whatever you want to call it, the tech high price incident. But what's kind of similar today and what's different from the past really-

Cameron Passmore: Are you're still there.

Benjamin Felix: That the spread in valuation between those expensive stocks and the cheap stocks is as wide or wider. I mean, I looked at a paper from Cliff [inaudible 00:40:40] from May, but the spread and valuation is as wide or wider today than it's ever been.

Cameron Passmore: Okay. So we're back after a severe thunder strike, hit right above my house, we lost power so we had to reboot. So there will appear like a break in thought between Ben and I, but carry on Ben, where you were.

Benjamin Felix: Okay. So the relative expensiveness, or I guess the relative cheapness, depends how you will think about it, but the relative expensiveness of growth stocks compared to value stocks today is as wide as it's ever been in the past. So when you just look at the normal HML measure for value, the academic definition of value, it is currently at its 100 percentile of expensiveness compared to the last 50 years of history, which is what Cliff was looking at in the paper that I'm talking about. And we talked about his post about this in a past episode, so I'm kind of skipping over most of it. But the question he asks at the end is maybe the cheap companies are really just not as good of businesses compared to the expensive companies. And it kind of ties back to that idea of estimation errors or that the paper that I mentioned earlier about where the glamor effect comes from and the idea that it comes from the overvaluation of companies that are fundamentally not so great, so that kind of ties into what Cliff is saying.

So Cliff looked at the business quality, which we'll define quantitatively in a sec, but the business quality between expensive and cheap stocks. So how do you measure business quality? Well, Cliff does it in this instance by gross profitability, return on assets and the debt to equity ratio. Now one thing that's important to note is that value stocks, cheap stocks, will tend to have worse metrics across the board than growth stocks, which is one of the reasons that their prices are low.

But the question Cliff is asking is, "When we look at the data right now, do the cheap stocks look worse from a quality perspective than they have in the past." We know they're going to look worse on average, but does it look extra worse. I think Cliff uses the word worser, he uses some funny word that isn't a real word and apologizes in his post for using the word, but are they worse now than we'd expect them to be? Are they worse now than what would be normal for how bad they are relative to more expensive companies?

And he finds that, that does not explain the massive spread in evaluation between cheap and expensive stocks, differences in gross profitability or were, when he wrote the post in line with historical averages, I doubt it's changed. Return on assets for cheap stocks looks better today than it has historically, I think it was in the 85th percentile of return on assets for cheap relative to expensive stocks. And cheap stocks are less leveraged today than they have been on average historically. So you could kind of summarize that as saying that cheap stocks from a business quality perspective actually look better than they have in the past. But it seems like for whatever reason, investors, at the moment, have this overwhelming preference for the large cap growth stocks.

Now, one thing that I'm realizing people may be thinking is that that's coming from index funds. We've talked with that in the past, and I did a YouTube video and I reject that hypothesis. And the reason is, it's not flows of funds that affect prices, it's trading that affects prices. Index funds don't trade very much. When we looked at it last time and it may have changed a bit since then as the assets continue to grow in index funds. But at that time, when we looked at it, index funds made up 5% of the trading volume. They might make up a huge portion of the assets, they're probably more than 50% of fund assets, not total assets, but assets in mutual funds and ETFs, so probably index now, and they were then when we're talking about it. But even at that time, it was 5% of the trading volume, and it is trading that sets prices.

So anyway, I didn't have that in my notes, but as I was saying that last bit about investors having an overwhelming preference for large cap growth stocks, I started to hear potentially other people thinking that it was because of index funds. I don't think that's what it is. I don't know what it is. Large cap growth stocks have been this expensive in the 2000, so it's not totally unprecedented, but yeah, who knows what the explanation is. But it sure makes that glamor argument of overestimating future profits seem compelling, which would be a reason not to invest in those massive companies despite how great they look right now. How's that?

Cameron Passmore: Anything else that, that's good?

Benjamin Felix: Yeah.

Cameron Passmore: So for planning topic this week, I thought I would suggest that we cover off the Registered Education Savings Plan withdrawal rules. As my daughter is going back to school this fall, and we're getting many requests from clients, I thought reviewing the rules on getting money out might be worthwhile. So off the top, what you need to withdraw from your RESP is the subscriber, is the beneficiary. So the parent basically needs the child to provide proof of enrollment, confirming that beneficiaries enrolled as a full-time or part-time student and a post-secondary program or institution. So once you get that in the websites of the institutions, most institutions that we've seen have that form, you can just download online to give to the parent, to give to the advisor, to request getting money out.

And then the next thing you need to do is decide on the withdrawal. Do you want to take out the money that you contributed or the growth in grant side, the money you put in is called the post-secondary education payment, that PSE. So over the lifetime of the plan, if you maximize to get the maximum grant, you will have contributed $36,000 per child, which will have accrued $7,200 of grant from the government plus whatever growth is in there. So the money that you put in, up to that 36,000 in this case, comes out tax-Free. The taxable side, which is a grant and the growth is called the educational assistance payment or EAP. So when you decided to take money out, you have to choose or the breakdown between the two.

If you decide you want it to be taxable, the part of the taxable portion that is the grant, you can choose to go on grant or growth. You get a prorated breakdown of grant and growth. So you can't just simply say, give me all the grant money, pretty clear, very simple to get money out. So for full-time program at Canada, the student must be in a program that runs at least three weeks in a row with 10 hours of instruction per week an EAP. So again, the taxable part is limited to 5k in that first 13 weeks. So to get them more than 5k, $5,000 at the taxable part, they have to be in that full-time program for 13 weeks.

Benjamin Felix: And that could be a big chunk of the overall money in the account if it's been growing for 18 years, whatever right?

Cameron Passmore: Exactly.

Benjamin Felix: The grant is 7,200, but the growth could be, who knows, a lot.

Cameron Passmore: It could be a lot, then once 13 weeks is complete, there's no limit to the taxable side that you can take out.

Benjamin Felix: That's the key. I think when I talk to people about this, about the restrictions around the area of speed, that 13 week piece is always a bit of a light bulb. Because it's like, even if the child doesn't go and complete a four-year degree, if they're enrolled in an education institution or a post-secondary educational institution that qualifies for 13 weeks, from the perspective of getting the money out tax efficiently, you're going to be okay.

Cameron Passmore: Right. But you can take out your money side any time, there's no 13 week on that. So in terms of what institutions qualify, this has come up a lot, pretty much everything I've seen, I don't think I've seen anything rejected. So see CEGEPs, trade schools, colleges, universities, and any other institutions certified by the Ministry of Employment and Social Development. And there's a list of approved educational institutions on the canada.ca website. So we highly recommend that you come up with an ideal strategy for withdrawal where you look at your children, the number of years that they're likely to be in school, what will their income be through the years?

Quite often, parents are taking out the taxable part earlier because often the younger, the child is the less income they have, but sometimes you have to plan around what they might be studying and kind of map it out over a number of years. Some parents that have a number of children, but may not have it fully funded, take all the money out up front for the first child and take the latter years out of regular cashflow, it's really a case by case basis. But the main thing is to be smarter on the tax side of it, and it's easy to get that from your institution, how much of the bucket of money is taxable versus non-taxable, and you can just map it out for the years that you want to do withdrawals.

Benjamin Felix: You could probably even do more. Well, you could definitely do even more optimization if there are multiple children in a family plan because the children are constrained at how much of the grant they can have attributed to them when they withdraw?

Cameron Passmore: You can't get more than $7,200 of grant per child out. Correct.

Benjamin Felix: But the growth could all be taken out by one child. If you have four kids-

Cameron Passmore: You can't stack the growth with that's a problem on the withdrawal, you can't say, "well, just give me the growth." Because you have to [crosstalk 00:49:38] proportional.

Benjamin Felix: Oh, it's got to be proportional. Yeah, okay. That's tricky.

Cameron Passmore: But if you didn't maximize a grant for one child, you can take up more of the taxable side, which may soak up another siblings grant side.

Benjamin Felix: Wow. Yeah. There's definitely some planning to do, especially with the multiple kids.

Cameron Passmore: Exactly. So that's pretty straightforward. On the bad advice of the week.

Benjamin Felix: It's straightforward, but it's surprising the amount of times, and I'm not saying it's the majority of the time or anything like that, but I've had enough conversations with people who have not been using the RESP because they didn't understand it and thought that it was going to be there's a high chance of it being detrimental in the end. Let's understand the rules.

Cameron Passmore: Your child not going to school and you lose the money. Well, that's not the case. You've got a lot of parents who say, "Well, I'll just use my line of credit and then pay it back over time." Well, if you're going to do that, if you know you're going to do that, why not load it up in the years leading up to when they go to school, now there's certain restrictions there, you have to make sure there's enough money for a certain amount of time to qualify. But when you go to your line of credit, you might as well go earlier, get the grant, make some growth on it, take advantage of the program. In all the years, I've never seen anyone lose their RESP money, it's always been used up. Not once have I seen that, and we've done many RESPs over the years. We have family now that has moved to the US, they're American citizens. So they're even being able to pull out because a lot of the schools there do qualify.

So bad advice in the week, I was going to use a story from TMZ, which of course is a natural place to go for investment advice. There was an ad that looked like an article. I have no idea how I got into TMZ. So I'm sure everyone's wondering why I'm on TMZ, I don't know if showed up somewhere. But it looked like a story, like a TMZ story. And it says in quotes, "TMZ may collect a share of sales or other compensation from the links on this page." So it was a get schooled in day trading, flips stocks make a bundle with ease, but I thought we just skip over the TMZ.

Benjamin Felix: But you know what though, that stuff on my YouTube channel, in the videos that I post, we monetize the channel, which brings in a tiny bit of income to help cover the production costs and stuff like that. But the ads that play almost makes me question monetizing the videos in total.

Cameron Passmore: …you know.

Benjamin Felix: I hope not. It's not just my video, anytime I go to watch stuff on YouTube that has ads, probably because of Google's profile of me, but I get so many trading course pitches and some guy in a Hawaiian shirt sitting in his desk, talking about how he used to work.

Cameron Passmore: Well, I…

Benjamin Felix: Oh, but it's just brutal. How is this stuff even legal? You can ask the same question about the actual bad advice article that you have, how is it even legal to say that? Talk about it.

Cameron Passmore: Anyways, so we're not going to use a TMZ article this week. We're going to go with one that another Jason, a friend of ours shared as an idea for this week's bad advice of the week. So this was an article from, it's a digital magazine that goes to financial advisors called the Wealth Professional Magazine, which is our trade journal. And these goes back to your discussion two weeks ago on gold, but get this as a headline, "Why not start with a 100% gold in your portfolio? CEO puts forward contrarian view and says holding only precious metals until a correction is over as a strategy worth considering."

Benjamin Felix: Oh, CEO of what?

Cameron Passmore: CEO of Bullion Management Group put forth a totally contrarian viewpoint. He believes that instead of talking about allocating a 10% to 20% portfolio, start with a 100.

Benjamin Felix: But that's a CEO of Bullion Management Group, which maybe they have some sort of vested interest in-

Cameron Passmore: They may be… I guess. He gives some reasons for it because the average age of a portfolio manager is currently 50 years old, they'll have no direct knowledge or experience of the gold bull market of the '70s. And only remember the bear market that lasted between 1980 and 2002. I think you kind of went beyond that a couple of weeks ago. And also during that time, they, being us, experienced that tech bubble and crash when many investors lost up to 70% of the portfolios and the 2000 real estate crisis when people lost homes and well-established REITs.

And now that we have the COVID-19 pandemic in March the S&P 500 declined, 34%, but thanks to central banks printing any enormous amount of new money in the world's governments and incurring mass have amounts of debts, the markets have corrected to previous highs. And he also wanted to buy all traditional measures, markets are more overvalued than ever before, and all major currencies have been devalued, step forward gold.

And of course, many experts believe that the next leg down will be worse than 1929. What investors, financial advisors and portfolio managers, as well as pension funds seem to be missing is that since 2000 there has been a paradigm shift and gold has risen on average 10% per year, to which you said that is true. It's 9.81%, right? Since 2000 gold has been the best performing asset class for six in 20 years. And most portfolios would have been lucky to have average 5% return and most pension funds require a 6% return to meet pension obligations. They would have done much better had they simply held gold bullion.

Benjamin Felix: I wonder if he's heard of Bitcoin. I think it's done a little better.

Cameron Passmore: Anyways, in his view, the paragraph that jumped out at me, the most pronounced example of golds performance compared to equities is the comparison to Warren Buffett's company. Berkshire Hathaway. The CEO believes that since gold has outperformed Berkshire, it is highly unlikely most financial advisors, portfolio managers or pension funds will outperform gold. In fact, the vast majority do not even outperform the index as he said.

So of course our GDP poised to decline further because of the COVID-19 shutdowns, the enormous amount of currency that the world's governments will have to borrow for financial aid in the [inaudible 00:55:19] printing of currency by the world central banks, it is very likely that the price of precious metals will rise significantly in the next few weeks, apart from not losing money during the correction, investors should consider the strategy of only holding gold and silver until the correction completes the opportunity will then be to deploy some of the increased precious metals holdings into stocks, bonds, and real estate at major discounts. At that time, it will be worth taking some gold or silver bullion out of the vault and investing at close to a bottom.

Benjamin Felix: I'd say that's pretty good bad advice. You know, one of the things is I've been reading a book. I think I've mentioned it maybe the last episode where it was just us, the Roy Jastram around book about the history of gold. And he's got that data series going back to 1564, the purchasing power of gold relative to English commodity prices. When you look at that chart over time and update it for more recently because that that data series, they went to 1975 or six. And then since then, it's like gold did hover around the cost of goods for a long time, and that's a pretty long data series. If we're going to make a completely empirical decision without theoretical basis, at least let's have a long data series, which we have for gold.

But gold was actually money or related to money for most of that period, until 1971, when the US and lots of other countries started going off of any type of gold relationship to their currency. And then since then the price of gold has just gone through the roof relative to goods. I mean, if there's a golden constant, and we expect gold to be constant over the long-term in its purchasing power. Right now, it seems to be way above that.

Cameron Passmore: Plus the provider of products, if he can get people to think beyond 10% or 20% and think 100, if he just shifts the needle a little, it's good for his business.

Benjamin Felix: Yeah. And it's going to be fascinating to see how the gold stuff plays out, fascinating.

Cameron Passmore: Anything else to add to this week's episode?

Benjamin Felix: No. I think that's good.

Cameron Passmore: I think the storm has passed here in Ottawa. My poor dog, Oscar is appeared to be calming down now. He's pretty freaked out, but he's by my side of the old show. So here we go. Thanks for listening.

Books From Today’s Episode:

What it Takes: Lessons in the Pursuit of Excellence — https://amzn.to/31uo7xF

Bloomberg by Bloomberg — https://amzn.to/34zDZ3V

Success and Luck: Good Fortune and the Myth of Meritocracy — https://amzn.to/31sOqo6

The Golden Constant: The English and American Experience, 1560 - 1976 — https://amzn.to/3fYrv8k

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/ 

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Join the Community — https://community.rationalreminder.ca/

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Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

'Persuasive evidence of market inefficiency' — https://jpm.pm-research.com/content/11/3/9

'The Cross-Section of Expected Stock Returns' — https://www.ivey.uwo.ca/cmsmedia/3775518/the_cross-section_of_expected_stock_returns.pdf

'Identifying Expectation Errors in Value/Glamour Strategies: A Fundamental Analysis Approach' — https://academic.oup.com/rfs/article-abstract/25/9/2841/1589567?redirectedFrom=fulltext

'Do Global Stocks Outperform US Treasury Bills?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3415739

'Wolf of Wall Street Get Schooled in Day Trading Flip Stocks, Make a Bundle w/ Ease!!!' — https://www.tmz.com/2020/08/11/day-trading-stock-market-wall-street-learn-tmz-bundle-course/

'Why not start with 100% gold in your portfolio?' — https://www.wealthprofessional.ca/investments/alternative-investments/why-not-start-with-100-gold-in-your-portfolio/332589